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Power companies challenge GST on green certificates

Power companies challenge GST on green certificates

Are renewable energy certificates, bought by power companies, goods or services?

Neither. And so, must be out of the indirect tax ambit, according to power companies which have suffered higher costs because of the Goods and Services Tax (GST).

The power companies that buy these certificates to comply with the environmental norms challenged the levy through a write petition filed in the Delhi High Court on Tuesday.

Power companies buy these certificates from renewable energy exchanges to abide by government norms that mandate that a certain percentage of power generated should be through renewable sources.

The certificates are derivatives based on the power generated in green route. Most power generators buy renewable energy from their green peers, sometimes based abroad. These certificates also work as a source to buy the balance quantity of renewable energy that cannot be bought or generated directly by the power firms.

“The taxability of renewable energy certificates has been challenged as these are securities which are excluded from both goods and services. These scrips are traded every Wednesday on IEX (Indian Energy Exchange) and PXIL (Power Exchange India), the two exchanges for the trading purposes,” said Abhishek A Rastogi, partner, Khaitan and Co.

According to the power companies, a government circular that came out in June last year added to their woes. It talked about the applicability of GST on the renewable energy certificates at 12%. “It is hereby clarified that Renewable Energy Certificates (RECs) and Priority Sector Lending Certificates (PSLCs) and other similar documents are classifiable under heading 4907 and attract 12% GST,” it read.

“Taxing renewable energy certificates will prove to be fatal for the power consumers by further increasing the cost of electricity. The regulatory obligations to consume renewable energy as a part of the climate change initiative to control global warming and the taxability can only be decided by the court,” said Harry Dhaul, director general of the Independent Power Producers Association of India (IPPAI).

“The circular provides for the taxability of renewable energy certificates and it will have to be determined in light of the statutory provisions,” said Rastogi.

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Source: Economic Times.
Apparel exports drop 3.46% on GST effect

Apparel exports drop 3.46% on GST effect

Shipments hit on 7% cut in incentives
Apparel exports dropped 3.46% in 2018-19 compared with the year-earlier period, mainly because exporting units took time to adjust to the new rates under the Goods and Services Tax (GST).

Apparel exports last financial year were worth $16.13 billion compared with $16.71 billion in the year-earlier period. However, in rupee terms, the exports grew by 4.66 %.

According to A. Sakthivel, vice-chairman, Apparel Export Promotion Council (AEPC), under the GST, there was almost 7% reduction in the incentives that the exporters were receiving earlier and they also had to adjust to the new system.

Chandrima Chatterjee, an advisor to the council, said the global apparel market was also stagnant. Yet, leaders in the segment such as Bangladesh and Vietnam witnessed growth. “We need to strategize to position Indian products in the international market,” she said.

Export of overall cotton textiles, including cotton yarn, rose almost 10% last financial year compared with the year-earlier period. Apparel exports, too, surged 15% in March after the Centre announced reimbursement of embedded taxes. This should give a boost to exports this year, says Siddhartha Rajagopal, executive director, The Cotton Textiles Export Promotion Council.

XaTTaX – World Class Automated eSolution for Return filing and e-Waybill

Source: The Hindu
Buyers still confused over new GST math

Buyers still confused over new GST math

With the new fiscal year kicking off, home buyers are a confused lot, with many having a tough time with recently revised Goods and Services Tax (GST) calculations.

The GST Council, in its 34th meeting, had finalized the modalities for the transition to new tax rates on residential flats, providing a flexible option for builders to choose from. According to the new scheme, developers have the option to apply for either the new GST rates — 1 percent for affordable under-construction houses and 5 percent on other houses — or old rates on ongoing projects where construction and actual bookings both began before April 1, 2019.

Real estate firms have time until May 10 to communicate to their respective jurisdictional officers whether they want to continue with the old GST rates with an input tax credit, failing which they will be deemed to have migrated to new tax slabs. Most developers have already expressed their intent to go with the old rates.

“For projects which were launched before April 2019, developers would prefer to stick to the old GST rates. It may not be possible to work on financial matters if the new GST rate is applied on older projects,” Harvinder Sikka, MD, Sikka Group pointed out.

