Category: Miscellaneous

GST updates (19 Nov 2016)

Posted on by Business So Simple in Miscellaneous


Government unlikely to bring GST bills soon

November 19, 2016
Government unlikely to bring GST bills soon

The government is keen to push the passage of three legislations related to the main GST bill in the ongoing Winter session, as Parliamentary nod for these bills is must for rolling out GST from the target date of April 1, 2017.

With the united opposition attacking the ruling dispensation in Parliament over the demonetisation issue, the government is unlikely to bring three bills related to GST in the coming days and hopeful of pushing them in latter half of the Winter session which began on Thursday.

The government is keen to push the passage of three legislations related to the main GST bill in the ongoing Winter session, as Parliamentary nod for these bills is must for rolling out GST from the target date of April 1, 2017.

The three bills related to GST are–the Central Goods and Services Tax Bill, the Integrated Goods and Services Tax Bill, the Goods and Services Tax (Compensation for Loss of Revenue) Bill.

The government is hopeful of passage of the three GST bills in the Winter session, which are likely to be introduced in either third or fourth week of the session, a source said.

As per the GST Constitution Amendment Bill, which was notified on September 17, 2016, the government is required to complete the process of implementation of GST within a year.

The all powerful GST Council, which is chaired by the Finance Minister and has representations from state, had already decided on a four-tier rate structure–5, 12, 18 and 28 per cent–with a cess over and above the peak rate for luxury and demerit goods.

The issue of dual control, which deals with who will control which set of assessees under GST, has been holding back the negotiations between the Centre and the states.

The government has listed total nine bills which also includes Surrogacy (Regulation) Bill for introduction, consideration and passage.

The government has listed 10 pending bills including HIV AIDS Prevention and Control bill, Mental Health Care bill, Maternity Benefit Amendment bill, Prevention of Corruption (amendment) bill and Consumer Protection bill for consideration and passing as these bills have already been introduced in Parliament. Source – http://auto.economictimes.indiatimes.com [19-11-2016]



GST seminar to help govt. officers educate industry

November 19, 2016
Ahead of next week’s Goods & Services Tax (GST ) Council meeting, Cabinet Secretary P.K. Sinha has asked all the officers of the rank of joint secretary and above in all Central government departments to attend an interactive seminar on GST on Saturday. “Impact of GST will be felt by all sectors… various stakeholders need to be familiarised with the new taxation system to ensure smooth transition,” Mr. Sinha said in a letter to all the secretaries. “Senior officials can contribute to this in a major way by educating the different stakeholders,” he said. An official statement on the seminar said introduction of GST is the most important reform in the indirect tax system in the country. “Indirect tax structure in India is highly complex with hidden costs for trade and industry. Non-uniformity across the States, cascading of taxes due to ‘tax on tax’ and multiplicity of taxes in the current tax laws are huge deterrents for the businesses  Source -www.thehindu.com [19-11-2016]


Duty sop in GST holds key to Foxconn’s Nokia unit takeover

November 19, 2016

Duty sop in GST holds key to Foxconn’s Nokia unit takeover

Taiwanese phone maker Foxconn’s plans to take over the shuttered Nokia factory near Chennai rest on a tax structure as India moves into the GST regime. Foxconn had shut its India plant near Chennai after Nokia exited the business of making phones in late 2014 following a large tax demand.

Its second innings had begun with a promise to start 10-12 factories across the country with an investment chest of Rs 12,000-crore ($2-billion). However, its comeback was through a small factory in Andhra Pradesh’s Sri City Special Economic Zone.

FOXCONN’S RETURN

Producing for a range of Chinese brands like Xiaomi, Foxconn’s return coincided with a new tax structure that favoured foreign contract manufacturers to make locally instead of importing completely built units into India.

Now, at its seminal point of its second entry through taking over a now-defunct Nokia Chennai plant, Foxconn is faced with a gnawing uncertainty over whether the duty differential dispensation will exist at all in the GST regime.

In a proposal accessed by ET, Pankaj Mohindroo, president, Fast Track Task Force, wrote to the Department of Electronics and IT(DeitY) in August, saying: “The duty differential dispensation remains at the heart of the current momentum in mobile handsets and components’ manufacturing…”

GST AND FOXCONN

In last year’s budget, the centre imposed a 12.5% countervailing duty on mobile phones that would be imported, strengthening the case of global corporations like Foxconn to set shop in India to serve the Indian market.

Since the Goods and Services Tax (GST) will subsume all state taxes such as the value-added tax -for which manufacturers can claim exemptions-retention of the duty differential becomes key for Foxconn to survive and expand in India.

In the one year after the centre incentivised domestic manufacturing, about 35 smartphone factories and 15 component manufacturers have set up shop, creating 50,000 jobs.

ALL ABOUT THE DEAL

An official aware of developments connected to Foxconn said: “The Nokia factory deal is four-way the centre, the state, Nokia and Foxconn at four corners, with all of them having something to contribute to the deal.”

“From the centre’s part, all the tax concessions that triggered local manufacturing need to remain. Otherwise, it really is going to spoil the deal for Foxconn-not just for the Nokia plant but for the entire industry,” the official added.

Sources aware of the Nokia-Foxconn negotiations say that currently, negotiations are taking place on the sops that Tamil Nadu is willing to offer and the valuations of the 212-acre factory that was shut for overtwo years.

Queries on the issue sent by ETto Foxconn remain unanswered.

Tamil Nadu government officials maintain that the state government is aware of Foxconn angling for the takeover and is liaising with the Centre to making it happen.

TAX ADVANTAGE

The Union government’s Make in India campaign seeks to grab a portion of foreign investments flowing into China for the country’s cheap electronics manufacturing prowess.

The tax advantage has been seen pivotal to this effort.

Tax experts, however, believe that the coming of the GST will only help India gain an edge against China in the exports market.
Sachin Menon, head of indirect tax, KPMG, said: “With the goods and service tax proposing to refund entire input taxes, as opposed to partial refund of input taxes under the current regime, it will help India to be competitive even in the export market.” Source – http://economictimes.indiatimes.com [19-11-2016]


GST to reduce margins

November 19, 2016
The logistics & real estate industries could see their profitability indented if the abatement of tax is not continued under the GST regime.

Whilst industries in general will benefit by GST and will see margin expansion, those like the services that have lower tax rates could see margins contract. It could also bring down prices of products as it would eliminate multiple taxes or ‘taxes on taxes’. Industries like cement and auto manufacturers stand to benefit from lower GST tax rates, while those that could be impacted negatively due to GST include the cotton and downstream value chain and apparel segment of the textile industry and print media, which are currently either tax exempted or subject to concessional rates of taxes.

The logistics and real estate industries could see their profitability indented if the abatement of tax is not continued under the GST regime, while the impact on the infrastructure industry with high value contracts spanning across years would have to be assed contract-wise.

Analysing the pros and cons of the four-rate tax slabs -5 per cent, 12 per cent, 18 per cent and 28 per cent of the GST, India Ratings and Research (Ind-Ra), says the practise of “kaccha bills” which lead to leakages due to non-payment of taxes would be eliminated as the users of input supply would insist on tax invoices to claim the input credit. Source – www.asianage.com[19-11-2016]

Cash Deposits: Tax implications

Posted on by Business So Simple in Miscellaneous



Cash Deposits can’t be shown as income in ITR under Sec.115BBE



November 18, 2016[2016] 75 taxmann.com 198 (Article)


The provisions of section 115BBE are as under:
♦ The Finance Act, 2012 inserted section 115BBE in the Income-Tax Act (‘the Act’) to tax unaccounted money represented by the additions covered by sections 68(Cash credits), 69(Unexplained investments), 69A(Unexplained money, etc.), 69B(Amount on investments, etc., not fully disclosed in books of account), 69C(Unexplained expenditure, etc.)  and 69D(Amount borrowed or repaid on hundi) at flat 30% without any deductions or basic threshold exemption limit.
♦ Section 115BBE provides that where the total income of an assessee includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, the income-tax payable shall be the aggregate of— (a)the amount of income-tax calculated on income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, at the rate of thirty per cent; and (b)the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (a).
♦ Section 115BBE further provides that notwithstanding anything contained in the Act, no deduction in respect of any expenditure or allowance shall be allowed to the assessee under any provision of the Act in computing his income referred to in (a) above.
♦ Section 115BBE was enacted “In order to curb the practice of laundering of unaccounted money by taking advantage of basic exemption limit.
From the above, the following position emerges:
♦ Section 115BBE refers to sections 68,69A, 69B, 69C and 69D
♦ Sections 68 to 69D nowhere contemplate voluntary disclosures made in ITR by the assessee
♦ Sections 68 to 69D contemplate additions for unaccounted/unexplained income detected by the AO during search or survey or scrutiny. This is clear from the words “where any sum is found credited in the books of an assessee”(section 68), “Where in any financial year the asssessee is found to be the owner of any money, bullion, jewellery or other valuable article”(section 69A)
Thus, section 115BBE read with sections 68 to 69D nowhere envisage a voluntary disclosure scheme where past unaccounted income can be declared by assessee in current ITR by paying 30% flat tax. If section 1155BBE is to be construed as a voluntary disclosure scheme, there was no need for Income Disclosure Scheme, 2016 or one-time window under the Black Money Act, 2015 for foreign black money.
Section 115BBE can be invoked only by AO and cannot be invoked by assessee to show huge cash deposits in bank as income in ITR at special tax rate of 30% under Section 115BBE.


No tax free status for all cash deposits up to Rs.2.5 lakhs



November 18, 2016[2016] 75 taxmann.com 197 (Article)


1. Deposits up to Rs. 2,50,000 have not been given any blanket tax-free status. Only such deposits will not be reported to the Income-tax Department by banks/post offices.
At Present:
A. The regular threshold exemption limit for individuals (other than resident senior citizens and super-senior citizens) is Rs. 2,50,000.
B. If the individual is a resident and senior citizen (aged 60 or more but less than 80), then it is Rs. 3,00,000.
C. If the individual is a resident and super-senior citizen (aged 80 years or more), it is Rs. 5,00,000.
D. If total income for any year exceeds this limit, it will be taxed as per applicable slabs.
E. If individual is found to be the owner of any money, bullion, jewellery or other valuable article and same is not recorded in any books of account of the individual and the source of acquisition is not satisfactorily explained, amount will be charged at flat 30% without regard to above threshold exemption limit.
F. If any individual deposits cash exceeding Rs. 50,000, on any one day, in account in bank or post office, PAN is required. This requirement of PAN for cash deposit also applies if aggregate deposits in bank account from 09-11-2016 to 30-12-2016 exceeds Rs. 2,50,000 in the aggregate.
G. Bank and Post office will have to report on or before 31-01-2017 cash deposits during the period 09th November, 2016 to 30th December, 2016 aggregating to:
♦ Rs. 12,50,000 or more in one or more current account of a person; or
♦ Rs. 2,50,000 or more in one or more accounts (other than a current account of a person)
The following clarifications in Press Release dated 10-11-2016 may be noted:
“Q.1 A lot of small businessmen, housewives, artisans, workers may have some cash lying as their savings at home, will the Income-tax Department ask questions if the same is deposited in banks?

A.1: Such group of people as mentioned in the question need not worry about such small amount of deposits up to Rs.1.5 or 2 lacs, since it would be below the taxable income. There will be no harassment by Income Tax Department for such small deposits made.”

