Rs 137 cr check post use less post GST

Chennai: Touted as the first modern integrated check post in Tamil Nadu, the facility on NH5 near Gummidipoondi is all set for inauguration soon. The Rs 137-crore facility will house various departments for executing an integrated checking of vehicles entering the state from Andhra Pradesh. But, the check post is unlikely to yield significant revenue as the major revenue generator – commercial taxes department – has pulled out of the check post after the implementation of the GST.

The 10-year-old project proposed in 2008 started taking shape after the state transport department sanctioned a total of Rs 109.46 crore for setting up the facility at Pethikuppam, about 60km north of the city in Tiruvallur district, in 2013. The plan was to accommodate seven departments, including revenue, police, prohibition and excise, civil supplies and consumer protection, besides commercial taxes in the check post such that an integrated checking can be carried out of vehicles coming from the neighbouring state. According to official sources, the cost had escalated by an additional Rs 27 crore in the last five years as the constructions got over. At present, the facility has features to scan the vehicle registration numbers captured through cameras, which would be sent to the central server of the Union ministry of road transport and highways (MORTH) for verification. The check post will have a modern weighbridge on the lanes that would automatically weigh the vehicles for overloading. Other departments should do checkings manually, official sources said. However, T K Pandian, a consultant for logistic firms, said, “These are the features of toll plazas, and not that of an integrated check post. The check post with such huge investments should have scanners that can detect carriage of any hazardous material without manual checking. It must have sophisticated scanners that can alert about any suspicious material being transported (without physical verification).”

While the commercial taxes department sources confirmed that they were not part of the facility after implementation of the GST, an official with the state transport authority said that police department can set up such exhaustive security gadget depending on their requirement. “The modern integrated check post is not a commercial venture such that we declare the notional revenue. We can tell anything only after its inauguration,” another transport department official added.


Punjab waives its share in GST on community kitchens

Punjab Chief Minister Amarinder Singh on Wednesday announced waiver of the state government’s 50 per cent share in the goods and services tax on the community kitchen at the Darbar Sahib, even as the state assembly unanimously passed a resolution to seek total waiver from the Centre.

The Chief Minister also announced similar waiver on GST on ‘langar’ and ‘prasad’ for Durgiana Mandir and Bhagwan Valmiki Tirath Sthal, while directing officials to work out modalities for similar waiver at religious shrines of other communities.

Intervening in a discussion on the issue in the assembly, Amarinder Singh said his government would not take its share of the GST on the ‘langar’ items but would it to the Darbar Sahib.

He said his government in 2002 waived off sales tax on all ‘langar’ items, which had been levied by the previous Akali government.

The Chief Minister slammed the Shiromani Akali Dal (SAD) and its ally, the Bharatiya Janata Party (BJP), for not opposing the imposition of GST before the GST Council.

Pointing out that this was not the first time the subject came up for discussion in the House, he said it was obvious that SAD was only trying to gain political mileage from the issue as it was not doing anything to force the BJP-led government at the Centre to waive off the GST on ‘langar’.

Meanwhile, the House unanimously passed the resolution to press the central government to immediately waive off its GST share on the ‘langar’ items at Sri Darbar Sahib and Durgiana Mandir.

The resolution, which was passed by voice vote, had been moved by Finance Minister Manpreet Singh Badal.

The Congress government had raised this issue thrice before the GST council, but their request had been rejected outright by the Union Finance Minister, Badal said.


Besides fares, cab aggregators free to charge extra for GST, toll

With app-based aggregators implementing the new structure announced by the transport department, cab rides may be costlier now.

The notification made changes from the earlier fixed fare for the first 4km. For Class B vehicles (Rs 10 lakh to Rs 16 lakh), it has been reduced from Rs 68 to Rs 64. For Class C vehicles (Rs 5 lakh to Rs 10 lakh), it is down from Rs 52 to Rs 48. However, the first 4km fares for Class A (Rs 16 lakh and above) and Class D (up to Rs 5 lakh) are unchanged.

Transport commissioner B Dayananda said the department will check apps and start field inspections from Thursday to ensure compliance.

Commuters are unhappy that they have to pay a minimum of Rs 44 for small cabs (vehicle costing below Rs 5 lakh) and Rs 80 for luxury cars (above Rs 16 lakh) for the first 4km. The new fare structure has classified vehicles into four categories based on the cost of the models. It replaces the earlier tariff which prescribed no minimum fare, but capped the maximum fare at Rs 14 per km for non-AC and Rs 19.5 per km for AC vehicles.

