GST : India can grow at higher rate; job creation plans underway : Jaitley

India has potential to grow faster and plans are underway to reduce poverty and create jobs in rural areas, Finance Minister Arun Jaitley said today, even as he ruled out the country becoming totally ‘cashless’ immediately. “One of the reasons for note ban was tax non-compliant. One of the objectives of the demonetisation was to reduce and eliminate anonymity. I don’t see India becoming a cashless system immediately. I see India becoming less-cash economy,” Jaitley told PTI here.

The Finance Minister, who is meeting top government officials and business leaders here, further said the GST regime would also make generation of cash more difficult, besides making the taxation system much more efficient. He hoped that the GST would be implemented by July 1.

On the Centre’s efforts to move towards digitalisation and cash-less regime, he said, “Major business, property transactions, salary payments, and school fees will be done through cash-less system. Will it be totally cash-less? I don’t see it happening immediately.”

Talking about retrospective taxation, the Finance Minister said the government has decided not to resort to such measures and the existing disputes are being sorted out either bilaterally or through the judicial system.

“India still has the potential to grow at a higher rate than today. A series of action is needed to reduce poverty in the rural areas. We have planned several programmes for rural India coupled with measures to create jobs,” Jaitley said.

“Today, India is one of the most open economies of the world. While the world is turning protectionist, India is opening up more,” he added.

On the Goods and Services Tax (GST) roll-out, the FM said, “The first requirement is constitutional amendment, the law has been passed unanimously and by September 15, 2017 the curtain will be down. We have resolved most of the critical issues. Legislations have been drafted. Two weeks ago, we approved the first draft. By March first week, the second draft will come up. Parliament will be resuming from march 9.”

The Finance Minister said, “Despite teething problems, hopefully GST will come up for implementation by July 1. The entire process has to be completed by September 15. At the moment, it is the biggest tax reform since Independence. Once implemented, it will be far more efficient tax system. The quantum of taxation will go up. GST will make generation of cash more difficult.”

Defending the government surprise move to ban old Rs 500/1,000 notes in last November, Jaitley said “one of the reasons for note ban was tax non-compliant. One of the objectives of the demonetisation was to reduce and eliminate anonymity… Today there is much greater support for any reform in India.”

On trade deal with the UK, the FM said “in my discussion with my counterpart here, he clearly convinced me that Brexit should not be confused with protectionism”. On visa liberalisation, he said it depends on the policy of the UK government.

The Financial Express, 27 February 2017

As GST approaches, CBEC looks at restructuring itself

Amid staff concerns over redundancy in the post-goods and services tax (GST) regime from the coming financial year, the Central Board of Excise and Customs (CBEC) is identifying new areas of work in international customs, risk assessment, post-clearance audits and taxpayer services, among others, to remain relevant.

With limited administrative role under GST, the indirect tax department is aiming to redeploy. “There are a lot of areas where maturity of administration needs to go up. We are not able to perform in those due to lack of workforce and resources. GST is one opportunity — it will free-up manpower to concentrate on important areas like data analysis, intellectual property, risk assessment, etc,” said a senior official.

There will be new Customs divisions. One on dispute resolution, capacity building and compliance is being deliberated.

CBEC administers service tax, Customs duty and excise duty. GST, expected to be rolled out from July 1, will subsume service tax and excise duty, to be jointly administered with states. CBEC officers had protested to the finance minister on this division of powers. By the Centre-states agreement, the latter will monitor 90 per cent of the taxpayer base, whose annual revenue is up to Rs 1.5 crore each. The other 10 per cent will be with the Centre.

Officers had protested that many of them would have little work. Finance Minister Arun Jaitley had assured that the new regime would generate adequate opportunities.

“I see no reason for disquiet. Opportunities available in the service are protected, except that the nature of activities will change. The extent of revenue to be collected will expand (under GST). Economic activity will expand,” he’d told CBEC officials.