Q.2: Will the Income-tax Department be getting reports of cash deposits made during this period? If so, will the current threshold of reporting requirement of reporting cash deposits of more than Rs. 10 lacs will only continue?

A.2: We would be getting reports of all cash deposited during the period of 10th November to 30th December, 2016 above a threshold of Rs. 2.5 lacs in every account. The department would do matching of this with income returns filed by the depositors. And suitable action may follow.

2. Tax-free status is for those whose total income does not exceed threshold limit of Rs. 2,50,000/Rs. 3,00,000/Rs. 5,00,000. One can imagine that savings of people with meagre income are not likely to exceed this amount. If they can prove they saved higher amount because they live in joint family and other family members have more income, then even higher cash deposits will not be taxed.
3. Housewives can even get exemption for higher cash deposits if it is savings out of pin money given to them by husbands for their expenses. Only that it will have to be established that husband is regular ITR-filer and has disclosed sufficient incomes and made sufficient cash withdrawals or transfers through banking channels to wife
4. Those whose cash deposits during the period 09-11-2016 to 30-12-2016 do not exceed Rs. 2,50,000 will not be picked up for scrutiny automatically as no reporting of the same is done by banks/post offices. But if their returns are picked up for scrutiny on random basis, this deposit can be examined and taxed at 30% under section 115BBE if not satisfactorily explained. There is as yet no instruction from department to AOs to ignore demonetized notes deposited in bank account up to Rs. 2,50,000 during scrutiny assessment.
5. Again it is not as if you have Rs. 10 lakhs in old notes and you have four bank accounts and you deposit Rs. 2.5 lakhs in each of the 4 accounts, your Rs. 10 lakhs has become tax-free. Your accounts may not be reported by bank/post office to ITD. But if your return is picked up in scrutiny at random, all four bank accounts will be called for and checked and if you fail to explain source of the amounts satisfactorily, then you will be taxed flat 30% on Rs. 10,00,000 without allowing for any regular threshold exemption limit as above. The Income-tax Department may also come to know about all deposits below the threshold limit, if Income-tax Returns forms introduce a new column asking for maximum balance during the year in each bank account.


Cash deposits in old currency may attract 200% penalty



Introduction
1. The opportunity to declare undisclosed income under Income Declaration Scheme, 2016 and pay 45% on the same expired on 30th September, 2016. If demonetized high denomination notes deposited in bank account pertain to cash in hand declared under IDS, 2016, there would be no problem. But what if IDS has not been availed? Can the assessee simply deposit undisclosed income in form of demonetized notes in his bank account, quantify tax liability @ 30%, pay advance tax and show the same in ITR of FY 2016-17 (current financial year) without attracting penalty of 200% under section 270A for misreporting?
Penalty under Section 270A
2. Salient features of penalty u/s 270A are as under:
♦ Section 270A providing for “Penalty for under reporting and misreporting of income” was inserted in Income-Tax Act,1961 by the Finance Act,2016 with effect from Assessment Year 2017-18.
♦ Section 270A(1) provides that “The Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner or Commissioner may, during the course of any proceedings under this Act, direct that any person who has under-reported his income shall be liable to pay a penalty in addition to tax, if any, on the under-reported income”.
♦ The words “may…..direct that any person who has under-reported his income shall be liable to pay a penalty” are significant. Imposition of penalty under section 270A is discretionary and not mandatory in view of the word “may” used in sub-section (1).
♦ Where no return is furnished, income is said to be under-reported if the income assessed exceeds the maximum income not chargeable to tax .
♦ Where return has been furnished, the starting point for determining whether there is under-reporting is an arithmetical calculation ascertaining difference between two figures-between income assessed or reassessed and income earlier assessed or as per return processed. If the former figure exceeds the latter, income is said to be under-reported
♦ The amount of under-reported income shall be, in a case where income has been assessed for the first time, if return has been furnished, the difference between the amount of income assessed and the amount of income determined under clause (a) of sub-section (1) of section 143.
♦ In a case where no return has been furnished, the amount of under-reported income shall be (A)the amount of income assessed, in the case of a company, firm or local authority; and (B) the difference between the amount of income assessed and the maximum amount not chargeable to tax, in a case not covered in item (A)
♦ In any other case, under-reported income shall be the difference between the amount of income reassessed or recomputed and the amount of income assessed, reassessed or recomputed in a preceding order
♦ Where under-reported income is in consequence of misreporting, the penalty shall be equal to 200% of the amount of tax payable on under-reported income[Section 270A(8)]
♦ Where there is only under-reporting without mis-reporting, the penalty shall be 50% of amount of tax payable on under-reported income[Section 270A(7]
♦ Levy of penalty is discretionary but amount of penalty is not discretionary.
♦ In a fit case, the authorities may decide not to impose penalty. But if they decide to impose, then they must impose the mandatory quantum as per section 270A(7)/(8)-no more and no less.
♦ Section 270A(9) provides that misreporting of income shall cover the following cases (and hence liable to 200% penalty):
(i) misrepresentation or suppression of facts;
(ii) failure to record investments in the books of account;
(iii) claim of expenditure not substantiated by any evidence;
(iv) recording of any false entry in the books of account;
(v) failure to record any receipt in books of account having a bearing on total income; and,
(vi) failure to report any international transaction or any transaction deemed to be an international transaction or any specified domestic transaction.
From the above provisions of section 270A, the following points emerge:
♦ Now misreporting per se will not attract penalty under section 270A @ 200%..To attract the penalty @ 200%, misreporting should result in assessed income being more than what is determined on processing under section 143(1)(a).
♦ There is a view that when unaccounted income in the form of demonetized notes is banked and same is shown in ITR for FY 2016-17 as “income from other sources” and tax @ 30% is paid thereon, the assessed tax will not exceed the tax as per return processed u/s 143(1)(a) and hence no penalty is imposable under section 270A. This view seems to be based on Press Release dated 10-11-2016 which contains replies by the Revenue Secretary. Q.No.3 in the Press Release clarifies that if huge cash deposits do not match with income declared, then it will be a case of tax evasion attracting penalty.
♦ If huge cash deposit is reported in ITR for AY2017-18, it can not be said to be “not matching with income not declared.
♦ However, one should pay careful attention to Q.No.2 of press release which says that all deposits exceeding Rs.2.5 lacs during 10th November to 30th December 2016 will be reported to Department and “The department would do matching of this with income returns filed by the depositors. And suitable action may follow.” As per amended Rule 114E , cash deposits during the period 09-11-2016 to 30-12-2016 aggregating to Rs.12,50,000 or more in current account or aggregating to Rs.2,50,000 or more in savings account will be reported by banks to tax dept. up to January 31, 2017.
♦ Thus, Department will match cash deposits with returns filed for past assessment years upto and including AY 2016-17 in January 2017 itself. If such deposits not matching with the past returns, notices may be sent out by February 2017 itself. In appropriate cases, surveys and raids may take place also. If that happens, assessee may not get a chance to execute this plan of showing cash deposits in ITR of AY 2017-18. If assessee is not able to explain it as current income of FY 2016-17, then it may attract 200% penalty under Section 270A.
♦ Further, Department will not accept a disproportionate spurt compared to preceding year as current year’s income unless satisfactorily explained. The Finance Minister clarified in Rajya Sabha as under:
“Sir, there is an existing law which would apply. I think what Mr. Gujral is referring to is when somebody declares it as a part of his current income and when current income is taxable at the rates provided in the Income Tax Act. But if the current income suddenly becomes 5,000 per cent of last year’s income, will it be treated as current income or otherwise?”
♦ For instance, if someone declares a total income of Rs.10 lakhs in preceding year and declares a huge amount of Rs.3.15 crores including a huge cash deposit of say Rs.3.0 crores, the Department is unlikely to accept that the huge cash deposit is from current year’s income unless the spurt in economic activity is satisfactorily explained by assessee. Further in such cases, Department may not even wait till ITR of current year is filed and based on report by bank it may initiate survey or search or even issue notice calling for explanation or details.
♦ Declaring past years’ income as current year’s income will amount to making of false statement in verification and would attract prosecution under section 277.
Conclusion
3. The strategy of declaring huge cash deposits in bank as current year’s income and paying tax on it is fraught with risks and assessee may end up with proceedings for past years being reopened with resultant huge interest and penalties for past years besides prosecution. Another thing to be noted is merely showing income does not fulfill assessee’s obligations under the Act as can be seen from a conspectus of various provisions of the Act. Assessee is obliged to also disclose and establish (i) source (ii) manner of deriving income and (iii) period in which derived. In other words a ‘full and true disclosure’ is contemplated. Further, disclosure of huge cash deposit may result in investigations under indirect tax laws such as VAT/Service Tax/Excise for evasion of those taxes also.
(SRINIVASAN ANAND G.CA) November 18, 2016 [2016] 75 taxmann.com 174 (Article)


Receipt of cash in new currency on selling a property would also invite penalty



In CIT v. A.M. Fazil [2012] 22 taxmann.com 238 (Ker.), the Court observed that ” unless prohibition is introduced against cash transactions particularly in sale of property, in film industry and the like at least for payments over a certain limit in cash, black money generation and circulation cannot be controlled because the disincentives on cash dealings contained under the various provisions of the Income-tax Act have failed to achieve the objective.” Accordingly, the Finance Act, 2015 amended sections 269SS and 271D of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). Section 269SS, as amended, prohibits acceptance of Rs. 20,000 or more for any transaction of transfer of immovable property otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account. The prohibition applies whether the sum is received as advance or otherwise. In terms of section 271D, violation of this prohibition attracts a penalty equal to the amount accepted or received
Following situations can arise where a seller receives property sale proceeds in cash off the record (i.e., in black)
Case 1: Seller sold the property and received part of it in black prior to demonetization and declared it in IDS
If seller had already declared the black component in IDS and old demonetized notes were deposited from this declared amount, seller will get immunity from penalty and prosecution under IT Act, 1961 and, hence, he will not be liable for penalty under section 271D. Also there would be no liability for capital gains tax.
Case 2: Seller sold the property and received part of it in black prior to demonetization and had not declared it in IDS
If the seller of property deposits the black component of sale price (received in cash) in bank account and explains it as consideration for sale of property, he is liable to pay capital gains tax with reference to total consideration including black. He will also be visited with a penalty under section 271D equal to the amount of cash accepted or received by him. What is more unlike IDS declaration which is confidential , these explanations given by seller that it is black component of sales price can be forwarded to Stamp Duty authorities for action.
Case 3: Seller has entered into agreement to sell prior to demonetization and received advance (bayana) in old notes prior to demonetization, i.e., on or before 8thNovember, 2016 and had not declared it in IDS
Seller can deposit in bank. However, he will be liable to pay capital gains tax with reference to total consideration including black. He will also be visited with a penalty under section 271D equal to the amount of cash accepted or received by him. What is more unlike IDS declaration which is confidential, these explanations given by seller that it is black component of sales price can be forwarded to Stamp Duty authorities for action.
Case 4: Seller has entered into agreement to sell post demonetization (unlikely as real estate deals have been hit) and received advance (bayana) in old notes post demonetization, i.e., on or after 9th November, 2016

The deal is illegal as cash ceased to be legal tender.