Aggregators can collect additional charges like GST and toll fee from passengers. The notification mentions that no fare shall be collected on the basis of time. “Only fares on the basis of distance travelled shall be levied on the passengers,” says the new rule.

It also stated that waiting charge will be free for the first 20 minutes and subsequently Rs 10 per 15 minutes. “No hidden charges shall be levied other than the fare charges notified by the government,” it added. Minimum and maximum fares apply to cabs in the city and also within the 25km radius of BBMP limits.

Ola was unavailable for comment.

“Uber has implemented the category-wise minimum and maximum fare caps notified by the government. The upfront fares are calculated using an algorithm that takes into consideration the expected distance of the trip, local traffic patterns, demand and supply at a given location. We’re able to use past data to estimate the likely cost of the trip and can present that price to a rider before they request for a ride,” said an Uber spokesperson.

Cab commuters clueless

While cab operators are yet to mention minimum and maximum fares of the four vehicle categories on apps, they continue to charge commuters also on minutes spent on travel, which has been done away in the latest revision.

Also with cap on fares still ambiguous, commuters are increasingly paying surge fares. “Earlier, it was easier to check whether we were overcharged as the fare was Rs 19.5 per km for AC vehicles. Now, there are four categories of vehicles and each has minimum and maximum charges. How do they expect us to remember these rates?” said Deepika S, a regular passenger. “There was no need to fix a minimum charge as it’ll increase fares and people will use private vehicles,” she added.

Dayananda said they are talking to cab aggregators to provide minimum and maximum fares of the four categories on their respective apps. “We’ll ensure they don’t charge commuters on time spent on travel,” he said.


Airtel, Vodafone, Idea and Reliance Jio served notices over GST

Telecom operators including Bharti Airtel, Vodafone India, Idea Cellular and Reliance Jio Infocomm have been served notices for exaggerated credit claims under the Goods and Services Tax, said two people familiar with the development.

The indirect tax department has issued notices to all the major telecom companies, including tower companies, for claiming additional transitional credit for capital expenditure incurred under GST. The companies also got separate notices for adding education, Swachh Bharat and Krishi Kalyan cess to their transitional credit balances. The department suspects the companies may have claimed credit even in cases where they are not eligible, such as for capital expenditure incurred prior to July 1, 2017, when GST was introduced.

Under current rules, service companies can seek tax credit on capital expenditure — there was no such concept for services earlier — and use them to offset their GST liability. Telecom companies had claimed input credit for capital expenditure on erecting towers, cell sites and switching equipment.

The department alleged that telecom companies claimed credit even on capital expenditure partially incurred after GST was introduced. “In some cases, companies had completed 90% of the work but that did not reflect on their books. But 100% of the capital expenditure came on their books after July 1 as they can claim credit,” said a tax official.

Tax experts said validating the claims may be tough because revenue officials will have to go figure out the timeline of capital expenditure for thousands of cell sites. “The verification of transition credit claims would be a difficult task, depending on the industry and the nature of the claims. While the tax authorities have every should not be subjected to undue hardship in the process,” said MS Mani, a partner at Deloitte India.

“GST legislation allows input tax credit of tax paid on immovable plant and machinery — but has specifically excluded mobile towers from the definition of plant and machinery for this purpose. The industry’s point of view — based on facts — is that towers are not immovable property given that they can and are in fact easily movable from one place to another,” said Uday Pimprikar, partner,tax and regulatory services, EY India.

According to people aware of the matter, the department has disallowed about Rs. 4,000 crore claimed by top telecom companies. The average credit claimed by a company ranges between Rs 800 crore and Rs.1,000 crore, for which tax notices were served.

Detailed questionnaires emailed to Reliance Jio, Vodafone, Airtel and Idea on Monday did not elicit any response. ET reported on December 14 that telcos were under scrutiny for inflated tax credits.


PwC urges govt to pare 28% GST bracket to 20-22%, merge middle slabs

In its new report, the audit firm urges policymakers to rework definition of ‘luxury items’ in sync with current standards of living The government should consider further pruning of rates under the goods and services tax (GST) regime by slashing the top bracket and merging the mid slabs, a top audit firm has said. PwC India, in its report titled ‘200 days of GST’, has suggested lowering the 28 per cent GST slab to 20-22 per cent, and clubbing of the 12 per cent and 18 per cent slabs to somewhere between 14-16 per cent.

