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GST collections pegged at Rs 7.61 lakh crore for FY20; FY19 budgeted target missed

GST collections pegged at Rs 7.61 lakh crore for FY20; FY19 budgeted target missed

New Delhi: GST collections by the Centre missed the budgeted target set for the current fiscal by Rs 1 lakh crore, while total mop-up from the indirect tax has been pegged at over Rs 7.61 lakh crore for 2019-20.

The government had budgeted to collect over Rs 7.43 lakh crore from Goods and Services Tax (GST) in the current fiscal ending March. However, in the revised estimates, the revenue mop-up has been pegged at over Rs 6.43 lakh crore.

So far, in the 10 months (April-January) of the current fiscal, total GST collections by the Centre and states stood at over Rs 9.71 lakh crore.

For the full fiscal 2018-19, the GST collection target of the Centre and states was Rs 13.48 lakh crore.

Presenting the Interim Budget for 2019-20, Finance Minister Piyush Goyal said in spite of major rate reductions and relaxations, revenue trends are encouraging.

“The average monthly tax collection in the current year is Rs 97,100 crore per month as compared to Rs 89,700 crore per month in the first year,” Goyal said.

The state revenues, he said, are improving with guaranteed 14 percent annual revenue increase for the first five years from the implementation of GST.

The Goods and Services Tax (GST) was rolled out on July 1, 2017, and has consolidated 17 central and state levies.

Goyal added that GST has resulted in the increased tax base, higher collections, and ease of trade.

“This will reduce the interface between the taxpayer and the government for day-to-day operations and assessments. Now returns are fully online and e-way bill system is in place,” he said.

Goyal said with the introduction of GST, inter-state movement of goods has become faster, more efficient, and hassle-free with no entry tax, check posts, and truck queues.

The minister also said that the GST rate has been continuously reduced, providing relief of about Rs 80,000 crore annually to consumers.

Most items of daily use for the poor and middle class are now in the zero percent or 5 percent tax slab, he said.

“Our government wants the GST burden on home buyers to be reduced and accordingly we have moved the GST Council to appoint a group of ministers to examine and make recommendations in this regard at the earliest,” he added.

Further, he said more than 35 lakh small traders, manufacturers, and service providers will benefit from the trader-friendly measures.

“Soon, businesses comprising over 90 percent of GST payers will be allowed to file a quarterly return,” Goyal said.

GST collection stood at Rs 1.03 lakh crore in April, Rs 94,016 crore in May, Rs 95,610 crore in June, Rs 96,483 crore in July, Rs 93,960 crore in August, Rs 94,442 crore in September, Rs 1,00,710 crore in October, Rs 97,637 crore in November, Rs 94,725 crore in December 2018 and over Rs 1 lakh crore in January 2019.

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Impact of GST on restaurant industry positive: Survey

Impact of GST on restaurant industry positive: Survey

Impact of GST on restaurant industry positive: Survey

The restaurant industry in Mumbai and Bengaluru feels the impact of Goods and Services Tax (GST) has been largely positive, but lack of clarity on regulations remains a major hurdle, according to a survey.

More than 70 per cent of the restaurant owners in the two cities believed GST is a positive decision for the industry, while 68 per cent businesses felt it will ease compliance since it is backed by technology, said the survey by Grant Thornton India, a leading assurance, tax and advisory firm.

High rentals and difficulty in retaining experienced staff are key challenges faced by the restaurant industry in Mumbai and Bengaluru, said the survey titled ‘Bon Appetit Emerging trends, opportunities and challenges in Indian restaurant industry’.

Lack of clarity on regulations has also been mentioned as an area of concern, it added.

The Grant Thornton’s Bon Appetit survey was based on findings from 35 (Mumbai) and 29 (Bengaluru) owners and Key Managerial Personnel (KMPs).

Like GST, demonetisation has also affected the restaurant industry, the survey revealed.

