Author Archives: CA Amit Shah

GST

Bad news for farmers: GST to increase cost of tractor production

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

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GST

GST: Imported garments to become 5-6% cheaper

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

 

Before GST 
* 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

 

After GST  

 

* 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

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GST

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Adhaar & Pan Card Centre

New Rule By Government! Your Mobile Number Will Be Deactivated If Not Linked To Aadhaar Card!

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.

How to link the phone number to your Aadhaar card?

  • 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;

1. Do I need to pay any charges?

This process is free and you need to get it done through an operator’s store only.

2. Can I do online registration?

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.

3. What’s the last date?

The last date is 6th of February 2018. Do it as soon as possible as it is rightly said, “Sooner the better”.

4. Can the Aadhaar card be linked to multiple SIM cards?

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.

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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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