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Jaitley likely to chair GST Council meet next week; lower levy for housing on the cards

Jaitley likely to chair GST Council meet next week; lower levy for housing on the cards

Union Minister Arun Jaitley is likely to chair the 33rd meeting of the GST (Goods and Services Tax) Council on February 20, which among other things will consider slashing tax on under-construction flats.

The meeting could be the last one before the code of conduct for the general elections comes into effect.

Jaitley, who has just returned from the US after treatment, is expected to resume work soon.

Meanwhile, officials in the Finance Ministry said the agenda for February 20 meeting will include a proposal to lower GST on under-construction flats and affordable housing. A Group of States’ Finance Ministers (GoFMs) has favored lowering GST rates on residential houses to 5 percent without input tax credit and to 3 percent for those under affordable housing. Both the rates will be without input tax credit and one condition for 5 percent is to source at least 80 percent of materials from a GST-registered supplier.

The proposal to lower the GST rate was discussed in the 32nd meeting of the GST council, held on January 10. As there was no consensus, the matter was referred to a GoFMs.

Three-tier structure

At present, there is a three-tier structure for housing projects — there is no GST on the sale of a complex/building and ready to move-in flats where a sale takes place after an issue of completion certificate by the competent authority. GST is applicable on sale of under-construction property or ready-to-move-in flats where completion certificate has not been issued at the time of sale. Card rate for such flats is 18 percent, but the effective rate is 12 percent after abatement of 33 percent (cost of land). And, in the affordable housing category, the effective rate is 8 percent. Both these rates are with a full input tax credit (ITC).

To boost sentiment

Experts feel that lower duty will boost the sentiment in the real estate market. Suresh Nandlal Rohira, Partner at Grant Thornton India LLP, said home buyers will get their due benefits under GST with the decision of GoFMs to recommend lower tax rate. “It is a welcome move as in most cases the buyers always felt that the builders were not passing on the ITC benefits to consumers under 12 percent levy and the ultimate burden was to be borne by the consumers. This will really change the sentiments and may bring some boost in the real estate sector,” he said.

Another issue likely to be taken up at the meeting is some relief for the exporters. As of now, exporters get a refund of basic Customs duty and no compensation for other levies which makes it difficult for them to be competitive. Now an effort is being made to provide duty-drawback kind of scheme where benefits will be provided through e-wallet. Such a mechanism will help exporters deal with the issue of working capital.

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Source: The Hindu Business line.
GST Council Likely To Meet Next Week To Discuss Cement Rate Cut

GST Council Likely To Meet Next Week To Discuss Cement Rate Cut

The GST Council is likely to meet on February 20 to discuss a proposal to slash tax on cement to 18 percent from 28 percent and also consider a recommendation of a Group of Ministers (GoM) on housing that advocates 5 percent GST in under-construction properties and 3 percent GST for affordable housing.
The GoM had earlier recommended 5 percent GST without input tax credit (ITC) on under-construction housing and 3 percent GST without ITC on affordable housing.

A rate cut in cement to 18 percent which is long pending will lead to a loss of Rs. 13,000 crore annually to the government but with election drawing closer, the government is keen to ensure the GST cut benefits the end users in terms of lower prices and low cement prices could lead to low housing costs for the middle class.

The proposed GST cut in cement and the GoM report are on the agenda of the GST Council meeting on February 20, sources said.

The GoM on housing which will also meet once before the GST Council meeting takes place on February 20 could also change the definition of affordable housing to accommodate more poor people under 3 percent tax rate. Currently, affordable houses are defined up to 50 square meters of carpet area which is likely to be increased to 80 square meters to include more people in the category.

Developers and prospective home buyers are expected to gain from this move.

The Cement Manufacturers Association had demanded a cut in GST to 18 percent as it would boost infrastructure spending and create jobs while reducing the costs of buying a house.

Union minister Arun Jaitley had earlier said lowering the tax rate on cement was a priority. Cement is the only commodity used by the common man that is taxed at the highest slab.

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Qatar seeks inclusion of natural gas in GST

Qatar seeks inclusion of natural gas in GST

India’s largest LNG supplier Qatar on February 10 urged the central government to include natural gas in GST to help create demand for the environment-friendly fuel and raise its share in the country’s energy basket. Speaking at Petrotech conference here, Qatar Gas CEO Khalid Bin Khalifa Al-Thani said India is a very important market for Qatar.

