GST Updates (31st Oct 2016)

Here’s the list: What is cheaper and what is dearer after GST

October 29, 2016
Here’s the list: What is cheaper and what is dearer after GST

Salt, bread, fresh fruit and vegetables, eggs, milk, curd, blood (yes blood, the human kind), prasad (the sacred kind), the national flag, kumkum, bindi-sindoor, glass bangles, even contraceptives — all these will continue to enjoy a taxfree run under the proposed goods and services tax (GST) regime.

A few essential services will also escape the levy under the new regime that the government wants to roll out from April next year. All the same, the list of exempted items that will be thrashed out by state and central government officials shortly after the rate structure is finalised will be getting shorter.

“The exemption list is to be pruned,” said a government official outlining the broad principle that will be followed in deciding what doesn’t get taxed under GST. But “those items that are exempted under value added tax will likely remain out of the tax net.”

This includes the items listed above. The exemptions are aimed at making sure that the common man isn’t subjected to tax shock. Shortening the list will ensure that the tax base is broadened.

“The list of exempted items cannot be very long but those that are considered of common essential use would be kept out,” the official said, adding that some of the services of this nature would also be included.

Exempted items won’t however be eligible for input tax credit. Many sectors, therefore, want to be included in the GST net but zero-rated, which means they’ll be eligible for input tax credit but untaxed.

After the rates are endorsed by the GST Council headed by Finance Minister Arun Jaitley, it will decide on exemptions and what items go into which tax bracket. The Centre has proposed five alternatives to a four-rate slab including a separate levy of 4% for precious metals. The rates proposed are 5-7% at the threshold level and 10-19% at the standard rate level.

The Centre’s preference is for 6%, 12%, 18% and 26% but the council will take a call on the framework at its next meeting on November 3-4. The minister said on Wednesday that a consensus is close on the matter.

Jaitley has already made it clear that the effort will be to keep the exercise tax neutral and fit items into tax brackets that are similar to the levies on them now.

There could still be differences depending on the bracket but even if these are on the higher side that should be more than offset by seamless input tax credit.

GST seeks to replace multiple central and state taxes on goods and services such as excise duty, service tax, value added tax, entry tax, purchase tax with one levy and create a seamless national market. Source –[26-10-2016]

GSTN inks MoU with DGFT for sharing of forex realisation data

October 28, 2016
GSTN inks MoU with DGFT for sharing of forex realisation data
The Goods and Services Network (GSTN) today signed a memorandum of understanding with the commerce ministry for sharing of foreign exchange realisation and import-export code data.

The move is expected to strengthen processing of export transactions of taxpayers under GST, increase transparency and reduce human interface, an official said.

GSTN is a not-for-profit, non-government, private limited company promoted by the central and state governments with the specific mandate to build the IT infrastructure and the services required for implementing GST.

The MoU was signed by Director General of Foreign Trade Ajay K Bhalla and GSTN CEO Prakash Kumar.

An electronic bank realisation certificate captures transaction level details of foreign exchange realised in India.

The eBRC project implemented by DGFT created an integrated platform for receipt, processing and subsequent use of all bank realisation related information by exporters, banks, central and state government departments.

The e-BRC project enabled banks to upload foreign exchange realisation information related to exports on to the DGFT server under a secured protocol.

The official said that so far 100 banks operating in India, including foreign banks and cooperative banks have uploaded more than 1.9 crore e-BRCs on to the DGFT server. Source – [28-10-2016]

Monthly returns to be mandatory under GST

October 29, 2016
Moving at a fast pace, the tax department on Tuesday came up with two more draft rules and their formats on GST returns and refunds requiring assessees to file monthly returns and specifying procedure for claiming refunds of taxes, interest and fees.

The stakeholders have been given time till Wednesday to give their comments on the two draft rules which, along with other rules, will be finalised at the second meeting of the Goods andServices Tax (GST) Council on September 30.

The Central Board of Excise and Customs (CBEC) on Monday unveiled three draft rules and their formats relating to registration, invoice and payments for public comments.

The government aims to implement the new indirect tax regime GST from April 1, 2017.
As per the rules for refund, every registered taxable person will be required to furnish a monthly return in specified form (GSTR-3).

There is also a provision for electronic furnishing of annual return by every registered taxable person and composition supplier.

