Now that the goods and services tax (GST) is a reality, it is necessary to look at some key areas that the government should focus on to unleash the true potential of the indirect tax regime.
Fewer rates and classifications
The GST has four base rates (5 per cent, 12 per cent, 18 per cent and 28 per cent), two special rates (0.3 per cent and 3 per cent) and three rates of cess (1 per cent, 2 per cent and 15 per cent). While services were earlier taxed at a uniform 15 per cent, the four base rates are now applicable to services as well. The classification of goods and services across these rates is going to lead to disputes. The rates have also been changed a couple of times even before the launch, giving credence to the fact that the multi-tier rate structure and the rate equalisation exercise has created certain anomalies. Some of these issues have been addressed, while some would hopefully get resolved soon.
Hence, it is necessary that the government now focus on reducing the rate slabs to possibly two base rates of 18 per cent (standard rate) and either of 5 per cent or 12 per cent as the merit rate. This would reduce the potential for disputes.
Inclusion of petroleum products, realty and electricity
The GST leaves out three important sectors, making the coverage sub-optimal. Petroleum, real estate and electricity generation would continue to have the older indirect taxes. The problem is exacerbated by the fact that these sectors would pay input taxes in the form of GST, which cannot be offset against the existing taxes. It is essential that the government work on a time-bound plan to get these sectors into the GST framework. This will not only expand the GST basket but also make it a more comprehensive tax, besides ensuring that all suppliers to these sectors become part of the ecosystem.
Soft launch to build acceptability
The ability to handle the changes that GST entails would depend on the size and nature of a business. While large businesses have the resources and knowledge to prepare for a change of this magnitude, smaller businesses would find it difficult. Businesses used to filing monthly returns and dealing with state tax authorities will find it easier to deal with GST, compared with service providers accustomed to a centralised registration with two returns a year. There is also now a need to ensure invoice matching to get input tax credits and reduce tax payment liability.
It is, therefore, necessary that the government ensure a soft approach for the first year or so, instead of focusing on strict observance of provisions. Similarly, there should be some leniency in allowing input tax credits for the first year, and the implementation could become progressively stricter. This will make the GST more acceptable to all businesses. It is necessary to ensure that several penal provisions are kept in abeyance during the introduction period.
Existing tax issues and assessments
There is significant pendency of assessments in various states and a large amount of appeals pending at various levels of adjudication. Many of these relate to periods for which even records would be difficult to trace. GST signifies the commencement of a new journey. While embarking on this journey, it is essential to discard old baggage and start afresh.
The government should fix timelines for disposal of cases and assessments so that businesses can focus on GST compliance and not worry about older cases and other such matters.
Seamless GSTN portal
Key GST processes would be entirely dependent on an information technology (IT)-enabled platform. The government has taken considerable pains to ensure the country gets a world-class IT-enabled system.
But the government should ensure that the GST portal is appropriately tested, even if this means initial processes are put on an extended timeline. It is better to have a tested system with some small delays instead of launching an imperfect system on time. Any difficulty in accessing the database or in uploading transactions could lead to credibility issues.
GST LIVE: The midnight launch of the Goods and Services Tax (GST), the country’s biggest tax reform since independence, has catapulted India into a select league of nations with a national sales tax.
Amid boycott of the launch ceremony by principal Opposition parties like the Congress, which termed it “tamasha” (gimmick), the new tax regime overnight replaces the messy mix of more than a dozen state and central levies built up over seven decades.
The one national GST unifies the country’s $2-trillion economy and 1.3 billion people into a common market, an exercise that took many long years.
The GST will eliminate the compounding effect of the current multi-layered tax system as well as the cross-state tax heterogeneity by fixing the final tax rate. It is expected to lower the average tax rate on manufactured goods and make them uniform across states by fixing the final tax rate.
Filing a tax return on the Goods and Services Tax Network (GSTN) portal by an entity will cost Rs 55 a month but the state will bear this burden. The user charge for all eight million taxpayers will be borne by the Union and the state governments, to keep revenue flowing for GSTN, the company charged with providing the information technology (IT) backbone for the reform, without burdening the assessees.
GST is set to be rolled out from Friday and will absorb a slew of indirect taxes — including service tax, central excise, value added tax, central sales tax and octroi.
