GST have potential to transform economy : RBI

The Reserve Bank of India (RBI) on Thursday asked banks to provide additional working capital limit to medium, small and micro enterprises (MSMEs) to deal with cash crunch following the Narendra Modi-led central government’s November 8 decision to demonetise high-value currency notes.

The central bank also said that demonetisation, besides the goods and services tax (GST), could transform economy, notwithstanding the inconvenience caused to the public and the momentary impact on economic growth.
On the corporate sector, the central bank said the performance of industry had improved, though the risk of a lower turnover remained.

On the performance of the financial sector, it said business growth for banks remained subdued, and public-sector lenders continued to lag their private-sector peers, with profit contracting in the first half of 2016-17. At 9.1 per cent in September, against 7.8 per cent in March 2016, banks’ bad loans were pushing overall stressed advances ratio to 12.3 per cent from 11.5 per cent, RBI said.

Financial system remained stable, although banks, particularly PSBs, continued to face significant levels of stress, the central bank added.

Business Standard, 30 December 2016

15-day slot given for AP dealers to register under GST

Around two lakh dealers in the State and about 28,000 in Visakhapatnam city have to get their provisional registration under the Goods and Services Tax Act, done by January 15.

The Central government has allotted a 15-day time slot period beginning January 1 to Andhra Pradesh, and all the dealers have to visit the site to upload the required documents such as Aadhaar card, PAN card and other details, to get the provisional registration, said Deputy Commissioner Commercial Tax Department K. Nagendra, here on Monday.

According to him, the Commercial Tax Department will send the provisional user id and password for logging into the GST website to the registered email and mobile number of the dealers and they can use the same to login to the site. So far about 60 per cent of the dealers have sent their mobile and email ids to the department and the deadline is Dec. 31.

According to Mr. Nagendra, the constitutional amendment for the GST Bill was passed by Parliament and already approved by majority of the States in the country.

“The Act will come into force from April 1,” he said.

The entire process is online and user friendly. The dealers have been sensitised through a number of workshops and if they still have doubts they can contact the respective Commercial Tax Officers or approach the helpdesk. They can also login to for further information, K. Durga Surekha, CTO of Dwarakanagar area, told The Hindu.

Talking on the impact of GST on the State, Mr. Nagendra said the average annual revenue generated from the department was about Rs. 32,000 crore in the State, and the share of Visakhapatnam district was about Rs. 10,000 crore, with Rs. 8,000 crore coming exclusively from the oil sector.

Post GST, the revenue might come down slightly, but the Central government has assured to meet the deficit every two months.

Explaining the GST module, Mr. Nagendra said as of now there are about 12 types of taxes like VAT, Luxury tax and CST and dealers have to file separate returns for each of them. But with the implementation of GST, all the tax components will be withdrawn and there will be just one tax (GST) and the dealers have to file just one return and that to online. The GST collected will be shared between the State and the Centre.

The Hindu, 27 December 2016


Demonetisation, GST sops worry weigh on smartphone makers

Demonetisation and uncertainty over the continuation of incentives for local production under goods and services tax are turning out to be a double whammy for smartphone makers, forcing them to slow down capacity expansion and pushing those considering fresh investment to the ringside.

The worry is primarily over the tax incentives that enticed them to build local capacities to make the maximum of the opportunities thrown up by the world’s fastest growing smartphone market.

Demonetisation was an unexpected and painful twist, but the companies expect the demand drought due to the current cash crunch to be temporary. Top Indian smartphone makers such as Lava, Intex and Micromax, which have moved a substantial portion of assembling capacities to India from China by investing hundreds of crores here, could be the worst hit if the duty differentials backing local production are discontinued under GST, said industry insiders.

“There is a stalling of investment in the mobile assembly space … players who were planning capacity expansion have stopped (proceeding with the plans), including us,” said Sunil Vachani, vice president of the Consumer Electronics and Appliances Manufacturers Association.

Economic Times, 26 December 2016

Seventh GST council meeting held, Centre and states agree on compensation Law

The seventh GST Council meet saw the Centre and the states agree on the compensation law detailing that the Centre will absorb any spillover of revenue losses accruing on account of the adoption of the new indirect tax regime.

But hurdles in the implementation of the Goods and Services Tax are far from over. Inter-state trade, dual control and the quantum of compensation remain unresolved issues, according to West Bengal Finance Minister, Amit Mitra.

