GST will benefit warehousing sector : Official

Implementation of GST will benefit warehousing sector with prevailing taxation issues in logistics and transportation expected to be streamlined, a senior official said today.

Warehousing sector will see transformation to a next level as the GST regime would have preferential treatment towards this sector, Nikhlesh Jha, Additional Secretary & Financial Advisor, Ministry of Consumer Affairs, said at a conference here.

“Not only the GST regime will streamline the prevailing inadequacies in logistics in general but also address host of issues relating to transportation and warehousing in terms of their indirect taxation and therefore, the Ministry of Consumer Affairs is confident that GST as and when implemented will reshape the warehousing in particular,” he was quoted as saying in a statement issued by PHDCCI.

He exuded confidence that the finance ministry in its forthcoming budgetary exercise would have considerate treatment and allocations for warehousing sector.

Jha said that given its criticalities, the GST regime would be pro-actively supportive to logistics and warehousing.

Speaking on the occasion, Managing Director, Central Warehousing Corporation, Harpreet Singh said the government would create warehousing, cold storage with modern approach.

He said there would be more focus on hilly states such as Uttarakhand, Himachal Pradesh, Jammu & Kashmir and the entire northern eastern belt to make sure that not only agri production is safely stored but also substantially reduce the wastage on fruits and vegetables including floriculture.

Money Control, 30 January 2017

Tech players brace for GST impact, want manufacturing norms to ease

With the government set to present the Union Budget 2017-18 on February 1, some of the leading tech companies and IT manufacturers are bracing up for the implementation of the much anticipated Goods and Services Tax (GST), demanding that the excise duty structure should be rationalised.

“The IT industry has been seeking an extension of the excise duty differential benefit scheme to cover all the Information Technology Agreement (ITA) products including desktops, laptops, telecommunications equipment etc. This would mean a zero duty on all inputs for manufacturing of electronic components and parts,” said Alok Ohrie, President and Managing Director, India Commercial, Dell-EMC.

According to Rajiv Srivastava, Managing Director, HP Inc. India, IT manufacturers are bracing themselves for the GST implementation.

“The government’s objective should be to enable this transition from the current taxation system as smooth and orderly as possible — both for itself and for businesses and consumers. It will be important to outline a roadmap for IT manufacturers for the implementation of the new GST policy well in time,” Srivastava said in a statement.

According to Ohrie, expected budget benefits include import substitution, attracting component manufacturers to set up base in the country and the creation of numerous jobs in the IT sector.

“After Make in India and demonetisation, the next big disruption is GST. The government has to carefully take measures to remonetise the economy to return to high GDP growth while maintaining cost competitiveness,” noted Vikas Agarwal, General Manager, OnePlus India.

“From policy perspective, the tax structure should be rationalised and land acquisition policies should be simplified to enable local manufacturing at a larger scale,” Agarwal added at a time when US tech giant Apple is seeking tax concessions to manufacture in India.

“The government should look for special incentives for the component industry to make manufacturing far more sustainable in India. The extension of the duty differential scheme to the PC segment will definitely take India one step closer to making it an export hub,” said Rahul Agarwal, Managing Director & CEO of Lenovo India.

According to Samson Khaou, Managing Director, Dassault Systemes India, the government must pursue the positive momentum for the dynamic and ambitious national projects like Make In India, Smart Cities and Digital India.

“Budget 2016 focused more on all-inclusive growth including boosting digital literacy, improved connectivity and access to technology across sectors. We hope to see a continued focus by the government of India in the realms of technological advancements,” Khaou said.

“We hope there is a robust policy to accelerate the utilisation of funds allocated to the IT sector so that there is a far-reaching impact of technology where every change at even the micro level will contribute towards actualisation of the larger goal of digitization,” added Rahul Agarwal.

