Author Archives: CA Amit Shah

GST

GST transitional issues: What more needs to be donex

Transitional rules were recently approved by the GST Council

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.

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Adhaar & Pan Card Centre

Link your Aadhaar with PAN through just an SMS

Link Aadhaar with PAN because from July 1, 2017 all tax returns will have to mention Aadhaar number

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.

 

 


Here is how you can use the SMS facility to link Aadhaar with PAN

 

Send SMS to 567678 or 56161 in following format:

UIDPAN<SPACE><12 digit Aadhaar><Space><10 digit PAN>

Example:

 

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.


Why is it important to link Aadhaar with PAN?

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


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GST

Industry’s last chance to register for GST

With only a month left for the roll-out of the goods and services (GST) tax businesses would have to register on its network in the next fortnight.

 

“This is probably the last window before the GST goes online on 1st July. To raise an invoice under the new indirect tax regime one would have to be registered on the GST Network (GSTN),”

 

Businesses would also be able to amend any mistake made during registration earlier in this window.

 

Experts said transition of credit and inputs in stock were dependent on being registered with the GSTN. Getting registered early would make the switch easy.

 

One would, however, be legally liable to register only if operating above a certain limit. In any case, it would be beneficial to register.

 

It would give businesses the opportunity to avail of tax credit, charge output tax and pass it on to customers, and avoid a cascading impact of taxes under the current tax regime.

 

Businesses would need to inform customers and suppliers of their registration if the whole value chain had to avail benefits of input tax credit.

 

“Both suppliers and customers would want registration details. If customers don’t have the registration number of the supplier, they would have to pay taxes on a reverse-charge basis and may not get reimbursement on the tax indicated on the invoice. If the supplier does not have the registration number of the customer, it would be treated as a sale to an unregistered person and the credit will be lost.”

 

The Central Board of Excise and Customs has made it mandatory for exporters and importers to declare valid GST registration numbers in customs documents, such as bill of entry and shipping bills, from 1st July. This will be required to avail Integrated GST credit on imports or GST refund on exports.

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GST

Textiles industry wants uniform GST for whole value change

The consensus in the non-handloom part of the organised textile industry seems to be for a uniform goods and services tax (GST) rate. The GST Council meets this Saturday to discuss it.  At present, the sector doesn’t have fibre neutrality in taxes. Cotton fibre has no excise; synthetic fibre has 12.5 per cent; fabric has nil. Branded garments have the option of a low rate if no input credit is claimed. The average is five to eight per cent.

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GST

GST: 5% for gold, 12-18% for biscuits; no exemption for handicrafts likely

The Centre is likely to propose two rates for biscuits, depending on prices, at the goods and services tax (GST) Council meeting on Saturday. It would also make a case to tax gold at 5 per cent.

 

For biscuits priced at Rs 100 a kg or more, the Centre might propose a GST rate of 18 per cent. Those priced less could be slotted in the 12 per cent slab.

 

At present, biscuits in the second category are not taxed by the Centre, but have a 4.5-14.5 per cent value-added tax, depending on the state.

 

Biscuit makers are opposing higher taxes. Parle-G, which produces popular glucose biscuits, wants it to be in the lowest tax slab — 5 per cent. They argue it is consumed by the poor and distributed at anganwadi centres.

 

On Saturday, the Council, chaired by Union Finance Minister (FM) Arun Jaitley and comprising FMs of states or their representatives, will decide on the rates for seven goods — biscuits, gold, textiles, handicrafts, footwear, bidis and agricultural implements. The final call on the fitment of rates might be a political one, but some petitioners to the Council are already giving it a political tinge.

 

For instance, Hindustan Unilever (HUL), the maker of Surf Excel, Rin, Vim and Wheel, has pitched for a lower GST rate, citing Prime Minister Narendra Modi’s Swachh Bharat campaign.

 

HUL has argued that a 28 per cent tax on detergents — used to clean toilets — was against Swachh Bharat.

 

At its previous meeting in Srinagar earlier this month, the GST Council cleared rates for 1,211 goods and 500 services.

On the demand for a low GST rate for biscuits, an official said the Council would look at the current tax incidence before deciding on it. Experts claim there should be a third category — of biscuits priced at Rs 500 per kg. These should be taxed at 28 per cent, said M S Mani, senior director, Deloitte.

 

“Low-price-high-nutrition biscuits should be taxed at five per cent, those priced between Rs 100 a kg and Rs 500 a kg at 12 or 18 per cent, and those priced higher at 28 per cent,” he said.

 

Mani added, “On a flight, three biscuits are sold for Rs 150. If a person can afford that, they should pay a higher tax.