The Indian Revenue Service (Customs and Central Excise) Officers’ Association had even sought Prime Minister Narendra Modi’s intervention to reverse the decisions taken by the GST Council.

CBEC is also working on setting up a National Targeting Centre to intercept consignments and do risk profiling. It would identify, develop, update and maintain risk parameters in relation to trade, commodities, services and all stakeholders in the domestic supply chain, among other things.

There could also be a wing to work on data analysis, mutual recognition and free trade agreements with other countries. Post clearance audit is another area to be strengthened. “There is a lot of emphasis on improving facilitation levels without inspection and examination. So, there must be simultaneous strengthening of post-clearance audit. If you are opening doors, we should also focus on revenue and security,” said another official.

Last year, CBEC had launched a ‘single window interface for facilitating trade, to speed clearance for consignments and improve the ‘ease of doing business.’ The idea was that importers should not need to run around to get approvals from multiple government agencies for consignments.

The GST Council, chaired by Jaitley and with a minister of state (finance) and state finance ministers as members, will meet over the weekend to discuss the proposed GST laws.

Business Standard, 28 February 2017

GAIL wants natural gas to be brought under ambit of GST

Gas Authority of India Limited wants natural gas to be brought under the ambit of goods and services tax (GST) as this will provide a boost to the government’s intent to increase the contribution of gas in the country’s energy mix to 15 per cent in another five years.

“The natural gas sector has not been able to realise its full potential until now because of apathetic government policies, including multiple stiff taxation on it such as excise, VAT, octroi and other such local levies and, therefore, it needs to be subsumed in the GST regime with new integrated energy policy in place which can offer a preferential treatment for natural gas,” B. C. Tripathi, chairman and managing director of GAIL (India) said at an event.

He said “natural gas share in the energy basket could increase to the intended 15 per cent only with the suggested prescriptions”.

India has set a target of natural gas contributing 15 per cent to the energy mix by 2022 from 6.5 per cent now. To achieve this, public sector GAIL has to ramp up production, and pricing will be an important factor for the viability of the output.

The Union budget has halved the customs duty of liquefied natural gas (LNG) to 2.5 per cent from 5 per cent at terminals as part of the government’s strategy to become a “gas-based economy”. This has kindled hope that the government will take steps to promote natural gas.

Tripathi said “preferential treatment for natural gas has become necessary to produce clean energy by pouring in huge investments into it rather than reviving the retired thermal power plants with additional investments which could not be cost-competitive and continue to abet pollution”.

The government has put some fuel items – kerosene, naphtha, fuel oil and LPG – in GST. However, it has kept out crude, natural gas, aviation fuel, diesel and petrol out of GST for the time being, and they will be governed by excise duty, VAT and central sales tax rules till they are brought under the new tax regime.

The biggest indirect tax reform is likely to be rolled out from July 1.

The Telegraph, 27 February 2017

Kerala achieved maximum registrations (60%) under GST

Kerala has achieved the maximum number of registrations under the Goods and Services Tax (GST) regime with at least 60 per cent of an estimated 2.5 lakh traders migrating to the new platform.

Its record becomes even more significant considering the fact that these registrations are complete in all respects, including the crucial provision of digital signatures, an official spokesman said here.

Date extended

Separately, the Commercial Taxes Department has extended until March 15 the time for GST registrations for those who have not been able to do it until now.

Propreitorship businesses may use the facility for E-sign using the Adhaar number to register without digital signatures. This facility is available on the GST portal (www.gst.gov.in).

The department has also set up help numbers 0471-155300 (BSNL) and 0471-2115098 (all other networks) for clarifying their doubts with respect to registrations.

Help desks

The spokesman added that help desks have been set up at all offices of the Deputy Commissioner (Commercial Taxes) in districts.

Hindu Business Line, 27 February 2017

GST : Footwear makers seek to step into their own shoes

As the country looks forward to the rollout of the Goods and Services Tax (GST), which is now likely on July 1, speculations are rife in every industry. One such industry is that of footwear. As a significant part of the fashion industry, it is hoping for GST to play a role in the ironing out of differences with its counterpart, the apparel industry.