The earlier three-day discussion on compensation had taken place before the demonetisation decision was announced. It was estimated, given only a few large states would need compensation, that in the first year the Centre would pay states Rs 55,000 crore raised through the levy of cesses. But now, after the demonetisation or invalidation of Rs 500 and Rs 1,000 notes and the ensuing cash crunch, states expect tax revenues will be hit by 30 – 40 percent and hence the compensation amount needs revisiting, said Mitra. He expects the compensation amount to increase to Rs 70,000 – 80,000 crore in the first year.

According to discussions at earlier meetings of the GST Council, the Centre will impose a cess on luxury items like high-end cars and demerit goods including tobacco, pan masala and aerated drinks, over and above the highest tax slab of 28 percent. These cesses would add up to Rs 55,000 crore, and it was decided that this amount would be used to compensate states for their revenue collection shortfall.

Mitra said, with the quantum of compensation set to rise, the Centre must look at additional routes to fund it, such as the Consolidated Fund of India, and the matter will therefore come back to the Council for further discussion.

There is a serious issue today. If Rs 55,000 crore was not enough, where will the remaining amount of money come from? The unanimous formulation was Rs 55,000 crore, every source was defined…and today that whole thing is out of the window.

Amit Mitra, West Bengal Finance Minister

Indirect tax expert Amit Sarkar said while the states will forego a large chunk of the tax collection once GST is rolled out, the implementation of the indirect tax regime will increase the total collection.

“If there is a request for higher compensation due to the adverse effect of demonetisation in the economy, it is important to note that it is the very same economy where the central government itself would be collecting taxes. So, the question arises where will that money come from?” Sarkar said.

Centre, states move to next step to rollout GST

Centre and states on Friday came within a step of reaching the consensus required to roll out the goods and services tax (GST).

The second day of the GST council meeting, chaired by finance minister Arun Jaitley, saw both sides agree to a compensation formula wherein the centre expressed its willingness to absorb any revenue losses accruing to the states on account of transition to the new indirect tax regime.

Similarly, the states met the Union government halfway by agreeing to a proposal to explore alternative sources of receipts, besides the cess on so-called demerit goods including tobacco, pan masala and aerated drinks, to fund the compensation package.

The GST compensation bill, which was cleared on Friday, will provide legal backing to the centre’s promise to compensate states if their revenue growth rate were to fall below 14% in the first five years of GST. The base year for calculating the revenue is 2015-16.

The compromise sets the context for the next meeting of the GST council, on 3-4 January, to discuss the final agenda item: sharing of administrative powers between the centre and states to govern GST. It has been a source of discord between the two, with the states even claiming it could be a deal-breaker in implementing the singular piece of tax reform.

The finance minister did not commit himself to any timeline for implementing GST.

“Our effort is to do it as quickly as possible. We are making reasonable headway (in that direction),” he said. The centre had earlier targeted 1 April 2017 as the date to bring GST into force.

Some states such as West Bengal, Kerala and Tamil Nadu are also demanding exclusive control over all traders who have an annual revenue threshold of less than Rs1.5 crore. The centre is unwilling to concede this, saying it will leave a very small pool of traders under its control.

The Union government favours dividing traders in a fixed proportion between the centre and the states, irrespective of the threshold.

“The thought behind dual control is that both have an assessing machinery and we have not reached that stage where we have a federal bureaucracy. There is one law but two bureaucracies. The issue will be resolved through a deliberative process,” said Jaitley.

The GST council also cleared the remaining clauses in the central GST and state GST draft bills. The revised draft bills, after a legal vetting, will again be placed before the GST council at its next meeting, after which they will be taken up by Parliament and state assemblies.

Some states continue to harbour reservations about the centre charging a cess to fund the compensation.

Yanamala Ramakrishnudu, the Andhra Pradesh minister of finance and planning, indicated as much.

“He (Ramakrishnudu) referred to the assurance given by the Union finance minister during the Empowered Committee meeting held on 14-06-2016 at Kolkata that the central government is committed to compensate the states for loss of revenue on account of implementation of GST. He stressed that the compensation must be given from the Consolidated Fund of India only,” a statement from his office said.

To this, Jaitley said, “There was one clause regarding source of compensation fund which will be redrafted and placed before the GST council”.

Pratik Jain, partner and leader, indirect tax, at PwC India, said the 1 April date of GST implementation is likely to be missed given the lack of sufficient time.