 

HUL’s demand would be considered under the light of the current incidence of tax.

 

“They want an 18 per cent tax, if not lower,” said a government official, adding that at present detergents attracted a tax of 28 per cent.

 

The GST might spell doom for tax exemption for handicrafts, rising in some cases to even 28 per cent, if the Council agrees to the Centre’s proposal.

 

This might be a blow for Jammu and Kashmir and some states in the Northeast, which handcrafts is a big employer. At present there is no central tax on handicrafts; some states also exempt it for levy.

 

The Center is also likely to propose there should be no distinction between handmade and machine-made items. “For instance, a machine-made shawl is priced at Rs 500 and a handmade one at Rs 5,000. If a person can shell out so much for a handmade item, they might as well pay a higher tax on it,” said an official.

 

The fitment committee has also proposed to tax handmade furniture at 28 per cent.

 

The official quoted above said it was difficult to specify if a piece of furniture was handmade. “Fakes are often sold under the guise of handmade,” he said.

 

According to the proposal, if marble was taxed at 28 per cent, handicraft made from it should also be taxed at the same rate. “Similarly, if bamboo is taxed at 18 per cent, handicrafts made from it should also be taxed at the same rate,” the official said.

 

Mani of Deloitte said taxing handicraft at same rate as the material would avoid classification disputes.

 

The Centre is also likely press for a 5 per cent tax on gold as it believes it is not for mass consumption or lower income groups. Currently, it attracts an excise duty of 1 per cent and VAT of about 1 per cent.

 

“Although the tax incidence on gold will go up, the positive is there would be no distinct slab for it, keeping the four-tier GST rate structure intact,” . A 2-3 per cent rate would have destroyed the GST structure, added.

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GST

Various tax slabs under GST worrying traders

Classification of different items under various tax slabs of GST has created an environment of anxiety and concern among the trading community across the country, Confederation of All India Traders said on Sunday.

 

Various verticals of retail trade are demanding lower tax on items being dealt by them since they have been categorised under higher tax slab in comparison to tax slab of current VAT tax regime, CAIT said.

 

As per an analysis, 1,211 goods and 36 services have been so far classified under GST out of which nearly 50 per cent goods have been placed under 18 per cent rate; 14 per cent under 5 per cent rate; 17 per cent under 12 per cent rate and 19 per cent under 28 per cent rate, CAIT said in a statement.

 

In view of growing discontent about proposed GST rates, CAIT has urged the government to revisit the rate schedule.

 

“The wider impact of the classification of items under different tax slabs needs to be gauged very cautiously since under GST not only the taxes paid on goods but even the taxes paid on the services will be eligible for input tax credit,” CAIT said.

 

Besides, taxes paid on inter-state purchases of goods or availing services will also be eligible for input tax credit, it added.

 

“Hitherto, both these advantages were not available under VAT tax regime. Therefore, impact on the prices of commodities will have to be drawn after calculating advantages of input tax credit’’

 

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GST

The business of GST decoded

The goods and services tax (GST) is not merely a tax change but a business change that will impact all functions of an organisation such as finance, product pricing, supply chain, information technology, contracts and commercials. Its companywide implementation is not limited to the finance and IT departments, but involves the entire business ecosystem. Any training and sensitising programme has to involve employees, vendors and key customers. Sudipto Dey looks at what it entails:

  • The regime’s impact analysis exercise has to involve several departments, including finance, IT, supply chain, product pricing and human resource, among others
  • Claiming input tax credit is the most important benefit. Currently, service providers can’t claim credit for VAT paid on goods, while traders can’t claim credit for excise/countervailing duty and service tax. Businesses have to identify benefits on account of the transition at an organisation-level
  • Identify possible cost savings key suppliers/vendors could be entitled to under the GST; engage with vendors for pass-through of these benefits in accordance with anti-profiteering provisions
  • Input tax credit is denied on goods and/or services used for personal consumption; tax credit not available on goods lost, stolen, destroyed, written-off or given away as gift or free samples
  • Employer can’t claim tax credit on offering cab service, canteen facilities, life insurance or health insurance to employees
  • One can’t claim input tax credit while taking a client out for a business lunch
  • To claim the input tax credit, the buyer has to ensure the supplier is paid within 180 days from date of invoice; otherwise, proportionate input tax credit will be reversed

 

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GST

World Gold Council urges govt to reduce tax on gold under GST regime

The World Gold Council  urged the government to reduce the tax incidence on gold and gold products under the new Goods and Sevices Tax regime.