Meanwhile, homebuyers are finding the flexibility offered more in the developers’ interest than theirs.
“It is not clear how much it is going to affect us. The new rates seem lucrative, but we are in the dark as to how much it is going to benefit us if we stick to the new GST rates. I believe that the GST Council should have left the platform open for the buyer to decide which GST rates they want even in the projects launched before April 1, 2019. Right now, the buyer has no choice but to go with whatever the developer decides,” Piyush Ranjan, a homebuyer from Noida said.

Experts had already warned of the potential for confusion.“Customers prefer reduced rates whereas developers might prefer higher rates with an input tax credit. We can expect many more disputes and cases in the anti-profiteering authority in the coming days,” Ankur Dhawan, Chief Investment Officer, PropTiger had predicted post GST ruling.

XaTTaX: Cloud and On-Premises Based GST Filing Software For India

Source: The New Indian Express
Council to review food aggregator’s GST woes.

Council to review food aggregator’s GST woes.

Online food aggregators such as Zomato, Swiggy, and UberEats are facing a curious issue in goods and services tax (GST) compliance, prompting a review.

The aggregators are unable to show tax collected at source TCS from restaurants using their platform, thereby preventing the partner restaurants from claiming credit. The government has referred the matter to a law committee under the GST Council. “The industry has represented the issue… It will be examined by the law committee,” said a government official privy to the developments. Zomato, Swiggy, and UberEats declined to comment on the issue.

The glitch stems from a bar on goods and services composition dealers from registering with e-commerce platforms. This prevents food aggregators from filing TCS collected from partner eateries — that are also under the composition scheme — on the GSTN portal. However, restaurants enjoy a carveout under the composition scheme is thus permitted to register with e-commerce platforms. But with their TCS not being recorded on the GSTN portal, the restaurants cannot claim credit or refund. This particularly hits small restaurants’ cash flow.

The composition scheme allows small businesses to opt for a fixed rate of tax — 5% in the case of restaurants — on their turnover, without the tedious compliance and paperwork.

The government is now examining if a carveout needs to be created for small restaurants under the TCS regime, said the official quoted above. The GSTN is also working on the online utility to facilitate this.

Tax experts say a mechanism needs to be evolved soon. “The GST Council needs to take a call either to remove the requirement of TCS on restaurant services for supplies by composition dealers or provide a mechanism to allow the e-commerce operator to file a return for TCS deducted in such cases. Restaurants should be able to claim TCS credit,” said Bipin Sapra, partner, tax and regulatory services, indirect tax, EY.

Some say it may be imperative to relook at the whole TCS itself. “While this seems like a technical issue that can be resolved easily, from a policy standpoint, the TCS mechanism needs a relook. It’s leading to unwarranted compliance issues and preventing small businesses, particularly those supplying goods, from transacting on an e-commerce platform,” said Pratik Jain, indirect taxes leader, PwC.

E-commerce players are mandated to deduct 1% tax (TCS) on payments made to their suppliers under the GST regime. The provision came into effect from October 1, 2018.

Ease Your GST Filing & Invoice with XaTTaX GST Software

Source: Economic Times.
View: A fair assessment of Good and Services Tax

View: A fair assessment of Good and Services Tax

After long deliberation, the goods and services tax (GST) was implemented in July 2017. Nearly two years have passed since, and there’s a widespread perception that GST revenue growth has not lived up to expectations. This is not a fair assessment. GST’s revenue performance must be measured against not the target set, but against the growth of nominal GDP.

An assessment was made by Kapil Patidar & Arvind Subramanian in June 2018. This showed that in the first year of implementation of GST, revenues grew by 11.9% and the buoyancy was 1.20. A buoyancy ratio over 1shows progressiveness in the revenue growth and opens up the prospect of a rising tax-to-GDP ratio.

This is a significant improvement over the pre-GST period when the buoyancy ratios for state value-added tax (VAT) and central indirect taxes like central excise and service tax were less than 1. The revenue performance is especially creditable given the transitional difficulties during implementation and teething technical problems with the GST Network (GSTN).

Some other analyses show that the tax-to-final consumption expenditure also grew from 10.3% in the year before GST (2015-16) to 11.9% (including adjustments for transitional credits) in 2017-18.

However, the state-wise picture shows that some states did better than the others. The states that had a high percentage of origin-based taxes in subsumed revenues — Bihar, Chhattisgarh, Himachal Pradesh, Punjab, and Odisha — were found to lag behind in subsequent revenue performance.