Firstly, to put things into context, from the consumer standpoint, apparel and footwear, both fall under the single category of fashion. However, from the supply standpoint, tax and duties treat each of these as different. While the basic customs duty remains the same for both at 10%, countervailing duty (CVD) and excise duty, at 0% to 4% for apparel and around 12.5% of maximum retail price (MRP) for footwear is a huge game-changer. Moreover, value added tax (VAT) for footwear averages at about 14% across the country, whereas for apparel, it is at about 5%.

With blaring dissimilarities in the taxation structure, the footwear industry is at a general disadvantage compared with the apparel industry. Now, as GST is expected to be the leveller, DH talks to industry players to understand what they anticipate.
Monrow Shoes Head of Brand Veena Ashiya says, “Having higher excise on footwear makes it harder for the industry to compete with apparel brands, when it comes to consumer wallet share.

Pressure is definitely high as in consumers’ mind, footwear and apparel fall under the same category as lifestyle. So many successful apparel brands have emerged in India and footwear can experience the same boom provided the government sees this as an opportunity to propel the footwear industry growth.” Monrow is a premium women’s footwear brand, which was recently launched in the market.

Woodland India Managing Director Harkirat Singh says, “The differential in VAT not only escalates the price of footwear, but also adds to cost of compliance, which in turn is ploughed back into the cost only. Consequently, footwear price becomes in-competitive compared with garments for no justifiable reason.”

Max Fashion India Executive Director Vasanth Kumar says, “Duties on footwear have always been higher, even when we are not comparing footwear and apparel. It is a natural drawback. Therefore, hopes from GST to aid the industry are quite substantial.” Max Fashion, which was launched as a value fashion brand in 2004, has a chain of 400 stores in 120 cities, and imports up to 12% of its merchandise, including footwear and apparel.

“With reduced disparity in the taxation structure, the entire process can be streamlined. Consolidation of warehouses and increased speed in the handling and transportation of goods would lead to improved business efficiency,” he adds.

Crocs India Managing Director Deepak Chhabra says, “Footwear is subject to about 12.5% excise duty or CVD, which is marked on MRP. The impact of this becomes huge because MRP is usually four times the cost of the product. Apparel on the other hand does not face such high duties. GST, if anything, should be able to bridge this gap, in terms of the comparative advantage apparel enjoys.”

A step too many

Multiple levels of taxation are not only cumbersome, but also shift the company’s focus away from its products and consumers. GST is expected to make the country more organised and improve the much talked about ‘Ease of Doing Business’ scale here.

Not only will it level out the playing field for organised players, but also give them the capacity to compete with unorganised players in terms of pricing.

“Multiple levels of taxation, including CST, VAT, excise and octroi will be eliminated, which will ease the whole taxation process to a large extent. This itself will offer huge relief. Moreover, if things go as expected, companies’ bottomlines will be the biggest gainers. There can be up to 4% addition to bottomlines, which would be a translation from savings,” says Chhabra.

Ashiya says, “Since a large segment of sourcing happens through imports, GST will ease up the CVD cost. Hopefully, this will make domestic factories a lot more organised and open sourcing doors for brands in India,” adding, “Service forms a huge part for the footwear brand pricing, hence, the input credit which can be availed makes bottomlines a lot healthier.”

Singh asserts, “If we are able to surmount initial hiccups due to novelty of legislation and its effects, GST is going to bring prices down after a period of three to five years.”

In this context, Red Chief Vice President Raman Kumar says, “GST will enable easier interstate movement of goods. Purchasing across states will be more hassle-free, as a unified tax structure will allow easy payments and tax calculation, while avoiding double taxation.”

With a lot riding on the GST roll out, the taxation slab that would be applicable for footwear, becomes highly consequential. On this, Kumar of Max Fashion India says, “What we are looking at, is a rate of 12%. This would be the best case scenario. Anything else would still exert some pressure on prices.”