GST Updates (17 November 2016)

Posted on by Business So Simple in Miscellaneous


Draft GST bills circulated with states no rates details

November 17, 2016
The Centre has circulated the draft goods and services tax (GST) Bills with the states, but it does not contain the four-slab rates agreed to by the GST Council earlier. The Union government has also circulated the draft compensation Bill with states.
With a heated debate on in Parliament over the government’s demonetisation move, the Centre is likely to introduce the Central GST and integrated GST Bills in late November or early December in the ongoing session in the form of money Bills  – http://www.business-standard.com[17-11-2016]

No rates in draft GST Bills that Centre circulates with states

November 17, 2016
The Centre has circulated the draft goods and services tax (GST) Bills with the states, but it does not contain the four-slab rates agreed to by the GST Council earlier. The Union government has also circulated the draft compensation Bill with states.

With a heated debate on in Parliament over the government’s demonetisation move, the Centre is likely to introduce the Central GSTand integrated GST Bills in late November or early December in the ongoing session in the form of money Bills, a move that may draw flak from the Opposition.

The GST Council, a body having representation from the Centre and states, will discuss these Bills on November 24 and 25.

While the Centre and the states have already decided on four-tier GSTrates – five%, 12%, 18% and 28% – these rates did not find mention in the GST Bills, sources said.

“Rates are not a part of the Bills at the moment. Most probably, powers will be taken to notify exemptions and rates. Even today, the Central Board of Excise and Customs notifies these,” one of the sources said.

It has also not yet been decided how to ring-fence these rates, one of the crucial demands of the Congress, sources added. “There is no finality as of now on how rates will be ring fenced.”

The Centre will have to clear CGST, IGST and compensation Bills in Parliament and states SGST Bill in their respective assemblies before GST could be rolled out from April 1, 2017.

States will be given seven days to suggest changes or improvement to the draft laws for GST, after which these will be taken up by the GST council, sources said.

The Centre is likely to introduce the CGST and IGST Bills in the second half of the winter session – November-end or early-December. With the Opposition attacking the ruling dispensation in Parliament over the demonetisation issue, the government is unlikely to bring three Bills related to GST in the coming days.

CGST and IGST Bills are likely to be money Bills, a source in the Parliamentary Affairs Ministry said. This might draw criticism from the Opposition, which wants it to be tabled as finance Bill because the Rajya Sabha, where they have an upper hand, does not have the power to shoot down money Bills.

The GST Compensation Bill will provide legal backing to the Centre’s promise to compensate states if their revenue growth rate falls below 14% in the first five years of the GST rollout. The base year for calculating the revenue of a state has been decided as 2015-16.

The compensation law would have the taxes subsumed and the revenue forgone by each state on account ofGST rollout.

It will give the details on how the Centre plans to raise funds for compensating the revenue loss. The Centre and states had earlier agreed on around 28% tax on high-end cars, tobacco, pan masala and aerated drinks to compensate states. Also, clean energy cess would not be subsumed into GST and would be used for funding compensation. Once the requirement of compensation is over in five years of the GST rollout, these cesses would cease to exist.

The Bill would also specify how much revenue is being raised from which item by way of levy of cess and also the way it is reimbursed to the states, leaving no room for ambiguity.

It would also specify at the end of five years if there is a surplus in the cess pool and in what proportion it should be allocated between the Centre and states. Source – http://www.business-standard.com [16-11-2016]

GST offers opportunity to ‘go digital’

November 17, 2016
The countdown to the roll-out of the goods and services tax, or GST, has begun. The government, enterprises, regulators and consumers are gearing up to handle the tax implications of “one-country one-market structure”. A lot has already been written about how enterprises can prepare for GST. However, in my opinion, GST is not just a financial reform, but a broader business reform. It has the potential to relook at how enterprises conduct their business in India.

With GST, enterprises have an opportunity to revamp systems, go beyond the physical constraints of supply chain, and focus on what matters the most for any business—customer experience! It doesn’t just stop there. With delinking of the physical footprint from direct tax implications, enterprises can use this opportunity to move beyond physical structures, ‘go digital’ and provide digital experiences.

But first, why digital? Digital is the norm in today’s era as consumers respond more when they have better digital experiences. A recent study conducted by SAP concludes that a great digital experience directly correlates with customer loyalty and advocacy.

The outcomes of the study indicate that consumers who are delighted with a brand’s digital experience are almost 10 times more likely to remain loyal than those dissatisfied with it. Moreover, consumers ‘delighted’ with the digital experience of a brand are significantly more likely to recommend the brand, to the tune of positive 77%, versus a negative 60% for dissatisfied experience. A poor digital experience these days causes more harm to a brand than just a lost sale. Negative word of mouth in digital spreads faster and wider, resulting in ‘switching economy’. A successful digital experience strategy lends enterprises the ability to serve customer needs through personalization.

What has GST got to do with the digital experience? GST has a much wider impact on the way enterprises will conduct business in India. It is change from physical to digital. As enterprises take steps to comply with the GST regime, they must use new agile models of sourcing and delivery through a better supply chain.
Free up working capital: The other big benefit of GST is to free up working capital. A recent study from CARE Ratings concluded that GST could help to reduce logistics costs by up to 20% from current levels. These potential savings can help the enterprises to build a digital footprint instead of the traditional route of investing in new offices for a bigger physical footprint.

Level playing field: One of the direct implications of GST that I foresee is the level playing field that GST provides for enterprises of all sizes. Imagine what the Indian Premier League (IPL) did to Indian cricket. Today, we see players from across the world getting uniform exposure on a globally competitive platform. Similarly, GST unifies and simplifies tax structures across all Indian states, ensuring enterprises of reduced barriers to entry and allowing the ability to compete equally.

Bigger play for SMEs: For small and medium enterprises (SMEs) that are usually more cash-strapped, there is potential to save and reinvest in growth and redefine business prospects.

Personalization and real-time pricing strategy: More information allows enterprises to use sophisticated analytics tools, offer personalized experiences to a diversified base of customers that opens up opportunities for pricing strategies to be more real time and tailored for various business segments.

As businesses take steps to adapt to the new GST regime, it is an opportunity to ‘go digital’ and redefine the business processes. Source – http://www.livemint.com [17-11-2016]

Government shares 3 draft GST Bills with states for consultation

November 17, 2016
The Central government has circulated three draft Bills relating to the Goods and Services Tax (GST) with states for consultation, a senior government official said adding that these will be taken up for discussion in next GST Council meeting on November 24-25.

The GST Council will have to clear Central GST (CGST), Integrated GST (IGST) and the compensation Bills before they can be introduced in the Winter Session of Parliament, which commenced Wednesday. States have time of over a week to give their views on the three draft laws relating to GST.

The Centre and the states have already decided on a four-tier GST rates— 5 per cent, 12 per cent, 18 per cent and 28 per cent-— but is yet to decide on the issue of cross empowerment to avoid dual control.
On November 10, Lok Sabha had listed three draft Bills relating to GST for introduction in the Winter Session of Parliament.

The constitutional amendment enabling rollout of the indirect tax regime was passed by Parliament in August, following which it became an Act in September after ratification by 16 out of 31 states and state legislatures. The government aims to introduce GST, which will subsume excise, service tax, VAT and other local levies, from April 1, 2017. Source -http://indianexpress.com [16-11-2016]

Government unlikely to bring GST bills soon

November 17, 2016
With the united opposition attacking the ruling dispensation in Parliament over the demonetisation issue, the government is unlikely to bring three bills related to GST in the coming days and hopeful of pushing them in latter half of the Winter session which began today.

The government is keen to push the passage of three legislations related to the main GST bill in the ongoing Winter session, as Parliamentary nod for these bills is must for rolling out GST from the target date of April 1, 2017.

The three bills related to GST are-the Central Goods and Services Tax Bill, the Integrated Goods and Services Tax Bill, the Goods and Services Tax (Compensation for Loss of Revenue) Bill.

The government is hopeful of passage of the three GST bills in the Winter session, which are likely to be introduced in either third or fourth week of the session, a source said.

As per the GST Constitution Amendment Bill, which was notified on September 17, 2016, the government is required to complete the process of implementation of GST within a year.

The all powerful GST Council, which is chaired by the Finance Minister and has representations from state, had already decided on a four-tier rate structure-5, 12, 18 and 28 per cent-with a cess over and above the peak rate for luxury and demerit goods.

The issue of dual control, which deals with who will control which set of assessees under GST, has been holding back the negotiations between the Centre and the states.

The government has listed total nine bills which also includes Surrogacy (Regulation) Bill for introduction, consideration and passage.

The government has listed 10 pending bills including HIV AIDS Prevention and Control bill, Mental Health Care bill, Maternity Benefit Amendment bill, Prevention of Corruption (amendment) bill and Consumer Protection bill for consideration and passing as these bills have already been introduced in Parliament. Source – http://www.financialexpress.com [16-11-2016]


Govt in favour of cross empowerment without limits

November 17, 2016
The government is in favour of not splitting jurisdiction over the taxpayers but rather is batting for cross empowerment without limits. The logic offered is that the Centre estimates only 3-5 percent of the tax payers may be audited under the Goods and Services Tax.

The Winter Session of parliament will be mainly focussed on the GST. The revised draft GST model laws were sent to states for comments on Tuesday. The draft GST compensation bill will be sent soon.

The states are in favour of horizontal division of the assessees. However the government is against both horizontal or vertical division of taxpayers. Source – http://www.moneycontrol.com [16-11-2016]

GST Updates (16 Nov 2016)

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As Centre Readies GST Bill, Subramanian Swamy to Move SC Against GST Network

November 16, 2016

Three bills on the much-awaited Goods & Services Tax (GST) will see light of day in the winter session of Parliament beginning Wednesday, but the government’s prestige legislation is all set to hit a Subramanian Swamy block.

The BJP Rajya Sabha MP has objected to private players being involved in setting up the infrastructure of the Goods and Services Tax Network (GSTN) and told News18 that he will take up the matter in the Supreme Court.

This comes at a time when the Centre and state governments have finally come together in agreement over GST and come out with a four slab structure.

Swamy said he is approaching the Supreme Court as he feared sensitive GST data might fall into the hands of private players and “foreign interests” if the Centre goes ahead with the current structure.

“I have sent half a dozen letters to the Prime Minister in this connection. He has acknowledged it. I have also sent the copies to BJP president Amit Shah, Home Minister Rajnath Singh and the Defence Minister Manohar Parrikar,” Swamy told News18.

“The GSTN will be controlled by private players with majority foreign shareholder organisations like HDFC Ltd, HDFC Bank Ltd, LIC Housing Finance Ltd, ICICI Bank Ltd and NSE Strategic Investment Corp Ltd. No opportunity was given to Indian companies with majority Indian shareholdings and nationalised banks to become shareholders. It poses a serious threat. I am challenging it before the Supreme Court in the national interest,” he said.

According to Swamy, in 2011 when Pranab Mukherjee was Finance Minister, the Centre had decided that GSTN would be owned by three government stakeholders: the Central government, the state governments and the Centre-owned National Securities Depository Limited (NSDL). Training his guns on former finance minister P Chidambaram, Swamy said that he had dropped NSDL and added five private players making it look like a private body for profits.

The Constitution Amendment Select Committee of the Rajya Sabha in its report accessed by News18 has expressed serious concerns over the structure of GSTN. The report said, “The committee noted that the non government shareholding in GSTN is dominated by private banks, and this is not desirable. It recommended that the non-government institution shareholding be limited to public sector banks and financial institutions.”

Swamy has forwarded all his correspondence on the GSTN with the Centre to President Pranab Mukherjee, informing him that he was free for any consultation on the subject. He said that the Comptroller and Auditor General had no jurisdiction over the GSTN in its current form and it could lead to a huge scam. He has also questioned the rationale behind outsourcing computer programming to private IT companies alleging that mandatory procedures were not followed before awarding such contracts.

