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Budget 2019: Amnesty scheme to resolve legacy tax issues

Budget 2019: Amnesty scheme to resolve legacy tax issues

The government has unveiled an amnesty scheme to resolve excise and service tax disputes pertaining to the period before the introduction of the goods and services tax to clear the backlog of cases and improve the ease of doing business. Even two years after the indirect tax regime was replaced by GST, the litigation doesn’t seem to die down and there is a huge pendency, tax experts said.

“The announcement relates to the legacy dispute resolution scheme, which intends to reduce the pending service tax and excise litigation of the pre-GST regime. It is expected that the scheme will support businesses where there are various ambiguous issues pending before the tribunals,” said Abhishek A Rastogi, a partner at Khaitan & Co.

All parties can settle the disputes, save those who face conviction and those who have moved the Settlement Commission. Relief under the scheme varies from 40% to 70% of the tax dues for cases other than voluntary disclosure cases, depending on the amount of tax dues involved.

“More than Rs 3.75 lakh crore is blocked in litigations in service tax and excise. There is a need to unload this baggage and allow business to move on,” finance minister Nirmala Sitharaman said.

Source: Economic- Times.

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GST refunds for exporters can now come in 3-4 days: CEPC’s Mahavir Pratap Sharma

GST refunds for exporters can now come in 3-4 days: CEPC’s Mahavir Pratap Sharma

The initial hurdles of GST refund for exporters are now showing some signs of ease. Mahavir Pratap Sharma, Chairman, Carpet Export Promotion Council looks back at the GST regime saying that the first nine months turned out to be a rather trying time. “I think it was the biggest challenge that we could have and, quite honestly, we as exporters were up in arms because of GST being deposited and exports hampered in the process. We took a beating because we had to park our funds and they got stuck,” he rues.

However, brighter days are there now with the process being seamless if all returns are duly filed. “Now, for the GST refund, if one is filing all returns in a perfect manner, if shipping bills are filed, if the shipment is on board and exported, then I think the refunds will take 3-4 days and I think every one is getting their refunds very easily,” adds Sharma.

There is a caveat though. For exports made under Letter of Undertaking (LUT) which is against a customs bond, exporters can claim refunds of an input tax credit on goods and services that aren’t utilized. “In such a situation, the money may be stuck for 3, 4 or even 15 days. So the LUT bit is still cumbersome with the paperwork to a certain extent required to be filed in the local office of the GST or the customs, whichever area that your unit falls under. That might take a few weeks to come by,” highlights Sharma.

There was also buzz about an e-wallet system under the GST last year which would come in handy for exporters facing working capital crunch with delayed GST refunds. However, this is yet to come through. Sharma is of the view that it makes sense for the government to create an online e-wallet which has been in the works since some time. “I think it is probably stuck somewhere in the legalities or the technology behind it and pretty soon the new government that comes in power should implement it. That would be of great help to the MSMEs and small businesses who face a shortage of capital. It is very important that this working capital blockage does not happen and I am sure pretty soon we will have this in place,” he asserts.


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Source: Economic Times.
Realtors seek clarity on GST exemption on development rights 

Realtors seek clarity on GST exemption on development rights 

Mumbai: Realty developers are seeking clarity on recent exemption offered from the goods & services tax (GST) levied on development rights, including transferable development rights (TDRs), development rights certificates (DRCs) and joint development agreements (JDAs).

Realtors’ body, the National Real Estate Development Council (NAREDCO), has written to the Ministry of Housing and Urban Affairs seeking clarity on this.

Last Sunday, the GST Council proposed that intermediate tax on development rights will be exempted only for such residential projects on which GST is payable.

The government decided to more than halve the GST rates for under-construction projects to 5% from 12%. The GST Council removed the input tax credit, while GST on affordable housing was reduced to a marginal 1% along with expanding the definition of such homes. Ready properties that have received occupancy certificate (OC) do not attract GST.

“What if some units are being sold after the project is completed? Being a completed project that has already received an occupation certificate, it will not attract GST. Will the JDA or TDRs used in this project still attract intermediate tax? We need to get clarity on this,” said Niranjan Hiranandani, national president, NARDECO.

The ministry has already announced that details of this scheme will be worked out by an officers committee and will be approved by the GST Council in a meeting to be called specifically for this purpose soon.

As the details of the scheme are yet to be worked out by an officers’ committee, the developers’ body has sought to make a representation to avoid confusions or litigations later on. NAREDCO is of the view that the condition to be fulfilled to receive the tax exemption — “only for such residential projects on which GST is payable” — may lead to litigations.

In its letter to the ministry earlier this week, the developers’ body has cited instances that can lead to confusion and litigations. These examples include that of a residential project with convenience and retail shops, smart and integrated townships tagged as mixed-use development, and sale of residential units post completion of the project.