“The most contentious issue of ‘dual control’ or ‘cross empowerment’ is to be discussed in the next meeting in early January. If there is an agreement on the issue, then GST laws can be passed in the budget session. However, now 1 April 2017 as the date of GST implementation is virtually ruled out, which I think is good news for both industry as well as the government,” he added.

Livemint, 24 December 2016

Most of the draft model Bill approves by GST Council

The Goods and Services Tax (GST) Council, comprising the Union finance minister and state representatives, mainly their finance ministers, cleared most of the draft model GST Bill on Thursday.

This leaves mainly the contentious issue of administrative turf between the Centre and states for Friday. Some state finance ministers did not rule out the Centre resorting to voting for resolving the issue of control over assessees under the proposed regime.

Beside administrative turf, the Friday meeting will take up the Integrated GST (IGST) and compensation Bills. Agreement over these would be crucial for introducing these in the coming session of Parliament.

 “The basic model GST Bill has been concluded. Things we have kept aside, such as the issue of cross-empowerment and IGST, will come for discussion tomorrow,” Jammu and Kashmir finance minister Haseeb Drabu told reporters after the meeting. He said it was decided earlier as well to go through the entire draft model law first and clear all procedural parts; that has been done.

The issue of administrative turf has been stuck for some time, despite an initial agreement between Centre and states. While the Centre is pushing for a cross-empowerment model of randomly choosing and dividing five per cent of the assessees between itself and the states, using a computer programme, states want sole control over assessees up to Rs 1.5 crore of annual turnover.

Earlier, it was expected the Bills would be introduced in the winter session of Parliament but that ended last week without the GST Council approving these. A consensus or some other resolution to the issue of administrative control over assessees is a must for the legislations to get into the Budget session.

M S Mani, senior director, Deloitte Haskins & Sells, said: “It is better if a consensus is achieved on the legislative issues. The need of the hour is to have clarity on several issues, including that of rates and classification so that businesses can be prepared.”

Kerala finance minister Thomas Isaac, who could not attend the meeting as he was unwell, told Business Standard over a phone that the contentious issues could be sorted only by voting.

If the Bills are introduced in the Budget session, there is hope, though dim, of introducing GST from April 1, when the next financial year begins. Last year’s constitutional change allows time till September 16 in this regard. After which, the authority lapses unless the rule is amended.

Asked about the demand of some states to raise the compensation amount to Rs 1.5 lakh crore from Rs 50,000 crore a year due to demonetisation, Drabu said: “I don’t think we should link the two.”

Business Standard, 23 December 2016

GST Council two day meeting starts today to consider model GST Law

GST council two days meeting will begin today to consider the model GST laws and iron out differences on the vexed issue of jurisdiction over assessees in the new indirect tax regime.

This will be the seventh meeting of the Council, which is headed by Union Finance Minister Arun Jaitley and has state ministers as members.

With as many as 20 chapters of the model GST law cleared in its last meeting earlier this month, the Council will tomorrow discuss the remaining 7 chapters and then on Friday take up the dual control issue.

As consensus eluded the Council meeting, the subsequent GST legislations — CGST, IGST and compensation law — could not be introduced in the Winter session of Parliament that ended last week. This has threatened the April 2017 rollout target of the Goods and Services Tax (GST).

Experts now say that implementation of GST should be postponed by three months to July next year as industry would need time to prepare their IT infrastructure.

The Economic Times, 21 December 2016

FMCG Companies keeps faith in GST after Demonetisation

The fast-moving consumer goods (FMCG) companies hopes that the back of a good monsoon and the Seventh Pay Panel award came partially unstuck after the government’s sudden move to pull back currency notes upset the applecart towards the end of 2016.

Two years of slow growth meant the companies had been gearing up to turn the corner on a likely demand surge because of a hike in salary and more rural income.

The FMCG players chose to describe the phase post November 8, when the notes ban was announced, as “a temporary blip” that is unlikely to prolong the slowdown and “demand should pick up next quarter on the back of strong demand and consumption”.

 Like the rest of the economy, the industry is getting ready for life after a likely Goods and Service Tax rollout in 2017, which analysts said “is expected to bring relief… From high taxation and consequent increase in cost”.

Acknowledging that there will be pain in the short term, the organised players believe that demonetisation and GST will stand them in good stead vis-a-vis unorganised players because of compliance and structural changes which will ensue.

Looking forward to the next year, Marico MD and CEO Saugata Gupta said, “We expect the fourth quarter to be better and settled in comparison to third. We are already seeing some signs of recovery, especially in stand-alone modern trade, urban, retail and chemists, but it will take time to stabilise completely.”