“I once again strongly urge the Prime Minister Modi to direct the complete stay of all operations of the presently constituted GSTN. At the same time I will also be moving the SC seeking cancellation of it,” he said. Source – www.news18.com [15-11-2016]


Passage of GST bill could take a hit over Modi’s demonetisation move

November 16, 2016
Will the Opposition’s onslaught against the Centre over the demonetisation affect the passage of the goods and service tax (GST) bill?

A confident government may bring the GST bill by early next week in Rajya Sabha, indicating it is not perturbed at the ongoing protests against another of its financial reforms — the demonetisation scheme.

The Centre wants to pass the GST bill to roll out the new tax regime from April 1, 2017. The proposed tax, which will absorb local levies and indirect taxes, has already missed many deadlines.

“We are getting the Constitution amended for GST on which discussions have been on since long… since Congress’ time. I am confident that we will do those amendments and pass the GST,” home minister Rajnath Singh said recently.

But for the Congress, the priority is to corner the BJP-led NDA over the demonetisation of 1,000 and 500 rupee notes. “Right now, the main issue is the surgical jumla (drama) of the demonetisation by Prime Minister Narendra Modi. The GST is not in our radar screen,” said Congress strategist and Rajya Sabha MP, Jairam Ramesh.

Even as the government may not require the Opposition’s support to pass the GST legislation, a united opposition might as well delay the passage of the bill through chaos and ruckus in the House. The Rajya Sabha may not get a chance to vote on the GST bill as the government is likely to introduce it as a money bill — such bills do not require the approval of the Upper House.

“I think the GST is a forgotten issue. Let us first see if the session runs or not. Then only the possibility of GST being passed arises,” said Ramesh.

In the last session, the government managed to pass the Constitution amendment bill on the GST as the Congress and other opposition parties came on board. Now, with a hostile opposition gunning for the BJP-led government, it might be a tricky situation for pushing the GST bill.

“Thousands of ‘rich’ and ‘corrupt’ persons standing in queue. The poor are cheering from their homes! Banks are doling out cash to citizens. That is proof that ‘Achhe Din’ has arrived! Millions of working people standing in queue. Long live productivity,” former finance minister P Chidambaram on Tuesday tweeted, taking potshots at the government. Source -www.hindustantimes.com [16-11-2016]

Congress expresses opposition to 4-tier GST rate structure

November 15, 2016
Ahead of the winter session of Parliament, Congress on Monday expressed its opposition to the proposed four-tier Goods and Services Tax (GST) rate structure which goes up to 28 per cent, insisting that it would hit hard the common man “Congress has always been insisting that the rate should not be more than 18 per cent as it would lead to rise in inflation and burden the common man”.

“Now it is being revealed that Narendra Modi and Arun Jaitleywho were having ambivalent position on the GST (when in the opposition) are now talking of a tax of 27 per cent”, party’s chief spokesman Randeep Surjewala told reporters.

He said that the Congress would “certainly oppose” the multiple rates of the GST up to 28 per cent as it would “break the back of the common man”.

Earlier this month, the GST Council, overcoming opposition from some states finalised a multiple-slab rate structure, including the cess, for the new indirect tax The quantum of cess on each of these will depend on the current incidence of tax.

While on nearly half of the consumer inflation basket, including food grains, the GST will be at 0 per cent, ultra luxuries, demerit and sin goods, will attract a cess for a period of five years on top of the 28 per cent GST.

The highest slab of 28 per cent will include white goods and all those items on which the current rate of incidence varies from 30-31 per cent.

Centre will have to pass the CGST and IGST bills in Parliament at the earliest to meet the deadline of roll out of GST from April 1 next year Source – http://www.indianexpress.com [14-11-2016]

State tax officers demand fair share in GST

November 15, 2016
State tax officers demand fair share in GST

In a unique way of protest, about 2.36 lakh officers and employees working with commercial and sales tax departments of various states will work on Sunday to press for their demand of having a fair share in the administration of taxes under the proposed Goods and Services Tax (GST).

The All India Confederation of Commercial Taxes Association (AICCTA) said its members will also go on day-long pen down strike on November 23 if their demands are not accepted by the government.

The confederation has decided that all its members will work on November 20, which is Sunday, to protest the way the administration of GST has been planned by the Centre.

“It is a positive form of protest by working on a general holiday,” the employees’ body said.
Union Finance Minister Arun Jaitley has called an informal meeting of state finance ministers to discuss the matters of dual control and cross empowerment on Sunday.

Earlier this week, different delegations of the confederation met finance ministers of various states to seek their support.

The confederation claims to represent over 36,000 Gazetted officers and about two lakh employees of Class-Ill and-IV categories.

The confederation has sought complete authority relating to monitoring, audit, assessment and enforcement activities provided either under the GST Act or under the Integrated Goods and Services Tax-to be levied on all inter-state supplies of goods and services.

“It is also demanded that the state authorities should also be empowered under IGST Actto administer matters relating to interstate transactions,” as per a memorandum submitted to the Finance Ministry.

The officers’ body has sought representation of officers from the states in GST council secretariat.

“It is demanded that the GST council provide sufficient funds to the states to establish a uniform infrastructural and networking system,” it said.

The confederation has said that they would not work on November 23 to protest against non-implementation of its demands and for a just and fair tax administration under the GST regime.

The proposed GST is a single tax on supply of goods and services, right from the manufacturer to the consumer.  Source -http://economictimes.indiatimes.com [14-11-2016]

State tax officers demand fair share in GST

November 15, 2016
State tax officers demand fair share in GST

In a unique way of protest, about 2.36 lakh officers and employees working with commercial and sales tax departments of various states will work on Sunday to press for their demand of having a fair share in the administration of taxes under the proposed Goods and Services Tax (GST).

The All India Confederation of Commercial Taxes Association (AICCTA) said its members will also go on day-long pen down strike on November 23 if their demands are not accepted by the government.

The confederation has decided that all its members will work on November 20, which is Sunday, to protest the way the administration of GST has been planned by the Centre.

“It is a positive form of protest by working on a general holiday,” the employees’ body said.
Union Finance Minister Arun Jaitley has called an informal meeting of state finance ministers to discuss the matters of dual control and cross empowerment on Sunday.

Earlier this week, different delegations of the confederation met finance ministers of various states to seek their support.

The confederation claims to represent over 36,000 Gazetted officers and about two lakh employees of Class-Ill and-IV categories.

The confederation has sought complete authority relating to monitoring, audit, assessment and enforcement activities provided either under the GST Act or under the Integrated Goods and Services Tax-to be levied on all inter-state supplies of goods and services.

“It is also demanded that the state authorities should also be empowered under IGST Actto administer matters relating to interstate transactions,” as per a memorandum submitted to the Finance Ministry.

The officers’ body has sought representation of officers from the states in GST council secretariat.

“It is demanded that the GST council provide sufficient funds to the states to establish a uniform infrastructural and networking system,” it said.

The confederation has said that they would not work on November 23 to protest against non-implementation of its demands and for a just and fair tax administration under the GST regime.

The proposed GST is a single tax on supply of goods and services, right from the manufacturer to the consumer.  Source -http://economictimes.indiatimes.com [14-11-2016]

Reporting of cash deposit (from 09 Nov 2016 to 30 Dec 2016) N/N. 104/2016 dated 15 Nov 2016

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Amendment in Rule 114B for compulsory quoting of pan in case of cash deposit exceeding Rs. 50000 in a single day or aggregating to more then Rs.  2.5 lakh during the period from 09.11.2016 till 30.12.2016.

Amendment in Rule 114E for filing AIR report as required under section 285BA of Income Tax Act, 1961 for reporting by banking company and a cooperative bank on account of aggregate cash deposits in one or more current account of a person in excess of Rs. 12.5 lakhs or Rs. 2.5 lakh or more in one or more account of a person during 09.11.2016 till 30.12.2016.

GOVERNMENT OF INDIA
MINISTRY OF FINANCEDEPARTMENT OF REVENUE
CENTRAL BOARD OF DIRECT TAXES

NOTIFICATION No. 104/2016-Income Tax
New Delhi, the 15th November, 2016

G.S.R 1068(E).- In exercise of the powers conferred by section 285BA, read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-
1. (1) These rules may be called the Income–tax (30th Amendment) Rules, 2016.
(2) They shall come into force from the date of their publication in the Official Gazette.
2. In the Income-tax Rules, 1962 (hereinafter referred to as the said rules), in rule 114B, in the Table, for serial number 10 and entries relating thereto the following serial number and entries shall be substituted, namely:-
Sl. No. Nature of transaction Value of transaction
(1) (2) (3)
“10.
Deposit with,-
(i) a banking company or a co- operative bank to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in
section 51 of that Act);
(ii) Post Office.
Cash deposits,-
(i) exceeding fifty thousand rupees during any one day; or
(ii) aggregating to more than two lakh fifty thousand rupees during the period 09th November, 2016 to 30th December, 2016.”.
3. In the said rules, in rule 114E, ̶
(i) in sub-rule (2), in the Table, after serial number 11 and entries relating thereto the following serial number and entries shall be inserted, namely:-
Sl. No. Nature and value of transaction Class of person (reporting person)
(1) (2) (3)
“12.
Cash deposits during the period 09th November, 2016 to 30th December, 2016 aggregating to ̶
(i) twelve lakh fifty thousand rupees or more, in one or more current account of a person; or
(ii) two lakh fifty thousand rupees or more, in one or more accounts (other than a current account) of a person.
(i) A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act);
(ii) Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898).”;
(ii) in sub-rule (5), the following proviso shall be inserted, namely:-
“Provided the statement of financial transaction in respect of the transactions listed at serial number (12) in the Table under sub-rule (2), shall be furnished on or before the 31st day of January, 2017.”

[Notification No. 104/2016]
[F.No.370142/32/2016-TPL]
(Dr. T.S. Mapwal)
Under Secretary to the Government of India
Note:- The principal rules were published vide notification S.O. 969 (E), dated the 26th March, 1962 and last amended vide notification S.O.3399(E), dated 07th November, 2016.

