Strong Q4-17 sales give cushion for carmakers in Gulf markets

There was lots happening on the sales side in the Gulf’s automotive retail sector in The fourth quarter of 2017 and which is now offering some cushion to a more sober start in the initial weeks of 2018. Plus, there is the support coming in from those Gulf markets that haven’t yet implemented VAT.

 “We are only into the third week of January and honestly I think it’s too early to say what impact VAT has had in the UAE and Saudi Arabia,” said Thierry Sabbagh, Managing Director at Ford M.E. “In 2017, one of the biggest strengths we had was the improvement in the retail (vehicles sold to individuals) business, and that was up 4 per cent. We could maintain those numbers.

“Plus markets like Kuwait are still going strong for us, where we are benefiting from changing the distributor (18 months ago).”

In the run up to January 1, it was widely expected that car sales in the UAE would come to an immediate halt as soon as the VAT factor showed up. But, by and large, January to date has provided enough buying support; buyers are still making the trek to showrooms and deals are happening. The important thing for the auto industry, including manufacturers, was to make sure some sort of connect is still there with buyers during the adjustment period.

Interestingly, Ford’s UAE dealership’s January campaign was built around raffles, including winning back up to Dh150,000 on select model purchases, rather than address the VAT cost component specifically. Sabbagh said it was done on purpose. “We wanted this campaign not to be part of the clutter (of VAT-specific promotions),” he added. “Even in Saudi Arabia, the dealership addressed the cost of fuel by extending free vouchers for a certain period than talk about VAT specifically.”

For Ford, it will soon have a new model showing up at dealerships and which has the heft to convince wanna-be buyers to get started on the process. The all-new Expedition, sporting an extensive inside-out makeover, will become available this quarter itself. (Local price of the top-of-the-range SUV, which was first revealed in November, is yet to be fixed.) “We have got a strong equity in the nameplate … and it’s a fact that our utility vehicles have had the greatest following in these markets,” said Sabbagh. “What was interesting was we had the Ranger Wildtrak (pickups) attracted a lot of retail business last year.

“But we do have continuing demand for the sedans, a good deal of it on the fleet side.”

Ford’s been adding another quiver to its bow, namely in the form its Transit range. Hugely popular in Europe, these commercial vehicles recorded a solid run all through 2017, picking up deals with the Dubai and Saudi Arabia ambulance fleets as well as

“We have introduced the full line-up of Transits in these markets now, got in place dedicated teams at the regional office to oversee, and also at the dealers,” the regional head added. “I guess that’s paying off. We have had Dubai Ambulance Services calling it their vehicle of the future. These things help.”


Accounting & beyond: Managing the supplies of a product based business

It has brought in new rules, new charges, and new documents that have to be maintained in the prescribed format for more than 5 years. But it has also defined a supply of goods or services, as well as a few particular types of supplies, including taxable supplies, non-taxable supplies, deemed supplies, exempt supplies and out of scope supplies.

Each sale will be designated as one of these types based on the sale conditions, so you will need an accounting system capable of applying the VAT rules to treat each case correctly.

Let’s look at the example of Hameed, who has a number of furniture outlets across different cities in the UAE. He buys finished furnitures from furniture distributors and carpenters and sells them through his outlets. His model is mostly B to C. He has implemented an integrated accounting software called Zoho Books to handle his finances and VAT. Let’s see how Hameed manages all his incoming and outgoing supplies in the UAE using Zoho Books.

Vendor and customer VAT treatments

To apply the correct VAT treatment to a vendor or customer, Hameed needs to know two things: the place of supply and the other party’s VAT registration status. The place of supply (the location from which he receives goods or to which he delivers goods) can be within UAE, within a GCC country or outside of the GCC region.

The vendor or customer can be either VAT-registered or not registered. Only by knowing the right VAT treatment can Hameed charge the right VAT rate for a transaction. For example, if he has a customer who is an end consumer living in the UAE and is not registered under VAT, then all sales made to this customer will attract 5% VAT.

If another customer is located in Tunisia, which is not a part of the GCC, sales to that customer would instead attract 0% VAT. Once Hameed has determined the right VAT treatment for each customer and vendor, Zoho Books will automatically associate the appropriate VAT rate to every transaction.

