The Good, Bad And Ugly Of GST

If there’s one word that sums up the response of India’s businesses and consumers to the country’s new national sales tax, it’s ‘confused.’

Will premium economy seats be taxed as economy class or business? Is a chocolate-coated biscuit a biscuit or chocolate? These are the questions now troubling businesses large and small across India’s $2.3 trillion economy.

The roll out of the goods and services tax came less than a year after the government’s shock withdrawal of 86 percent of the nation’s currency, which helped knock India’s GDP growth down to 6.1 percent from 7.1 percent in the January-March quarter and eliminated as many as 1.5 million jobs.

After more than a decade-long journey, the biggest tax reform since independence in 1947 became a reality on July 1, combining more than a dozen levies into one tax.

Many Indians responded by sharing their first GST bill on WhatsApp, Facebook and Twitter. The novelty soon wore off. Small traders and businesses struggled to issue invoices and battled with the new software, with some forced to provide handwritten invoices to customers.

In an attempt to cut through the confusion, the government held tax ‘master classes’ and published advertisements in the newspapers showing the revised prices alongside the old prices of goods.

About two dozen states of 29 have abolished check points at their borders, where tax compliance and goods inspections used to delay deliveries — often by days.

Transportation of illegal goods has reduced because those businesses cannot provide GST-compliant bills.

“People are finding it tough to understand the GST,” said Pradeep Singal, national president of the All India Transporters Welfare Association. “This has meant that companies had ordered in advance and are still using old stocks,” pushing down transport business by 30 percent.”

Traders, particularly in small towns, are struggling with their lack of knowledge of the new tax regime — compliance obligations, raising invoices and accessing input credits, said Praveen Khandelwal, secretary general of the Confederation of All India Traders.

Small merchants and e-commerce companies are tripping over a dizzying array of documents and the complicated classification system that determines what percentage of tax will be charged. Thousands of small merchants have stopped selling on e-commerce sites because they can’t meet these new requirements.

Add to that, there’s multiple rates for various products. Footwear below Rs. 500 attracts one rate and above that price attracts a higher tax rate, leaving suppliers confused over which rate they should apply.

“Any new law would have interpretation issues,” said Pratik Jain, national leader indirect tax at PWC India. “Like what rates would be charged for an economy-plus ticket issued by some airlines? It should be charged at economy rates.”

Whether the GST network can seamlessly match billions of credits, facilitate tax collections, provide refunds and check evasions will be tested when most of the traders and companies file returns in September.

Businesses have not yet uploaded their sales and purchases invoices generated post-July 1 on the network, as that part of the system has not been functioning and companies have been allowed to file late returns for first two months.

“The biggest problem being faced right now is that the GSTN has still not formalized their format for firms to pay taxes,” said Sachin Menon, national head of indirect tax at KPMG India. “We have some multiple revisions in format in the last couple of weeks alone. Companies providing GST software are having a tough time.”

Small business owners, as well as traders and shopkeepers who have never turned on a computer, are scrambling to acquire the skills to navigate these technological challenges.

Prices of some products are varying according to location as traders have not fully implemented the new structure and profiteers have stepped in, hindering the creation of a single Indian market.

For instance, Maruti Suzuki India Ltd.’s Baleno Sigma gasoline model cost Rs. 6.35 lakh near Navi Mumbai in Maharashtra while the same model is priced at Rs. 6.65 lakh in Bengaluru in Karnataka.

“A quick comparison of price of motorcycles and cars across the country reveals a convergence in price post-GST,” equity analysts of Jefferies India Private Ltd., the unit of the global investment banking firm said in a July 13 note.

Movie tickets in Tamil Nadu and Maharashtra became costlier as the states imposed additional taxes, defeating the purpose of a unified tax. The central government, however, has set up a panel of officials to monitor any price rise, shortage of commodities and implementation of GST.

Textile traders have been protesting to demand that fabrics be exempted from the tax. The government is reluctant to agree, saying it will break down the input tax credit chain.