Business Standard, 30 January 2017

GST: Tax base sharing is main cause of ‘disquiet’ amongst officers

The dual GST model adopted by India is like a joint venture between the Centre and states, where both would levy and collect GST on a common tax base in such a predetermined manner that a taxpayer would have interface broadly with only one of the aforesaid two tax administrations. Success of a joint venture depends heavily on one factor—happiness of both the partners. Keeping this in mind, the Centre has been making a number of compromises. On their demand, essential inputs, like petroleum and its products, were kept outside the ambit of GST; so is alcohol, which is a state subject, although other demerit goods, like tobacco and cigarettes (central subjects), are in. States have also been allowed to vary their GST rates within a band. Most important, the Centre agreed to compensate them fully for first five years in case of loss of revenue.

These compromises impaired the shine of a good GST, but were considered necessary to bring states on board and make them happy. The finance minister was applauded for being flexible. But can the same be said about the recent decisions of the GST Council, for resolution of dual control issues?

The first decision for intra-state supplies by taxpayers below the threshold of Rs 1.5 crore was that states would administer both SGST as well as CGST for 90% of taxpayers, leaving the balance 10% for the Centre. Second, the taxpayer base will be divided 50-50 above the said threshold. Third, even for administering IGST for inter-state supplies, the taxpayer base will be divided in those two ratios. However, there is a rider that if there is a dispute between states over determination of ‘destination state’, as per the laws relating to ‘Place of Supply’, the IGST would be administered by the Centre. In GST regime, the destination state gets the share of state GST.

Another decision has been to cap the audit at 5% of the total taxpayers, based on risk factors. The list will be decided jointly by the Centre and states. The auditees will be shared through a computer-based programme. As for intelligence-based enforcement work, generally anti-evasion, this will be in the domain of both, perhaps on the time-honoured principle of first-strike—whoever strikes first carries on with the entire work in that particular case.

On the first decision of sharing of tax base below the threshold of R1.5 crore, it must be kept in mind that 93% of the existing service tax assesses of the Centre are in this band of less than R1.5 crore, and most cases of evasion have been detected in this band. Also, officers of the Centre, i.e. CBEC, have 23 years of collective experience in administering tax on services, since 1994. On the other hand, states have no experience. Being intangible, taxing services with reference to the place of supply is more complicated than taxing tangibles. Thus, it does not make sense to give a go to the vast experience of the Center’s officers and entrust most of the work to states.

The second decision of sharing the tax base 50-50 for taxpayers above the threshold of R1.5 crore is a fair one and this principle of equal sharing should have been followed for entire tax base.

The third decision regarding similar sharing of tax base with respect to IGST for inter-state supplies violates the provisions of Article 269A read with Act 246A. These provisions make it clear that GST in inter-state supplies ‘shall be levied and collected by the government of India’ and that the taxes collected would be ‘apportioned’ between the Centre and states. Even the law ministry has clarified that IGST can be levied and collected by the Centre alone. The reliance on Article 258, which authorises the President to entrust states with the executive power of the Centre in certain cases for the purpose of cross-empowerment with respect to IGST seems far-fetched. Besides, the rider that in the event of a dispute between two states regarding place of supply, the administering of IGST would vest on the Centre will only make things complicated.

On audit, all GST experts, led by Prof Richard Bird, have maintained that audit is the essence of administering GST. Audit has been decided to be capped at 5% of the tax base. Therefore, effectively, the Centre will have only 5% of 10% of the tax base below the threshold of R1.5 crore, with the Centre’s share of tax base in this band being only 10%. This is grossly unfair. But the decision of sharing of ‘anti-evasion’ work all through the tax base seems fair.

It is evident that CBEC has got an unfair deal with respect to sharing of tax base. Reportedly, the service associations of all the three groups—Groups ‘A’ ‘B’ and ‘C’—have in a joint memorandum demanded reversal of these decisions on sharing. These are the reasons that seem to have nudged the chairman, CBEC, on January 27, to draw FM’s attention to the ‘rising disquiet in the cadre’. The assurances given by FM, and later by the revenue secretary regarding protection of job and promotion prospects, could not remove this ‘disquiet’ as officers feel the arrangement would reduce Centre’s share of work. A future review of staff requirements vis-a-vis workload will indeed make a major dent in the interest of the field officers of CBEC. Further, there was no explanation to justify the 10-90 share between the Centre and states. Therefore, the general impression was that it was done to appease a few states.