Inventory tracking

Hameed can enable inventory tracking within Zoho Books for all the pieces of furniture he sells. This will allow him to track the inventory asset value based on the FIFO logic. Since he has the need to manage his inventory across multiple outlets and possible warehouses, he can integrate his Zoho Books with an order management solution called Zoho Inventory to add warehouse managing capabilities to Zoho Books.

Purchases and imports

To make a purchase, Hameed drafts a purchase order in Zoho Books and emails it to the vendor. When the goods arrive, Hameed can record the invoice sent by the vendor as a bill in Zoho Books. If the purchase was made from a VAT-registered vendor in the UAE, then Hameed can even create a self-billed invoice on behalf of the vendor, as long as the vendor has agreed.

When it comes to vendor payments, Hameed can set up payment reminders that will alert him of his own payables. This will in turn help him clear all his bills before they become overdue and maintain a strong relationship with all of his suppliers.

Whenever Hameed imports furniture from a supplier located outside of the UAE, he will be required to pay import VAT according to the UAE VAT laws. However, vendors outside the UAE are often not registered for UAE VAT, so the invoices they issue, may not mention any VAT amounts. Instead, Hameed has to pay an import VAT of 5% to the customs office before collecting the item. So how can he record this import VAT if it’s not on the invoice?

In Zoho Books, it’s simple. He just has to record a bill of entry in Zoho Books, showing the import VAT along with any other charges or duties paid at customs. Then the import VAT he paid will be added to his current VAT return. If, instead of paying the import VAT upon pickup, he submitted a letter of undertaking to the customs office agreeing to pay the import VAT later, he can use an option within the Bill of Entry to add the amount owed to his VAT payable amount.

Sales and exports

Hameed’s typical sales cycle starts with a personalised estimate that he crafts using the Templates module of Zoho Books. Depending on the sale, he might add a custom price list for his client, or just give out an individual discount.

His client can then view the estimate through the client portal, add comments during the negotiation phase, and then accept or decline the estimate. Once the estimate is accepted, it can be converted into a VAT compliant invoice in English or Arabic, with a VAT rate based on the client’s VAT treatment and the place of supply.

The customer can pay Hameed online using one of the payment gateways that he has integrated with Zoho Books, which will automatically issue a thank-you note and a payment receipt to the client.

One thing to note here is that, all sales made to VAT registered customers who reside in other GCC states will be treated as out of scope supplies as according to the VAT laws of UAE. This is because, each of those states will charge their own import VAT and give credit only for the VAT amount paid within their country.

Post sale corrections

If something changes in a sale after the invoice has been generated, Hameed can use Credit and Debit Notes to keep everything straight in Zoho Books. Credit Notes can be used to record product returns and post-sale discounts. Debit Notes can be used to capture any extra billable expenses that come up after the sale, such as shipping expenses that Hameed needs to pay on the client’s behalf.


With Zoho Books, Hameed can generate more than 40 different accounting reports including P&L statements, journal reports, customer balances, FIFO cost lot tracking, and VAT returns. If he needs more reporting power, he can always enable Advanced Analytics by integrating Zoho Books with Zoho Reports. This will give him access to more than 70 pre-defined reports and the ability to create any custom report he needs.

Throughout the sales cycle, using Zoho Books allows Hameed to automate his process for greater accuracy and time savings. By capturing the place of supply and VAT treatment for his contacts, Hameed can use Zoho Books to automatically determine the right VAT rate for each particular invoice.

Depending on his sales scenario, he can issue self-billed invoices on behalf of his vendor, or record credit notes and debit notes for his customer or vendor to keep his accounts accurate. Whenever he imports goods, he can capture the import VAT paid or payable (in case of an undertaking) with the help of a bill of entry. And Zoho Books will automatically generate his VAT return and an FTA audit file based on the transaction data he’s recorded.


VAT in UAE: Too many shops ‘still not returning proper change’

lem Al Shamsi claimed there is a shortage of 10, 5 and 1 fils coins in the market, and said number of banks do not have a sufficient supply.

This means stores round up when giving out change, and customers lose out as a result, the Ajman member said.