The impact of demonetisation appeared to have been more in Bengaluru, where only one-third of the respondents said there is no impact, compared to Mumbai, where it was 60 per cent, it said.

This is also as cash is still a predominant mode of payment and accounts for 20-30 per cent of receipts in a restaurant, it said.

M-wallets have just started picking up and account for 4-5 per cent of the collections, it added.

“The Indian restaurant industry has evolved and grown significantly over the past two decades and continues to grow at a steady pace.

“This can be attributed to the changing demographics, increase in disposable incomes, urbanisation and growth of organised retail. The market is highly segmented on account of varying income levels and age bracket of the population,” said Grant Thornton India LLP Partner Dhanraj Bhagat.

The survey revealed that quality of food emerged as the key driver for growth of restaurants, followed by location and pricing.

For Mumbai respondents, having organic food is more important than concerns related to pricing and cuisine preference, while affordability was highlighted as the key emerging trend in consumer preferences in Bengaluru.

Meanwhile, the respondents said pan-India or regional expansion was the primary strategy for growth.

In Mumbai, respondents said global expansion and cuisine addition are two other crucial strategies for increasing footprint.

When it comes to funding these expansions, Mumbai respondents preferred private equity firms, whereas Bengaluru saw bank loans as the primary source, the survey added.

Source :  The Economic Times
Impact of Goods and Services Tax (GST) on Union Budget 2018-19

Impact of Goods and Services Tax (GST) on Union Budget 2018-19

Impact of Goods and Services Tax (GST) on Union Budget 2018-19

Budget 2018-19 is the first Union Budget after the implementation of GST in July 2017. After the implementation most provisions of the Goods and Services Tax (GST) were tweaked and tax rates of numerous products were reduced in subsequent GST council meets which resulted in a sharp decline in government’s tax collection figures.GST replaced more than a dozen indirect taxes; these indirect taxes together formed a bulk of the government’s earnings. Service tax alone accounted for more than 14% of the government’s revenue in the last Budget in 2017. Thus fall is GST collection is a major cause for concern for the FM.Finance Minister Arun Jaitley who is also the GST Council Chief has stated that Budget 2018 will provide further opportunity for him to address issues related to GST and also to further tweak the GST rates. Almost every sector desires a rate cut in the GST rates but probably only a few of these expectations will be met on the budget day given the precarious fiscal situation that the FM has to deal with.

Effect of GST on Union Budget of India
One of effects of the GST on the union budget of India is that, now that the various indirect taxes are gone the manoeuvring space for the FM has reduced substantially. Before GST implementation in the Budget all the changes in the indirect taxes were contained in the Part B of the Budget that dealt with tax proposals. But now any decision regarding changes in GST rates is taken by the GST Council. Thus other than changes in the basic custom duties which are outside the purview of GST no big bang changes in the GST tax regime is expected. The FM is his Budget 2018 may state about foreseen changes but won’t be able to implement concrete changes through the Budget itself. Another effect of the GST on the Union Budget would be because after the implementation of GST the government’s revenue has been steadily declining which puts further pressure on an already strained fiscal deficit target of the government. Along with need for enhance public spending in various sector, the fall in GST collection throws up a difficult situation for the FM to tackle in the Budget 2018.

Challenges related to GST in Budget 2018
The most significant GST related challenge for the FM is to tackle falling GST revenues. The GST collections have been consistently going South since September. This is majorly due to cut in GST rates on many products and because of small businesses opting to file returns on a quarterly basis instead of initially proposed monthly returns. If the current trend continues the GST collection of the government would be below collection of indirect taxes in the pre-GST era, this will be a big jolt to the fiscal consolidation agenda of the Government. Thus the biggest GST related challenge before the FM is to improve GST collection through better compliance, technology and other means. Another challenge for the FM is to expand the GST base thus we could see some movement on this front too in the Budget 2018. Government may incentivise and offer concessions and rebates to honest tax payers and make evading GST more difficult. GST when introduced was supposed to be a user friendly tax regime hence further steps to simplify the GST system is also expected. The Budget 2018 may also be used to iron out some issues that are plaguing the GST regime such as export refunds that are stuck with GST department, technological bottlenecks and more.
Also read: 25th GST Council Meet:Rates revised for 29 goods, 53 services, says Arun Jaitley