From a long-term perspective, he said: “The demonetisation coupled with GST will lead to more compliance and bring about structural changes in the way the wholesale functions in the sector. There is absolutely no change in the medium- and long-term growth aspirations. In fact, organised players like us will further benefit.”

EY India Partner and Leader (Retail and Consumer Products) Pinakiranjan Mishra agreed: “This will bring businesses into the tax bracket while lowering the tax impact and bringing more transparency… This will also create a level-playing field among players by bringing all into the tax system.”

But for the moment, the industry is reconciled to dealing with the after-effect of demonetisation.

“Overall, 2016 was a lacklustre year for the FMCG sector. We did see some recovery, with growth inching up to low single digits… (but) the hopes of a significant revival post a strong monsoon have been temporarily derailed by the impact of demonetisation,” said Godrej Consumer Products (GCPL) MD Vivek Gambhir.

ITC Chief Operating Officer Sanjiv Puri pointed to the difficulty faced by consumers, wholesalers, retailers, brand owners and manufacturers.

“Certainly, in this period, growth rates would be muted. Some categories which are high on consumer discretionary would even have degrowth,” he noted.

Puri was quick to add: “In the short run, we have challenges, but are still optimistic because India has long positives going for itself.”

According to Rajat Wahi, Head, Consumer Markets and Agriculture, KPMG in India, the FMCG firms will first have to address the issue of destocking in 2017 at wholesale and stockist levels as it failed to take off because of the cash crunch due to demonetisation.

“Demand for the last quarter was expected to be strong due to the good monsoon and the 7th Pay Commission payout, but due to the liquidity crunch following the demonetisation exercise, there will be slowdown in offtake as retail and wholesale trade adjusts to this,” he said.

Dabur India Chief Financial Officer Lalit Malik chipped in: “There has been massive amount of destocking across the entire trade channels and distributors, particularly wholesalers and retailers, which has led to a sharp drop in primary sales. So, while the actual consumer offtake may not have suffered very much, the destocking impact is severe.”

There are some that are happy with the way things have panned out. Yoga guru Ramdev-led Patanjali, which has been a ‘disruptive’ player in 2016, sees the crisis as a perfect opportunity to cash in on.

“When people face such situations, they buy only necessary products that are of good price and quality. We have no impact (of demonetisation) on our sales and in fact, it has gone up slightly,” Patanjali CEO Acharya Balkrishna claimed.

Riding high on its ayurveda-based products, Patanjali is on track to achieve a sales target of Rs 10,000 crore in 2016-17, he said. The strategy has, in fact, prompted other traditional players to jump onto the bandwagon.

“The year saw demand for ayurvedic and natural products grow with more and more consumers embracing these products. Dabur has always believed in the benefit of ayurveda and has been spreading the goodness among our consumers in India with a range of ayurvedic products,” said Malik of Dabur.

As for Swiss FMCG firm Nestle, 2016 was a continuation of its comeback trail of its popular noodles Maggi, which within a year of relaunch almost gained over 60 per cent market share in the segment.

“For the first three quarters of 2016, there had been broad-based growth across categories aided by a spate of innovations and renovation of over 25 new products. We are now clearly in the leadership position in instant noodles category, which vindicates consumer confidence and trust in brand Maggi,” a Nestle India spokesperson said.

2016 did not exactly turn out to be a good year for rural sales, which contribute around 35 per cent to the total industry pie. But the companies are optimistic of a bounceback once the effect of the cash deficit blows over.

“Since the rural economy is largely cash based and wholesale dependent, the large cash crunch has led to a slowdown in rural sales. We believe that the slowdown is temporary. We expect that as the liquidity situation improves, rural (numbers) will start showing better growth,” said Gambhir of GCPL.

Looking forward, FMCG companies, including GCPL, Patanjali and Dabur, are lining up big investment plans for their expansion in 2017.

“We are investing in Jammu and Kashmir to build large-scale manufacturing facilities for many of the categories we operate in. This new facility will help ramp up our presence in the rural market, which is a real growth driver for us,” said Gambhir.

Likewise, Balkrishna of Patanjali said: “We will invest Rs 5,000 crore in 2017-18. We will foray into new product category such as textiles and also improve our offerings in cosmetics and child nutrition. We would also venture into dairy segment and rice.”

Business Standard, 21 December 2016

Additional Tax burden upto Rs. 15000 crore may bear on India’s Airlines under GST

India’s Airlines industry may have to bear an additional tax burden of up to Rs 15,000 crore annually once the Goods and Services Tax (GST) is implemented, top industry executives have told the finance ministry.