Abu Dhabi’s Department of Economic Development originally said businesses could round up prices to the nearest 20 fils, but later changed the decision after complaints from customers.

“There are banks who refuse to deal with the fractions of a dirham and we hope the Central Bank could force them to do so,” Mr Al Shamsi told the council.

“The fractions exist all around the world, to solve the issue of change owed to customers. We also hope consumers will be made aware of their rights.”

Earlier this month the Central Bank said there was a sufficient number of coins in circulation and on Tuesday Obaid Al Tayer, Minister of State for Financial Affairs, told the council that many shops do not ask the banks to supply them with small denominations.

He said there are millions of fils coins available upon request from banks and money exchange centres.

The supply as of January 25 was 3.4 million for 1 fils coins, 42.4 million 5 fils coins, 48.7 million 10 fils coins, 262 million 25 fils coins, and 363.8 million 50 fils coins, he said.

“The ministry is following up on the local currency circulation on a daily basis, and is constantly studying the need for denomination coins, and if there is a need for an extra supply the Central Bank will produce them,” he said.

He said the number of complaints received by the ministry on issues related to VAT is dropping, now that the first month of application has almost passed.

Earlier this month, some shopkeepers said they were rounding down in the customers’ favour, in order to make matters easier and satisfy customers.


Will Bollywood, Hollywood celebrities pay VAT for their UAE shows?

Be it education, banking or entertainment, services industry is huge. Where there is no delivery of goods, that is characterised as service industry. And the recent application of VAT in the UAE covered both the categories with few exemptions.

When it comes to entertainment, Dubai is second home to dozens of celebrities – especially from Bollywood – who come here frequently to perform in front of thousands of fans and also in private parties invited by individuals. This entertainment sector is subject to five per cent value-added tax (VAT).

But the question arises whether all those Bollywood and Hollywood celebrities will also be subject to new tax for their services – read performances – provided in the UAE.

When asked tax experts, they said, as per UAE laws, Bollywood and Hollywood stars who want to continue performing here in the UAE will have to register with the Federal Tax Authority to obtain Tax Registration Number in order to pay VAT if the invitee is not registered with FTA.

As per UAE law, Naveen Sharma, chairman, The Institute of Chartered Accountants of India (Dubai Chapter), says every person, who does not have a place of residence in the UAE or any GCC country and who is not already register, shall register mandatorily if he makes supplies of goods and services in the UAE, and where no other person is obligated to pay the due tax on these supplies in the UAE.

“If a person is not a resident in the UAE and is required to register in accordance with the provisions of the Decree-Law, the Authority shall register him with effect from the date on which he or she started making supplies in the UAE, or from such earlier date as agreed between the Authority and the person, whether or not person notifies the authority of the liability to register for tax.

“Considering the above legislation of the law, it can be interpreted that, a person who is a Bollywood or a Hollywood celebrity, and not a resident in the UAE, comes to perform any service in the UAE will have to register mandatorily in case no other person is obligated to pay the VAT on the services performed by them in the UAE,” Sharma said.

The celebrities would have to register in his or her name as an individual with the Tax Authority by submitting the required details online on the FTA portal, he added.

Most – if not all – of the Bollywood celebrities of modern era have performed in the UAE and continue to perform. Even Hollywood stars are also invited time and again to perform in the UAE.

A PricewaterhouseCoopers report had forecast that the UAE’s leisure and entertainment market potential would reach 45 million visitors by 2021, with international tourists accounting for 30 million, while residents and friends and relatives of residents total a further 15 million.

Dilip Jain, Principal – VAT, Nimai Management Consultants, noted that in cases of celebrities performing in UAE, the organising event companies who bring celebrities are likely to be registered for VAT and would pay tax on the amount paid to celebrities.

“Where the performance of such services exceeds or is likely to exceed the threshold limit of Dh375,000 in 12 months, and the payment is received from an unregistered persons, then the celebrities will have to register for a Tax Registration Number with Federal Tax Authority and pay VAT. They can also appoint a legal representative to register on their behalf.”

According to Shailesh Khandelwal, CEO and founder, Shailesh Khandelwal Accounting & Book Keeping Services, the UAE VAT law states that if the taxable person imports concerned goods or services for the purpose of his business, then he shall be accounting for due tax in respect of these supplies.