GSTN, officially a private body (it was formed at the government’s behest and support), has estimated the total cost of the project at Rs 3,000 crore. That covers salaries, interest cost, security operations for five years of operation and the ongoing development period of two years. It awarded a contract worth Rs 1,320 crore to Infosys for building and maintain the IT network, crucial for implementing the proposed system across the country, for five years.
GSTN’s job is to provide a common platform for registration, a filing of returns and e-payment. It will also integrate the common GST portal with the tax administration systems of Centre and states.
The Centre and states will pay Rs 550 crore to GSTN for the expenses incurred this financial year. The budget proposal was approved by the GST Council in its recent meeting. “We will get money on a per-taxpayer basis for all the cost we are incurring and other expenses that will come up. We have worked out the per-taxpayer cost,” said Navin Kumar, chairman, GSTN.
It had earlier proposed to charge a user fee for filing a return using the portal. The government rejected the proposal. ‘The government disagreed as taxpayers have never been charged anything for filing a return. It asked for the number of taxpayers and said they will pay,” said Kumar.
The cost of each taxpayer will be split between the Centre and states on a monthly basis. The cost per state will be calculated on the basis of the number of taxpayers in that state and will be shared with the Centre. With that, the Centre will pay the GSTN a little over Rs 23 crore a month.
The total cost was arrived by taking into account the slightly over eight million taxpayers. “Using the same formula, we will calculate the cost for next year as well,” said Kumar.
The Rs 550 crore revenue will go towards repaying a Rs 550 crore loan from IDFC and to pay, Infosys, besides salaries for the staff. The GSTN had taken the term loan earlier this year and will further take a working capital loan. The government has provided a guarantee for the loan, used for developing the service and hardware.
The loan is needed only till rollout of the portal. The revenue model of charging on a per-user basis will help it sustain afterwards.
GSTN was incorporated at end-March 2013, as a private limited company, with government shareholding of 49 per cent and private shareholding of 51 per cent. ICICI Bank, HDFC Bank, LIC Housing and NSE Strategic Investment Corporation hold at least 10 per cent stake each. The other 49 per cent is held by the central and state governments, each holding 24.5 per cent.
About 6.6 million taxpayers have already migrated to the GST portal and received provisional identification. The window for migrating was earlier closed for a while; it reopened for new taxpayers last week. It is compulsory for dealers with an annual turnover of more than Rs 20 lakh to register
Tractor prices may go up by around Rs 25,000 after the goods and services tax is imposed because the gap between input and output taxes is wide.
In a recent meeting, the GST Council addressed the issue of the inverted duty structure in various industries, including the tractor industry. Subject to a 28 per cent duty on components against 12 per cent on tractors, manufacturers would have faced an accumulation of credit. The council reduced the GST rate on clearly identifiable tractor components from 28 per cent to 12 per cent.
However, Chairman of the technical committee and immediate past president of the Tractor Manufacturers’ Association (TMA), said the relief was marginal and input costs per tractor would rise by Rs 25,000 The industry’s working capital would also be squeezed by Rs 1,600 crore, he added.
The revision of the GST rate was limited to token components while engines, transmission and other parts would continue to face the 28 per cent duty, chairperson said. The TMA has sought a change in component duties from 28 per cent to 18 per cent.
Chairperson and chief executive officer of Tractors and Farm Equipment Limited (TAFE), said, “Unfortunately this (the GST) has only been partially rolled out and the increase in input cost stands at Rs 25,000.”
Chairman urged the government to reduce the duty on all components that go into the manufacture of tractors. “This would be needed to ensure that the farming community does not suffer,”
Chief executive officer of Escorts, said tractor makers might not be able to pass on the higher costs to customers because of the anti-profiteering clause. Tractor makers typically hike prices by Rs 3,000-4,000 every year. Transitional provisions for stocks held at dealerships have also not been extended to the tractor industry because tractors were in the exempted category till now. The industry holds over 150,000 tractors in depots and dealerships, and denial of this relief will affect the farming community
LIKELY TO GET DEARER
- 28% duty on components
- 12% duty on tractors
- Industry says tractor prices would rise by Rs 25,000
- The council reduced rate only on clearly identifiable tractor components from 28% to 12%
- The industry’s working capital would also be squeezed by Rs 1,600 cr, industry body says
- Tractor makers typically hike prices by Rs 3,000-4,000 every year
- Rise in price to effect the farmers
Imports are likely to remain 5-6 per cent cheaper than locally made apparel, despite the goods and services tax providing input credits to the textile industry.