As was stated at the beginning, both the partners should remain happy for a joint venture to succeed. The Centre had started well in ensuring that its partner, i.e. the states, remain happy. But the latest series of decisions arising out of unjust appeasement have made the field officers unhappy, thus casting a shadow on the success of this great joint venture. Sharing of the entire tax-base 50-50 seems to be the only answer.

The Financial Express, 31 January 2017

Note Ban, GST to bring more revenues to government: Arun Jaitley

Finance Minister Arun Jaitley today put up a spirited defence of demonetisation, saying the drive “shook” the financial system for a short while, but will integrate the shadow economy with the formal in the long run and ensure better tax compliance.

He said most contentious issues regarding the Goods and Services Tax (GST) have been sorted out between the Centre and states and the new indirect tax regime is at the final stages of implementation.

“This (demonetisation), coupled with GST, in the days to come will ensure much larger revenues as far as states and the central government are concerned and expand the size as far as the formal economy is concerned,” Jaitley said at the CII Partnership Summit here.

Stating that India is largely a tax non-compliant society, he said states and the central government struggled with their revenues to run the system which created an unfair enrichment in favour of the evader.

“It also becomes very unfair on the normal taxpayer because what the evader manages to evade is what the compliant has to pay more,” Jaitley said.

The government, therefore, decided to demonetise the high denomination currency, “which shook the system for some time”.

Jaitley said demonetisation has gradually increased the process of integrating the shadow, parallel and informal economies in far greater number with the formal economy.

“The size of the formal economy is expanding, so are the transactions in the banking system and through the digital mode,” he said.

As for the implementation of GST, the finance minister said new indirect tax regime will make India one single market, eliminate multiple assessments, check evasion and bring more revenues into the system.

“I am glad that almost all state governments have actively co-operated in making this a reality. Most of the contentious issues have been sorted out in the GST Council, a forum where you will see deliberative democracy in action. Those are now at final stages of implementation,” Jaitley said.

The government plans to implement GST, which will subsume excise, service tax, VAT and other local levies, from July 1.

The Economic Times, 27 Janury 2017

GST won’t lead to job losses, enough work to be available: Arun Jaitley assures

After the Customs and Central Excise officials raised concerns of job loss after rollout of Goods and Services Tax (GST), finance minister Arun Jaitley on Friday assured that they should have no insecurity as enough work and opportunities will be available to them and only the nature of work will change in the new indirect tax regime.

“I see no reason really for disquiet for the simple reason (that) opportunities which are available to people in service and the matter of policy and constitutional guarantee are all protected,” Jaitley said at the Investiture Ceremony organised by Central Board of Excise and Customs (CBEC).

The proposed GST will subsume all indirect taxes, replacing an array of central and state levies like excise duty, service tax and VAT.

“Important changes and evolutions which take place are never put on the back burner for the reason that they are the responsibility of those who conduct the activity itself will now be in an altered form, altered environment,” he said.

He further said: “Once it takes place you have a situation where taxes (that) are levied by the state (and) by Centre (will) all be integrated into one and therefore resulting in one assessment. Multiple systems on assessment which is there at present will evolve into a newer kind of system,” he said.

Jaitley responded to concerns of indirect tax officials after CBEC chairman Najib Shah pointed to the “rising disquiet in the cadre”. Shah said there were human resource issues in the service.

Jaitley also said the revenue to be collected is going to expand and there will be expansion of economic activity as well. “Therefore even though you have two parallel machineries which could now be converging into similar kind of activities and shared responsibility, I think the future will stand witness to the fact that there will be adequate amount of opportunities to be created and therefore the kind of disquiet in service, the kind of personal pressure I see on you should reduce as there is no real occasion for a fear of this kind or a sense of insecurity for anyone in this service,” he said.

