SUVs, luxury cars to cost more as GST cess raised to 25 per cent

Under the new tax regime, cars attract the top tax rate of 28 per cent, besides attracting a cess of 1-15 per cent in order to create a corpus to compensate states for loss of revenue from GST implementation.

The GST Council on Monday approved a proposal to hike cess on SUVs, mid-sized, large and luxury cars from present 15 per cent to 25 per cent. These mid-segment to luxurious cars had become cheaper following the implementation of GST (Goods and Services Tax) on July 1. Under the new tax regime, cars attract the top tax rate of 28 per cent, besides attracting a cess of 1-15 per cent in order to create a corpus to compensate states for loss of revenue from GST implementation.

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In a statement, the Finance Ministry said after introduction of GST, the total tax on motor vehicles (GST plus compensation cess) has come down vis-a-vis the total incidence in pre-GST regime. “The GST Council considered this issue in its 20th meeting held on August 5 and recommended that the central government may move legislative amendments required for increasing the maximum ceiling of cess leviable on motor vehicles falling under headings 8702 and 8703 to 25 per cent instead of the present 15 per cent.

However, the decision on when to raise the actual cess leviable on the same will be taken by the GST Council in due course.

An amendment to the Schedule to section 8 of the GST (Compensation to a State) Act, 2017 is required to increase compensation cess. The vehicles that come under headings 8702 and 8703 include mid-segment, large cars, SUVs and motor vehicles which can carry more than 10 persons, but less than 13. In addition, hybrid vehicles with engine capacity of more than 1500 cc and mid segment hybrid cars of less than 1500 cc also fall in the category.

Prices of most SUVs came down significantly between Rs 1.1 lakh and Rs 3 lakh following implementation of GST, which subsumed over a dozen central and state levies like excise duty, service tax and VAT, from July 1.

Source: http://indianexpress.com/article/business/economy/suvs-luxury-cars-to-cost-more-as-gst-cess-raised-to-25-per-cent-4786159

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Profit petroleum may be exempt from levy of GST

The oil and gas exploration and production business is likely to get a boost following a proposal to exempt the profit petroleum paid to the Centre from the Goods and Services Tax (GST).

The production sharing contracts (PSCs) signed for exploration and development of oil fields require operators to pay a pre-determined share of the surplus petroleum output to the Centre as a form of royalty. Currently, such profit petroleum is subject to GST as it has been construed as a payment made by firms for a service.

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Though profit petroleum is legally taxable, the levy of GST doesn’t appear to be in sync with the PSCs signed under the New Exploration Licensing Policy or NELP, said officials aware of the development, adding that the proposal to rectify this is likely to be taken up by the GST Council at its next meeting in September.

‘Implicit cost’

“The PSC allows contractors to recover all expenses incurred in exploration, development, production and this includes costs of all inputs and indirect taxes paid thereon (except corporate income tax). If profit petroleum is a consideration paid to the government for the right to explore, it is also an implicit cost,” said an official, who spoke on the condition of anonymity.

However, operators are not allowed to recover the profit petroleum paid to the government as a cost under the PSC. Moreover, if GST is to be levied on the government’s share of profit petroleum, disputes could arise on whether the contractor can pay the GST out of his own profit petroleum.

Industry bodies such as CII had made several representations on the issue to the Centre, contending that paying a share in profit petroleum to the government is a profit-sharing arrangement rather than a payment for a service. While officials disputed this interpretation and said that the relationship between the government and contractors is of an assignor and assignee, they concede that the GST levy has the potential to lead to litigations and disputes.

“Profit petroleum in this context is the government’s share from exploration and production activity, so the question whether the explorer should be liable to pay tax on it or not has been deliberated for long,” said Anish De, partner and head (infrastructure) at KPMG India.

“This is not good for reducing India’s dependence on imported oil and gas. So, in order to quell the concerns of this strategically important sector, we have mooted that the GST Council consider exempting government’s share of profit petroleum from the tax,” the official said.

“Profit petroleum is a bidding parameter for players under the NELP regime and they are required to share varying amounts of the surplus oil drilled beyond a particular threshold with the government,” said K. Ravichandran, senior vice-president at ratings agency ICRA.