The NAREDCO representation is that the wording should be: “Tax on development rights, such as TDR/ JDA, long-term lease (premium), FSI shall be exempted”. Effectively, there should be no levying of ‘intermediate tax’ and the exemption should not be restricted to just ‘residential property’, but to all segments and types of property including commercial.

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Source : economictimes.indiatimes.com
Taxpayers Alert! Check out these 8 new features at GST Portal: Here’s how easy GSTR filing gets for you

Taxpayers Alert! Check out these 8 new features at GST Portal: Here’s how easy GSTR filing gets for you

TDS/TCS Credit available for utilization

A new window has been enabled for claiming TDS/TCS credits. The taxpayer has the option of accepting or rejecting the TDS/TCS credits available and filing their return, after which the credits get transferred to the cash ledger and can be used for making GST payments.

This facility helps taxpayers easily identify such credits and take action accordingly.

E-way bill data can be imported for GSTR-1

The E-way bill (EWB) and the GST portal has now been integrated. The same gets automatically imported for the B2B and B2C (large) invoices sections as well as the HSN-wise-summary of outward supplies section. Users only need to verify the data and proceed.

This has definitely saved both time and effort for a business person, as it avoids unnecessary data-entry. However, many businesses were performing this sort of reconciliation themselves using smart tools to ensure accuracy of data.

List of preferred banks available for making payments

A taxpayer can choose from a list of 6 preferred banks that will be auto-saved at the time of making payments. If he makes payment through a 7th bank account, the same will get added, and the least used bank account will get removed. He has the option to delete the bank accounts at any point in time.

With this feature in place,the taxpayer need not enter bank details every time, as he can simply select a bank with the click of a button and proceed to make payment.

Refund applications can be filed monthly for quarterly filers

There is good news for taxpayers opting to make payments on a quarterly basis. They now do not have to wait for the quarterly filing of refund applications, as the same can be done monthly. However, a prerequisite for the same would be to ensure that GSTR-1 for the quarter has been filed.

This will definitely help mobilise the working capital flows of business as there is no longer a need to wait till the end of a quarter to apply for a refund.

Appeals can be filed online and system-generated acknowledgment will be issued

A taxpayer can file an appeal against an order passed by an appellate authority, or against an advanced ruling by an appellate authority on the GST portal. He even has the option to file an application with the appellate authority in the case of rectification of a mistake in order passed.

In the event of an appellate authority failing to issue a final acknowledgment within the stipulated time, then a system generated final acknowledgment will be issued with the remark “subject to validation of certified copies”. This has simplified the process of filing appeals and also helps to track the status of the same.

Composition taxpayers can reply to SCN online for compulsory withdrawal

For composition taxpayers, there is a simpler way to reply to show cause notices(SCN) now. This is in the case of a show cause notice being issued for compulsory withdrawal from the composition scheme, and if proceedings are initiated against the composition taxpayer, he now has the option to reply to show cause notices on the portal.

Bank account details not mandatory at the time of registration

Declaring bank account details are now optional at the time of registration for Normal, OIDAR and NRTP taxpayers. Previously, this was a mandatory requirement. The bank account details can be updated at a later date, which will be at the time of the first login.

Hence, a GST registration number can be obtained without the same. New businesses who are in the process of obtaining bank accounts can simultaneously proceed with GST registration, thus saving time.

Claiming of ITC and amendment of B2B invoices of 17-18 are re-opened up till March 2019

Users can now amend B2B invoices of FY 2017-18. The facility to amend the GSTR-1 details of FY 17-18 was closed on filing the September 2018 return. The same has been made available while filing returns for the months of January to March 2019. The input tax credit of FY 2017-18 that was omitted and hence unclaimed up till September 2018 can be claimed now up to March 2019 as well. This was a much-needed remedy for taxpayers who made errors reporting any invoice in the past or previously missed out claiming genuine credit.

While there are updates being rolled out from time-to-time, users are still hoping to see a smooth system that is completely online and indefectible. In the future, users can look forward to more new updates that would familiarise taxpayers with the new return system that is likely to be introduced by July 2019

 

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Source: zeebiz.com
Guest house for employees a perk, cannot claim GST input credit rules Odisha AAAR

Guest house for employees a perk, cannot claim GST input credit rules Odisha AAAR

A new ruling by the Appellate Authority of Advance Ruling (AAAR) can open a Pandora’s Box when it comes to an employer, employee relationship and the nature of perquisites being provided.

The case came up when the National Aluminum Company Limited (NACL), a manufacturer of aluminum metal, decided to appeal against the ruling pronounced by the Odisha Authority for Advance Ruling.

NACL has townships at Angul, Damonjodi, and Bhubaneswar for its employees and also runs hospitals at Damanjodi and Angul for its employees along with guest houses for touring employees and guests. The bone of contention was that NACL wanted to claim input credit in maintaining hospitals, residential colonies and guest house and also the upkeep of garden in the residential colonies, mine and office premises. When the case went to the Odisha Authority for Advance Ruling (AAR), input credit was disallowed for some activities.