The industry won’t be able to sustain the rise in costs, given that 60 percent of the trade is in the informal sector, said S. Sunanda, secretary general of the Confederation of Indian Textile Industry, which represents more than 3,000 units.

“Individuals form about 65 percent of units involved in our trade,” Sunanda said. “The trade will be hit by cheaper imports from China, Bangladesh and Indonesia.”

There’s a 5 percent GST on cotton, however the government raised tax rates on man-made fiber to 18 percent from 12 percent.

“While the medium-to-long run benefits of GST cannot be disputed, the short-run impact on growth is expected to be negative as compliance, confusion and inventory effects take a toll,” said Abhishek Gupta, India economist at Bloomberg Intelligence. “However, recorded GDP growth is still likely to show an increase as part of the shadow economy shifts to the formal sector.”

Source : http://www.ndtv.com/business/the-good-bad-and-ugly-of-gst-1728916

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Adopt GST and become part of history: Irani to biz community

Calling the Goods and Services Tax (GST) a “great step towards transparency,” Union minister Smriti Irani today urged the business community to become a part of this historic tax reform.

“GST is not only a good and simple tax, but also a great step towards transformation. Let us make history and be a part of it, so that we can tell our future generations that we never evaded tax,” she said.

Irani was addressing businesspersons at a function on GST here.

“When I say GST is a great steps towards transparency, what does that mean? How many consumers before GST knew what all taxes they paid? How much VAT, excise, multi-tax you were paying that you did not know of?

“Now with GST, as consumers and taxpayers, you are informed that this is the part of economy you contribute,” the textile and information and broadcasting minister said.

“(The effort is) how to expand manufacturing base, how to expand base of tax, and build infrastructure so that people do not evade paying tax.”

Irani said GST was supported by all political parties in Parliament which is a rare achievement.

“The GST Council is one place where all political parties spoke in one voice, and through consensus supported GST, which is something you do not get to see in Parliament.”

She said the government will ensure traders, who have been protesting against the new tax regime that came into force on July 1, are not harassed.

“Traders and manufacturers have some apprehension. The government has said time and again that those who want to come into formal economy need not fear. If any (tax) official harasses you, let us know, we will ensure you are not harassed,” the minister maintained.

Taking a dig at opposition Congress, Irani said those who are criticising GST are the same people who gained when this tax system was not in place. They are now trying to create fear against the new tax regime among traders.

GST actually subsumes 72 taxes and 17 cesses. Post the new tax regime, trucks no longer have to stop at checkpoints to pay octroi (entry tax), she said.

On input tax credit, Irani said the provision is to give money back for paying GST.

“That is one element of GST, which is giving you back for being a productive Indian, and for being an honest Indian. And I am hopeful that more and more Indians will help each other in understanding GST,” she said. KA PD RSY

Source : http://timesofindia.indiatimes.com/business/india-business/adopt-gst-and-become-part-of-history-irani-to-biz-community/articleshow/59740488.cms

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GSTN portal started invoice uploading for businesses

The GSTN portal has started accepting uploading of sale and purchase invoices of businesses generated post Goods and Services Tax rollout on July 1.

GST Network (GSTN) is the company handling the IT backbone for the new tax regime.

The uploaded invoice data can be saved at the portal and the GST system operated by GSTN will auto populate the invoice data of the respective buyers, the company said in a statement.

The GST kicked in from July 1 and so far, the Goods and Services network has been facilitating registration of businesses.

“If the taxpayer has limited number of invoices, he can directly enter the details at the GST portal. However, this would not be practicable if the number of invoices is in hundreds or thousands,” it said.

It added that to help such taxpayers, GSTN has developed a tool which can be downloaded from the portal and installed on the taxpayer’s computer to prepare the return in GSTR-1 format at one’s ease in an offline mode without connecting to Internet.