“In the GST regime, we urge and expect that the total tax burden on gold be halved from the current level of around 12 per cent,” WGC managing director Somasundaram PR said here today during launch of a new comprehensive India gold report in Bengali.

The report is published after 15 years and is also available in English, Hindi, Malayam and Tamil for a ready reference to Indian gold industry.

Currently, total taxation comes to between 12 and 13 per cent. Custom duty is 10 per cent, excise is one per cent and VAT of 1-1.5 per cent depending upon states.

“In the GST regime, we demand the total tax burden on gold to be not more than 6-7 per cent. But, we have to wait for a few days more when the GST rates on gold is expected to be announced,” Somasundaram said.

He tried to convince that gold import was not as bad as was perceived to be when asked why the government should offer low tax on gold which is an idle asset and contribute a lot for current account deficit.

“According to a 2014-15 report of PWC, value addition in gold is to the tune of USD 30 billion with a lot more scope. Gold loan is also to the tune of around USD 10 billion with about 1,250 tonne as collateral allowing persons access to credit be it formal or informal,” Somasundaram said.

Hoping GST will bring lot of transparency in the gold industry including check on illgeal imports which is about 120 tonnes a year now. But it will take few months industry to get stabilised, the WGC official said.

Somasundaram said government should promote gold investment through ETF with tax breaks rather than physical gold.

He reteriated that the country needed a gold policy that would help all stakeholders.

Meanwhile, the gold demand during Q1 (January-March, 2017) grew by 15 per cent to 123 tonnes, but it was 18 per cent down compared to the corresponding period in the last five years on average.

 

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GST

Sugar, tea, coffee, milk powder to become cheaper under GST

Sugar, tea, coffee and milk powder will cost less with tax incidence coming down under the goods and services tax(GST) scheduled to be rolled out from July 1.

 

Currently, sugar attracts specific central excise duty of Rs 71 per quintal plus a cess of Rs 124, which translates into ad valorem rate of more than 6 per cent.

 

If central sales tax (CST), octroi, and entry tax are factored in, the total incidence works out to more than 8 per cent.

 

“As against this, the proposed GST rate on sugar is only 5 per cent, i.e. 3 per cent less than the present incidence of taxes,” the finance ministry said.

 

The tax under GST on tea and coffee – other than instant coffee – will come down to 5 per cent, from the current 7 per cent.

 

Milk powder attracts nil central excise duty and 5 per cent VAT.

 

The embedded taxes in the production of milk powder and the incidence on account of CST, octroi, and entry tax work out to more than 7 per cent. As against this, the proposed GST on milk powder is only 5 per cent.

 

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GST

Exhibitors rally against 28% GST on cinema halls

The announcement of the Goods and Services Tax (GST) rates came as a disappointment to the film industry, specifically to the exhibitiors, as were put in the 28 per cent bracket.

 

Interestingly, other categories in this bracket include luxury goods, casinos, races and 5-star hotels. The Multiplex Association of India (MAI) has appealed to the government to reduce this levy in the interest of the survival of the

 

The letter, signed by president of MAI Deepak Asher, points out the various challenges that the industry is facing, including lack of screens, decreasing footfalls and competition by It adds that the total tax levied on cinema house may actually be more if the local bodies decide to levy an additional tax.

 

“Many states are now empowering local bodies (municipal corporations, municipalities, panchayats, local councils, district councils, etc.) to levy an additional entertainment tax. While entertainment tax levied by the state government is subsumed in GST, entertainment tax levied by such local bodies would be outside of the regulatory framework. In other words, according to the current tax regime, the entertainment tax levied by such local bodies would not be creditable under the regime and would end up being an additional tax. In substance, could well end up paying, not just a prohibitive 28 per cent GST, but possibly a 10 – 25 per cent local body entertainment tax as well,” Asher argues in his letter.

 

The exhibition industry, which includes single screens and multiplexes, was rallying for the implementation of in the hope that the taxation will decrease. Until now, the exhibitors paid blended taxes depending on the tax regime of the states. So the tax component varied from state to state.

 

“We were hoping to be placed in the 12 to 18 per cent slab. This would have been a balanced approach to the taxation issue for the exhibition industry,” says Ajay Bijli, chairman and MD, Ltd, the largest multiplex chain in the country with more than 500 screens.

 

He adds that while the burden of taxation will be felt equally by multiplexes and single screens, exhibitors in Tamil Nadu, Karnataka and Madhya Pradesh will have a particularly tough time since the government (state) has levied a cap on ticket prices in the state. In this case, since the ticket price cannot be raised, the operators stand to take a major hit in the bottom-line, especially because all three states had entertainment tax levy less than 28 per cent.
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