The relative buoyancy of GST revenue compared to the pre-GST period is not surprising. This is a result of two factors. One, the design of GST that integrated the entire value chain from raw material to retail for the purpose of indirect taxation. This design reduced non-compliance in downstream trading, as these entities chose to register to avail of the input tax credit generated upstream.

The Economic Survey 2016-17 also points out that small units even falling within the threshold exemption limit opted for GST registration to avail of the input tax credit as they buy largely from bigger units.

Two, GST buoyancy was also aided by the tax incidence on services increasing from 14% pre-GST to 18% post-GST. The buoyancy in GST revenues is also reflected in the bump in the personal tax revenues on the direct tax side. Personal income-tax collections include the revenues of unincorporated enterprises that have tended to pay more direct tax revenues induced by their formalization in the GST scheme.

A further surge in GST revenue will happen once land and real estate is brought under the GST net. This will clean up the land market and the revenue gains will be more on the direct tax side as more transactions are reported under GST.

Asalutary impact of GST is the greater coordination between the Central Board of Indirect Taxes and Customs (CBIC) and the Central Board of Direct Taxes (CBDT). This reduces non-compliance and enhances revenues, a win-win for both departments. The I-T departments have incorporated information on GST registration and turnover in their return format.

A more detailed analysis of GST revenue buoyancy is hampered by the fact that there is no data on the sectoral profile of the new registrants and of separate revenue trends for goods and services. There is a perception in many states that revenue from services has lagged behind expectations. This can be rectified by a small modification in the format of the GST annual return.

This modification would require companies to indicate the HSN (Harmonised System of Nomenclature) code in eight digits in respect of goods supplied by them and accounting codes of each of the services provided.

Duty payment in cash should be indicated code-wise for each of the goods and services. At the time of evolution of GST, it was visualized that the monthly and quarterly returns would be kept simple and that the annual return would capture detailed information for compliance verification and data analysis. It would be a real pity if an analysis is hampered by insufficient data. Besides greater revenues, the great success has been the emergence of the GST Council as a credible institution of cooperative federalism.

Its success has opened up the prospects of replicating this institutional arrangement in other sectors like power, agriculture, and transportation. The GST impact goes beyond revenues and rates of duty. It has fundamentally transformed our federal polity for the good.

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Source: Economic Times
Lowering GST rate on cement next on agenda: Arun Jaitley

Lowering GST rate on cement next on agenda: Arun Jaitley

Finance Minister Arun Jaitley on Thursday said the BJP-led NDA will continue with fiscal prudence and lower tax rates if elected back to power.

He further said the GST (Goods and Services Tax) Council has cut tax rates on consumption items to 12 or 18 percent from the highest slab of 28 percent and lowering rate on cement is next on agenda.

“I speak in terms of taxation policies… I’m quite clear in my mind that on two issues at least we had – a lot of good fiscal prudence and we brought the rates down, these are two areas, if we are in power we will continue the same glide path,” Jaitley said while addressing the CII AGM here.

The general elections will be held in phases beginning April 11 and counting of votes will take place on May 23.

Jaitley said India’s growth has stabilized between 7-7.5 percent and irrespective of global trends, domestic consumption is going to increase.

“We have come to 7-7.5 percent (growth rate) range despite the fact that there is no global boom or support of any kind, and we have stabilized at that, you need to graduate further,” he added.

The Reserve Bank of India Thursday cut its GDP growth forecast for the current fiscal by 20 basis points (bps) to 7.2 percent.

The minister said that over the last 5 years the government did not increase tax rates, and in some cases doubled tax base and increased tax collection.

“In the last 20 odd months of the GST except for Cement that is because of affordability, … every item of consumption has come down to 18 percent and 12 percent category from 28 percent. So, it is only a matter of time that the last one also comes down,” Jaitley said.

Asked what steps would be taken if the government comes to power, Jaitley said, “Wait for a couple of days, when our manifesto comes out, you may find some of the views expressed in that”.

The government had revised upwards the fiscal deficit target for 2018-19 fiscal to 3.4 percent from 3.3 percent projected in the budget.

For current fiscal, which began on April 1, the fiscal deficit target has been set at 3.4 percent.