“The GSTR-1 software and the offline java tool have been elaborately tested. The portal has started accepting invoice uploads into GSTR-1 from July 24. Now taxpayers can prepare GSTR-1 at their convenience on their own computer and upload the data to the Portal easily within a matter of minutes using the offline tool,” Navin Kumar, Chairman, GSTN said.

He said businesses, particularly MSMEs and larger businesses that generate large number of invoices should to start uploading invoice data to portal straightaway and not wait until September when the July return will be due.

The company has stated that the invoice upload facility is available 24×7.

“It has advised that the taxpayers, such as large manufacturers, distributors and wholesalers, should frequently upload their supply invoice details at regular interval to prevent any hiccups near the due date,” it added.

Generating invoices for dealings above Rs 200 and keeping invoice records in serial number even if maintained manually, are pre-requisites for claiming input tax credit under the GST regime.

Under GST, which is a single tax in place of multiple central and state levies like excise, service tax and VAT, businesses are required to upload on GSTN portal invoices of their trade every month.

Source: http://economictimes.indiatimes.com/news/economy/policy/gstn-portal-begins-invoice-uploading-for businesses/articleshow/59744610.cms

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Proposal to refund central GST on goods made in excise-free zones to help auto, FMCG and pharma companies

A proposal to refund central goods and services tax (GST) on items made in formerly excise-free zones in Himachal Pradesh, Uttarakhand and the North-East is set to be presented to cabinet. The move will benefit companies such as CiplaBSE  , Dabur, Dr Reddy’s and TVS MotorBSE that invested in those areas because of the tax break.

Such exemptions have largely been scrapped under GST as part of efforts to create a common market across India with as few interstate variations as possible.

The Expenditure Finance Committee (EFC) has approved the scheme, which is likely to benefit a number of automobile, fast-moving consumer goods (FMCG) and pharmaceutical companies that have invested in these zones.

“EFC has cleared the scheme,” a senior finance ministry official told ET. It will shortly be introduced in the cabinet, he said.

Hundreds of pharmaceutical companies including high-profile ones such as Cipla, Dabur, Dr Reddy’s, Johnson & Johnson and Wockhardt have plants in such zones in Himachal Pradesh. TVS Motor, Lloyd Electric, TAFE and other automobile component makers also have units in the state.

Many companies in the cement sector have plants in such zones in the North-East. Department of Industrial Policy and Promotion, which anchors the scheme, will move the proposal for cabinet consideration.

The much-awaited plan provides for refund of 58% of central GST paid by manufacturers in the erstwhile excise-free zones of Himachal Pradesh, Uttarakhand and the North-East. States are yet to take a call on their portion of the levy or state GST. Refunds will be worked out after adjusting for input tax credit due, said the official cited above.

Most exemptions have been scrapped under the GST regime barring some essential goods but the government decided to grandfather the excise exemption for special category states to ensure a smooth transition.

Industry had expected the rollout of the scheme along with GST, but the plan wasn’t ready at the time. “It would be in place before the first payment of GST becomes due,” said a government official.

Companies have to pay GST by August 20 after which they can file refund claims. Industry will have to seek refunds in line with detailed guidelines for the new scheme. Tax experts sought a mechanism that provides complete tax benefit.

“Companies that have invested in area-based exemption zones are eagerly waiting to know the mechanism by which the refunds will be granted along with the time lines,” said Anita Rastogi, partner, PwC. “It is critical that the benefit in whole is available.”

GST, which was put in place on July 1, replaced 17 central and state taxes besides 23 cesses.

Source: http://economictimes.indiatimes.com/news/economy/policy/proposal-to-refund-central-gst-on-goods-made-in-excise-free-zones-to-help-auto-fmcg-and-pharma-companies/articleshow/59745276.cms

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

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Number of taxpayers under GST set to eclipse that of previous tax regime

 The number of registered taxpayers under the goods and services tax (GST) is set to exceed those in the previous indirect tax regime as early as this week, a development that is likely to give the government more room to spend on welfare or cut taxes.