But if celebrities or other service providers offer services to unregistered or non taxable persons in the UAE, they need to register themselves in the UAE. Otherwise, this will result in contravention of the UAE VAT law.

“Celebrities often come to UAE to attend various personal events on the request of residents and citizens of UAE and are paid for this gesture.”

However, the mandatory and voluntary threshold limits of Dh375,000 and Dh187,500, respectively, for registration under UAE VAT law are not applicable to non-resident suppliers of goods and services. Thereby, all non-resident suppliers supplying goods or services, where article 48 is not attracted, have to register and need to comply with UAE VAT law provisions even if the value is less than the threshold limits, Khandelwal added.


Notification No. 3A/2018–State Tax

RNI No. MAHBIL /2012/46121
GST Bhavan, Mazgaon, Mumbai 400 010,

dated the 22nd January 2018.

Notification No. 3A/2018–State Tax

No. JC(HQ)-1/GST/2018/Noti/1/E-way Bill/ADM-8.—In exercise of the powers conferred by clause (d) of sub-rule (14) of rule 138 of the Maharashtra Goods and Services Tax Rules, 2017, (hereinafter referred to as the “said Rules”), the Commissioner of State Tax, Maharashtra State, hereby notifies that the provisions of rules 138 so far as they relates to generation of e-way bill, in respect of movement of the goods stated in column (3) of the Table below, within such area as mentioned in column (2) of the said Table and for such value as given in column (4) of the said Table, shall not apply for the period starting from 1st February 2018 and ending on the 30th April 2018.


Sr. No. Area Particulars Value of the goods
(1) (2) (3) (4)
1 Whole of the State Goods Covered under,—(a) Schedule-I, II, III, IV, V and Schedule-VI of Notification No. 1/2017, State tax (Rate), published in the Official Gazette Extraordinary IV-B No. 183 dated 29th June 2017.

(b) Notification No. 2/2017, published in the Official Gazette Extra-ordinary IV-B No. 182 dated 29th June 2017.

Any value

Commissioner of State Tax,
Maharashtra State, Mumbai.

E-Way Bill for intra-state supplies in punjab optional for 2 months (till 31.3.2018)

Government of Punjab
Department of Excise and Taxation
Bhupindra Road, Patiala, Punjab.

NOTIFICATION No. GST-1-2018/101 Dated 29th January, 2018.-

In exercise of the powers conferred by Clause (d) of sub-rule(14) of rule 138 of the Punjab Goods and Services Tax Rules, 2017 read with Section 168 of the Punjab Goods and Services Tax Act, 2017 (Punjab Act No.5 of 2017), itis notified that no e-Way Bill will be required to be generated for a period of two months from 1st February, 2018 for intra-state supply of goods provided such goods do not cross the state boundary during transit.

2. This order is being passed after having consultation with the Chief Commissioner of Central Tax, Chandigarh Zone.

3. It is clarified within this period of two months, a supplier can optionally generate e-Way Bill for intra-state supplies also.

Vivek Pratap Singh,
Commissioner of State Tax

Taking a leaf out of GST book for income tax reforms

It would not be out of place to state that despite the many twists, turns (including U-turns) and travails that the goods and services tax (GST) rollout has seen, it is the working of the GST Council that is the all-curing balm.

Cut to income tax, where we deal with a law first introduced in 1922. The current 1961 version has perhaps more text on insertions, deletions, provisos and explanations than the original law itself, and with the loudening global pitch on base erosion (read: protectionism) and profit shifting (read: sharing), the pace of change will only increase.

Whether one asks the common man, or a big enterprise, there are fundamentally three issues that create an overhang. No, the first is not about the tax rate, which by all means is due for a reduction, as much as it is the need for clarity and certainty. The second is to walk the talk—there is often many a slip between intention, drafting and implementation. The third relates to being futuristic. With our population, India will remain the hottest, largest and most lucrative market. It is almost impossible to predict what the next waves will be. Rather than, therefore, believing that owing to our customer base advantage there ought to be a one-way ticket to tax collections, it is time that a futuristic view is taken with balanced objectives.