GST Updates (14 Nov 2016)

Posted on by Business So Simple in Miscellaneous


Retain Differential Duty Under GST, Handset-makers Tell Govt

November 12, 2016
Handset makers have asked the government to continue differential duty advantage under the goods and services tax (GST) regime, and deincentivise import of fully built mobile phones by imposing higher rate than on locally produced phones.
Unsure of the slab rate under GST, representatives of the Indian Cellular Association (ICA) and Consumer Electronics and Appliances Manufacturers Association (CEAMA) separately met senior officials in the revenue department earlier this week to present possible solutions to keep local phone manufacturing going.
“We have proposed that the government introduces a new concept, a negative list under GST for imports and trading of goods, which includes mobile handsets, on which no credit of central GST should be allowed,“ CEAMA vice president Sunil Vachani told ET after the meeting.
The GST Council is yet to decide the rate category for mobile phones, which are at the forefront of PM’s Make in India initiative. India is set to produce mobile phones worth Rs 94,000 crore locally this fiscal, up from Rs 54,000 crore in 2015-16.
The government took the first step towards creating a uniform tax rate structure for the country with GST, but decided on a four-tiered tax system 5%, 12% 18% and 28% with the first three rate slabs comprising goods of mass consumption.
The 28% slab is applicable to white goods, cars, pan masala, tobacco and aerated drinks. Additionally , a cess will be imposed on luxury products and products such as pan masala, tobacco and aerated drinks. A committee of secretaries will now allocate items into different tax categories.
Handset makers fear that lack of clarity on the duty dispensation could not only upset the momentum of local manufacturing growth but also put at risk investments made by device makers that assemble phones locally. They said if the duty differential is not continued, it may also threaten the proposed Phased Manufacturing Programme (PMP) that aims to make 1.2 billion mobile phones – worth Rs 15 lakh crore by 202526 ¬ potentially employing 5.8 million people.
Both ICA and CEAMA have proposed an alternative, where import GST rate of 12.5% without any credit should be applied on phones that are imported. In order to maintain differential duty structure for locally made phones, a nil central GST rate without input tax credit and state GST rate of 5% at each stage which is creditable, should be set.
ET has seen details of the presentations made by both associations that represent leading mobile phone makers such as Samsung, LG and Micromax besides consumer durable makers such as Haier and Videocon.
The government currently levies a 12.5% countervailing duty on fully made phones imported into India and a similar rate of duty on batteries, chargers and headsets of mobile phones.
Senior officials from telecom and electronics and IT departments had earlier said that policy and regulatory framework would be supportive to the industry, seeking to position India as an emerging global hub for manufacturing of mobile phones. However, a final word from the government on the rates is awaited. – http://www.economictimes.indiatimes.com [12-11-2016]

GST implementation can’t be delayed beyond Sept 16, 2017

November 11, 2016
Finance minister Arun Jaitley on Thursday said the Centre was trying earnestly to build a consensus with the states on the sticky issue of sharing of administrative control on assessees to ensure that the April 1 deadline for rolling out the goods and service tax (GST) was met.
“We are making all efforts to introduce GST from April 1, 2017. GST has to be implemented latest by September 16, 2017, and if it is not implemented by then, states will not be able to collect their share of taxes, and hence, there is not enough scope to further delay the decision,” Jaitley said at an economic editors’ conference here.
The minister was referring to the GST Constitutional Amendment, which has a provision in this regard. After deciding the GST rate structure a day earlier, the Centre and states hit a speed breaker on November 4 as they could not decide on how the audit and enforcement powers would be shared between them in the GST regime.
The Union and state finance ministers would meet informally on November 20 to solve the issue politically and suggest their formula to the GST Council meeting on November 24-25 for endorsement. In the meantime, officials from both sides are deliberating to finalise the four draft laws — those on central GST (CGST), integrated GST (IGST), compensation and state GST (SGST) — by November 15. The Centre is trying to introduce CGST, IGST and compensation Bills in the winter session of Parliament later this month.
“Only the last stages (of decision-making) remain and I do hope we (GST Council) are able to resolve that too, through a larger consensus,” Jaitley said.
The government has covered a lot of distance for implementation of comprehensive indirect tax and it was not in favour of resorting to voting to decide on any issue at the GST Council meeting. “We have already sorted out 10 issues. The issue of dual control still remains, there is no reason why we will not be able to work out a reasonable solution on this,” he said.
Jaitley assured people that taxman will not hound those making small deposits in scrapped Rs 500/1,000 currency and advised them not to throng banks as there is enough time to exchange the junked notes. He however said that those depositing large sum of unaccounted money will have to face the consequences under tax laws, which provide for tax and a 200 per cent penalty. Source – http://indianexpress.com [11-11-2016]


Surrogacy regulation and GST related bills to be introduced

November 11, 2016
As many as nine new bills, including three related to GST, and surrogacy regulation will be introduced in Parliament in upcoming Winter Session.

The three GST related bills are — Central Goods and Services Tax Bill, Integrated Goods and Services Tax Bill, Goods and Services Tax (Compensation for Loss of Revenue) Bill will be introduced in the session.
Winter Session of Parliament will begin from November 16. Surrogacy (Regulation) Bill will be introduced to constitute national surrogacy board, state surrogacy boards and appointment of appropriate authorities for regulation of the practice and process of surrogacy and for matters connected therewith or incidental thereto.
Besides these, six other bills will be introduced including IIM bill to confer Indian Institutes of Managements (IIM) statutory status and the competence to award degrees. While HIV AIDS Prevention and Control bill, Mental Health Care bill, Maternity Benefit Amendment bill, Prevention of Corruption (amendment) bill and Consumer Protection bill will be taken up for consideration and passing as these bills have already been introduced in the Parliament.
Mental Health Care bill, Maternity Benefit Amendment bill were passed by Rajya Sabha and are pending in Lok Sabha. While, Consumer Protection bill, and HIV, AIDS Prevention and Control bill were referred to the standing committees and Prevention of Corruption (Amendment) bill was referred to the select committee, according to Lok Sabha bulletin. Source -www.dnaindia.com [11-11-2016]




GST Updates (10 Nov 2016)

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Govt lists GST Bills for passage in Parliament

November 10, 2016

The Centre today formally listed three Bills to complete the Goods and Services Tax reforms for consideration and passage of Parliament in the winter session starting next week.

These Bills—The Central Goods and Service Tax Bill, the Integrated GST and GST (Compensation for Loss of Revenue)— are among the nine new Bills to be moved.

The Central GST Bill will facilitate levy of tax on intra-state supply for goods or services; the Integrated GST will enable levy of tax on inter-state supply of goods or services; and the third Bill is to facilitate payment of compensation to states for loss of revenue arising on account of implementation of GST for a period of five years. Last week, the GST Council finalised a four-tier tax structure of 5 per cent, 12,18 and 28 per cent with lower rates for essential items.

Among the other Bills on the anvil are the Surrogacy (Regulation), to constitute National and State Surrogacy Boards, and appointment of appropriate authorities for regulation of the practice and process. Another Bill includes amending the 1869 Divorce Act and empowering courts to make decrees of dissolution of marriage when either party to a marriage is domiciled in India, enable the Christian wife to present a petition to the district court and reduce mandatory period for separate residence from two to one year.

The winter session is scheduled between November 16 and December 16.  Source – http://www.tribuneindia.com [10-11-2016]


GST rates announced: well begun is half done

November 9, 2016

Last week, the goods and services tax (GST) council, in which the states and the central government participated, announced the GST rate structure. The rates are in four slabs: 5%, 12%, 18% and 28%. The luxury and sin goods, will be taxed above 28% plus additional cess. And essential goods like foodgrains will be in the 0% slab, if we can call it a slab.

This is a major step towards meeting the April 2017 deadline for implementing GST, but by itself this announcement means very little. The GST council will meet a few more times in November, and then more laws will have to be passed in the winter session of Parliament. Post that, state legislatures will have to pass their own laws, and only then will there will be a workable framework for implementing the GST nationwide.

For now, we know the GST rates. What we do not know—among many other things—is the rate at which specific items will be taxed, in different parts of the country. If you want to know how much more or less you will have to pay to buy a house, a car, some mutual funds or that annual holiday next year, you will have to wait a bit more. But there are some broad indications out there and Mint Money looks at how the implication of GST will affect you.

Banking and insurance

All financial products will be impacted by the GST. Banking products are already in the service tax net. Banks typically pass this tax burden to their customers in the form of charges and fees. The same is likely to happen with the GST.

The current service tax rate is 15%, and with GST, banking and insurance services are likely to be in the 18% slab. “Also, if the free banking services get taxed, again it will impact the customers. Right now, there is no clarity if the government is looking to tax interest also,” said Nihal Kothari, executive director, Khaitan and Co., a Mumbai-based law firm. We have to wait for the final rates. “The Rajya Sabha had pointed out that banking services should have lower rates. We will have more clarity on it by mid-November. You will see the maximum impact on financial services,” said Kothari.

The insurance industry is proposing that at least the life insurance services should be taxed at a lower rate of 10-12%, and more importantly, the GST rate for it should be uniform across the states. “Though our proposal is 10-12%, I think government will be more likely to keep it at 18%,” said Prashant Tripathy, senior director and chief financial officer, Max Life Insurance.

The demand for lower rates is easily understandable. But why does the industry want a single rate across states?

Insurance and banking companies are large organisations, with offices all over the country. For reasons of efficiency and economy of scale, many of these offices perform specialised functions for an entire region, or even the whole country. For instance, a customer may pay for a life insurance policy in a Mumbai branch, have her know-your-customer (KYC) process done by an office in Delhi, her policy prepared by a branch in Gurgaon, and have it mailed from a centralised dispatch office in Chennai. The company’s centralised data warehouse may be in Hyderabad and the call centre in Kolkata. Taxing these services currently is not a problem, as the service tax is at a uniform rate of 15% across the country. “Though the impact is yet to be fleshed out, there will be administrative issues for the insurance sector. Taxation is determined by where the business originates. We assume it could be state-wise, which will become more complex for insurance,” said Sanjay Datta, chief-underwriting and claims, ICICI Lombard General Insurance Co. Ltd.

Banking and insurance industries are, therefore, seeking a centralised registration system instead of having to register different offices in different states separately.

Non-financial products

The stated aim of the GST was to have a single indirect tax regime across the country, however, the current structure “is against the very essence of a simplified tax regime, even as it scores high on progressivity and inflation neutrality,” said Jay Shankar, chief India economist, Religare Institutional Research.

Analysts believe that the effective tax rate under GST will keep the prices for consumers at the same level as at present. For instance: aerated drinks are taxed at 40% and luxury cars at 40-45%. In both the cases, similar rates are being proposed to be retained in the form of 28% tax plus cess.

The current tax incidence on cars is around 26% and under GST they would be in the 28% tax slab, which is in line with the current tax incidence, said Sachin Menon, partner and head, indirect tax at KPMG in India. The auto sector was expecting cars to be taxed at 18% under the GST regime.

“The broad principle…seems to be that goods (will not) attract more tax than they are currently attracting. So, the goods or services will be categorised in the nearest lower slab,” Menon said. “For most goods, there will be a reduction in total tax,” he said. Taxes, and hence prices, may not go up. White goods present a tricky situation. While washing machines, refrigerators and televisions can be called luxury goods, it may not be proper to call them sin goods. “(The government) should take care that these do not come under the 28% slab. It is not yet clear what tax bracket these will fall under. Most probably it should fall under 18%,” Menon said.

More clarity is needed on telecom services too. Many believe that the common man could in fact end up gaining to some extent. The current level of taxes on services is 15% and it can go up to 18%. But “if you look at the service basket, the only item that is used by every common person is a mobile phone. The government will not bring a rate that will pinch the common man,” Menon said, adding that telecommunication and transportation services could fall under 5% or 12% tax slabs. The excitement around GST will give way to more informed discussions once the different goods and services are allocated to the GST slabs. “Without these specifics, it is not possible to assess the exact impact on the final prices of individual goods and services,” Shankar said.

Final rates for goods and services could take some time, but we can expect more clarity by end of November, when the GST council would have met a few more times. But we can already expect that GST will have only a small impact on the price of your banking and insurance products. And while the tax impact on most goods would remain the same, it could come down for some. Source – http://www.livemint.com [09-11-2016]


GST positive for India; Trump may bring in oil gains

November 10, 2016

GST positive for India; Trump may bring in oil gains:Julius Baer

The introduction of Goods and Services Tax (GST) is a very positive move for India feels Mark Matthews of Bank Julius Baer & Co., who believes it will restructure the economy.

The introduction of Goods and Services Tax (GST) is a very positive move for India feels Mark Matthews of Bank Julius Baer & Co., who believes it will restructure the economy.