“If there is a change in demand worldwide we will see it in India especially in fossil fuel,” he said.

Qatar supplies 8.5 million tonnes a year of liquefied natural gas to India. It is the country’s single largest source of imported gas, supplying about 40 percent of all overseas shipments reaching India.

He said the country needs to build infrastructure so that clean fuel can reach all corners.

“LNG should be considered to get full benefits of GST,” he said. “We would be working closely with the government”.

Qatar is the second big foreign investor to seek GST on petroleum products. In October last year, Russian oil firm Rosneft, the biggest foreign investor in India’s energy sector, had criticized the country’s taxation policy, saying it was a major hurdle in its expansion plans.

Rosneft and its partners had in August 2017 completed a USD 12.9 billion acquisition of Essar Oil to enter the world’s fastest-growing energy market. The company will, however, have to pay a 20 percent withholding tax even after paying corporate tax and dividend, Rosneft’s first vice-president for economics and finance Pavel Fedorov had said.

Fedorov said the company was also not able to claim a credit of tax it pays on inputs in its Vadinar refinery in Gujarat. While the Goods and Services Tax (GST), which unified over a dozen central and state levies, came into effect from 1 July 2017, five petrol goods — crude oil, natural gas, petrol, diesel, and aviation turbine fuel (ATF) — were kept out of it.

This means the tax, a user of natural gas pay on inputs cannot be offset by taxes paid at consumption end. State-owned gas utility GAIL India Ltd Chairman B C Tripathi, speaking at the same session at Petrotech, too favored bringing natural gas under the ambit of GST, saying it is a low hanging fruit.

Also, power plants must start using natural gas as it would be difficult to achieve the target of raising the share of natural gas in the energy basket to 15 percent by 2030 from the current 6.2 percent.

Al-Thani said natural gas demand worldwide is expected to grow at the rate of 1.5 percent through 2035 and LNG demand is projected to grow by 4 percent to 600 million tonnes from 290 million tonnes in 2017.

Qatar, he said, will raise LNG production capacity to 110 million tonnes by 2023 from the current 77 million tonnes.

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Source: Money Control.
‘Pass on GST cut to consumers or be prepared for action’

‘Pass on GST cut to consumers or be prepared for action’

The state-level screening committee of antiprofiteering of GST has warned traders, manufacturers that if they do not pass on benefits due to a decrease in GST on certain goods to consumers, action will be initiated.

Principal commissioner and member, State Screening Committee, M Srinivas had even issued a public notice on January 25 in this regards.

“GST Council on December 22, 2018, has recommended a reduction in GST rates of several goods and services. As per Section 171 of the GST Act, any reduction in the rate of tax or benefit of the input tax credit shall be passed on to the recipient by way of commensurate reduction in prices,” Srinivas told TOI.

Consumers could file a complaint regarding suspected profiteering or refusal to pass on the benefit of the input tax credit with the state-level screening committee or directly on the website

The complainants should produce basic documents like invoice or proof of purchase, packing material containing declared price and bills or documents pertaining to purchase prior to reduction and after reduction. The application after scrutiny at the state-level would be forwarded to the national-level committee.

Vegetables uncooked or cooked by steaming or boiling in water, frozen, branded and put in a unit container, GST of 5% has been waived off. GST on power banks of Lithium-ion batteries was reduced from 28% to 18%, while GST on digital cameras, video camera recorders, video game consoles, retreated pneumatic tyres of rubber, monitors and TVs up to 32 inches, pulleys and gearboxes has been reduced from 28% to 18%.

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Source: Times Of India.
On GST Council table: Tax relief for real estate, duty relaxation for exporters

On GST Council table: Tax relief for real estate, duty relaxation for exporters

The proposal was discussed in 26th GST Council meeting in March last year and since many technical, legal and administrative issues were identified, its implementation was put on hold.

Duty relaxation for exporters and a tax relief package for the real estate sector are likely to be discussed at the next meeting of the GST Council, which is expected to meet once before the model code of conduct kicks in ahead of the Lok Sabha elections.

Targeting the steady erosion of export competitiveness across segments, which is especially telling in labour-intensive sectors such as textiles and garments, the Centre is readying a proposal for a duty drawback like scheme under the Goods and Services Tax (GST) regime that could comprehensively compensate exporters for embedded taxes.