Apparel imports are subject to a countervailing duty (CVD) of 6 per cent on cotton and 12.5 per cent on polyester, which importers receive as a central value-added tax credit. The CVD is optional at a flat 2 per cent if the importer does not claim a set-off against input costs. The government has provided a 40 per cent abatement on this optional flat duty, which works out to 0.8 per cent. Thus, the total applicable tax is 1.2 per cent for importers who do not claim the set-off. This apart, importers pay a 4 per cent special additional duty (SAD) without any duty protection, which after considering cesses, works out to over 5 per cent.
“The government had levied this duty as protection for domestic players. With the GST, this duty protection will be removed and imported garments will be 5-6 per cent cheaper. The government has fixed 5 per cent as the GST rate on all textile products and apparel,” said by president of Clothing Manufacturers Association of India.
The textile industry fears an increase in imports from Bangladesh and China, where the cost of manufacturing is lower due to cheaper labour. “The GST subsumes all taxes, including protections. Garment imports will become cheaper due to removal of the SAD,” said an official from the Cotton Textiles Export Promotion Council. The textiles ministry has set an export target of $45 billion for FY18, marginally lower than the $48 billion set for FY17.
The government plans to present a new textiles policy by September. It is also organising Textiles India 2017, a seminar to bring global buyers under one roof, between June 30 and July 2 in Gandhinagar. While 61 countries have booked pavilions, 1,900 stalls are expected to be booked by state governments and industry players.
“Our aim is to increase textiles exports and create a competitive environment. We would like states to take such initiatives to help the industry showcase its products directly,” said by secretary of textiles ministry. Ministry had done some work on the new textiles policy, which would focus on India’s competitiveness in the world market.
Effective levies on imported garments
* Countervailing duty include excise duty on cotton 6% and polyester 12.5% with Cenvat credit
* Optional duty of 2% with abatement of 40% on it (i.e. 0.80%) means effective duty of 1.2% without Cenvat credit
* 4% of special additional duty, which along with cess, educational cess and others wok out to Rs 5.5%.
* Thus, duty protection of 5.5% from cheap import
* All duties subsumed in 5% of the GST for both domestic manufacturers and importers
* No protection, as both domestic manufacturers and importers would require to pay same duty
#CA Amit Shah & Co.
In the month of March, the Indian government made Aadhaar card compulsory for new SIM cards; And now, the rules have become even stricter. Already telecom operators such as Airtel and Idea have started sending SMSes to existing subscribers asking them to link their Aadhaar and mobile numbers.
Yes, the Department of Telecom issued a directive to all mobile phone companies in India saying that they need to re-verify all mobile phone users in India through Aadhaar card.
So, it has now become a compulsory thing to keep your mobile number linked with your concern Aadhar card. It’s just simple as, if you want to keep your mobile number active, you need to link it to your Aadhaar card. This move comes after the DoT i.e. the Department of Telecom directed mobile operators to re-verify the e-KYC of postpaid and prepaid customers with Aadhaar cards.
This move comes after the DoT i.e. the Department of Telecom directed mobile operators to re-verify the e-KYC of postpaid and prepaid customers with Aadhaar cards.
So, if you want to enjoy undisturbed services, follow this rule. A notice released by telecom operators reads that after 6th of February 2018, numbers that aren’t linked with Aadhaar cards, will be treated as invalid.
- As soon as you receive the SMS, go to the nearby store of your operator.
- Take your Aadhaar card along and give the details there.
- After this, you will receive a 4 digit verification code.
- Once the code is confirmed, fingerprint verification will be done.
- Within 24 hours, you will get another message for “Final verify”.
- Reply to that message with “Y”.
- You will get an SMS that your number is linked to the Aadhaar card.
Even other mobile operators like Vodafone, BSNL, Aircel and Jio are expected to follow this process. After knowing this, people are having many questions in their minds. Clear your doubts with these answers;
This process is free and you need to get it done through an operator’s store only.