Under the current indirect tax regime, the industry has to pay only about Rs 3,600 crore every year, according to industry estimates, while its annual revenue is pegged at Rs 60,000 crore.

The additional tax burden may push airlines, most of which have turned profitable, into losses again, coming as it does at a time when global fuel prices are flaring up.

In a meeting with revenue secretary Hasmukh Adhia on Saturday, the airline executives said the industry will have to bear additional taxes on ticket sales, import of aircraft and aircraft parts, lease rentals, and transfer of spares and goods within the country.

Among those who attended the meeting were members of the Federation of Indian Airlines – IndiGo CEO Aditya Ghosh, SpiceJetBSE 1.32 % chairman Ajay Singh, Jet AirwaysBSE 1.06 % director-finance Ravichandran Narayan and GoAir general manager-finance Joyakesh Podder – along with executives from national carrier Air India.

“We have raised very serious concerns. It will be a massive burden for the industry, which is already operating in a very tough environment,” one of the executives who attended the meeting said on condition of anonymity.

The industry submitted a letter to the revenue secretary detailing its concerns. ET has seen a copy of the letter.

Earlier this year, the government proposed a historic overhaul of the taxation structure in India, merging most of the existing indirect taxes into a single system – GST.

ET had on August 5 first reported on the concerns this would create for the domestic aviation industry.

Currently, an airline needs to pay 6% service tax on economy class tickets and 9% on business class, a relaxation on the usual charge of 15%.
No such abatement is likely to be available under the GST regime.

This will mean an additional indirect tax burden of over Rs 7,000 crore, said an executive, who was present in the meeting.

In its letter to the revenue secretary, the industry said “the government should maintain current abated tax rate of 6% of economy class and 9% for business class, without any restriction on input credit or categorise airline passenger services under the lowest tax band under GST regime (viz 12%)”.

Import of aircraft and aircraft parts are currently fully exempted from basic customs duty and countervailing duty (CVD) as well as special additional duty (SAD). There is no service tax on operating lease of aircraft, neither is there a sales tax or value-added tax on purchase or lease of planes.

Under the new regime, according to the letter, CVD and SAD will be subsumed under GST for all imports. This means purchase or lease of aircraft parts will attract GST of 18%, the letter said.

This will translate into GST liability of Rs 60 crore on procurement of one aircraft. India’s airlines – led by IndiGo – lease more than 60 planes a year. The annual additional burden will thus be about Rs 4,000 crore.

Besides, there will an additional annual impact of Rs 2,000 crore on lease rentals, the letter said.
Yet another impact will be on stock transfer.

“If a plane is grounded in Chennai and I have to fly in spares from Bengaluru, that will be taxed,” said the executive cited earlier.
The total burden will be Rs 1,800 crore.

Airlines are also worried about compliance requirements and massive additions to paperwork.

“Since airlines operate across the country, we will now have to file multiple tax returns in each state. Also, for each transfer of stock we have to file a different invoice, something we don’t do now. This is extremely cumbersome and will increase paperwork by 100 times,” the executive said.

The Economic Times, 20 December 2016

GST enrolment deadline extended

The sales tax department of the Jharkhand government has given the state’s businessmen, whose gross turnover is less than Rs 20 lakh, an extended time for registering an exemptions certificate under the goods and services tax (GST).

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With the ambitious GST likely to roll out in April next year, the sales tax department has extended the period for enrolment till December 22 which was originally December 15.

Gopal Krishna Tiwari, sales tax commissioner said in press meet on Sunday, “Considering the fact that the enrolment of businessmen in Jharkhand has been less, the deadline has been extended from December 15 to 22.”

According to the the statistics provided by the sales tax department, only 72,000 businessmen with a gross annual turnover below Rs 20 lakh, have enrolled in the goods and services tax network (GSTN) during this period.

But the total enrolment is roughly 30% of the total number of businessmen falling under the tax slab, the department claimed.

Tiwari said GST, which is being termed as a “tax reform” will help the state in terms of revenue in the long run.
The sales tax department said it has made a 24×7 active toll free number (0651 6600500), operational from Sunday. The toll free helpline will guide the dealers through the enrolment process, at any time of the day.
Trained professionals of a private company (TCS) have been deputed in all the divisions of the state to ensure a smooth and easy enrolment process for all, Tiwari said.
Times of India, 19 December 2016