As of mid-Friday, 7.95 million applicants had sought GST registration. That is 99.3% of the 8 million tax base under the earlier system that comprised assessees of state value-added tax (VAT), service tax and central excise duty.

GST Network (GSTN), the firm that grants registration and processes returns, is getting as many as 50,000 applications a day under a new registration window that opened on 25 June and will remain open till 22 September, according to GSTN chairman Navin Kumar.

“It is possible we may surpass the 80 lakh (8 million) level within a working day or two. We will know in a month, by how much we have exceeded,” Kumar said in an interview on Friday.

A wider tax base, which will allow the government to lower taxes and boost welfare spending, is one of the benefits policymakers have been hoping for from the GST rollout. India’s tax revenue as a share of its gross domestic product was 16.7% in 2016, lower than the 25.4% in the US and 30.3% in Japan.

The surge in GST registrations is despite the fact that rules exempt businesses that have annual sales of up to Rs20 lakh a year to get registered, a threshold which is higher than the ones that existed earlier for most indirect taxpayers.

In the earlier system, those with sales above Rs5 lakh a year had to register for paying VAT in most states (a few states had a Rs10 lakh threshold). Also, service providers with sales exceeding Rs10 lakh had to register for service tax.

One of the reasons contributing to a wider tax base could be voluntary registration by small dealers who would not like to lose business ties with larger companies that prefer to deal with registered vendors in the GST regime, said R. Muralidharan, senior director, Deloitte India. Another possible reason for increased GST registration may be the requirement for service providers to register in every state from where they render a service, unlike the previous regime, he added.

Of the 7.95 million entities that have opted for GST registration, 900,000 had not registered for any of the indirect taxes in the previous regime. Many of these new indirect-tax payers could also be first-time income-tax payers.

“The increase in tax base subsequent to GST rollout should also take into account the broadening of the direct tax base,” said a government official, who declined to be named.

India’s direct tax base has expanded in the last couple of years, especially after the withdrawal of high-value currency notes in November. The income-tax department added 9.1 million new income-tax payers in 2016-17, as against an average net addition of about 5 million taxpayers a year, according to tax department officials, Mint had reported on 12 May.

“Indications are that GST is set to widen the tax base and increase government’s tax revenue receipts due to increased compliance. Entities that are out of the supply chain have incentives to come under GST,” said Bipin Sapra, partner, tax and regulatory services, EY.

Source: http://www.livemint.com/Industry/dB7O9EuvPmvZ62CBBwKMmJ/Number-of-taxpayers-under-GST-set-to-eclipse-that-under-prev.html

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Traders’ association to protest against GST

The Tamil Nadu Traders’ Association will conduct a protest against the goods and services tax system on Tuesday. The association will also make a representation to State finance minister D Jayakumar, asking him to place their demands to the GST council, secretary of the association in Coimbatore KP Kumaran said.

“We have been told by the officials of the Central government that any representation regarding GST has to be made to the State finance ministers, who will place our requests to the GST council,” he said.

The association feels that only if the requests are made in the initial days of the GST regime, will they be able to get them fulfilled. “We hope our demands are heard in the first three-four months,” said Kumaran.

The association wants the revenue cap for tax being upped from Rs 75 lakh to Rs 1.5 crore. “There are many traders who will get affected because of this. The GST council should consider this,” said one of the district vice-presidents, T Soundararaj. Tamil Nadu had exempted 589 grocery items from tax until GST was implemented, he said.
 “Under GST, nearly 500 of these 589 products are being taxed. The tax ranges from 5-28%. This has impacted the traders as well as the common man,” said Soundararaj. “We are also creating awareness among the public about the new tax rates on the products under GST,” he said.
The association has prepared a 10-point memorandum that will be handed over to the State government to be placed before the GST council. “If our demands are not heard, we will go on a day-long strike on August 8,” Soundararaj further said.
source : http://timesofindia.indiatimes.com/city/coimbatore/traders-association-to-protest-against-gst/articleshow/59729597.cms 

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GST extremely ‘tedious’ for traders, says Bhupinder Singh Hooda

Former Haryana Chief Minister Bhupinder Singh Hooda today dubbed the Goods and Services Tax (GST) as “extremely tedious” for traders and sought simplification of various procedures involved.