Also, a ministerial panel set- up last month to analyse tax issues faced by the real estate sector under the GST regime is set to make a strong push for lower tax rates for under-construction residential properties and the affordable housing segment.

Currently, under the GST regime, compensation for taxes other than the basic customs duty (BCD) is not given to exporters, which ends up eroding their competitiveness. Officials involved in the exercise confirmed that the duty drawback scheme is being readied after a letter from the Directorate General of Foreign Trade (DGFT) to the Central Board of Indirect Taxes & Customs sought relief on this count.

After this, a proposal has been sent to the GST Policy Wing for a duty drawback like scheme under GST. GST officials are also discussing contours of the proposed e-wallet scheme for exporters, which was put on hold for six months until October last year.

“A scheme to provide more sops for exporters such as some relief on the front of the additional levy is being worked on. It would be more clarificatory in nature aimed at freeing up the working capital of exporters,” said a government official, adding that the existing export incentive scheme Merchandise Export from India Scheme (MEIS) could be tweaked to give some more sops to exporters.

The Commerce Ministry has been pushing for more relief to exporters including the e-wallet scheme but the Finance Ministry has raised some concerns about the possible misuse by some fly-by-night exporters, said another official. An inter-ministerial meeting regarding the e-wallet scheme for exporters has been scheduled for next week.

The e-wallet scheme or electronic e-wallets will be credited with notional or virtual currency by the DGFT. This notional/virtual currency will be used by the exporters to make the GST/IGST payment on goods imported by them so their funds are not blocked.

The proposal was discussed in 26th GST Council meeting in March last year and since many technical, legal and administrative issues were identified, its implementation was put on hold.

“It will monitor the track record of the exporter and provide relief on taxes paid on inputs. Last time, the discussion stalled as there were concerns about the availment of credit and the exporter having an edge over others since his working capital will be free compared to other exporters,” an official said.

Meanwhile, the Group of Ministers (GoM), under Gujarat Deputy Chief Minister Nitin Patel, set up last month to analyse tax rates and challenges being faced by the real estate sector under the GST regime is leaning in favour of lower rates for under-construction residential properties.

The panel has favoured lowering the GST rate on under-construction residential properties to 5 per cent (without input tax credit) from the present rate of 12 per cent with an input tax credit (after abatement of land) and for affordable housing to 3 per cent from the current rate of 8 per cent.

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Source: Indian Express.
GoM favours cut in GST to 5% from effective rate of 12%

GoM favours cut in GST to 5% from effective rate of 12%

Currently, GST is levied at 12 per cent with input tax credit (ITC) on payments made for under construction property or ready to move in flats where the completion certificate has not been issued at the time of sale.

A Group of Ministers (GoM) formed to analyse tax rates and issues being faced by the real estate sector under the goods and services tax (GST) regime has favoured reducing GST rate on under-construction residential properties to 5 per cent without input tax credit from current effective rate of 12 per cent, after abatement of value of land. The panel is also leaning in favour of a lower rate for affordable housing at 3 per cent from 8 per cent at present, a government official said.

The seven-member GoM, headed by Gujarat Deputy Chief Minister Nitin Patel, will finalise its recommendations in 1-2 days and then submit its recommendations to the GST Council, which will take the final decision on the proposal. “The industry players have asked for a higher rate with input tax credit but the ministers felt that the benefits of input tax credit don’t get passed on to homebuyers. That’s why like in the case of restaurants, the GoM has favoured lowering the GST rates on residential houses to 5 per cent without input tax credit and to 3 per cent for affordable housing,” the official said.

Currently, GST is levied at 12 per cent with input tax credit (ITC) on payments made for under construction property or ready to move in flats where the completion certificate has not been issued at the time of sale.

The effective pre-GST tax incidence on such housing property was 15-18 per cent. GST, however, is not levied on buyers of real estate properties for which completion certificate has been issued at the time of sale. There have been complaints that builders are not passing on the ITC benefit to consumers by way of reduction in the price of the property after the rollout of the GST.

We want to ensure lower tax rates for housing for the middle class and homebuyers, Gujarat’s Deputy Chief Minister Nitin Patel told reporters after the meeting. Tax experts, however, said this may lead to breaking of inputs tax credit chain as some inputs such as cement are taxed at a much higher rate of 28 per cent.