Sharing his views on the US elections outcome, Matthews says market is increasingly looking at Donald Trump as a pro-growth President and although his world view is through a narrow prism of business and economics and he is not so much in geopolitics of things, “he is more of a deal-maker than deal-breaker” which might prove beneficial.

Factoring in Trump’s plan of trimming corporate tax rates to 15 percent from 35 percent, earnings per share of companies in US should expand by 20 percent over next few years and that itself could help markets rally, he adds.

For India, he believes Trump might bring benefits in oil prices as he might allow a lot more US oil production leading to price decline.

He expects the US Federal Reserve to increase rates in December followed by two more hikes in March and August next year.

Below is the transcript of Mark Matthews’ interview to Latha Venkatesh, Sonia Shenoy and Anuj Singhal on CNBC-TV18.

Anuj: Event is out of the way and the markets have rallied a lot from the low point. Do you think this market can rally or do you see more volatility going forward?

A: It will continue to rally and the market is rapidly looking at Trump at being pro-growth president and less through the prism of his geo-politics. And therefore, if we factor in especially his plans to cut corporate taxes from 35 percent to 15 percent, that alone could add almost 20 percent to earnings per share (EPS) growth in the United States over the next few years. I do not see why the market cannot go higher.

Sonia: And is that your view about the Indian market as well because now it seems like our own markets will focus on domestic cues and we have many positive domestic cues going for us. The biggest one was what happened yesterday with the whole black money probe and the clamp down. Is that something that you have read into and is that something that would make you a bit more positive from our markets?

A: What made me most positive on India was the goods and services tax (GST) and I continue to think that that will restructure the economy in a very positive way. These things are all linked in a strange way. I do not know if it is the alignment of the planets and the moons or what, but it seems that around the world, governments are changing broadly in a way which is beneficial to economies and markets. And it started with Mr Modi and also in Indonesia and a few other countries in the world and now it has progressed to the United States and so, I do not know where it goes next, but many places in the world are becoming better run. Let us put it that way.

Latha: What is it from an India investor point of view that we should take away from Donald Trump’s speech and the economic philosophy he stands for? One part of the philosophy which is why stocks like Caterpillar went up looks like he is going to spend his way into growth, probably higher fiscal deficits, higher debt ceilings. Should we therefore see that as emerging market positive?

A: Broadly if we have the major risk assets of the world going up like the Standard and Poor (S&P), barometers of them, then the riskier spectrum which has historically been considered emerging markets should go up as well. I do not see any problems in the emerging markets on an individual basis to hold them back in most of them. And then, with India specifically, the oil price will be interesting, because although most commodities have risen, what Mr Trump will probably do is allow a lot more US oil production. So, there should be more supply of oil. That could keep the oil price down which would be good for India. And also, he said that he likes Indians. I do not know why. I guess the ones he has met, he has liked them. So, I do not see why we could not expect good relations between the two countries as well which never hurts.

Sonia: There were a bit of concerns that people had that Trump would follow through on some of those threatened punitive tariffs against China, against Mexico, etc. Do you think all those concerns are unwarranted now?

A: They are still warranted, definitely. I think that his world view is through a very narrow prism of business and economics and so, he is not so much into the geo-politics of things. So, what he wants to do is make deals and he is more of a deal maker than a deal breaker. So, when he comes in to negotiate, he will probably come in with a much more tough tone, but maybe Asians will appreciate that because maybe Asians are used to negotiating that way anyway. It is too early to say. But I do think that we will see trade deals re-negotiated. Will it be so punitive that at the end of the day, China cannot make any money selling anything to the United States? I doubt it.

Latha: What next from the Fed? That is the next big event to watch out for.

A: If you look at the futures, the implied probability of a rate hike is about 80 percent in December which is down from 84 percent before the election. So, people are still really expecting the Fed to go ahead and of course, we saw the reaction with the 10-year treasury bond above 2 percent yesterday and various measures of inflation have shot up dramatically. And of course, the move in stocks like Caterpillar speaks for itself. So, I would expect a rate hike in December. Probably another one in March and then in August of next year. Now, people are worried about Janet Yellen and Trump spokespeople have said that he does not intend to fire her, but when her chair comes up for renewal in February of 2018 that he will get somebody else which is an entirely normal thing for presidents to do. Presidents like to have Fed chairs who are from their party. Source – http://www.moneycontrol.com [10-11-2016]


Developers pitch for increased benefits for affordable housing; reasonable GST rate

November 9, 2016

Real estate developers have pitched for increased benefits to boost affordable housing. They want infrastructure status for affordable housing and suggest that the rate of goods and services tax (GST) should not be more than 5%.

A delegation of the Confederation of Real Estate Developers Associations of India (Credai) held a pre-budget meeting with finance ministry officials on Tuesday and submitted a wish list that included increased benefits for affordable housing, increased income tax rebate for homebuyers and suggested that the rate of GST should not be more than 5%.

“We have asked for infrastructure status for affordable housing. We have also pitched for a higher interest subvention for affordable housing, which was 1% on housing loans of up to Rs 35 lakh. This should be enhanced to 2% for housing loans of Rs 50 lakh at least. We have also asked for income tax rebate to be increased from Rs 2.5 lakh to Rs 4 lakh,” said Getamber Anand, president, Credai.

Homebuyers in India are entitled to claim interest and principal components of home loan repayments for tax benefits. Currently interest payable on a self-occupied house is subject to a maximum deduction of Rs 2.5 lakh under the head Income from House Property.

To enable more supply in the affordable housing segment, “we have also pitched that the size of houses be increased from 30 to 60 sq m to 60 to 90 sq m as aspirationally people want bigger houses so that they can live comfortably, Anand said.

Union Budget 2016 had announced a zero service tax policy for developers constructing flats of less than 30 sq m in tier-I cities and less than 60 sq m in tier-II cities, with the intention of incentivising developers to create affordable housing.

The GST tax rate should not be over 5%, otherwise the home buyer will be doubly hit as they will have to pay both the stamp duty and the GST, he said.

While the goods and services tax (GST) tax structure has been announced, the real estate industry is waiting with bated breath to see which tax rate is applied to the real estate and construction industry. The finance minister has clarified that the highest tax slab will be applicable to ‘sin’ items and other categories that are currently taxed at around 30%.

Ministry sources confirmed that the delegation was given a patient hearing. “We have not made any commitment but will look into their request,” they said. Source – http://www.hindustantimes.com [09-11-2016]


GST enrolment programme to begin in Puducherry today

November 9, 2016

PUDUCHERRY: The enrolment of VAT assessees to Goods and Services Tax (GST) Portal will begin in Puducherry, the first in the country (along with Sikkim), from November 8. On the same day, the GST Portal will be launched by the Government of India, as part of rolling out the GST from April 1, 2017. Puducherry and Sikkim were selected as pilot States to be migrated to the new GST System.

Around 16,000 VAT assessees in Puducherry will begin the enrolment from November 8 and continue up to November 23. With the provisional user ID and password provided by the Puducherry Commercial Department, after validation of e-mail id, mobile number and PAN, the enrolment can be done to GST, though the portal http://www.gst.gov.in. Already PAN validation has been completed for the existing 15,900 VAT assessees by the Puducherry Commercial Department and email-id and mobile number verification has been done for 70 per cent of the VAT assessees. Those who have enrolled will get a provisional GST certificate once the GST is rolled out on April1, 2017.

“The enrolment of other States will be done subsequently and the entire process completed by January 15, 2017,” said Navin Kumar, Chairman of GST network.

Giving a presentation at the GST Portal Curtain Raiser, organised by the Confederation of Indian Industries, Puducherry, Navin Kumar said that under GST, dealers need to have a separate registration in every State where they are operational. However for the same dealer who is paying VAT, service tax of central excise, separate registration is not required. Source – http://www.newindianexpress.com [09-11-2016]


GST rates: India Inc eagerly awaits finer details

November 10, 2016

e countdown has begun! The announcement of GST rates is again showcasing the steady approach and determination of the government of India towards introducing the much-awaited GST regime. A four-tier GST rate structure ranging from 5 percent to 28 percent, plus a cess on certain commodities has been recommended by the GST Council. A comprehensive list of commodities falling under each rate slab is yet to be notified. However, this rate structure is enough to create a buzz in the industry to speed up the preparations for the new regime. India Inc is eagerly waiting for the finer details to become public.

The four GST rates are 5 (lower rate), 12, 18 (standard rates) and 28 percent (higher rate). Besides the 4-tier tax structure, the GST Council has announced zero rating of items of basic necessities such as food grains. Further, approximately 50 percent of items forming part of the CPI basket have been proposed to be kept in the no tax basket. Some of the hitherto untaxed items (such as agri products) and sectors (such as education and health care) should hopefully feature in the list of zero rated supplies. Keeping essential items in the zero rate or exempt basket would regulate inflation and be consumer pocket friendly at the same time.

The Centre’s initial proposal of 6 percent as the threshold rate has been tweaked and reduced to 5 percent instead. Lower rate of 5 percent for items of mass consumption would make GST less regressive. For industry, tax costs might even go down due to commodities taxable at the lower rate provided the credits on procurements are fully allowed. While the lists are yet to be rolled out by the GST Council, sectors like transportation, logistics, storage & warehousing, financial services, etc, merit coverage in the list.

Furthermore, a standard rate of 12 and 18 percent for most of the items and services should keep the overall tax incidence below or around the existing tax costs. The inflationary impact on standard rated commodities should be minimal but services may cost more due to a push to the 18 percent slab.

As per the statement of the Union finance minister, a 28 percent tax slab has been proposed for the items which presently face a 30 to 31 percent tax incidence (including excise and VAT). The industry is most concerned about the items to be covered in this list. Ostensibly, the commodities falling under this rate slab would cause lesser tax outflow under GST regime versus the present regime (from 30/31 to 28 percent). However, on closer analysis, it emerges that the GST rate of 28 percent on currently standard rated goods would lead to a higher tax incidence as it applies on final stage of consumption in comparison to excise duty which applies at the stage of manufacturing. Thus, keeping the current standard rated goods in this list will enhance the tax burden on such goods. This will, clearly be, contrary to the assurance given by the Union government time and again that the overall tax incidence on most commodities will go down with the advent of GST. Putting a very restricted range of commodities in this tax slab is quintessential to keeping the inflationary impact of GST on common man at check.

From the perspective of overall tax incidence, levy of cess along with tax at 28 percent on luxury items, sin and demerit goods viz; luxury cars, tobacco, etc, ensures that these goods face a similar tax burden as is faced presently. Levy of compensation cess on certain luxury and sin goods in addition to tax is, however, likely to add complexities to the indirect tax administration and compliance environment for such product lines. Though the cess has been proposed to be levied for initial five years only, this would transit the complexities of existing tax regime to GST which could have been easily avoided by keeping a higher GST tax rate for these products. Thus, dealing with another tier of tax would pose administrative challenges before the industry. Accordingly, modalities around levy of cess, point of levy, credit eligibility, etc, will be critical aspects to watch out for. Also, the GST council needs to build in enough safeguards in the fine-prints of its recommendations such that the industries liable to pay cess are not left grappling with uncertainties around jurisdiction, differences in rates of cess across different states and possibility of increase in rate of cess at the whims and fancies of the central or the state governments.

Historically, it has been witnessed that multiple tax rates have led to classification issues and disputes. A micro level impact analysis of the rate structure across all sectors and products will however be ascertainable only when the complete schedules are made available. The country continues to hope that final lists of GST rates will be in sync with the overall stated intent of the government behind introducing GST and hence the total indirect tax incidence on the common people would come down. Also, it is hoped that there would be seamless input tax credit to businesses leading to a reduced effective tax on goods and services.