“To be required to pay GST on what in itself is a physical levy paid to the government is inequitable so any rationalisation on this front will bring relief to the sector,” said Mr. Ravichandran.

“In the overall scheme of NELP, treating government’s share in profit petroleum as a cost and levying GST appears odd,” the official said.

At the same time, the government is likely to clarify that ‘cost petroleum’ — which is the value of petroleum that a contractor can take in order to recover all contract costs for exploration and royalty incurred during a year — could be taxable.

“Cost petroleum is not a consideration for a service to the government and thus not taxable per se. However, it is a valid measure of mining service provided by an operator, which is taxable… especially where details of cash bills raised by the operator are not available with authorities,” said an official, adding that a clarification may be issued to make this clear.

Terming the proposed change in GST applicability on profit petroleum share as a strong signal for exploration and production players that it is serious about scaling up exploration business, Mr. De said the stance taken for existing NELP on the issue will also extend to the new HELP regime where a revenue-sharing arrangement is proposed.

Source: http://www.thehindu.com/business/Economy/profit-petroleum-may-be-exempt-from-levy-of-gst/article19446532.ece

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GST: Centre asks relabeling of unsold pre-packaged stock

It said the new guideline needs to be followed because the retail sale price printed on pre-packaged commodity prior to July 1, 2017, when GST was implemented, is required to be changed.

In the wake of GST, the Centre has issued an order for stamping, putting sticker or online printing on pre-packaged commodities for declaring the revised retail sale price (MRP) on the unsold stock.

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The Consumer Affairs, Food and Public Distribution ministry has asked the manufacturers, packers and importers to follow the guideline on account of implementation of GST.

It said the new guideline needs to be followed because the retail sale price printed on pre-packaged commodity prior to July 1, 2017, when GST was implemented, is required to be changed.

Use of unexhausted packaging material and wrapper has been allowed up to September 30, 2017 after making the necessary corrections.

The guideline has already been disseminated to all the stakeholders and controllers of Legal Metrology of all states and UTs for immediate necessary action. The Department’s website contains FAQs for explaining the manner in which MRP can be undertaken.

The ministry said the matter is being monitored on a continuous basis, and the complaints received so far for not selling the pre-packaged commodities at decreased prices where the rate has been decreased on National Consumer Helpline have been forwarded to the controllers of Legal Metrology for immediate necessary action.

Further, section 171 of the Central Goods and Services Act, 2017 provides for Anti-Profiteering measure according to which any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices and the Centre may constitute an Authority to examine the same.

Many business entities have reduced the prices of their goods and services in view of lower GST rates under the GST regime. They have been publishing these revised rates in leading new dailies from time to time for consumer benefit.

The ministry has already issued an advertisement in newspapers regarding MRP aspects and the final price to protect consumer interests. It is also doing the outdoor publicity through creatives on MRP after implementation of GST.

SOURCE:http://indiatoday.intoday.in/story/gst-consumer-affairs-revised-retail-sale-price/1/1019104.html

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Nil GST on fabrics not feasible

Also, 28% GST for hotels with tariffs above ₹7,500: Ministry

Organised traders and unorganised sellers in the textiles sector have not been affected by the Goods and Services Tax, according to Minister for Finance, Defence and Corporate Affairs Arun Jaitley, who ruled out a decrease in the tax rate on the sector under GST.

Mr. Jaitley added that the textile manufacturers’ and traders’ main demand was for a nil tax rate on fabrics, but that this would not be feasible since a nil rate would make input tax credits unavailable. This answer in Parliament follows several strikes by textile manufacturers across the country protesting the GST treatment of the sector.

At the same time, the Finance Ministry on Tuesday clarified that hotels with a declared tariff of less than ₹7,500 per day would attract a GST of 18% and hotels with tariffs above that would attract GST of 28%, regardless of the star rating of the hotels. The clarification was in response to reports expressing doubt as to whether 5-star hotels have to pay a 28% tax regardless of tariffs.