Addressing these by way of budget amendments, by its very design, will always be reactive, often be a year late and rarely be conceived beyond the revenue implications for the next 12 months. Can we borrow a leaf from GST here?

Instead of a committee that is set up every few years to make recommendations to simplify the law (and reports that then languish in bookshelves), why not have an income tax council, made up of some permanent and some invited members, that meets every now and then, as the need arises, and one that does not stop at making recommendations, but that works through with the Central Board of Direct Taxes (CBDT) to issue the necessary clarifications or guidance, and works to amend the law when needed. There is a waiting opportunity to weave this concept into the new income tax law being drafted so that there is necessary legal sanction.

It will be beyond my competence to make recommendations on the composition of the council, but I would certainly prepare an agenda for its first meeting.

Taxation of capital gains

The last few years have seen see-sawing on taxation of capital gains. The period of holding for long-term assets was increased and then reduced. Budget 2017 introduced limitations to the stock market exemptions. Foreign parties get taxed at a reduced rate and are not subject to minimum alternate tax (MAT), whereas Indian companies are. The additional 10% tax on dividends also does not apply to foreign shareholders. My case here is to deliberate on what is the philosophy to be followed, to what extent is there a need to incentivize capital and investment creation and then have a framework that can stand without questions being raised every year. Include in this debate whether private investment also needs exemptions, or lower rates, to what extent, why and for how long there ought to be differences between foreign and Indian investors and how retail and institutional investors will be differentiated, if at all.


A pill should cure and the side-effects should not substitute the original disease. Start-ups need a simple dose that reads: no limitations on carry-forward of losses, don’t tax my capital (which is so hard to raise in any case), and provide me with a tax holiday once I start making profits. The moment the council speaks to a handful of entrepreneurs the pain will be palpable and the prescription forthcoming.

The digital economy

Old school wisdom says don’t tweak and don’t have knee-jerk reactions. Tax policy and principles are built on a solid foundation, and they should work as efficiently and effectively on all kinds of business models. If a foreign company sells shoes to customers and does not pay tax in India, why should a company selling digital products? We have a world-class GST system (well, almost) to collect taxes based on consumption. Coming up with new taxes that are levied on the consumers is only as good as increasing the rate of GST, and finally, is paid for by the end-users like all of us reading this. Our judiciary and legislature haven’t sorted out how software is to be taxed for decades on, so I only dread to even think how much complexity we will be adding to our ecosystem if we do not adopt a logical and simple approach on the digital world.


GST council recognises Greater Noida authority as civic body

After Noida, GST council now recognises Greater Noida authority as civic body. The Greater Noida Industrial Development Authority (GNIDA) on Tuesday said that it has received a letter from the Goods and Services Tax (GST) council recognising it as a civic body. The same had been announced by the Noida Authority about a week ago. The latest announcement has brought to an end confusion over GST charges, as many departments of the authority were unsure if GST applied to the services they offered.
In July last year, GNIDA had announced on its website the levy of GST on some of the income it generates from its allottees. The Authority had listed 19 heads under which it would impose the 18% tax including lease rent, rent from commercial property, property transfer charges, penal interest on missed instalments towards property owned, etc. The tax was also imposed on water and sewer charges besides water connection charges and building plan sanction fees. Road cutting charges, parking charges and booking for parks for holding banquet functions was also to attract GST. If an allottee had to seek time extension for construction of property or restore a cancelled lease deed or building sanction, these services were also to be imposed with an 18% tax. This tax was to be collected from allottees across all land categories including group housing, residential plots, industrial, institutional and commercial.
Now that the authority has been acknowledged as a civic body, residents or individual plot owners will not have to pay GST for many services, including sewer and water taxes, which are provided by GNIDA.
According to officials, institutional, commercial, industrial and group housing plot owners will have to pay GST as per rules. However, the industrial plot owners will not have to pay GST on land cost. Non-business entities such as schools, medical colleges and religious buildings will also not have to pay GST for services provided by the authority. GST will also not be imposed on penalties levied on allottees, officials from the finance department of GNIDA said.