“..item in government’s priority list this year should be further pruning of (GST) rates. While there has been substantial reduction in the number of items in the 28 per cent bracket, the government should also consider reducing the rate from 28 per cent to 20-22 per cent,” the report said.
The GST Council had in its November meeting slashed rates on over 200 items. Rates of 178 items were reduced from 28 per cent to 18 per cent, including chewing gum, shampoo, detergent, chocolates, beauty products, and sanitaryware.

Other items that enjoyed a rate cut include leather clothing, cookers, stoves, aftershave, deodorant, detergent and washing power, razors and blades, cutlery, storage water heater, batteries, goggles, wristwatches, and mattresses.

Only 50 items currently remain in the 28 per cent bracket, including ACs, refrigerators, and cameras.

“It is important that policymakers revisit their definition of ‘luxury items’, considering standards of living in today’s world,” said the report.

GST was implemented on July 1 and has undergone a slew of changes to make it industry-friendly. Besides cutting rates, the return filing has been simplified and compliance burden eased over the months.

“There is hope that GST 2.0, which is at the works currently, will be a much improved version compared to the first one,” said Pratik Jain, partner, PwC India.

PwC further suggested aligning the tax with global trends, bringing clarity by removing legal loopholes and the need for simplification of compliance-related requirements such as a letter of undertaking in the case of GST-free exports.

The report pointed out that GST suffers due to ambiguities and loopholes that came to light only after its implementation.

Some of its provisions seem to contradict the objectives with which these were brought into play, it added. For instance, goods imported into a Customs bonded warehouse and subsequently sold to a customer in the domestic tariff Area attracts dual levy of tax. “This appears unintentional, but it is imperative that necessary changes in law are made soon,” it said.

“It is expected that the GST Council will bring taxation of transport and logistics on a par with global practices, i.e., zero rate export freight on an ongoing basis along with incidental services, clarity on place of supply provisions, stabilise GST Network (GSTN), and simplify GST compliance, allowing this sector to use a single number for e-way bills on an all-India basis,” said Varun Dhawan, head of taxes, India, Deutsche Post DHL Group.

Hazy rules on anti-profiteering is another concern. There is lack of clarity on whether a company can choose not to reduce the price of a particular product and instead offer an increased quantity or freebies. “While transitioning to the GST regime, various costs have been incurred by companies. There is still no clarity on whether such costs can be taken into account while computing a revised, anti-profiteering and tax compliant rate,” it said.

According to the anti-profiteering rules under GST, “Benefits of input tax credit should have been passed on to the recipient by way of commensurate reduction in prices.” The government has received about 100 anti-profiteering complaints so far and about 63 are currently being investigated by Directorate General of Safeguards.

It further said that there was very little flexibility offered to users of GSTN. “For instance, there is no option to set off excess tax paid by an entity holding the same permanent account number under one registration vis-à-vis another registration in a different state. The network does not allow filing of returns for a subsequent period till the previous period returns are filed and the penalty, if any, is paid,” it said. The report said that resolution of these and implementation of changes on a simple and easy-to-use online portal is imperative for GST’s success.


Govt bats for e-wallet to address GST refund delays as MSME exporters raise alarm

Owing to delays in refund of taxes under GST regime, exporters including the Micro, Small and Medium Enterprises (MSMEs) have been facing challenges, in order to deal with this issue, Commerce and Industry Minister Suresh Prabhu said introduction of e-wallet mechanism will effectively address the concern.

Prabhu said that secretaries in the commerce and finance ministries are taking all possible measures on this matter.

He further said that e-wallet can effectively address this issue because exporters do not have to pay and seek refunds as notional credit would be transferred to exporter’s accounts automatically based on their past records and credit can be used to pay tax on inputs.

Talking to KNN, Badish Jindal, President of MSME body FOPSIA said that the industry have been facing the issue of blocked refunds under the new taxation.

With the blocked taxes, it is becoming impossible for the production cycle to run, he added.

Commenting along similar lines, Sunil Vaish of Indian Industries Association (IIA) informed that the refund of exporters has been stuck from a long time with interest piled up which has led to the shortage of working capital. Government should resolve the issue of refund as soon as possible.

Federation of Indian Export Organizations (FIEO) mentioned that e-wallet could not only solve the problem of liquidity but also exporters may use it like a running account where money will be debited from e-wallet when duty paid supplies have to be undertaken and the amount is credited when the proof of exports is made available.

Exporters raised that delay in refund of taxes for months posing serious problems for them as their working capital get blocked which is also affecting shipments.

Also recently the announced GST refund fortnight in order to quickly sanction pending refunds to exporters and to begin from Saturday.