The rules further said that every taxable person whose aggregate turnover during a financial year exceed Rs 1 crore will be required to submit annually a duly certified audited statement.

The draft rules, according to Rajat Mohan, Director- Indirect Taxation, Nangia & Co, “have prescribed the form and manner of submission of quarterly returns by composition supplier, returns by non-resident taxable person, input service distributor, persons required to deduct tax at source and the form and manner of submitting statement of supplies effected through e-commerce.”

The rules, he added, also provide for matching of input tax credit claim on inward supplies and procedure for output tax liability reduction claim.

As regards the refunds, the rules specified the procedure for claiming refund of any tax, interest, penalty, fees or any other amount under GST.

“Where application relates to refund of input tax credit, electronic credit ledger shall be debited by the applicant by an amount equal to the refund so claimed…refund in case of export of taxable goods or services without payment of tax under bond or letter of undertaking, shall be granted on the basis of a prescribed formula,” said Mohan.

He further said that as per the rules no refund of input tax credit would be allowed if supplier of goods or services avails drawback or claims rebate of tax paid.

The rules also provide for grant of provisional 80 per cent refund to notified exporters and refund to certain persons.

It further specified that in respect of supplies made to an SEZ unit/developer, or supplies regarded as deemed exports, application will have to be filed by said SEZ unit/developer or recipient of deemed export supplies Source – [29-10-2016]

How The Promise Of GST Is Shaking Up India’s ‘Zero Mile’ City Nagpur

October 28, 2016
When Indian retailer Future Group opened a warehouse on the outskirts of Nagpur three years ago to supply its supermarkets, the building was surrounded by dry, barren fields. Now it is only one in an expanse of distribution centres, storage depots and factories.

A dusty provincial city of 2.5 million, Nagpur is at the geographical heart – India’s “zero mile” marker, the centre of the country, has been located here since the British colonial era.

It is also at the heart of the action now as the government prepares to roll out the biggest fiscal overhaul since independence: GST, a national value-added tax that will replace a proliferation of local levies.

The Goods and Services Tax itself, due to be introduced in April next, could well see delays.

But Nagpur is already benefiting from a change that will allow companies to move goods across state borders without being hamstrung by local levies. Property prices have surged as companies from Amazon to tractor maker John Deere have set up central facilities in the city to cut down on transport costs.

“The advantage of Nagpur is simple. All metros (big cities) in the country are all about 900 km from there,” said Rakesh Biyani, Future Group’s joint managing director.

Consultancy Alvarez & Marsal, which specialises in turnarounds and performance improvement, estimates firms can cut logistics costs by 25 per cent if they consolidate their warehouses in Nagpur.

Future Group is quadrupling the land it owns at the edge of the city, with plans to turn Nagpur into its biggest warehousing facility supplying more than 250 of its Big Bazaar supermarkets.

Mahindra Logistics, part-owned by cars-to-IT conglomerate Mahindra Group, has accelerated plans to buy more land in Nagpur since the new tax was approved in August. E-commerce giant Flipkart and even guru-turned-businessman Baba Ramdev are setting up facilities in Nagpur or planning to.

Land prices are up by as much as a fifth since April, real estate agents say, as developers snap up farmland.

Viren Thakkar, managing director of warehouse manager Logistics Park India, said he was getting three enquiries a week about Nagpur, up from one a month a year ago. “I have started aggregating land parcels in the city, anticipating demand,” he said.

Nagpur has seen ambitious plans before. Almost a decade ago, India was promoting plans to build an international metropolis here – then the global financial crisis hit and plans for export-oriented special economic zones were put on ice.

But since then, India’s consumer goods market has blossomed, and so too has the pressure for better logistics hubs: the e-commerce industry, for example, has grown five-fold between 2013 and 2015, from $2.9 billion to $16 billion (around 19,300 crore to around 1.06 lakh crore), Deloitte estimates.

Nagpur is also in a rosy political spot. The city is home to the Rashtriya Swayamsevak Sangh or RSS, the ruling BJP’s ideological mentor and the local MP is India’s powerful transport and shipping minister, Nitin Gadkari.