Speaking at ‘Veopari Sammelan’ here in the home constituency of Chief Minister Manohar Lal Khattar, Hooda noted that in the name of ‘One Nation, One Tax’, the present GST brought by the BJP was “extremely tedious” with seven-tier tax structure.

The Congress, on the other hand, was committed to one tax rate (with three slabs) with a cap of 18 per cent, he claimed.

The two-time former chief minister also presented a 12- point demand letter for a people-friendly GST in front of the traders who had come from across the state.

He said that if the government failed to fulfil their demands, then they would hold a ‘Veopari Mahapanchayat’ in Haryana after the monsoon session of Parliament and later protest would also be held across the state.

He demanded that a provision be kept for filing two returns instead of multiple in a year, cloth traders be exempted from the GST while imposition of GST on farm-related goods should be done away with.

He also demanded to revoke the provision of search and seizure, saying it would invite inspector raj.

“We are not against the GST, but we are opposing the flaws in the newly-introduced GST,” Hooda said.

Former Haryana Assembly Speaker Kuldeep Sharma and Rohtak MP Deepender Singh Hooda also spoke on the occasion.

The former chief minister has also been holding “Kisan Panchayats” across the state to highlight the plight of the farmers.

Source : http://economictimes.indiatimes.com/news/economy/policy/gst-extremely-tedious-for-traders-says-bhupinder-singh-hooda/articleshow/59727424.cms

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Delhi government to launch mobile vans to educate traders about GST

Delhi government will be launching six mobile vans on Monday to tour the city’s markets and attempt to help traders with issues related to GST.

The decision to start the vans was announced by deputy chief minister Manish Sisodia about 10 days back after he received feedback that several small traders were facing problems with the new GST regime.

“The mobile vans will tour the city’s markets and will also set up helpdesks across the city,” said an official. “We found out that the problems being faced by traders are largely very basic. All the vans will have one official who can address all the basic problems.”

The mobile vans, each with a GST officer, will go from market to market. “The vans are being equipped with a loudspeaker so that they can announce their arrival and point for meeting. Then they will set up camp at a central point and assist traders,” said an official. “The government will also tie up with market associations so that we can inform them of the date and time when the vans will be visiting their markets,” he added.

Sisodia, who has mainta ined that the GST system is good in concept but has not been implemented properly in India, has said that it could lead to tax evasion at one level and harassment of traders at another.

“It is too early to ascertain the impact of GST on business right now but traders are facing problems. Even now, many traders have not been able to incorporate the new system within their existing billing. We will review the situation in some time,” said an official.

Source : http://economictimes.indiatimes.com/news/politics-and-nation/delhi-government-to-launch-mobile-vans-to-educate-traders-about-gst/articleshow/59731227.cms

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Adopt GST to become part of history, Smriti Irani tells business community

Calling the goods and services tax (GST) a “great step towards transparency,” Union minister Smriti Irani on Saturday urged the business community to become a part of this historic tax reform.

“GST is not only a good and simple tax, but also a great step towards transformation. Let us make history and be a part of it, so that we can tell our future generations that we never evaded tax,” she said. Irani was addressing businesspersons at a function on GST in Ahmedabad.

“When I say GST is a great steps towards transparency, what does that mean? How many consumers before GST knew what all taxes they paid? How much VAT, excise, multi-tax you were paying that you did not know of? Now with GST, as consumers and taxpayers, you are informed that this is the part of economy you contribute,” the textile and information and broadcasting minister said.

“The effort is how to expand manufacturing base, how to expand base of tax, and build infrastructure so that people do not evade paying tax.” Irani said GST was supported by all political parties in Parliament which is a rare achievement.

“The GST Council is one place where all political parties spoke in one voice, and through consensus supported GST, which is something you do not get to see in Parliament.”