The finance minister said change and evolution are an integral part of any economic order. “This is an ongoing process it will continue and we will all have to adjust ourselves with this particular change. I can only assure you that there is no reason for disquiet, you can go and have a comfortable sleep tonight,” Jaitley said.

Revenue secretary Hasmukh Adhia also told the officers that they will have enough work to do under GST.

The Indian Revenue Service (Customs and Central Excise) Officers’ Association had asked the government to protect the sanctity of their service amid attempts by officers of state government VAT departments to equate themselves with IRS (Customs and Central Excise) officers. They had called for a non-cooperation movement by wearing black badges against the recent decisions made by GST Council, which divided the taxpayers in a 90:10 ratio below the annual turnover threshold of Rs 1.5 crore, with 90 per cent of the tax assessees to be scrutinised and audited by the states.

For taxpayers above the Rs 1.5 crore threshold, the taxpayers will be divided equally between the states. The arrangement between the Centre and the states to break the deadlock on division of control is being seen as a compromise on part of the Centre, as it has lost out on the maximum share of taxpayers under the threshold of Rs 1.5 crore.

The Indian Express, 28 January 2017

Input tax credit on ATF: Aviation Min suggests ways to compensate airlines

Civil aviation ministry has written to the finance ministry suggesting ways to compensate airlines that will not be able to take input tax credit on aviation turbine fuel (ATF) under the Goods and Services Tax (GST). Since petroleum products including ATF are outside the GST regime for the time being, airlines will not be able utilise credit on taxes paid on ATF — a key input which comprises over 40 per cent of airlines’ operating expenses.

Union civil aviation minister Ashok Gajapathi Raju said his ministry has suggested various alternatives to the finance ministry to help compensate airlines that cannot take tax credit on ATF under the GST regime.

“GST is becoming a reality but India is a federal structure. So generally, GST means, they (corporates) would get set-offs for their inputs. Now here in this federal structure, state governments wants petroleum products to be kept out of it. That generates one type of problem because petroleum and intoxicants, state governments want that out (of GST). Ok, keep that out but then how do they get the set-off, that becomes a double whammy,” Raju said.

“The issue has to be identified, flagged and the ministry has flagged it with the finance ministry. They have to take a call on it, what to do, how to go about it. Anywhere between 40-45 per cent of the operating costs are fuel. If fuel is high taxed and that too with no set offs, they will be in trouble,” the minister said.

When asked about specific suggestion that have been made, Raju said: “What alternatives could emerge have been suggested, but unless a final decision is arrived at, I should not be talking about it.” Sources said the government may keep GST rate on passenger travel on the lower side to help compensate for the unavailability of input tax credit.

Apart from issues related to ATF, industry expects GST to increase tax rates in the aviation sector as higher especially for the economy class air travel. In Budget 2016-17, the government has raised excise duty on ATF to 14 per cent from 8 per cent, though ATF for supply to aircraft under the proposed Regional Connectivity Scheme was kept at 8 per cent.

Currently, the Centre and states levy taxes on ATF including excise duty and value added tax. A service tax of 6 per cent is levied by airlines for economy air travel and 9 per cent for non-economy air travel. Ticketing systems under the proposed GST regime will also need to be realigned as every journey across states or countries will be treated as a separate journey and GST will be levied at the point of embarkation. This is in variance with the present tax arrangement where a return journey is treated as one journey irrespective of stopovers. Also, if the point of embarkation for a return journey is outside India, then it does not attract service tax.

The GST Council had agreed on a higher tax rate of 18 per cent for services under the indirect tax regime, while some essential services are proposed to be taxed at 6 per cent or 12 per cent, though the complete structure is yet to be finalised. This is likely to lead to an increase in the ticket cost and there won’t be any set-off available in form of input tax credit as ATF will be out of GST ambit. “The implementation of GST could possibly also result in higher upfront costs for aircraft and leases, spares and parts, and distribution costs, increasing cash flow requirements, although airlines may receive input tax credits later,” Centre for Asia Pacific Aviation said in its India Aviation Outlook for 2017-18.