Pratik Jain, Leader, Indirect Tax, PwC India said, “While the intention of the government is to provide relief to the end customer, from a structural standpoint, it should be ensured that the chain of GST credit is not broken. Perhaps a better approach would be to reduce prevailing GST rate on residential property, say bringing the effective tax rate down to 8 per cent from 12 per cent, while continuing the benefit of input tax credit.”

Abhishek Jain, Tax Partner, EY said, “For real estate properties where the cumulative impact of tax cost on account of denial in credits and 5 per cent output GST rate is lesser than the current 12 per cent rate, this rate cut would be quite positive. But where the cumulative cost is higher than 12 per cent, this rate reduction could entail an increased tax cost.”

The GST Council, headed by the Union Finance Minister and comprising his State counterparts, on January 10 decided to set up the GoM. The other Ministers in the seven-member GoM are the Finance Ministers of Maharashtra Sudhir Mungantiwar, Karnataka’s Krishna Byre Gowda, Kerala’s Thomas Isaac, Punjab’s Manpreet Singh Badal, Uttar Pradesh’s Rajesh Agarwal and Goa Panchayat Minister Mauvin Godinho.

Apart from Patel and Gondinho, Friday’s GoM meeting was attended by Mungantiwar and Badal through video conferencing. Also other state ministers, who are part of the panel, too would be giving their views in a couple of days.

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Source: Indian Express
GSTN Alert: Two New Features added in GST Portal

GSTN Alert: Two New Features added in GST Portal

The Goods and Services Tax Network ( GSTN ) has added two new features in the GST portal including List of Preferred Banks list while making Payment and the Monthly Refund applications by Quarterly GSTR-1 filers.

From now, every time a taxpayer makes GST payment using in the bank, it will be updated in the Preferred Bank list for that taxpayer. As per the statement issued by the GSTN, up to six preferred banks will be shown to the taxpayer while making e-payment on GST portal.

The GSTN further removed the restriction for applying for a refund on a quarterly basis for quarterly GSTR 1 filers. These taxpayers can now file refund application on a monthly basis if Form GSTR1 for the quarter is filed.

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Source: Taxscan
GST revenue shortfall drags down tax revenue estimates

GST revenue shortfall drags down tax revenue estimates

Shortfall in GST revenue of an estimated Rs 1 lakh crore has forced the government to revise downwards its gross tax revenue target by over Rs 23,066 crore in the revised estimates of the current fiscal despite a better-than-expected collection on the direct tax side.

As per the Interim Budget tabled in Parliament on Friday, the government revised the Goods and Services Tax (GST) target from Rs 7.44 lakh crore to Rs 6.44 lakh crore — a gap of Rs 1 lakh crore — due to a shortfall in collections.

However, an upward revision of Rs 50,000 crore in estimates for direct taxes to Rs 12 lakh crore has made up for a significant portion of the shortfall. Total indirect taxes, including Customs and other duties, are estimated to be Rs 10.45 lakh crore, down from Rs 11.18 lakh crore.

For Financial Year 2019-20, the government has set a direct tax collection target of Rs 13.8 lakh crore (up 15 per cent from this year’s revised estimates) and indirect tax collection target of Rs 11.7 lakh crore (up 11.9 per cent).

Last week, the IANS had reported that the government may miss the GST collection target set in the Budget estimates by as much as Rs 1.5 lakh crore based on collection trends till December.

While GST collection showed a marked improvement in January, it may not be enough to restrict the deficit to Rs 1 lakh crore. However, the government is confident of meeting this year’s as well as next years’ targets.

CBIC Chairman Pranab Kumar Das, who assumed charge last month, said with compliance going up and tax net widening, it won’t be difficult to meet the revenue targets.

“The very first month after assuming charge on January 1, I have already achieved the target of Rs 1 lakh crore that I promised before taking over… I have shown this is possible,” he said.

“And with compliance going up, and a number of taxpayers going up, it is not difficult for us to get this revenue,” he added.

Das added that transparency was the key to improve compliance which would play a key role in achieving targets.

“People are interested to take advantage of this compliance level, this transparent system because they benefit if they become a part of the supply chain. So even though they are below the threshold, many of these entities are registering themselves,” he said.

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Source: Economic Times
Budget 2019: Govt disappoints two-wheeler companies with no GST relief

Budget 2019: Govt disappoints two-wheeler companies with no GST relief

Finance Minister Piyush Goyal provided no relief on goods and services tax (GST) to automobile companies, disappointing two-wheeler companies categorised under the luxury and sin goods segment.