Meanwhile, the GST Network said there was no possibility of data on the GST portal being mixed up. There is “not even the slightest possibility” of data on the portal being mixed up, with one taxpayer’s details being shown to another, GST Network chairman Navin Kumar said on Tuesday. GST Network also clarified that there were enough safeguards to prevent such a mix up from taking place.

Source : http://www.thehindu.com/business/nil-gst-on-fabrics-not-feasible/article19303068.ece

GST Council raises cess on cigarettes to fix anomaly under GST

The goods and services tax (GST) Council raised the cess on cigarettes Monday to address an anomaly under the new regime that had resulted in lower tax incidence than before. The move will raise the prices of cigarettes that had fallen under the GST regime, which rolled out July 1.

Cigarette maker ITC had been the biggest gainer from the anomaly with its stock rising nearly 10% from end-June levels, more than double the rise in the broader market over this period. An ITC spokesperson said the company was studying the details of the move. The increase in cess ranges from `485 per 1,000 sticks for filter cigarettes of up to 65 mm length to `792 per 1,000 sticks for those of 70-75 mm. In the case of other filter cigarettes, the tariff will rise by 31%. The new rates took effect at midnight.

Finance minister Arun Jaitley said the anomaly would have cost the government Rs 5,000 crore in tax and benefited companies in the sector.

“GST Council meeting was called after an anomaly was detected in the compensation cess on cigarretes. Impact of the cascading was not factored in, which resulted in windfall gains for cigarette companies… This was not the intention of the GST Council,” Jaitley said, adding that the council reviewed the cess on cigarettes and decided to increase it. The council met via videoconference.

TAX ANOMALY
The weighted average value added tax (VAT) rate on cigarettes was 28.7% and in line with that, GST was kept at 28%. In addition, compensation cess was to be levied at 1.05 times the specific rate, or 5% extra, the specific excuse duty rates.

“However, this method of calibrating the compensation cess did not take into consideration cascading of taxes (that is, in earlier regime, VAT being charged on value inclusive of the excise duty). As a result, the total tax incidence on cigarettes in GST regime has come down, as compared to the total tax in pre-GST regime,” the finance ministry said in a statement. “While any reduction in tax incidence on items of mass consumption would be welcome, the same would be unacceptable in case of demerit goods like cigarettes.”

The tax rate of 28% and ad valorem cess of 5% remains the same except in the case of other items falling in the cigarette category.

REGISTRATIONS ON RISE
Jaitley said registration of existing taxpayers who are migrating from the previous tax regime had exceeded 7 million. He said fresh registrations had crossed 500,000 and another 250,000 were in the process of being approved.

Source : http://economictimes.indiatimes.com/news/economy/policy/gst-council-decides-to-hike-cess-on-cigarettes/articleshow/59635800.cms

Clarity on GST over aircraft imports soon

The finance ministry has assured airlines that confusion over the applicability of the goods and services tax (GST) on imported aircraft that resulted in double taxation will be sorted out soon and a clarification will be issued at the GST Council meeting likely to be held next month.

The matter is related to taxation on aircraft imported before July 8.

“Basis that assurance from the finance ministry, we have got our aircraft approved on Saturday. We have given a letter of undertaking, which says that we will pay if the government does not issue a clarification in the next GST Council meeting,” said a senior Air India official, who did not want to be identified.

Apart from Air India, one aircraft each of IndiGo, Vistara and AirAsia India are stuck because of the confusion, as are planes of other airlines. “Our aircraft is still stuck as we await clarity on it from the government,” said a senior executive of an airline whose aircraft is still awaiting clearance. The next GST Council meeting is likely to be held on August 8, 2017. The council makes recommendations on matters related to the tax.

ET reported on Saturday that aircraft are stuck due to lack of clarity on taxes to be charged on planes imported between July 1, 2017, and July 8, 2017. The GST regime, which came into effect on July 1, allowed taxation on cost of aircraft at the time of import and on lease rentals. The government clarified on June 8 that only one of the charges would be applicable.

The circular, however, did not say whether the clarification would be applicable from the day GST came into force or from the day of the clarification.

Due to the confusion, the customs and excise department sought a 5% levy on the total cost of the aircraft and another 5% GST on lease rentals on aircraft imported within that period.