Mr Gadkari has said the government has sanctioned R 25,000 crore ($3.7 billion) worth of projects linked to the city since Prime Minister Narendra Modi came to power in 2014, including starting work on a new ring-road and acquiring land for a dry port with rail and road connections to Mumbai, India’s biggest city and largest port 825 km to the west.

“Nagpur is the zero mile, where you can manufacture and distribute in the country and the logistics cost is less. There are huge opportunities,” Mr Gadkari said in an interview at his office.

Mr Gadkari said he wants to accelerate construction of a long-delayed international cargo hub and expanded airport, spread over an area the size of 4,000 football fields, so that it provides 50,000 jobs by 2019, compared to 9,600 staff today.

What is not clear is how quickly these ambitious projects will be completed. While a new expressway to Mumbai has been approved, critics say construction will mean acquiring land from reluctant farmers – a slow process.

Mr Gadkari’s international cargo hub has been partly constructed and some tenants have arrived. But the airport expansion has stalled, although a tender for the project is likely to be launched this year.

There is little question India needs an efficient hub. It is hampered by creaking infrastructure, with many roads and rail links dating to the colonial era. It has few cold storage networks, and cross country transport is at glacial speeds.

Fractured tax systems among India’s 29 states and seven other territories have hardly helped. Goods trucks wait days at checkposts at state borders for clearance and payment of local taxes before they can proceed. That has blocked movement of goods and encouraged firms to operate multiple warehouses across the country.

Mahesh Y Reddy, director general of the Infrastructure Industry and Logistics Federation of India, said it was sometimes cheaper to send goods from Mumbai’s port to Dubai than to Nagpur, less than half the distance away, because of delays in shifting goods onto trucks and then the slow haul through the interior of the country.

“Ultimately, it’s because of these inefficiencies that the likes of Nagpur do not become industrial hubs,” Mr Reddy said. “They remain as they are.  Source – [28-10-2016]

Petroleum products to enter under GST regime to fuel big gains

October 28, 2016
Petroleum products to enter under GST regime to fuel big gains

Petroleum products, including crude and some intermediate products, could be taxed under the proposed goods and services tax (GST), a move that will reduce the imperfections in the new levy and also narrow the inflationary impact of the tax.

A proposal favouring imposition of a modest tax on these products is being examined and is expected to be taken up by the newly constituted GST Council where the government will try a convince states of its merit.

The idea is to have some minimal tax of about 2-3 per cent so that seamless flow of credit is n broken and cascading is removed.

These products are at present proposed to be covered within the GST but zero rated till the time the council decides to impose a tax. States will continue to have freedom to levy local sales tax on it.

States have been opposed to a change in tax regime for petroleum goods, an easy way of quickly mopping up revenues if needed. But now thinking has veered around to having some minimal tax from the beginning as it could help in bringing down the overall tax rate and allow the industry to get credit.

The Arvind Subramanian committee has recommended a standard GST rate of around 18 per cent. There are concerns GST could stoke inflation. ET had reported some policymakers are in favour of rate as low as 16 per cent.

Tax at marginal rate would not hurt consumers much but will benefit industry in a big way.
“If the petroleum products are taxed at a GST rate which is equivalent to the input GST cost, the cascading of taxes would be mitigated and the final price of the products may reduce,” said Bipin Sapra, partner, EY.

Credits to power, airlines sectors

Sapra said this will allow some credits to the sectors such as power, airlines, transport of goods and passengers, which will help in reducing the cost of these services. “There have been discussions on having some tax on petroleum products…,” said a government official, adding that the final decision would rest with the GST Council.

This would be in addition to local state sales tax on these products. “This would reduce cascading to some extent and allow for some flow of credit,” the official added. The committee headed by Chief Economic Adviser Arvind Subramanian, which had suggested revenue neutral rate in the 15-15.5per cent range with a lower rate of 12per cent anda standard rate of 18 per cent, had said its inclusion could make the industry more competitive.

“Bringing electricity and petroleum within the scope of the GST could make Indian manufacturing more competitive,” the report had said.

The government has put implementation of GST, which seeks to replace plethora of central taxes including excise duty, service tax, cesses and state taxes such as value-added tax, octroi, entry tax with a single levy, on fast track and the newly set up GST Council will meet later this month to take a call on crucial issues.

Prime Minister Narendra Modi will also attend a presentation on the GST framework and issues connected with it on Wednesday.  Source –

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