GST related decisions expected in the Budget 2018
The major GST related decisions that may be unveiled in the Budget 2018 are bringing of the real estate sector under the purview of GST along with diesel, natural gas and gasoline. Although the FM cannot reduce the GST rates of the products in the Budget but he can announce the intention of reducing GST rates on products such as electric vehicles, agriculture related products used by farmers and others.  One of the GST related expectation from the Budget is that the limit of the composition scheme of GST which is currently 15 Lakhs can be increased to 30 Lakhs. Other GST related decisions on clarity of taxation on e-wallets, centralised registration for banks, insurance companies and financial institutions and also ending of certain restrictions on input tax credit is expected. A decision on single stage return filing by consolidating the three key return forms GSTR1, GSTR2 and GSTR3 to minimize compliance burden on small and medium businesses may also find mention in the FM’s speech on the that day.

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Source: Business Standard
GST to have a positive impact on state government finances

GST to have a positive impact on state government finances

gst positive Impact

Implementation of GST will have a positive impact on state governments’ finances in the medium to long term, according to a report by ratings firm India Ratings. Even in the short term, the impact on individual states varies across states, it said .

GST, a process towards standardisation of taxes across the country, is being criticised for its near term impact on inflation and to some extent impacting states’ autonomy in deciding tax rates.

Nine state-level taxes included in goods and services tax are: state value added tax, central sales tax, purchase tax, luxury tax, entry tax (all forms), entertainment tax (except those levied by local bodies), taxes on advertisements, taxes on lotteries, betting and gambling and state cesses and surcharges insofar as they relate to the supply of goods or services. However, taxes on income, property and capital transactions, petroleum products, state excise and electricity duty are not part of GST and states would continue to levy and collect these in the same manner as earlier.

At an aggregate level, the state taxes that are subsumed in GST accounted for 55% of states’ own tax revenue and grew at 14.0% during FY12-FY17, the report said. This will be the rate at which if state taxes that are subsumed in GST grow in FY18 over FY16, then centre will not be required to compensate states for any revenue loss.However, there are wide variations across states, with subsumed GST taxes growing at just 8.47% for Punjab during FY12-FY17 but 39.70% for Telangana.

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GST revenues of all states combined will grow at a CAGR of 16.6% in FY18 over FY16, according to India Rating’s calculations. However, since the picture at the individual state level differs, eight states namely Andhra Pradesh, Chhattisgarh, Gujarat, Himachal Pradesh, Madhya Pradesh, Odisha, Punjab and Tamil Nadu would need compensation from the central government for any revenue loss under baseline scenario. This would cost INR56 billion to the central government in FY18.

As post introduction of goods and services tax, input tax credit is available on both goods and services, Ind-Ra’s calculation shows that the growth of GST component of states’ own tax revenue for all states in such a case would drop to 15.5% in FY18 (base line scenario 16.6%) and three more states namely, Goa, Jammu and Kashmir and Jharkhand would require compensation from the central government.The total compensation amount, therefore, would increase to Rs 95 billion in FY18 (baseline scenario: Rs 56 billion). This is based on the assumption that in the final production of goods and services, service tax accounts for 10%.

Like the state VAT which was rolled out from April 2005 to January 2008, implementation of GST will also bring in some efficiency gains. If we combine the 5% efficiency gain with 10% input tax credit on services tax, then only five states namely Chhattisgarh, Gujarat, Odisha, Punjab and Tamil Nadu would need compensation from the central government and the total compensation amount would drop to Rs 37 billion in FY18.

To be able to absorb the positive impact of GST on state finances, states will have to keep a constant vigil on the buoyancy of taxes that are outside the purview of GST as also their own non-tax revenue, India Ratings said.