The airlines refused to pay the taxes and took up the issue with the government, leading to revenue losses because of inability to deploy the aircraft.

Source: http://economictimes.indiatimes.com/news/economy/policy/clarity-on-gst-over-aircraft-imports-soon/articleshow/59623322.cms

Alcohol, petroleum products to streamline GST roll-out, says IACC

The Indo-American Chamber of Commerce (IACC) on Monday flagged points for the smooth transition of the Goods and Services Tax (GST) into a full-fledged tax structure.

Up on the suggestion list of the IACC is the need to bring alcohol and petroleum products within the ambit of the Central GST, said the apex bilateral Chamber synergizing India-US economic engagement.

There is a strong pitch by the states not to give up the taxation of these sectors as the revenues from them constitute a major chunk of their resource mobilisation, the IACC said in a statement.

“A pragmatic approach to counter this will be citizens’ pressure for assigning this right to the Centre,” the statement released on Monday added.

Next in the order of importance, according to the IACC, is pruning up the number of slabs in the GST.

World over, GST or similar clone of a comprehensive indirect tax, would either have one slab or at best two.

In India, in effect, there are five slabs — zero per cent, five per cent, 12 or cent, 18 per cent and 28 per cent — which would make the tax structure complicated and difficult to comply with.

“We have to draw up a roadmap for further pruning the number of rates in a time-bound manner,” IACC’s Finance Committee Chairman S.K. Sarkar said.

“In the given situation, it is prudent to do away with highest slab/s and amalgamate it/them with the next lower slab,” Sarkar said.

The conceptual ambiguity in the GST structure was another important issue that has to be addressed, the Chamber said.

The manufacturing states feel that their interests have been jeopardised under the GST, which is a destination based tax, the IACC noted.

It is important to evolve pragmatic schemes that should address the genuine concerns of manufacturing states in order to shore up their faith in the dispensation, it said.

Small businesses in the manufacturing sector would not have it easy in the GST regime.

Under the excise laws, only manufacturing business with a turnover exceeding Rs 1.50 crore had to pay excise duty.

Under the GST, the turnover limit has been reduced to Rs 20 lakh, increasing the tax burden for many manufacturing Small and Medium Enterprises (SMEs).

Many of the SMEs would find compliance tough and even if they comply with the GST norms, it would be at an additional cost.

Most businesses use accounting software or ERPs for filing tax returns, which have excise, VAT and service tax already incorporated in them.

“The transition to GST will require businesses to change their ERPs either by upgrading the software or by purchasing new GST-compliant software. This will lead to increased costs of buying new software and training employees on how to use it,” Sarkar said.

Another anomaly in the GST structure is in the form of taxing branding packaged edible items if the brand name is registered under the Trade Marks Act. If it is not registered under the act, tax is not levied.

Introduction of the GST is seemingly affecting the textile industry at least in the short run.

It is expected that the tax rate under the GST would be higher than the earlier tax rate for the textile industry. Natural fibres (cotton, wool) which were exempted from tax, would be taxed under the GST.

A significant portion of the textile industry is in the unorganised sector or composition scheme. This creates a gap in the flow of input tax credit since tax credit is not allowed if the registered taxpayers procure the inputs from the unorganised sector.

Also, Composition scheme (turnover up to Rs 75 lakh) for traders, manufacturers and hotels may be done away with since this scheme militates against the GST principle of getting input credit across the supply chain.

In any case, this scheme does not appear to have too many takers, the IACC said.

On the export front, it is important to align two main export promotion schemes in India — the Merchandise Exports from India Scheme (MEIS) and the Services Exports from India Scheme (SEIS) with the GST.

Under these schemes, exporters with a certain amount of turnover are provided with duty credit scrips.

These scrips allow for the exemption of duties paid on the import of raw materials.

Under the duty drawback scheme, the exporters are provided with a refund of the customs and excise duties paid on the imported inputs.

The GST legislation has a provision on a duty drawback for these inputs. This implies a refund of the taxes paid on both imported as well as domestic inputs.

The duty drawback scheme helps those exporters who produce goods that are not being taxed but still have to pay taxes on the inputs used in their manufacture.