She said the government will ensure traders, who have been protesting against the new tax regime that came into force on 1 July, are not harassed. “Traders and manufacturers have some apprehension. The government has said time and again that those who want to come into formal economy need not fear. If any (tax) official harasses you, let us know, we will ensure you are not harassed,” the minister maintained.

Taking a dig at opposition Congress, Irani said those who are criticising GST are the same people who gained when this tax system was not in place. They are now trying to create fear against the new tax regime among traders.

GST actually subsumes 72 taxes and 17 cesses. Post the new tax regime, trucks no longer have to stop at checkpoints to pay octroi (entry tax), she said.

On input tax credit, Irani said the provision is to give money back for paying GST. “That is one element of GST, which is giving you back for being a productive Indian, and for being an honest Indian. And I am hopeful that more and more Indians will help each other in understanding GST,” she said.

GST actually subsumes 72 taxes and 17 cesses. Post the new tax regime, trucks no longer have to stop at checkpoints to pay octroi (entry tax), she said.

On input tax credit, Irani said the provision is to give money back for paying GST. “That is one element of GST, which is giving you back for being a productive Indian, and for being an honest Indian. And I am hopeful that more and more Indians will help each other in understanding GST,” she said.

Source : http://www.livemint.com/Politics/X4kMBgfjyGcbxy4Qh5OgRL/Adopt-GST-to-become-part-of-history-Smriti-Irani-tells-busi.html

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GST protesters in Tamil Nadu try sending sanitary napkins to Modi

A new form of protest was witnessed in Coimbatore when members of the Revolutionary Youth Front attempted to parcel sanitary napkins to Prime Minister Narendra Modi and Union Finance Minister Arun Jaitley as a sign of agitation against the levying of 12 percent Goods and Services Tax (GST) on it.

The protesters claimed that the earlier tax was only five percent, but now 12 percent has been imposed.

“It looks like a well-plotted conspiracy reflecting Hindutva. This is a very high price and violates women’s rights,” One of the protesters Kanmani said.

On July 18, the Delhi High Court had sought reply from the Finance Ministry by November 15 on the Public Interest Litigation (PIL) filed on the imposition of 12 percent GST on sanitary napkins.

The PIL also sought to exempt goods like kajal, kumkum, bindis, sindur, alta, plastic, glass bangles, hearing aids, passenger baggage, puja samagri of all kinds and all types of contraceptives, including condoms; from the purview of taxation.

Earlier on Monday, the Delhi High Court issued notice to the Government of India, Delhi Government, New Delhi Municipal Council (NDMC) and Municipal Corporation of Delhi (MCDs) on the PIL filed to ensure availability of sanitary pads for free or at subsidized rates.

The court also directed to conduct workshops on menstrual hygiene for school girls.

The next date of the hearing is on November 7.

Meanwhile earlier, sanitary napkins attracted a GST of 12 percent, a shade lower than 13.7 per cent in the previous indirect tax regime.

Clarifying on the reports of tax incidence on sanitary napkins under GST, a finance ministry statement said, “The tax incidence on this item before and after GST is the same or less.”

In pre-GST, they attracted concessional excise duty of 6 per cent and 5 per cent VAT.

The total tax incidence on sanitary napkins was 13.68 per cent after considering cesses.

“Therefore, 12 per cent GST rate had been provided for the sanitary napkin,” it said.

Raw materials used for the manufacture of sanitary napkins attract GST of 12 per cent and 18 per cent.

If the GST rate on sanitary napkins was reduced to 5 per cent, it will further accentuate the tax inversion and result in even higher accumulated input tax credit (ITC), with correspondingly higher financial costs on account of fund blockage and associated administrative cost of refunds, putting domestic manufacturers at even greater disadvantage vis-a-vis imports.

Source : http://www.business-standard.com/article/current-affairs/gst-protesters-in-tamil-nadu-try-sending-sanitary-napkins-to-modi-117072200183_1.html

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