The Goods and Services Tax (GST) was rolled out from July 2017, following which exporters across sectors have raised he concern of blocked capital due to delay in refunds.


Tea exporters worried over delayed refund of GST claims

“It is not just non-refund of GST amount but the paper work and documentation that is putting the tea traders under pressure. We are in a spot. At this juncture, the situation looks grave,” a leading tea exporter told BusinessLine, voicing concern over the mounting claims week after week.

The GST refunds, due to the members of the South India Tea Exporters Association (SITEA) is estimated at over ₹50 crore, as on date.

“The refunds have been pending since July last. We paid 5 per cent GST on the value of the teas purchased at auctions and filed refund claims online. We have not received any sum so far by way of refund. Officials of the State GST and the Central Board of Excise and Customs — at various levels — are demanding multiple sets of hard copies of tax invoices, shipping bills, bill of loading, etc for verification, defeating the very purpose of online filing of GST returns,” said Rony Elias Tharakan, Vice-Chairman, SITEA.

He further said that the exporters had availed loan from banks and their working capital situation is squeezed at present as the refund amounts have been locked for many months.

“If this situation continues, a good number of exporters will be forced to slow down export operations or exit from business. This will have an adverse affect on the tea auction sales. Volumes on offer may not be taken up fully for want of funds and the competition on the auction floor will go for a toss. The resultant impact would be on the price. When the price drops, it will affect the small growers in Tamil Nadu, who depend on the auction system for their livelihood. It is a vicious cycle,” Tharakan said, appealing for early settlement of refund claims.

“If this situation continues, a good number of exporters will be forced to slow down export operations or exit from business. This will have an adverse affect on the tea auction sales. Volumes on offer may not be taken up fully for want of funds and the competition on the auction floor will go for a toss. The resultant impact would be on the price. When the price drops, it will affect the small growers in Tamil Nadu, who depend on the auction system for their livelihood. It is a vicious cycle,” Tharakan said, appealing for early settlement of refund claims.


After GST, fashion foreign brands targeting India expansion

Global cues indicate that the fashion industry is moving towards the Orient. In India, the growth story is obvious, but the understanding the success story of any international brand in the country lies in comprehending the pre and post GST era.

Exclusive European and US brands have extended their business in many Indian metros. The young and aspirational crowd, the classic middle-aged bunch thronging the freshly smelling new stores with enthusiasm have helped lure these brands Eastward. Whoever said GST has been a spirt damper should check out a few stores like Levis, US Polo Association, Charles & Keith, H&M, Zara, Mango and Uniqlo, the latest international entrants in the growing apparel retail industry in India. And each of these brands is working towards changing the social fabric of the country with their retail experience.

Here is a quick overview of how some brands have gained after GST implementation in India.

Not many players in the apparel trade are likely to forget the unorganized taxation regime as it hurtles into the dustbins of history. Manufacturers, retailers and all stokers in between knew they had to pay 4.5 percent VAT along with 2 percent excise duty. Added to this were the new way of serving consumers-via e-commerce portals. Many branded retailers were also giving heavy discounts and it added confusion to the pricing structure. Various portals and even showrooms offered schemes like ‘Buy 2 Get 2 Free’. Added to these were End of Season sales that made customers wonder at the drastically slashed prices.

A lot has changed now that the GST is in place. Before GST came into force, branded clothes above Rs 1,000 were being taxed at flat 12 percent. The problem was accelerated by the technical and technological glitches that accompany with the new systems. As foreign brands are used to the system for them it has been an easy-peasy solution to showcase their polished stocks. They have benefits the most by the technological ease and GST software compliance. It is now left to the locals to match their fabrics and brands with them.

Post-GST Structure in 2018

As e-commerce also chips in, foreign brands are able to add more muscle to the local industry by giving employment and introducing global norms. The Indian apparel industry is shaped by growth from three main divisions – men’s wear, women’s wear and kids wear. They all come under the same GST ambit. Shirts, trousers, and denim wear have the most hold over the Rs 1,24,423 crore (US $19 billion) market.

This year, Japanese brand Unilqo entered India with plans to go solo. Their main global rival is already in the country – Heinz and Mauritz (H&M) – and has previously taken over large retail spaces in leading malls. H&M, and other fast fashion brands like Mango, ZARA and Forever 21, will all be getting the benefit of the new GST regime of Asia’s third largest economy, especially since the brands are geared to cater to the young and aspirational class with fresh stocks. All these brands together aim to open 10,000 stores by 2022 all over India.