In January, two of India’s top four two-wheeler makers sought relief from the government to move two-wheelers to the 18 percent GST slab from 28 percent.

Hero Motocorp Chairman Pawan Munjal and TVS Motor Company Venu Srinivasan had suggested two-wheelers be moved to the more affordable tax bracket. Rajiv Bajaj, MD, Bajaj Auto who had supported the call for a tax cut said it was important to time the tax cut as well.

Their comments were based on the fear of an expected slowdown in demand for motorcycle and scooters in the coming months with the implementation of new regulations and upgradation of vehicle technology as prices will shoot up substantially.

Two-wheelers are taxed in the same bracket (labelled as luxury and sin goods segment by the government) as mini cars, even though the consumer base is significantly larger with sales of more than 21 million units a year.

The Hero MotoCorp chairman argued the cost-sensitive buyer depends on the two-wheeler as a lifeline and a sharp increase in the prices of two-wheelers following the new set of safety and emission regulations will be detrimental to the industry.

“With new safety norms and BS-VI integration also around the corner, both of which will increase two-wheeler prices, it has become imperative to relook at the GST rates for two-wheelers to ensure social inclusion that is sustainable in the long run,” said Srinivasan.

The two-wheeler industry will brace for more than one upward revision in price over the next 15 months. These will be as a result of the new safety norms from April 1 this year and the new emission standard norms from April 1, 2020. A combination of these will likely result in an increase of a minimum of Rs 8,000 (almost 20 percent jump) in prices of budget (100cc) two-wheelers.

Currently, more than half of TVS’ sales come from scooters, which is where it has cemented its place as India’s second-largest scooter manufacturer. In the same price band, Hero sells its largest-selling motorcycle Splendor. Though both segments cater to different buyers, they fall in budget-buy segments, making them vulnerable to any hikes.

The two-wheeler segment has grown by nearly 10 percent to 16.53 million units during the April-December period, as per data provided by the Society of Indian Automobile Manufacturers. The segment has bucked the broader trend of a slowdown that has reduced the growth of the auto industry significantly.

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Source: Money Control.
Reduction in GST rate on property will propel demand

Reduction in GST rate on property will propel demand

The interim budget to be presented on February 1 holds much significance, especially with this year being the electoral year. While the real estate industry has its expectations from the interim budget, as with the previous union budgets, it remains to be seen whether the budget would lend extensive focus on the industry given other priorities of the government.

There are a host of industry matters that need timely attention from the government in order to accelerate the growth, which has slackened in the past two years owing to several regulatory changes.

While the wish list of the real estate sector has remained almost similar in the past few years, it is pertinent to note that the fulfilment of a long-standing demand – that of allocation of infrastructure status to affordable housing, has only given rise to newer expectations from the government. Promotion of affordable housing has been a key focus area of the government and the previous budget had accordingly announced comprehensive measures to provide an impetus to the sector. Some of the key issues on the wish list for the interim budget for the year are:

Single window clearance – Post the implementation of the RERA reform, there have been improvements observed in approvals and redressals regarding real estate projects, however, there still exists a need for a structured single window clearance system to avoid delays in clearance certificates, construction work, possessions, investor complaints etc.

Tax reductions – Another major subject in the wish list is regarding the reduction of 12% GST on under-construction projects. The GST council was expected to bring down the prevailing GST rates on under construction projects in the latest meet, but it has kept them same as of now. A reduced GST rate on a property would propel prospective home buyers to accelerate their purchase decisions, thereby leading the residential market to pick up pace. Meanwhile, there are also expectations regarding reduction in income tax slabs as well as higher relief on housing loan rates from the budget.

Stamp duty should be brought under the purview of GST

Incentivise Rental Housing – Promotion of rental housing through tax incentives such as offering to increase the deduction from rental income under Section 24(a) can be provided in the budget. It is also expected that a boost to rental housing through various incentives would eventually lead to a promotion of the government’s ‘Housing For All’ scheme.

Increase the limit of interest deduction paid on home loan from Rs 2 lakh to Rs 3 lakh.

Provide further impetus to the development of physical infrastructure in the country which will boost Real Estate.
Thus, it is evident that despite this budget being an interim one, the real estate industry has a number of expectations from it. The market is banking on positivity to emanate from the budget in order to create an environment conducive to the growth of the industry, generate new business opportunities and lead the economy to new heights.

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Source: Money Control.