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Impact of GST on Indian Healthcare and Pharma Sector

Impact of GST on Indian Healthcare and Pharma Sector


In India many types of tax systems were prevailing in the past, and during British period, there were significant changes in the taxation system. There after many changes took place time to time. To make the Indian Tax system more uniform, Goods and Services Tax has been introduced in India from 1st July 2017.

Goods and Services Tax is hailed as the biggest tax reform since independence. Parties on both sides of the political divide say it is a good initiative but may disagree on preparedness to implement and the rates on various goods. It will include all taxes at various stages of value addition in production process of goods and services i.e. buying raw material, manufacturing of components and final product, warehousing, and transportation and final sale to customer. These taxes were levied by multiple authorities such as local (municipalities), state and central governments. The final customer will pay GST while purchasing from the last dealer. Thus it is not a new tax but replaces all taxes which were levied at all the previous stages in production and sale process with one tax.

Now there is one tax with two components i.e. state components and central. The state component will go to the state in which final transaction took place and central component will go to central government. GST is expected to increase the government revenue as tax evasion will be checked and many services that were not under the service tax regime will come under GST. The increase in Government revenue will improve investment in health and the social determinants of health. It will also provide transparency and certainty in the Indian tax system. It will improve the ease of doing business in India for both local and off-shore investors.India’s current standing globally in ease of doing business is 130 out of 190 countries. Globally, Goods and Services Tax is seen as a simple, efficient and successful form of indirect tax reform. It will contribute to accelerate economic growth in India by replacing the current multiple (more than 15), inefficient, irrational and complex indirect tax system in India.

GST in other countries:

Most of the countries (160) in the world especially the ones with advanced economy have Goods and Services Tax or similar tax system, some have been in place for more than fifty years. These include France (first country to implement in 1954), China (1994 modified in 2016), Japan (1989), Malaysia (2015), Australia (2000), New Zealand (1986), Singapore (1994), and Canada (1991). Globally there are more than 40 models of GST. India’s GST system is closer to that of Canada with two components (state and the center).

Even smaller economies like Seychelles, Gambia and Congo have introduced GST in last five year. The countries introducing Goods and Services Tax have faced short term disruptions such as protests, inflation spikes, burden on small businesses etc. before the benefits start emerging. India has four slabs of taxes (5, 12. 18, 28 and on some goods sin tax of 40%) where almost all other countries have only one slab.There is no doubt that GST is going to affect almost every sector of the economy in India, so the experts are trying to analyse their respective sectors and their growth under the umbrella of GST.

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GST and healthcare sector

Health care is one of the fastest growing sectors of the Indian economy with lots of potential in terms of revenue and employment. Health care is a wider term that mainly includes pharmacy, medical devices, medical insurance, diagnostics and other components of medical care. The GST is going to affect all the components of health care in various ways.

1) GST and Pharmaceutical industry

About two thirds of the out of pocket expenditure on healthcare is on drugs in India.The burden of all the taxes on drugs in general was about 13 percent in the pre GST period and the current GST is 12 percent as a whole including ayurvedic drugs. The medicines for HIV-AIDS, malaria, tuberculosis and diabetes will be imposed 5 percent GST. The GST on the drugs produced under excise free manufacturing zone is yet to be clarified.The best thing for the pharma companies is that their cost of purchase is going to reduce. Moreover the burden of multiple tax and complexities associated with multiple tax system slowed down the business. GST will give hassle free business environment to the pharma companies. For the consumer the cost of drugs will come down.

2) GST and Medical devices and Equipment

The manufacturers of medical devices are also joining the party as medical devices and surgical equipments are proposed to be taxed 12 percent under the GST. The previous burden of taxes on the medical devices and equipment was over 13 percent including all the bunch of taxes. So one percent tax benefit is clearly visible under the new tax system for the medical device and equipment industry. This will clearly give a boost to the industry in the near future. The consumer will also share the benefits in terms of lower price and affordability.