Single-rate GST regime may be a reality in 3-5 years

Chief economic adviser Arvind Subramanianon Monday said India may be headed to a single rate for goods and services tax (GST) over the next three-tofive years, but called for further rationalisation of the indirect tax regime that kicked in last July.
The comments from the government’s chief economist came after the Economic Survey authored by him and his team suggested that GST had got off to a good start, with growth in collections estimated at 12 per cent. “In the initial phase of such a large disruptive change, this performance is noteworthy. The GST promises to be a buoyant source of future revenues,” the document tabled in Parliament said.
Belying “confusion and anxiety” surrounding GST collections, the Survey said the uncertainty will be removed once the system stabilises later this year.
“But the provisional assessment is this: Revenue collection under the GST is doing well, surprisingly so, for such a transformational reform,” it said, adding, taxes that GST has subsumed had fetched Rs 9.7 lakh crore to the exchequer in 2016-17.
Although policy makers were initially upbeat, collections dipped for a few months and caused some anxiety before the tide turned in January and provided some comfort. Subramanian acknowledged that there are too many rates currently, which need to be corrected but drew satisfaction from the fact that the current average rate of 15.6 per cent was in line with the 15-16 per cent revenue neutral rate recommended by a panel headed by him.
The Survey noted that base of indirect taxpayer has increased by over 50 per cent, with 34 lakh businesses coming into the tax net, led by voluntary registrations, especially by small enterprises that buy from large enterprises and want to avail themselves of input tax credits. Nearly 17 lakh businesses registered under GST, despite turnover being below the threshold limit of Rs 20 lakh.
Data mapped by the government showed Maharashtra, UP, Tamil Nadu and Gujarat have the largest base, with UP and West Bengal seeing the maximum jump in the number of new taxpayers. The worrying trend was that nearly 47 per cent of the taxes were collected from five states — Maharashtra (16 per cent), Tamil Nadu (10 per cent), Karnataka (9 per cent), Uttar Pradesh (7 per cent), and Gujarat (6 per cent). “The distribution of GST base among states is closely linked to size of their economies, allaying fears of major producing states that the shift to the new system would undermine their tax collections,” government’s economic report card said.


CII seeks easier GST compliance procedures in Budget

Ahead of the Budget, industry chamber CII today sought redressal of issues related to GST compliance including filing of returns, matching of invoices and getting timely input tax credit.

According to the chamber, simplification of Goods and Services Tax (GST) compliances would result in higher number of returns filed, increased collection of revenues, and easier working capital management by trade and industry. The GST Network (GSTN)functioning and return filing formats could be tweaked to ensure acceptance of invoices, it added.

CII also stressed upon the need for designing a fool- proof and effective return filing system where seamless and speedier input tax credit (ITC) can be availed by the recipient, as against the current requirement of filing three GST returns.

The landmark tax reform was introduced on July 1, 2017.
In a statement, CII said it is in agreement with the proposals presented to the GST Council by Nandan Nilekani, former chairman of the Unique Identification Authority of India and chairman, InfosysBSE -0.69 %.

“If the buyer accepts supplier invoices on the GST System, this automatically determines the input tax credit. In the proposed model, there will be no mismatch or reversal,” the statement quoted Nilekani as saying.
“Currently, the buyer is responsible for ensuring tax payment by suppliers to avail ITC. Mismatch in invoices due to filing errors leads to funds being held up. A successful model should align with the natural business process,” Nilekani added.

He further suggested that the proposed process will offer multiple channels for upload and acceptance of invoices and filing of returns.

Small taxpayers with no automated accounting systems can view and accept pending invoices directly on the portal, and SME taxpayers with some level of automation can use Excel- based offline tool to download, compare and accept pending invoices.

CII had earlier recommended similar measures for easier invoice matching at the time of initial release of the Model GST law.

“The recommendations made by Nilekani seem practical and are expected to be business friendly for the successful transition to GST,” CII said. It also suggested trials and tests before introduction of such a system.

Further, to keep the system simple, it is also suggested that uploading of invoices with total amount with GSTN of recipient should suffice instead of invoices at line-item level.

Acceptance of invoices by buyers and suppliers as per normal business process should be used for ITC payment. This will pave the way for smoother implementation of GST and simplification of return filing system, which it turn will enhance tax revenue towards a successful Good and Simple Tax, the industry body said.