With a headline message that the GST rates would not vary significantly from the rates under the existing indirect tax enactments, the GST Council has successfully marked a crucial milestone towards the timely rollout of GST. These indicators are acting as catalysts in keeping the industry exhilaration for GST alive. This proactive approach also reassures India that the policymakers will put in their best efforts for a timely rollout of GST.  Source – http://www.forbesindia.com [10-112016]





GST Updates (08 Nov 2016)

Posted on by Business So Simple in Miscellaneous

Govt. launches GST Portal;issues state-wise enrolment schedule

Enrolment Plan for your State
The schedule of the enrolment activation drive for states is given below. We encourage you to complete the enrolment during the specified dates. However, the window will be open till 31/01/2017 for those who miss the chance.

States
Start Date
End Date
Puducherry, Sikkim
08/11/2016
23/11/2016
Gujrat, Maharashtra, Goa, Daman and Diu, Dadra Nagar
Haveli, Chhattisgarh
14/11/2016
29/11/2016
Odisha, Jharkhand, Bihar, West Bengal, Madhya Pradesh,
Assam, Tripura, Meghalaya, Nagaland, Arunachal
Pradesh, Manipur, Mizoram
30/11/2016
15/12/2016
Uttar Pradesh, Jammu and Kashmir, Delhi, Chandigarh,
Haryana, Punjab, Uttarakhand, Himachal Pradesh,
Rajasthan
16/12/2016
31/12/2016
Kerala, Tamil Nadu, Karnataka, Telangana, Andhra
Pradesh
01/01/2017
15/01/2017
Service Tax Registrants
01/01/2017
31/01/2017
Delta All Registrants (All Groups)
01/02/2017
20/03/2017


Auto cos seek clarity on cess under GST

November 8, 2016

The automobile industry is jittery ahead of the Goods and Services Tax (GST) Council meeting later this month which will arrive at a definition of cars which fall under the ‘luxury’ category and the incidence of cess that will be applied on it.

Members from the auto industry met Revenue Secretary Hasmukh Adhia to discuss these issues under the GST regime which may be implemented from April 2017. They sought clarity from the Revenue Department to address the transitional issues before the GST is rolled out.

“We have talked about the cess rate that will apply on luxury cars and its definition. We have given our views,” said Pawan Goenka, Executive Director, Mahindra & Mahindra.

The GST Council had arrived at a four-tier tax structure of 5, 12, 18 and 28%. However, aerated drinks and tobacco which fall under the category of sin goods, as also high-end luxury cars will attract a cess in a manner that the total incidence of tax remains at the current level. Goenka said that lack of clarity on the definition and on incentives that were given by the Central and state governments, especially by the hilly states, are a real cause of concern for the automobile industry.

“It appears to us that the definition of luxury cars will remain the same and the tax incidence will be similar to what it is today. There may be some differential 2-3 per cent up or down, but it will not be a major change,” he added.

Kenichi Ayukawa, Maruti Suzuki MD and CEO feels that the GST tax structure may be good for the country but its implementation needs to be smooth. He said that, “We are expecting the definition (of luxury cars) to be as it is.” The GST Council, chaired by Finance Minister Arun Jaitley and comprised finance ministers of all states will arrive at a decision in their next meeting this month.  Source – http://www.newindianexpress.com [08-11-2016]


Maharashtra govt optimistic on GST effect

November 8, 2016
The Maharashtra government expects the four-tier rate slabs, decided between the Centre and states for the coming national goods and services tax (GST), to help consolidate its position as a prominent centre for manufacturing and logistics.

Manufacturing, engineering, construction and logistics together constitute a third of the gross state domestic product. State finance minister Sudhir Mungantiwar told this newspaper, “There will be growth in manufacturing and logistics. The share of state GST in total GST will be slightly more than what it is today in VAT (value added tax). The gain in services tax as part of the GST will be a total gain for all states.” The higher tax revenue from GST will be used for development of infrastructure, he said.

He noted octroi and local body tax, two major levies, would now be subsumed in GST. The Centre’s assurance on compensation for revenue loss for the first five years is important — the Brihan Mumbai Municipal Corporation, for instance, gets Rs 7,000 crore annually through octroi. Source – http://www.business-standard.com [08-11-2016]


Hotel Industry warns tourism will suffer at 18% GST on rooms

November 8, 2016
The Hotel and Restaurant Association of Western India (HRAWI) today said the government’s four-tier structure in Goods and Services Tax (GST), in which the service sector will be taxed at 18 percent, will cause the tourism sector a major setback.
In the recently concluded meet on GST, the government has declared a four tier structure of 5,12,18 and 28 percent of which the service sector will be taxed at 18 percent.
“It is estimated that the lower GST rate of 5 percent will contribute to a decrease in our Current Account Deficit, increase in the GDP, doubling up of both foreign and domestic travel and also doubling up of tourism induced employment, across each state and nationally,” HRAWI President Dilip Datwani said.

India’s tourism competitors in South East Asia (excluding Japan and China) earn among themselves over USD 150 billion in foreign exchange and attract almost 100 million tourists annually, he said.

According to estimates, a GST rate of 5 percent will more than double both foreign travel coming to India to 20 million tourists and domestic travel within India to 2.5 billion.
“We welcome the 5 percent tax slab on food, which is a positive outcome of subsumed taxes for hotels and restaurants. However, the 18 percent levy on services or room revenue in our case, compared to our neighbouring countries which charge a Tourism tax between 4 to 7 percent, rules out fair competition,” HRAWI former President Kamlesh Barot said. Overseas, he said, GST can have least slabs as they have minimum exclusions unlike ours.
“A foreign tourist planning a trip across Asia may entirely skip India or spend fewer days in our country on account of these perceived high room rates because we also don’t refund taxes to foreigners like many countries do,” added Barot.  Source – http://www.firstpost.com [08-11-2016]


Classification of goods under GST, the new flash point say experts

November 8, 2016
The government may be rejoicing after getting the GST (Goods and Services Tax) council to agree to the rates and slabs for the new tax, but experts and insiders point out that the biggest hurdle is yet to be crossed: choosing the goods that will fall into these slabs. It has been decided that a committee of top officials of all states will work on this, but this could become a flash point in the run-up to the implementation of this new indirect tax.

The GST Council, the highest decision making authority for the new tax, last week agreed to a four-tiered GST. Essential items such as food grains, one of the main reasons for rising inflation, will be taxed at zero rate. The lowest rate of 5% will be on items of common use, followed by the standard rates of 12% and 18% and the highest rate is 28%. Additionally, a cess will be added to the top 28% GST rate on luxury cars and harmful products like tobacco and fizzy drinks.

“A committee will decide the fitment of goods into the four-tiered GST rates. We cannot divulge anything more than this, now,” said revenue secretary, Hasmukh Adhia.
Top sources in finance ministry say that this committee is yet to be formed. The demand is to include senior functionaries from all states in the committee for deciding this ‘fitment’.
“But that would become very cumbersome. A committee with so many people will make the decision making even more difficult,” said an official in the know of the matter who did not wish to be named.

The GST council will have to define luxury and essential goods even before the classification of goods begin, the official quoted above, added.

Experts agree. “Classification of goods for fixing their tax slabs will throw up a fresh set of disputes and this may lead to some confusion,” Bipin Sapra, tax pertner, EY told HT.
Classification of goods into categories and applying different tax rates on them has the potential of leading to litigation, say experts.

“Multiple GST slab rates may be politically correct but it will lead to classification dispute and compliance challenges unless the items covered under the slabs are not clearly defined,” Sachin Menon, partner and head of indirect tax, KPMG said.

But, a top official in the revenue department allays all fears saying that the process of classifying goods will be based on the process of elimination. “Once the essential items and luxury goods are classified what is left will fall in to the standard category,” he added.

At the end of the fourth GST council meeting on November 4, finance minister Arun Jaitley had said that the issue of cross-empowerment is the only pending matter that needs to be resolved, before the other GST-related legislations are finalized.

Cross empowerment deals with the issue of who will tax whom between the Centre and the states once GST is rolled out.

But functionaries involved say that the issue of ‘fitment of categories of goods in to the tax slabs’ will be a more immediate hurdle to cross.  Source – http://www.hindustantimes.com [08-11-2016]


Levy 1.25 per cent GST rate on jewellery industry

November 8, 2016
Levy 1.25 per cent GST rate on jewellery industry: GJF

A delegation of the jeweller s’ body today met M ahar ashtra Finance M inister Sudhir M ungantiwar at Nagpur and submitted its representation on GST.

A jewellers body today demanded that the GST rate on the jewellery sector should be 1.25 per cent if the government wants the industry to be “compliant and organised”.

“We are now gearing up for GST and have proposed that the GST rate for the gems and jewellery sector should be 1.25 per cent if the government expects the industry to be compliant and organised,” All India Gems and Jewellery Trade Federation (GJF) Chairman Sreedhar G V said in a release.

A delegation of the jewellers’ body today met Maharashtra Finance Minister Sudhir Mungantiwar at Nagpur and submitted its representation on Goods and Services Tax (GST).
GJF, he said, will send the representation to Union Finance Minister Arun Jaitley on GST, highlighting various concerns of the sector.

“We have been constantly highlighting various contentious issues such as smuggling of gold and increasing PAN card limit for purchases, lack of hallmarking infrastructure and high Customs duties on raw material gold,” he added.

GJF, he said, is closely evaluating the implications of Model GST Law and has already started mapping the business practises of the sector with the Model GST Law and Draft GST Rules.

GJF Director and Member-High Level Committee (HLC) Ashok Minawala said, “The HLC Report, which was unanimously accepted by the government, was prepared after taking the suggestions and recommendations from over 60 associations of India into consideration.”
“Keeping in mind, the unique characteristics of the gems and jewellery sector, the kaarighars and small jewellers were kept out of purview of the Excise Duty. Therefore, while we welcome GST we request the GST Council to recognise the practical issues faced by the sector as highlighted in the HLC report,” Minawala added.  Source – http://www.retail.economictimes.indiatimes.com [08-11-2016]






GST Updates (07 Nov 2016)

Posted on by Business So Simple in Miscellaneous

New GST structure likely to be non-inflationary

November 7, 2016

New GST structure is likely to be ‘non-inflationary’ as most of the items in the Consumer Price Index basket will be taxed at a rate which is very close to their current levels, says a Citigroup report.

The GST Council has agreed on a 4-tier GST tax structure of 5, 12, 18 and 28 per cent, with lower rates for essential items and the highest for luxury and de-merits goods that would also attract an additional cess.

According to the global financial services major, almost 50 percent of the CPI basket including food grains will continue to be out of the tax net (0 per cent tax), while four ‘sin’ goods (tobacco, pan masala, aerated drinks and luxury cars) will be taxed at their present rates which are much higher than 28 per cent.

“New GST structure likely to be non-inflationary,” Citigroup said in a research note, adding, “it appears that most of the items in the CPI basket will be taxed at a rate which is very close to their current levels”.

According to Citigroup, even if some of the ‘services’ move to 18 per cent tax bracket (from 15 per cent), it is not likely to stroke inflationary consequences if the tax pass-through is smooth.

On the other hand, given that tax rates will be mostly unchanged, the positive growth impact will be felt only through better tax efficiency, the report added.

The report noted that the non-inflationary bias drove the GST rate consensus and bodes well for the introduction of new GST rates from April 1, 2017.