As FDI in retail sector improves, one tax system is contributing at a national level. There is no confusion over different tax slabs. So, GST has come as a relief to all players as a level playing field has emerged.

GST: Re-Shaping the Retail Industry

Currently, foreign fashion brands that have entered the country have bought ready stocks from their manufacturing units. There is no additional paperwork or documentations. There is no additional burden of double taxation because they are coming from another country. Ultimately it is the consumer who stands to benefit. For example, if a person a paying the same price of the garment no matter where he buys it from, it makes sense to make a local purchase where he will be allowed fitting, trials, and options of choosing sizes and colors and touch the garment.

It may be hard for the consumer to understand that even if he is paying a slightly higher price, the benefits are enormous. The scissors have already been used to cut a lot of wastage in terms of many other business processes. In making the high couture trade more appealing to the Indian consumer the brand conscious consumer does not feel cheated as one price rules across the country.

For the companies that have already made the foray, the experience is better and fairly competitive. They find ease of business through:

– Control right from the warehouse for the inventory
– With technology it is easy to monitor stocks in various showrooms across the country
– With the use of cashless transactions, every deal is transplant
– Internal costs of transportation, logistics and delivery is more organized
– In every state, the taxation is uniform and unburdened with different payment structures.
– With GST, there is no delay in any supply chain, payment to vendors, distributors
– Employees are being trained to utilize their time to focus on customer engagement rather than on the ‘sale’
– The PoS system ensures that the potential consumer eventually comes to the counter and makes the purchase
– Different payment schemes have added the impetus to buy apparel at no extra cost

In conclusion, with the advent of GST, there is no reason why a brand’s equity will not improve with the bespoke brand experience for the customer.


PwC India Urges GST Regime Simplification

PwC India has called for simplification of India’s goods and services tax regime, in a report to mark 200 days since the regime entered into force.

The report points out that the GST law prescribes filing of at least three returns every month, as well as an annual return. Apart from this, it says, there are other returns such as input credit distributor’s return. Calling for simplification, the report says that the tax administrative burden for firms has been higher than expected, especially for the services industry, which had generally been subject to a biannual filing obligation.

On rates, PwC India noted that contrary to many territories’ relatively simple one-rate tax structure, India levies four rates of value-added tax, plus the zero rate, with one rate as high as 28 percent and sometimes two different rates applying to the same service – for instance, hotel accommodation – depending on the value of such.

The report says: “Additionally, in many cases, the Government has chosen to levy the tax on the basis of the status of the buyer, instead of the product itself, and this has resulted in a great deal of complexity. Additionally, in certain cases, a distinction has been made on the basis of the mode of the supply of products, which is unheard of around the world. For instance, in the case of goods procured through e-commerce, additional compliance requirements have been proposed.”

The report notes measures that have been taken so far to amend the regime to make it more simple, including proposals currently under consideration to eradicate some filing requirements.

It recommended that this year the Government should look to prune its value-added tax rates and at least narrow the base of the 28 percent rate. It said that this 28 percent rate should be lowered from 28 percent to around 20 percent to 22 percent. It also proposed consolidating the 12 and 18 percent rates into a single rate somewhere in the range of 14 to 16 percent.

On the administrative burden, PwC India welcomed plans to overhaul filing obligations but recommended also the removal of onerous documentation procedures such as the letter of undertaking required in the case of GST-free exports. It also recommended that India should consider merging the direct and indirect tax boards.

Other recommendations include that the Government should consider reforms to alleviate pressure on firms’ cash flow and constitute a public GST forum, to enable taxpayers to be more involved in the GST reform process going forward.

Among other things, the report also calls for measures to ensure that tax-related disputes are minimized, including by strengthening the advance ruling process.

PwC India concluded: “Implementation of the GST is truly a remarkable achievement for India and all the stakeholders, and the Government, industry, and consumers deserve to be applauded for this. It’s now time to consolidate and let the regime stabilize, while continuing to explore structural changes to bring it closer to what we had all visualized. We hope the wealth of experienced garnered by the Government and industry over more than 200 days will make GST 2.0 a much improved version of GST 1.0.”


CBEC to verify GST transitional credit claims of 50,000 taxpayers

NEW DELHI: In order to check “frivolous and fraudulent” tax credit claims by businesses, the CBEC has decided to verify demands of top 50,000 tax payers claiming maximum GST transitional credit, starting with those where the quantum exceeds Rs 25 lakh.

The verification of “unreasonable” transitional credit claims would be conducted in four phases, a source said, adding that credit verification will remain one of the focus areas in 2018-19.
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