“There is apprehension that footwear may again be taxed adversely at 18%, while garments at 12%, as per confirmed reports. If this be so, footwear shall again be at the receiving end only,” augments Singh.

“Ultimately, GST must be implemented with clear concept so that every industry must be clear about this. After GST, a single taxation process must be followed by corporate, and leather’s rate of GST must fall near the 12% range,” opines Raman Kumar.

However, says Chhabra, “With a 12% rate applicable for apparel, the same would be ideal for footwear as well. However, even an 18% rate, which the industry is preparing itself for, would be okay. Compared with the current situation, 18% rate will still offer relief.”

“Treat footwear the same as apparel, as from the consumption point of view, they are same. Then why different level of taxations? If the government can realise amazing success stories built in India in apparel, the same can happen in footwear if the taxation levels are same. India is the second largest footwear producer of the world, and not even a single billion-dollar brand hails from India yet? I think that the answer lies in creating fair and levelled taxation for the footwear industry and see it boom like apparel,” opines Ashiya.

At 22 billion pairs of annual production, India is the second largest footwear producer in the world, next only to China. As a consumer, the country stands third, after China and the US. Even as a major section of the market is captured by unorganised players, organised manufacturers are rapidly gaining ground with ecommerce and increasing fashion consciousness. Shift in consumer behaviour is being marked by reduced price-sensitivity and increased disposable income. The trend is looking at substantial boost from the GST rollout.
Deccan Herald, 27 February 2017

IRS officers seek PM Modi’s intervention for smooth roll-out of GST

An association representing indirect tax officers has sought Prime Minister Narendra Modi’s intervention to reverse certain decisions taken by the Goods and Services Tax (GST) Council.

In a memorandum submitted to the Prime Minister’s Office (PMO), the officers’ body has also highlighted the serious security and financial concerns raised by the Comptroller and Auditor General (CAG) and the Home Ministry against the Goods and Services Tax Network (GSTN).

The GSTN is a special purpose vehicle set up to provide information technology infrastructure for the implementation of the new tax regime.

The GST Council had in its January 16 meeting 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, besides drafting certain provisions of Integrated GST.

The Indian Revenue Service (Customs and Central Excise) Officers’ Association said that states have no experience of Service Tax which is very different as a concept.

“In such a scenario, divergent views on similar tax issues may emerge across states leading to a plethora of litigations,” it said.

The association demanded revision of the division of assessees below Rs 1.5 crore in the ratio of 50:50. This would mean a vertical split of the entire assessee base in the ratio of 50:50.

It also raised concerns over the GSTN which is manned by non-IRS officers at senior levels.

“There are security and financial concerns in GSTN, which could have been avoided by giving this work to the Directorate General, Systems, Central Board of Excise and Customs. CAG and Home Ministry have already raised concerns regarding GSTN,” the association said.

In written reply to a question in the Lok Sabha, the government had recently said no security clearance was obtained by the Ministry of Finance from the Ministry of Home Affairs at the time of incorporation of GSTN-Special Purpose Vehicle.

The officers’ association has demanded that the Chairman and Chief Executive Officer of GSTN be from IRS, serving or retired or “GSTN kindly be placed under CBEC”.
The association said in many countries GST implementation

has failed because of faulty execution in the hand of “generalists”, instead of giving it to “specialists”.

“There is a feeling that the dignity and the vital role of the central government has been compromised and the role of Indirect Tax experts has been undermined in the hand of generalists, which is the major cause of above perceived problems. It may be seen that here is no one to represent this Service in GST Council to give expert advice and technical input. The Chairman, CBEC is only an invitee,” it said.

It said that the Additional Secretary in the GST secretariat is an IAS officer without any experience.

“We will be failing in our constitutional duties, if we do not bring these concerns to your kind notice before the roll-out of GST. Final call is always with the government, to which we promise to abide by.