The Indian Express, 27 January 2017

State seeks GST exemption on drugs used for cancer, kidney treatment

The drugs used for cancer and kidney treatment, and medical equipment for dialysis in Maharashtra may continue to be exempted from all taxes even after the roll out of Goods and Services Tax (GST).

State finance minister Sudhir Mungantiwar has written to Union finance minister Arun Jaitley and has sought GST exemption for specific cancer and kidney treatment medicines which were already exempted under value added tax (VAT) in the state.

“Within a year of BJP coming into power, I took a decision to do away with taxes on medicines and equipment used for cancer, kidney diseases and dialysis,” said Mungantiwar. “We had enlisted over 108 medicines which were under exemption in state. GST will be introduced from July 1. We are now demanding that the exemption shall still continue to stay on these medicines and equipment under GST.”

“The recommendation, when it comes into force, will be applied on medicine and equipment sold under a generic name or a brand name,” the minister added. “I am hopeful that the central government will agree to my recommendation and might give a waiver.”

 Saying that cancer is the most “dreadful disease”, Mungantiwar added, “Person from any strata can get affected by it. In our state, especially in Central India, there is a huge concentration of patients suffering from oral cancer. Even the medicine rates are high.”
“The dialysis facility across the country needs improvement. Over the years, a gradual growth is also observed in rate of patients going through dialysis. These types of exemption will also bring relief to patients suffering from kidney ailments,” he said.
Before the waiver was introduced by state government in 2015, 5% VAT was levied on the drugs used for cancer and dialysis, while the medical equipment was sold with a VAT ranging between 5 and 12.5%. Import duty on dialysis equipment like dialyser and tubing, used to be around 44%, making the procedure extremely expensive.

Times of India, 26 January 2017

Healthcare sector should keep outside the purview of GST : Assocham

Healthcare sector should be kept outside the purview of Goods and Services Tax (GST) as it is likely to make medical care expensive and unaffordable for the common people, industry body Assocham said today.

Healthcare is currently exempted from service tax and a similar dispensation should continue even after the implementation of the GST regime at least for 10 year.

According to Assocham-TechSci Research paper, the sector caters to the unmet health needs of the society and should be kept out of the purview of the GST or else medical care would become expensive and unaffordable for the common people.

“A large number of items like food and other essentials for a common household are being kept outside the purview of the GST. The healthcare is equally important and essential, important only next to food. So, there is a strong case for the sector to be spared the GST,” Assocham Secretary General D S Rawat said.

Government proposes to roll out new indirect tax regime GST from July 1. The GST would subsume excise, service tax, VAT and other local levies and make India a single, uniform market for seamless transfer of goods and services.

The industry chamber also demanded that Finance Minister Arun Jaitley in the forthcoming Union Budget 2017-18 should raise tax exemption on preventive health check-up and announce a healthcare infrastructure medical innovation fund.

It also pressed for raising the tax exemption on preventive health check-up under section 80D of the Income Tax Act, 1961, to Rs 20,000, from current value of Rs 5,000, in order to achieve the aim of universal healthcare coverage.

Additionally, the GST exemption should cover the health insurance premium, as it is exempted from the service tax at present.

The other pre-Budget demand with regard to the healthcare sector includes increasing the depreciation rate on medical devices, equipment from 15 per cent to 30 per cent.

The Indian pharma industry, with an estimated turnover of USD 36.7 billion in 2015, is among the largest producers of pharma products in the world, Assocham said.

The Economic Times, 25 January 2017

GST: 70,000 tax officials warns of non-cooperation movement

Opposing some recent decisions taken by GST Council, various indirect tax officials’ associations today decided to start non-cooperation movement.