“An early consensus over this complex issue opens up the possibility of further GST legislations being passed in the winter session of parliament and introduction of new GST rates from April 1, 2017,” Citigroup said.

Meeting the April 1, 2017 timeline of GST rollout is now going to depend on technology preparedness and familiarisation of the new GST structure among both the tax payers and tax collectors, it added. Source – http://www.moneycontrol.com [07-11-2016]


Govt hopeful of consensus on vertical division

November 7, 2016

The Centre is hopeful of a consensus around ‘vertical division’ of assessees, one without a turnover threshold, to resolve the issue of dual administrative control under the proposed goods and services tax (GST) regime.

While most states are in agreement over the principle of division in a pre-decided ratio between the two authorities, Kerala, West Bengal and Tamil Nadu have pressed for exclusive state control over those with annual turnover up to Rs 1.5 crore and dual control for beyond that.

Also termed ‘horizontal division’, this threshold formula would ensure states get control over most assessees. By government data, 88% of assessees are below the Rs 1.5 crore threshold.

“A consensus appears to be evolving around the ‘vertical division’ of assessees for scrutiny and audit. Negotiations will centre around the ratio of division. We are willing to do less assessment than states,” said a central official. The ratio could be 1:2 or 1:3 in favour of states.

Resolution of the issue is needed to prevent harassment of taxpayers. “We can’t have two competing authorities for the same assessees,” said the official.

Assam’s finance minister, Himanta Biswa Sarma, told a television channel after the Council meeting on Friday: “When the meeting started, the Council was leaning towards a Rs 1.5 crore threshold but now many states feel that it should be vertical division. We expect the dual control issue to be resolved soon.”

Jammu & Kashmir’s Haseeb Drabu said the state would back a vertical split of administrative powers. While the states had earlier agreed to exclusive assessment of manufacturing units with turnover of up to Rs 1.5 crore, they went back on it as the Centre retained administrative control over all 2.6 million service tax assessees.

Finance Minister Arun Jaitley said after the meeting, “We don’t want to take a decision in a hurry because, administratively, any mistake on this front could be chaotic.”

The finance ministers will have an informal meeting on November 20 to discuss it. “Sometimes ministers in the Council meeting discuss a politically correct stand in the presence of everyone. Informally, they might have a different view,” said an official.

Pratik Jain, partner at consultancy PwC, said: “With services also getting split between Centre and States, it is unlikely the Centre would agree on horizontal division. A vertical division on an agreed ratio seems more viable.”  – http://www.Business-standard.com[07-11-2016]

With GST on its way, India rises to second spot on global biz optimism index

November 7, 2016

India improved its ranking by one spot in a global index of business optimism, with policy reforms and Goods and Services tax (GST) expected to become a reality soon, says a survey.

According to the latest Grant Thornton International Business Report, India was ranked second on the optimism index during the third quarter (July-September 2016).

Indonesia took the top spot, with the Philippines coming in third.

India was ranked third during the April-June period after being on top for two consecutive quarters.

“The improvement in the optimism ranking in the recent past clearly reflects that the reform agenda of the government and its efforts on improving the climate for doing business are having an impact,” Grant Thornton India LLP Partner – India Leadership Team Harish H V said.

High business optimism was also complimented by the rise of employment expectations. India regained its top position on this parameter, from second position in the April-June period, while profitability expectations also moved up.

“…all the programs and initiatives of the government as well as its focus on building relationships with all major economic powers has made India a bright spot in the global economy,” Harish said, adding the recent push for GST augurs well and should give a further boost to business optimism.

While India continues to be amongst the top five countries citing regulations and red tape as a constraint on growth, for the first time in the year, the country’s ranking on this parameter has dropped from second to fourth.

As per the survey, 59 per cent of the respondents have quoted this as an impediment in the growth prospects compared to 64 per cent in the previous quarter.

The report is prepared on the basis of a quarterly conducted global business survey of 2,500 businesses across 36 economies.

Meanwhile, in terms of revenue expectations, India slipped to third position from top in the previous quarter.

In spite of the downturn, India is much ahead of China where only 30 per cent respondents expect an increase in revenue, whereas in India, 85 per cent respondents have voted in favour of increasing revenue.

The survey further noted that 68 per cent of respondents have voted for an upsurge in selling prices. On this parameter too, China lags India with only 10 per cent of respondents expecting an upsurge in selling prices. The global average is 19 per cent.

Globally, business optimism stands at net 33 per cent, rising 1 percentage point from the previous quarter but falling 11 percentage points over the year.

“Political events such as Brexit and the US presidential election understandably rattle the global economy and test the resilience and elasticity of businesses worldwide. In general, businesses do not like uncertainty, and that is what is happening,” Grant Thornton Global CEO Ed Nusbaum said. Source – economictimes.indiatimes.com [07-11-2016]

Aerated drink makers fume at being put in demerit list

November 7, 2016

Indian Beverage Association has expressed disappointment at the re-categorisation of aerated drinks under ‘demerit’ category in the GST rate slabs, saying at Rs 10 for 200 ml, such drinks are neither luxury goods nor do they pose health hazards.

“Aerated drinks are not ‘luxury’ goods. Aerated drinks cater to the average hydration needs of Indians in the form of immediately-available hygienic and safe drink source,” Indian Beverage Association (IBA) said in a statement.

The association, which has major cola and other beverages makers such as Coca-Cola India, PepsiCo India and Red Bull India among others as members, said aerated drinks are also not ‘sin’ goods “as the Union Government itself had accepted the position by removing such goods from Schedule VII of the Finance Act, 2005 in the 2015-16 Budget”.

On the health issues linked to such drinks, IBA said: “There are observations by the court on the basis of the report of an expert panel that the ingredients present in aerated drinks do not pose any health hazard.” Last week, GST Council had announced that luxury items like high-end cars and demerit goods including tobacco, pan masala and aerated drinks, will be taxed at the highest rate of 28 per cent and would also attract a cess in a way that the total incidence of tax remains at almost the current level.

Expressing disappointment at the decision, IBA said: “At Rs 10 for 200 ml, aerated drinks are neither luxury goods nor do they carry the kind of health hazards attributed to them.” It further said the consumer base of aerated drinks ranges from the low to high income group and they are supplied even to rural villages and semi-urban places.

When the applicable tax rates on aerated drinks with abatement already stands at an effective 30-31 per cent, the IBA does not subscribe to the recommendation of an additional cess on aerated drinks over and above the 28 per cent GST rate, it added.

Stating that food processing and aerated beverages have been one of the largest contributors to the FDI in the country, IBA hoped that it will not be “discriminated against in GST”.

While increase in taxes will lead to an increase in the price of the soft drinks, the viability of the industry could be in grave danger due to a consistent adversarial tax approach, IBA added. Source – http://www.moneycontrol.com [07-11-2016]

How to make GST fair and simple

November 7, 2016

Conflicting demands of different stakeholders make tax reform the art of the impossible. While the gainers are silent, the vociferous cacophony of the opponents drowns the voice asking for bold and imaginative reform. It therefore comes as no surprise that the Union finance minister has had to abandon most essential features of the transformational goods and services tax (GST) reform. Bound by the constraint of his 30 colleagues in the GST Council wedded to the legacy system, he is forced to follow the path of mediocrity.

The unanimous passage of the Constitution Bill in Parliament had revived the hopes that Prime Minister Narendra Modi could well make impossible possible and deliver a GST that met the triple objectives of fairness, simplicity, and economic growth. However, the proposals of the GST Council meet none of these objectives.

The positive impact of GST on economic growth will be a result of the removal of cascading of taxes, i.e., noncreditable taxes on investment and production inputs. No credits are allowed for input taxes where the sectors are exempt from tax. The blocked credits add to the cost of investment, and hinder economic growth.

Following the methodology adopted by the GST Council for revenue and inflation impact analysis, we estimate the quantum of cascading taxes to be Rs 3.2 lakh crore (or 36 per cent of the Rs 8.8 lakh crore of revenues in 2015-16 to be subsumed under GST) under the current system.

With 50 per cent of the consumption basket remaining exempt from tax under the GST Council proposal, cascading taxes will go up (not down) marginally, to 39 per cent of total revenues. As a result, the positive impact on GDP would be negligible, less than 0.5 per cent.

The objective of simplicity will also remain a mirage if the multi-rate structure and the model GST law are adopted. If anything, complexity may go up during the transition. The model law requirement of state-wise registration will multiply the compliance burden for pan-India service providers by a factor of 30. Despite extensive representations by the industry, the states have refused to adopt a single centralised registration system.

The multi-rate structure will compound the complexity. The impact would be the worst on the SMEs who are illequipped to manage classification of goods in multiple baskets. Kirana store dealer will have goods in all five baskets (exempt, five per cent, 12 per cent, 18 per cent, and 28 per cent). The tax rates will differ for similar products. Bread may be exempt, but other bakery products taxable at a merit rate. What will be the fate of chocolates, biscuits, and fruit bars? The same products bought at a restaurant or fast-food outlet may attract tax at the 18 per cent rate for services. Consumer durables will attract 28 per cent tax when bought, but only 18 per cent when rented as a service.

Taxation of mobile phones has already been a matter of controversy. Should they be taxed as telecommunication equipment, cameras, or computers? Fairness is the principal reason for the adoption of the multi-rate structure. Finance Minister Arun Jaitley defends the four-tiered structure by stating that air conditioners and chappals cannot be taxed at the same rate. True, but those with air conditioners also buy chappals .

The benefit to them of a lower rate would, in fact, be substantially more simply because they spend more on them.

The ultimate test of fairness is not the tax rates applicable to individual products, but the overall distribution of the tax burden across lower to upper echelons of society. Surprisingly, the four-tiered structure approved by the GST Council results in a higher tax burden on the bottom 30 per cent of the consumers. EY estimates show that the bottom 30 per cent of consumers accounts for 12 per cent of total consumption spending, but contribute 12.6 per cent to the total taxes on final consumption. Under the fourtiered GST rate structure, their contribution to total taxes goes up to 12.7 per cent.

Viewed from this perspective, the new rate structure worsens the fairness of tax.

This result is not unique to GST reforms in India, but common in most jurisdictions with multi-rate structures. Lower rates for basic necessities do not improve the fairness of tax, and often worsen it. The rich benefit from the lower rates more than the poor simply because they spend more (on items in all rate categories) than the poor.

So, what can be done? The only option to improve the fairness of GST is to replace exemptions and lower rates by a targeted income support program for lower-income consumers. As suggested by Kelkar, Poddar and Bhaskar (in ‘GST: make haste slowly, Mint ,October 19, 2016), this could be in the form of a direct benefit transfer (DBT) of, say, Rs 2,000 per head per annum for the bottom 27 crore (bottom two deciles of the population). This program would have a cost of Rs54,000, which would be a fraction of the cost of exemptions in the GST Council formulation. The GST could then be levied at a single rate of 12 per cent on a broad base, with a supplementary cess on selected demerit and luxury goods.

The contribution of the bottom 30 per cent to GST revenues would then fall to 5.4 per cent, from 12.7 per cent under the multirate structure.

The single rate will be pro-poor, bring in simplicity, and spur investment and economic growth.

The GST Council must face up to this reality and decide. It can either sacrifice simplicity and economic growth for all at the altar of keeping a few happy, or take the bold step of adopting an alternative that gives all the three advantages of simplicity, fairness and economic growth.  – http://www.Business-standard.com[07-11-2016]