GST updates 15 Oct 2016

CAIT backs penalty waiver in first 3 years of GST rollout

October 15, 2016
Traders body CAIT on Friday proposed that the government should waive penalties on compliance errors during the first three years of rollout of the goods and services tax (GST) regime. Observing that it would be difficult for anyone to evade taxes under the new framework, CAIT said even the instances of under-invoicing will gradually wane as the tax department will have PAN-based registration and sale-purchase data of traders.

“GST will be a complex structure of taxes and we have asked the tax department to exempt traders from penalties in the transition period of first three years,” CAIT Secretary General Praveen Khandelwal said.

To educate traders about the new indirect tax set-up, the Confederation of All India Traders (CAIT) has entered into an MoU with Tally Solutions to train them on GST compliance and adoption.

The government plans to roll out GST from April 1 next year. The GST will subsume excise, service tax and other local levies.

Khandelwal said the next meeting of the GST Council, to be chaired by Finance Minister Arun Jaitley, later this month will decide on tax rates, products and compliance and after that, CAIT will prepare the working module for traders. A standard GST rate of 18% would be “justified”, and at that rate, the investment cost of traders will be less, he told reporters here.

Asked about the fate of traders who do not give bills at present, Khandelwal said the GST design does not have this option. “We have to give sales details to the tax department and hence, there will be no scope of under-invoicing as over a period of time, all data will go to the tax department,” he said.

CAIT National President B C Bhartia said that since GST registration is PAN based, so the government will get to know how many traders have not registered from its own database. “The purchase ledger of traders is with the government. So by under-reporting of sales, if stocks start piling up, the tax department will ask why are you purchasing? With so much data, it will become difficult to evade taxes,” Bhartia reasoned. He said last-mile disposal by an importer will come under the tax lens through Integrated GST and hence, under-billing will become difficult. Source – [15-10-2016]

GST may trigger consolidation in warehousing space

October 15, 2016
GST may trigger consolidation in warehousing space

The goods and services tax (GST) regime could usher in consolidation in the Indian warehousing space, property consultants and analysts said.

With the government pushing for an April 2017 rollout of the single tax structure, many manufacturers who had built or leased warehouses in nearly every state to avoid duplication of taxes don’t see the need to extend their lease arrangements, and can instead own or lease large warehouses in a few strategic locations.

Warehouses across the country mostly facilitate operations of ecommerce firms, automotive companies, and manufacturers of consumer electronics, pharmaceuticals and fast-moving consumer goods. These manufacturers are now looking at having fewer but larger warehouses at locations such as Mumbai, Delhi, Ahmedabad, Chennai, Bengaluru and Hyderabad.

“Instead of having warehouses in all the cities, we will look at a cluster of states where it will be easier to send goods across the country without having to make the customer wait,” said Pravin Shah, chief executive (automotive) of Mahindra & Mahindra. However, he said that his company was waiting for the GST rates to be finalised to chalk out a strategy on consolidating warehousing.

Experts said that warehouses in tier-I markets may find business, but it will be difficult for those in smaller cities to sustain in the medium to longer term. While some see opportunity to set up new larger warehouses in emerging manufacturing hubs and strategic locations, others are looking at options to convert idle warehouses in smaller cities into residential and commercial assets.

Amazon and Flipkart didn’t respond to ET’s queries, while ShopClues refused to comment.
Meanwhile, the looming shift in strategy is catching the attention of developers. Indospace, a joint venture between private equity firm Everstone Capital Advisors and Realterm Global, is planning to develop big projects at manufacturing clusters with an investment of over $1billion over the next fourfive years to more than double the project pipeline to about 50 million square feet from the current 20 million sq feet.

“There will be a consolidation in this market with the passage of GST, as there will be more focus on setting up warehouses in the manufacturing hubs. This will lead to cost efficiency with reduced cost on transportation, labour and real estate,” said Indospace’s partner Brian Oravec.

“Ecommerce companies in our network are already in the consolidation process with Amazon and Flipkart, and are moving into lar ge warehouses of around 350,000 sq ft from their earlier spaces measuring 50,000 sq ft on an average,” said Mumbai-based Prakhhyat Infraprojects’ proprietor Sumit Bhalotia.

“The warehouses that will become redundant will be bought out by smaller players or will make way for office or residential complexes, as it would not be viable to run with low demand and high rentals,” says Samantak Das, chief economist at Knight Frank.

The government is setting up inter-state industrial corridors such as the Delhi-Mumbai industrial corridor and freight corridors such as the western and eastern dedicated freight corridors. Analysts said that more manufacturing activities will be taken up along these routes, which in turn will increase warehousing demand.

Further, with direct sale, companies’ inventory of goods will also reduce by nearly a third, as goods will move from manufacturing hubs to the dis tributors directly, instead of it being stocked. This will lead to efficiency in the supply chain and cost, said Balbirsingh Khalsa, national director (industrial services and landlord representation), Knight Frank.

The total warehousing space requirement in the top seven markets is expected to grow at a compounded annual growth rate (CAGR) of 8% -from 621 million sq ft in 2016 to 839 million sq ft by 2020 -estimated the Indian Warehousing Market Report 2016 by property consultant Knight Frank.  Source – [15-10-2016]

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