3) GST and Health Insurance

There is lot of scope of for health insurance in the country like India where the coverage under health insurance is only 18 percentage in urban and 14 percent in rural India in 2016. The GST rate on the insurance sector is 18 percent as against 15 percent service tax in the pre GST era. It clearly indicates that the health insurance premiums are going to increase.

4) GST and diagnostics

There is expected rise in the prices of diagnostics such as blood tests, X-rays, MRI and strip based diagnostics as they are put under either 12 or 18 percent slab which is higher than the previous tax rate on these services. In the pre GST era the 10-15 percent of out of pocket expenditure is on diagnostics which is expected to increase in the post GST period.

Goods and Services Tax will certainly increase the Government revenue in the country with more transparency in the tax system that will further simplify the tax structure. The economy is expected to grow at a faster rate. Every sector of the economy would have its share in the growth of the economy including healthcare sector. In a broad spectrum, it is an analysing phase for the healthcare sector to see the impact of Goods and Services Tax. The experts of the healthcare sector are confident that the post GST period will bring the strategic change and will create a positive environment by minimizing the obstacles and complexities in the growth of healthcare sector and have a positive impact to bring down the cost of health.

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Source : ETHealthWorld
GST Impact: Monthly GST returns to burden professionals

GST Impact: Monthly GST returns to burden professionals

GST impacts almost all types of industries, and professional are no exception. Until recently, professionals enjoyed the benefit of centralised service tax registration for all their offices located across India. However, with advent of GST, professionals operating from multilocation office will have to obtain state-wise registrations.

The compliance and report ing requirements for professionals will also increase under GST. Under the erstwhile service tax regime, professionals could file half-yearly service tax returns requiring disclosure of the revenue and eligible input tax credit on an aggregate basis.

However, under GST they need to file monthly GST returns with disclosure of invoice level details for all their sales and purchase. Also, for professionals operating as individuals and partnership firms doing away with the option of quarterly tax payment, it increases the need for additional working capital.

While the government has provided a composition scheme for small manufacturers/traders up to an annual turnover of Rs 75 lakh, however, such an option is not extended to the professional service providers.

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Though the tax rate under GST has increased from 15% to 18%, there’s good news for professionals, as they will now be entitled to higher input tax credit due to withdrawal of non-creditable state taxes such as VAT/CST/entry tax/octroi on procurement of goods and certain cesses levied by central government.

The place of supply was not too relevant for professional s under service tax law (except for import and export), but they will now be required to change their IT system to map the place of supply for each supply of services (intra-state and interstate) and set up the reporting requirement accordingly. Besides the above compliances, professionals will also have to comply with reverse charge provision in case of purchases from unregistered dealers.

Overall, it appears that GST has a mixed impact on professionals with both positives and negatives.

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Source: ET
GST Impact: Waive off 18% lease rent GST, say Noida bizmen

GST Impact: Waive off 18% lease rent GST, say Noida bizmen

industrial lease rent : GST

Members of the Noida Entrepreneurs Association (NEA) on Tuesday made an appeal to senior officers of the Noida Authority that the 18 per cent GST imposed on all industrial lease rent be waived.

NEA members claimed that industries in Noida have always been exempt from tax on lease rent and this newly imposed tax could affect working costs. They also claimed that they were yet to see the real impact of ‘ease of doing business’ on the ground.

NEA members also made an appeal to the industrial body to defer the e-way bill process or cancel it altogether as it would add to the complexity of the taxation process. After the introduction of GST, entrepreneurs involved in inter-state trade would have to fill up and document e-way forms. While the Union government has advised the introduction of e-way forms be held back till October, in UP it is applicable from July 26.

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“GST was meant to be based on the concept of ‘one nation one tax’. The e-way form is an additional formality for all businessmen to fill up and submit every time there’s a transaction with another state. This is not very different from the process followed during the sales tax regime,” Vipin Kumar Malhan, president, NEA, said.