Due to a higher rate of tax under the GST, exporters might face a cash crunch due to the blockage of working capital.

“In order to address this issue, the Finance Ministry should evolve schemes to fast track process of refund within a stipulated time of say five days,” Subramanyan said.

Source : http://www.business-standard.com/article/economy-policy/include-alcohol-petroleum-products-to-streamline-gst-roll-out-says-iacc-117071700228_1.html

GST could impact branded basmati rice companies’ profitability: ICRA

The profitability of the organised basmati rice companies is likely to be negatively impacted as the same will be subject to 5% Goods and Services Tax now, said credit rating agency ICRA.

The GST was implemented in India from July 1.

“Earlier basmati rice was subject to value-added-tax (VAT) or was tax free in different states. However under GST, basmati rice has been included in the category of branded cereals registered in the Register of Trade Marks, that attract a levy of 5% GST,” the ratings agency said.

This is likely to put the branded players in a disadvantageous position compared to the unbranded rice segment as it would further widen the pricing gap and may result in some transition of demand from branded to unbranded basmati rice, it noted.

Branded basmati rice companies will see some erosion of profitability as they would look to absorb the GST impact and maintain the pricing parity with the unbranded segment, added ICRA.

Source : http://economictimes.indiatimes.com/industry/cons-products/food/gst-could-impact-branded-basmati-rice-companies-profitability-icra/articleshow/59592317.cms

GST: SFI activists post sanitary pads to Arun Jaitely

Activists of a Left students union in Kerala today posted sanitary napkins to union Finance Minister Arun Jaitley as a mark of protest for imposing GST on women’s hygiene product.

Students Federation of India (SFI), the students outfit of ruling CPI(M) sent the napkins with the slogan ‘Bleed without fear, Bleed without tax’ written on them.

The hygiene products were sent as part of a protest programme organised by the outfit in various college campuses across the state against the taxation on sanitary pads.

SFI central committee member Khadeejath Suhaila inaugurated the protest event here.

Various state and district level leaders took part in the protest organised in other parts of the state.

Sanitary napkins will attract Goods and Services Tax (GST) rate of 12 per cent, a shade lower than 13.7 per cent in the previous indirect tax regime.

Source : http://economictimes.indiatimes.com/news/politics-and-nation/gst-sfi-activists-post-sanitary-pads-to-arun-jaitely/articleshow/59561500.cms

 

items of gst with rates    GST 0% Rate Category Items List  

items of gst with rates    GST 5% Rate Category Items List 

items of gst with rates    GST 12% Rate Category Items List

items of gst with rates    GST 18% Rate Category Items List 

items of gst with rates    GST 28% Rate Category Items List 

 

No GST on ‘anna kshetras’ of religious institutions

The government has said free food supplied in anna kshetras (food areas) run by religious institutions is exempt from GST. Besides, prasadam distributed by places of worship like temples and gurudwaras would not attract any GST.

Clarifying media reports that suggested GST would be levied on free food supplied in anna kshetras , the finance ministry said in a statement that “this is completely untrue. No GST is applicable on such food supplied free.”

However, some inputs and services required for making prasadam are subject to GST. These include sugar, edible vegetable oil, ghee, butter and transportation of these goods.

The ministry said most of these inputs or input services have multiple uses and under the GST regime, separate tax rates can’t be prescribed depending on the purpose for which sugar is supplied. GST being a multi-stage tax, it is difficult to administer exemptions and concessions based on end-use and no such incentives are envisaged under the new tax regime, the ministry said. “It would, therefore, not be desirable to provide end-use based exemption for inputs or input services for making prasadam or food for free distribution by religious institution.”

Source : http://economictimes.indiatimes.com/news/economy/policy/no-gst-on-free-food-supplied-by-religious-institutions/articleshow/59547163.cms

items of gst with rates    GST 0% Rate Category Items List  

items of gst with rates    GST 5% Rate Category Items List 

items of gst with rates    GST 12% Rate Category Items List

items of gst with rates    GST 18% Rate Category Items List 

items of gst with rates    GST 28% Rate Category Items List