“We sincerely hope that the issues raised above would be redressed, for the smooth and successful implementation of GST, unlike other countries. Successful GST is our utmost desire,” the association said.

Business Standard, 26 February 2017

GST tax structure ready; how will it impact economy and various sectors

The passage of the Constitutional Amendment Bill on GST has paved the way for introduction of GST in India, likely in H1FY18. The need for GST has been felt because under the current indirect tax structure 1) tax barriers have fragmented the Indian market, 2) cascading effects of taxes on cost have made indigenous manufacture less attractive, 3) complex multiple taxes have raised cost of compliance.

The GST Council has finalised a four-tier GST tax structure of 5 per cent, 12 per cent, 18 per cent and 28 per cent, with lower rates for essential items and the highest for luxury and de-merits goods, including luxury cars, SUVs and tobacco products, that would also attract an additional cess. Moreover, with a view to keeping inflation under check, essential items including food, which presently constitute roughly half of the consumer inflation basket, will be taxed at zero rate. The cess is expected to provide additional resources to the central government to compensate states for losses incurred. This will be based on the compensation formula.

GST is expected to have a favourable outcome on the economy :

1. Removal of tax barriers with seamless credit will make India a common market leading to economies of scale in production and efficiency in supply chain.

2. Removal of cascading effect of taxes embedded in cost of production of goods and services, significantly reducing cost of indigenous goods and indirectly promoting ‘Make in India’.

3. Facilitating ease of doing business – Integration of existing multiple taxes into single GST will significantly reduce cost of tax compliance and transaction cost.

4. Stable, transparent and predictable tax regime to encourage local and foreign investment in India creating significant job opportunities.

Sectoral impact :

The exact rates applicable to particular goods and services have not been finalized and this will likely happen over the next few weeks. Hence, it is difficult to measure the exact impact across sectors. Based on the current tax rates (central excise and VAT) for key product segments across sectors and the proposed GST rates, we expect most sectors to gain or otherwise in a limited way.

As part of GST implementation, service tax is expected to go up from the current levels of 14.5 per cent, which will be negative for service companies in airlines, telecom, insurance, etc., in terms of demand impact.

1. An important fallout of GST could be shift from unorganised to organised segment. The unorganised sector will come into the tax net and will lose the benefits arising from non-payment of taxes and levies. Thus, companies which are operating in sectors will high unorganised component will benefit in terms of increased demand. Companies in sectors like plywood, ceramic tiles, batteries, etc. will stand to benefit.

2. The sectors which have long value chain from basic goods to final consumption stage with operation spread in multiple states such as FMCG, pharma, consumer durables, etc should benefit. FMCG companies could generate substantial savings in logistics and distribution costs as the need for multiple sales depots will be eliminated. FMCG companies pay nearly 24-25 per cent including excise duty, VAT and entry tax and a lower rate of 18 per cent could yield significant reduction in taxes. But a higher GST rate of 28 per cent for consumer durables and some FMCG products may disappoint the market. Warehouse rationalisation and reduction of overall tax rates, is expected to generate saving.

3. Some automobile companies could gain from GST implementation if the GST rate on their products is 18 per cent and they are able to retain the benefits of lower rates. However, the higher rate of 28 per cent would be negative versus expectations.

4. Services sector, like telecom could face marginally negative impact from the higher service tax rate of 18 per cent (likely) versus 15 per cent currently.

However macro benefits emanating from implementing GST far outreach the negatives, it is also a significant change communicating to the world at large that we are focused on one path for economic progress.

The Economic Times, 26 February 2017

Lower tax rates possible when all pays dues: Goyal

The government can lower tax rates if people pay their dues sincerely, Union Power Minister Piyush Goyal said.

We can lower tax rates of GST, income tax and others if everybody pays taxes,” Goyal said while addressing businesses at the ‘EY Entrepreneur of the Year Awards’ here.

On the demand of businesses to lower tax rates, he said industry chambers ask for zero or five per cent tax the proposed GST regime.