The entrepreneurs also placed a formal request with the Authority to transform Sector 10 into a wholesale material trade zone so that Noida manufacturers do not have to depend on Delhi wholesale markets to procure raw material. The businessmen also appealed to the Authority officers that the industrial sectors be provided with drinking water supply.

“There’s no provision for proper drinking water in the industrial areas. We have made an appeal for such a supply since such a large number of people are engaged as workforce in these areas,” Malhan said.

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Source: TOI
Transport sector to benefit from GST in a big way: Ministry of Road Transport and Highways

Transport sector to benefit from GST in a big way: Ministry of Road Transport and Highways

Ministry of Road Transport and Highways : GST

Ministry of Road Transport and Highways has prepared a booklet on the benefits of GST for the transport sector.

The unified tax regime has obviated the need for interstate check posts.  This will result in reducing the travel time of long-haul trucks and other cargo vehicles by at least one-fifth, said the booklet.

“This, coupled with the proposed E-way bill that will require online registration for movement of goods worth more than Rs 50,000, will ease the movement of freight further, and bring in more transparency in the whole process” it added.

The booklet also said that efficient freight movement will also boost the demand for high tonnage trucks, which will in turn reduce the cost of transportation of freight.

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A single GST also means an optimized warehousing structure. Earlier, companies had to maintain warehouses in every state due to different taxation slabs, said the report.

Pre- GST, the statutory tax rate for most goods worked out to about 26.5%. Post GST most goods are expected to be in the 18 % tax range, it added.

According to Nitin Gadkari, the Minister for Road Transport & Highways and Shipping,  India’s logistics sector would gain the most from the Goods and Services tax as costs would fall by almost 20%.

He has also said that logistics parks are being set up at various places across the country to act as freight aggregation and distribution hubs. These logistics parks will enable long haul freight movement between hubs on larger sized trucks, rail and waterways.

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Source :  SME Times
Impact of GST on Top Five Insurance Plans

Impact of GST on Top Five Insurance Plans


On July 1st 2017 the most awaited and historic change to the Indian Taxation system was made with the introduction of the Goods and Services Tax (GST). So far, many speculations have been made regarding the effect of GST on day to day necessities as well as luxuries. This article discusses the effect of GST at a glance on the insurance premiums of Top 5 Insurance Plans. Prior to the introduction of GST a person had to pay Service Tax at 15% which also included Swacch Bharat and Krishi Kalyan Cess on your premium, however, post the introduction of GST, you have to pay 18% Goods and Services Tax. However, it is also noteworthy that you do not have to pay GST on the entire amount of premium but only that amount that provides coverage from risk.

For instance, if you have bought an insurance policy for 2 purposes namely, insurance and investment, only that part which provides life cover will be liable to be taxed under GST.

Let’s take a look on the impact GST will have on insurance premium based on different types of insurance policies:

Unit Linked Life Insurance Plans

In these plans the insurance part and the investment part are categorized clearly and GST will be levied only on the risk cover part. The investment part will not attract any taxation under GST.

In ULIPs, every month or quarter, these charges are commonly recuperated through liquidation of reserve units. Also, risk cover charges increase with an increase in age. Also, fund management charges increase with corpus.

Along these lines, it may not be as simple to evaluate the correct effect however, there is still a marginal increase since GST is 18% and Service Tax including cess was 15%.

Term Life Insurance Plans

Life Insurance plans only serve 1 purpose and that is risk cover and since GST will be levied on the part which goes towards risk cover hence, the entire premium will be taxed under GST. The service tax was levied at the rate of 15% however 18% GST will now be charged which leads to a 2.61% marginal increase in rate of taxation.

For Example: You have taken a life insurance policy whose annual insurance premium is ₹20,000. Under service tax you would have paid premium of ₹23,000 i.e. ₹20,000 + ₹3,000 (15% of ₹20,000). However under GST you’ll be paying ₹23,600 i.e. ₹20,000 + ₹23,600 (18% of ₹20,000), thereby, effective increment in the premium will be 2.61%.