To start with, the employees associations will not celebrate international customs day on Friday. Besides, they will observe ‘black day’ by wearing black badges on Martyrs’ Day, i.e. January 30, as per minutes of meeting held among their representatives here.

The associations said that their members are “highly disappointed” and feel “cheated” over the decisions taken by Finance Minister Arun Jaitley-led GST Council in its meeting on January 16.

The Council had agreed to give states the powers to levy tax on economic activity within 12 nautical miles of territorial waters and to administer 90 per cent of the tax payers under Rs 1.5 crore annual turnover.

“We feel that the biggest tax reform of the century should have been in conformity with the principles of responsibility and authority going together and also in
conformity with the Constitutional design. We feel that the decision shall weaken the Centre’s ability to ensure its revenues.

“The decision will not only adversely affect the career of revenue officers but it is not in national interest. We oppose the decisions taken by GST Council and requests for deferment and review of above inappropriate and incorrect decisions,” as per the minutes of meeting of steering committee of associations representing Group A, B and C employees of Central Board of Excise and Customs (CBEC).

The decision came after a meeting of representatives of Indian Revenue Service (Customs and Central Excise), All India Association of Central Excise Gazetted Executive Officers, All India Central Excise Inspectors’ Association and All India Central Excise and Service Tax Ministerial Officers Association, comprising 70,000 personnel, here, office bearers said.

According to them, the decision taken by GST Council in its January 16, meeting will not only weaken the Centre but also adversely affect the Indian economy and revenue
collection but also national security.

They have decided to request authorities concerned to take immediate necessary action to resolve the issues and to defer the unjustified decision of GST Council taken under pressure of state VAT officers.

“We feel that if the above genuine demands in national and revenue interest are not considered then this disciplined service will be forced to initiate non-cooperation movement following Gandhian methods of Satyagraha,” the associations said.

The Goods and Services Tax (GST) is likely to be rolled out from July 1, as against April 1 decided earlier by the government.

First Post, 26 January 2017

Indian biscuit industry demand exemption from GST

The ₹36,000-crore Indian biscuit industry, on Tuesday, demanded complete waiver of Good and Services Tax (GST) on Low Price-High Nutrition (LPHN) biscuits priced under a maximum retail price of ₹100 a kg.

“LPHN biscuits are the only hygienically produced and affordable snack sold in small packs retailing at ₹2-5. Consumed mainly by the low-income group, any increase in price of LPHN biscuits causes a direct reduction in demand,” said Mayank Shah, Vice-President and spokesperson of the Biscuit Manufacturers’ Welfare Association.

He said while there is a 62 per cent weighted average hike in input costs (maida, sugar and vegetable oil) over the last decade, the biscuit manufacturers have been unable to increase their realisation pro-rata.

Glucose biscuits offer consumers 72 kilo calories/ per rupee (Kcal/re) compared to 55 by bread, 18 by potato chips and 29 by namkeens.

All three enjoy concessional rate of taxes. A 70 gram pack of glucose biscuits which retails at ₹5 offers 315 Kcal, which is about 16 per cent of the daily dietary recommendation of the government.

Last year, the biscuit industry procured agriculture produce of over ₹13,300 crore. Sugar prices have more than doubled in the last decade and the current wheat flour and vegetable oil prices make net margins on LPHN biscuits reduced to just 3 per cent.

Fear of the advent of negative margins phase forces manufacturers to curtail production leaving demand unsatiated. Glucose biscuits retailing at ₹70 a kg today attract net taxes of ₹7.21 which is higher than the value addition earned by the industry (₹7.01).

Premium category

“The government may tax premium biscuits as they deem fit. We are a highly compliant industry with last annual contribution to the exchequer at ₹3,075 crore. However, on behalf of over 600 manufacturers of LPHN biscuits retailed at up to MRP of ₹100 a kg, I urge the GST Council to completely exempt the LPHN biscuits,” Shah added.

The Hindu Business Line, 25 january 2017