No, don’t go behind any online registration sites, as they are fake. The process is manual and as of now, only offline registration facility is available. Telecom operators haven’t started online registration.
The last date is 6th of February 2018. Do it as soon as possible as it is rightly said, “Sooner the better”.
Yes, you can link it. However, a limit has been set for maximum connections. You need to find it out from your operator store.
Follow the instructions mentioned above and get your card linked as soon as possible. It is better to be safe than sorry; following the rule at the earliest will not only benefit you but will also ensure that you don’t face any issues later on.
#CA Amit Shah & Co.
As the country stands on the cusp of a transformational tax reform, the worry now centres on how smoothly trade and industry can carry over existing input credit into the new GST regime. Therefore, trade and industry is looking closely at transitional rules. This has important consequences on how quickly trade would like to draw down their inventories before the implementation date and also on decisions relating to the pricing pattern.
The transitional rules were recently approved by the GST Council in the meeting held on June 3.
The positive decision was that the input credit available to manufacturers and dealers without having to produce original duty paying documents has been raised from the proposed limit of 40 per cent of the value of the goods to 60 per cent for items bearing GST duty rates of 18 per cent or more. This provision would benefit industries with a long delivery supply chain, extending to first-stage dealers and second-stage dealers and stockists. This measure would largely allay the fears of the business community. Another area of worry relates to simplification of the refund procedure where the inverted duty structure prevails (GST rates on inputs and intermediaries are higher than on the final product). While the existing provisions provide for grant of 90 per cent of the refund amount upfront within seven days in respect to exports. The same facility has not been extended to the inverted duty structure. This needs to be done, as it will reduce the interest burden on industries created by the higher working capital requirements imposed on them due to imposition of IGST levy on inter-state supply.
The transitional rules approved in the third meeting also provide relief to high-value commodities like consumer durables, tractors and so on by allowing validation of duty claims through cross-reference to product details embossed on engines, chassis and other equipment. All in all, the amendments approved to the transitional rules would help trade and industry to effect a smooth transition. Another interesting announcement was that the remaining period of this financial year post the July 1 implementation would be treated as period of transition. This suggests that the government would take a sympathetic view on procedural violation if the intent is honourable and mistakes are unintended.
The announcement also ensures the government would be prepared to make calibrated changes as the situation unfolds, without a rigid view.
There are, finally, two institutional measures the government should take to ensure smooth transition:
A GST Secretariat must be created in all states, where senior state and central tax officials can come together in an institutional framework. this body can be registered under the Societies Act much like the Empowered Committee of State Finance Ministers; this will allow the body to have a dedicated secretariat and also provide a forum for trade and industry to raise non-policy implementation issues at the level of the states
Finally there is also a need to create a technical secretariat both at the Centre and state, which could provide instructions on assessment-related matters which would be binding on the field officers; there is already an enabling provision in the GST law passed which allows this to ensure uniformity of practice all over the country; this would ensure the “rule of law” and not the rule of thumb.
#CA Amit Shah & Co.
Now you can link your Aadhaar with PAN using just an SMS. Your mobile number and e-mail id will help you receive alerts related to your Aadhaar and to access Aadhaar services easily. The Income Tax Department issued advertisements and described how both the unique identity numbers of an individual can be linked by sending an SMS to either 567678 or 56161.
Send SMS to 567678 or 56161 in following format:
UIDPAN<SPACE><12 digit Aadhaar><Space><10 digit PAN>
UIDPAN 111133333321 AAAAAEEEEE
It said people can also visit the official e-filing website of the department to link the two identities, in both the cases– identical names in the two databases or in case where there is a minor mismatch.
It said linking the two numbers is the key to “seamlessly avail online, a world of income tax facilities.”
“Aadhaar can also be seeded into PAN database by quoting Aadhaar in PAN application form for new PAN allotment or by quoting Aadhaar in change request form used for reprint of PAN card,” it said in the advertisement.
The Income Tax Department is urging taxpayers to link their Aadhaar with their PAN, using an SMS-based facility because from July 1, 2017, all tax returns will have to mention the Aadhaar number.
If you have both the permanent account number (PAN) and Aadhaar, you need to link the two. If you fail to do so, your PAN number could become invalid
#CA Amit Shah & Co.