Traditional Life Insurance plans – Recurring Premium 

These plans serve a dual purpose i.e. both insurance as well as investment, however, GST will only be charged on the Insurance premium towards risk cover. But it is difficult to categorize between the insurance and investment portion in the entire premium and thus, the categorization is done in the following manner whereby the premium paid in 1st year is different than the premium paid in the subsequent years:

i) For the 1st Year, GST is charged on 25% of the insurance premium which is going to be 4.5% (25%x18%) which earlier used to be 3.75% under Service Tax.

ii) For the subsequent years, GST will be charged on 12.5% of the insurance premium which is going to be 2.25% (12.5%x18%) which earlier used to be 1.875% under Service Tax.

Traditional Life Insurance Plans – Single Premium

For single premium traditional life insurance plans, 18% GST is going to be levied on 10% of the annual premium paid.

For instance: ₹5 Lakhs is the base premium, then the GST amount to be paid is 1.8% i.e. (10% x18%) of the premium amount which comes to a total of ₹5.09 Lakhs however if the same was to be paid before July 1st under the Service Tax regime then a Service Tax would have been 1.5% i.e. (10%x15%) of the premium that is ₹5,07500, which shows a minimal increase of 0.30%.

Health Insurance, Motor and Travel Insurance

The Insurance premiums for Health, Travel and Motor insurance are pure risk cover plans just like Life Insurance. The premium for these insurance plans changes every year and this increase is a routine procedure and cannot be attributed to GST however if we assume that the base rate of annual premium remains the same, we’ll again see a 2.61% increase in premium due to GST as calculated for Term Insurance plans as GST will be levied on the entire premium.

Source :  News18
GST impact: Maharashtra may revise incentives plan

GST impact: Maharashtra may revise incentives plan

gst impact : psi

The Maharashtra government plans to revise the Package Scheme of Incentives (PSI) offered to attract investments in the state for industrial development, and to promote employment generation.

This is necessitated due to the launch of the Goods & Services Tax (GST), as beneficiaries from various sectors, including automobile, steel, cement, textiles and mirco, small and medium enterprises (MSMEs) may lose the permissible quantum of refund towards Value Added Tax (VAT) and central sales tax (CST) under the VAT regime. The state industries department has already launched an extensive review of the GST impact on various sectors. The department will then introduce a revised PSI. The present PSI, brought into effect in 2013, is applicable till March 2018.

An industries department official, on the condition of anonymity, said under the proposed revised PSI, industrial units will get interest and power tariff subsidies apart from the exemption in stamp duty, octroi duty and electricity duty. These benefits are generally granted as subsidies based on the quantum of payment of VAT and CST by companies to the state government according to their manufacturing activities over a specified time period. The state’s annual outgo towards refund paid to auto, cement, steel and other units is of the order of Rs 3,000 crore.

”Presently, industrial units get a VAT refund on 20 per cent of local sales (within Maharashtra) and a 2 per cent refund of CST on nearly 80 per cent of inter-state sales (outside the state). The CST is also paid to the state government (being the originating state) as it is calculated towards the incentive.

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However, with the shift to the GST regime, the benefits will now be restricted to 20 per cent of local sales, with the units standing to lose out on a refund for 80 per cent of sales outside the state,” said the official. He added that various sectors made a strong case for the protection of their benefits during the GST regime, and called for an increase in its tenure beyond March 2018.

The officer said the textile sector has brought to the state government’s notice that it would have to bear an additional burden following a 5 per cent GST on cotton. Therefore, it has pleaded for a protection of benefits under the GST regime. Further, the small units, which are not entitled to benefits based on gross taxes paid, but on net taxes paid, have hinted that they would be hit badly.

KPMG, a leading auditing firm, in its recent analysis on the GST impact on PSI said the picture changes dramatically. There will be a two-fold impact on the quantum of incentives, therefore, inter-state sales will not contribute to the incentives under GST, and the effective tax rate could also be lower.

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