“I wonder what revenue neutral rate it would be, if we will put every thing in zero or low rates. Do we have to make profit at the cost of the nation?,” the minister said.

Goyal also appealed to the charter accountants to suggest their clients to pay their taxes.

Talking about the wind power tariff touching an all-time low of Rs 3.46 per unit without sops like accelerated depreciation, generation-based incentives and tax holidays, he said this auction was just for 1,000 MW and many more will come.

He also rubbished the advisory issued by an industry body to bidders to avoid bold bids in the wind power auction.

Speaking at the function, Commerce Minister Nirmala Sitharaman said the government wants the businesses and investors to feel at home so that they can create a vibrancy in the economy and expand their business activities.

“We are ready to receive your thoughts on how the government can move forward and what all we can do,” she said.

India.com, 24 February 2017

GST represents one tax, one market, one India: CEA Arvind Subramanian

A few months ahead of the incorporation of the much-awaited Goods and Services Tax (GST), Chief Economic Advisor Arvind Subramanian revealed that internal trade has drastically improved; this being a boon to the country’s progress in the wake of GST.

Addressing a session at the Indian Institute of Management (IIM) in Ahmedabad yesterday, Subramanian presented results of a survey that was conducted in various regions of India analysing tax collection, trade statistics, urban density and the need for a Universal Basic Income.

“In spite of Octroi and other tax barriers across states, movement of goods in India is going well. Trade within India is 56 percent. This goes to show that trade barriers have not affected statistics much,” stated Subramanian.

Furthermore, the Chief Economic Advisor revealed that according to statistics, India has managed to overtake China, as the latter’s economic growth ‘plummeted post the financial crisis.’

However, Subramanian emphasised on the importance of timely tax collection, stating that the State Governments need to impose stricter penalties on deferring tax payment.

“The survey done in Bengaluru and Jaipur has showed only five to 15 percent of the total tax to be collected. States need to be less lenient with regards to tax matters,” said Subramanian.

“One of India’s biggest concerns at the minute is the growing disparity among states. Globally, statistics from the past 25 to 30 years has revealed that poorer countries are now catching up with developed countries, thus diversifying standard of living. However, within the states, a division of growth is still prevalent,” added Subramanian.

Highlighting the proposal to implement a minimum basic income for Indians, Subramanian said that the implications are being monitored and will be discussed as and when a consensus is made. “The idea of having a universal basic income has garnered a lot of attention, both nationally and internationally,” added Subramanian. (ANI)

India.com, 25 February 2017

 

Tally launches online forum on GST

Tally Solutions Private Limited, announced the launch of an online forum dedicated to Chartered accountants in the country. The portal will host threads of discussion on the fundamentals of GST, its implications on different stakeholders and opinions shared by eminent CAs in the form of articles and interviews. Tax practitioners and business people will be able to view and follow these and prepare themselves for the transition to GST.

Commenting on the launch, Tejas Goenka, Executive Director at Tally Solutions, says, “We firmly believe that the CA and tax practitioners community will have a key role to play in helping the country transition to and comply with GST.
This portal has been designed to house the rich experience & knowledge of CAs and industry experts on tax matters. It will also allow for sharing of knowledge not only among the tax practitioners but also be an awareness forum for businesses. We would like to take this opportunity to invite all CAs in the country to be a part of this forum designed especially for them and lead India’s transition to the GST era. ”
Commenting on the portal, CA K Ravi, practicing Chartered Accountant & Senior Vice President, Federation of Karnataka Chambers of Commerce & Industry, says, “This is a good initiative by Tally to bring all Chartered Accountants community and Industry experts in the country under one platform to discuss and deliberate on GST.

I am impressed with the way the forum has been designed, and I would urge all my friends from the community to visit this space and benefit from it. The general business community also stands to gain a lot of knowledge by viewing the discussions on different topics about GST.”

The Hans India, 24 February 2017