According to the AAR, inward supplies received by way of management, repair, renovation for furnishing the residential colony does not qualify for the input tax credit as residential accommodation is an exempted supply.

The input tax credit is also not admissible in respect of services and goods procured for maintenance of hospitals and pharmacy outlet as such services, being nil rated also fall under exempt supplies. Similarly, the service availed in relation to plant & garden in the residential colony will also not qualify for input tax credit

NACL was, however, entitled to input tax credit of the tax paid on inward supply of input and input service for maintenance of the guest house, transit house & training hostel. Also, services availed in relation to plantation and gardening within the plant area including mining area and the premises of other business establishments will also qualify for input tax credit.

Following the order by the AAR, the Commissioner (CX &GST, Bhubaneswar) interestingly also preferred to appeal against the order, challenging that the order is not legal and proper to the extent it has allowed credit for maintenance of guest house, hostel and service utilized for plantation and gardening within the plant area, administrative building.

Justifications by NACL in its appeal:
The AAR has wrongly held that the company’s activities of management, maintenance or repair of the townships are not for or in relation to its core business while denying the credit of the tax paid on the goods and services used for management, maintenance or repair of the township of its employees, and horticulture in township. NACL said it undertakes such activities for its business in the course or furtherance of business and, therefore, it is entitled to take credit of tax paid on such services.
The infrastructure of township at Angul, Damanjodi and Bhubaneswar are necessary to run large scale business of manufacturing, where thousands of employees are working.
In terms of GST laws, not only the manufacturing activity but any incidental or ancillary activities thereof are also covered within the expression “business” in the GST laws. Maintenance of various facilities in residential townships is integrally related to the business activities of the appellant and not a welfare activity undertaken by the appellant.

Contentions by the Commissioner:
Residential colonies are built for the welfare and benefit of the employees and extending any sort of benefit to the employees cannot be treated as something used or intended to be used in the course or furtherance of business
Similarly, the ruling of the AAR that utility of service provided through plantation & gardening within the plant area including mining area will be eligible for credit is also not legal and proper as it does not do not pass the legal test, which is used or intended to be used in course or furtherance of business.

Final ruling of the Appellate Authority of Advance Ruling (AAAR):
After considering the legal provisions and facts of the case, the AAAR held as follows:
The ruling of the AAR that inward supplies received by NACL for management, repair, renovation, alteration or maintenance service or goods received for furnishing the residential colony will not qualify for input tax credit is found to be correct.
Expenditure incurred by NACL towards construction, reconstruction, renovation, additions or alterations or repairs to the residential colony including plantation and gardening is not eligible for input tax benefit as it is nothing but a perquisite. “This ruling is likely to open the debate on whether an expenditure incurred by employee qualifies as a perquisite or a business expense incurred during the course or furtherance of business. This is because credit for former is not available while for later it may be available. It is time to re-look at the employment contracts,” says Harpreet Singh, Partner, KPMG India.
However, the AAAR held that the ruling of the AAR entitling NACL to input tax credit of the tax paid on inward supply of input and input services for maintenance of guest house transit house and trainee hostel is found to be not correct as the same is also a perquisite in favour of the employees.
The AAAR, however, allowed credit to NACL on services availed in relation to plantation and gardening within the plant area including mining area and the premises of other business establishments citing that it is a business necessity for controlling pollution as well as atmospheric temperature.

The same is also mandated in various laws under which the Applicant conducts its business such as the Forest Conservation Act, the Environment Protection Act, etc. Therefore, such activities are integral to the business activity and hence can be treated as activities in course or furtherance of its business.

“This is a positive order for the industry as, while allowing input credit of services availed in relation to plantation and gardening within factory premises, the authorities have not only considered whether such expenditure was warranted by any statutory law, but also taken cognizance of the expenditure being a business necessity for controlling pollution, temperature and preventing soil erosion,” added said Singh.
There is a thin line between perquisite and business expenditure and the ruling does not do anything to reduce confusion. For businesses, it will be a setback that facilities like guesthouse that carry certain expenditure, does not qualify for input credit. In considering maintaining and running a guest house as a cost-to-company, the AAAR has stated it in not in furtherance of the business nor is it integral part of the business. The debate on employee benefit and business expenditure is likely to continue.

 

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Source : economictimes.indiatimes.com
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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Source: economictimes.indiatimes.com
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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Source:  http://economictimes.indiatimes.com/news/economy/finance/gst-to-have-a-positive-impact-on-state-government-finances/articleshow/60262382.cms
Impact of GST on Indian Healthcare and Pharma Sector

Impact of GST on Indian Healthcare and Pharma Sector

Impact-of-GST-on-Indian-Healthcare-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
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