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Source: Money Control
Realtors have time till May 10 to opt for old GST rates

Realtors have time till May 10 to opt for old GST rates

Real estate firms have time till May 10 to communicate to their respective jurisdictional officers whether they want to continue with the old GST rates with the input tax credit, failing which they will be deemed to have migrated to new tax rates. The GST Council had given the option to real estate companies to either opt for old rates of 12 per cent (for residential) and 8 per cent (affordable housing) with input tax credit (ITC) benefits or the new tax rates of 5 per cent for residential units and 1 per cent for affordable housing without the benefit of adjusting the credit on inputs used during construction.

The Central Board of Indirect Taxes and Customs (CBIC) has issued a notification giving real estate companies a one-time option to choose either of the tax rates.

“Provided that in case of an ongoing project, the registered person shall exercise one time option … to pay central tax on construction of apartments in a project at the rates as specified …. by the 10th of May, 2019,” the CBIC said.

In case, realtors do not exercise the option, they will be covered under the lower tax rate of 5 percent and 1 percent with effect from April 1, 2019, and will not be entitled to avail tax credit on inputs.

Meanwhile, in a separate notification, the CBIC has asked the real estate companies that will be migrating to the new rates to prepare their books of accounts with regard to ITC and repay the over-used credit, if any, to the government in 24 installments.

Explaining the provision, AMRG & Associates Partner Rajat Mohan said builders opting for a lower rate of taxes with effect from April 1 would have to recalculate eligible tax credit since the inception of GST based on the proportion of residential to commercial carpet area, sold to unsold units and invoiced to a un-invoiced amount.

“Based on the factual data if tax credit has been availed beyond permissible proportion, then such excess needs to paid back to tax authorities. In quite a few cases, such tax payment would be magnanimous, especially where the project is nearing completion, but unsold units lying in inventory are high. This will have a high tax risk on real estate sector and many may experience the worst cash flow position since the inception of GST,” Mohan said.

Further, the CBIC has also asked builders to maintain project wise account of inward supplies from a registered and unregistered supplier.

“GST mandated a state-wise registration. However, now taxpayers in the real estate sector are liable to produce project-wise break-up of procurements and outward supplies in order to re-calculate admissible tax credits. This will burden a taxpayer with multiple tax records to be updated on a regular basis, moving away from ‘Ease of doing business‘,” Mohan said.

XaTTaX – World Class Automated eSolution for Return filing and e-Waybill

Source: Times of India
Roll-out of new, simplified GST return forms deferred

Roll-out of new, simplified GST return forms deferred

The pilot project envisaged for rolling out simplified monthly GST return forms from April 1 has been deferred and the new forms would be made available once they the notified and the software is ready.

The GST Council had in July last year decided that the simplified GST return forms — Sahaj and Sugam — would be rolled out on a pilot basis from April 1, 2019, while mandatory filing across the country would kick in from July.

In July last year, the Central Board of Indirect Taxes and Customs (CBIC) had come out with the draft GST returns forms and sought comments from stakeholders.

Under the new return filing format, taxpayers who have no purchases, no output tax liability and no input tax credit in any quarter of the financial year would have to file one ‘Nil’ return for the entire quarter. Facility for filing a quarterly return shall also be available by an SMS.

The new return filing format would replace the current requirement of filing final sales return GSTR-1; but as per the plan, summary sales return GSTR-3B would continue for some time.

“The pilot project of new return filing has been deferred. The new date would be decided. The forms would be notified first; following which, the pilot would be launched. Systems are being developed for the new forms,” an official said.

Small taxpayers, with a turnover of up to Rs 5 crore in the last financial year, can file a quarterly return with monthly payment of taxes on a self-declaration basis.

The return form ‘Sahaj’ is for businesses which make supplies to only consumers (B2C). It includes details of outward supplies and inward supplies attracting reverse charge as well as a summary of inward supplies for claiming an input tax credit (ITC).

Also, such B2C businesses will have to show harmonized system nomenclature (HSN)-wise summary of supplies and interest and late fee liability details along with payment of tax and verification. HSN is a code number to specify a particular product.

Besides, businesses making supplies to both businesses (B2B) and consumers (B2C) have to file returns form ‘Sugam’. It includes a summary of supplies made and tax liability, a summary of inward supplies for claiming ITC, along with details of interest due and tax payment.

When goods and services tax (GST) was rolled out from July 1, 2017, a three-stage monthly return filing system was set up — GSTR-1 (sales return), GSTR-2 (purchase return) and GSTR-3 (final returns based on GSTR-1 and 2 matching).

However, with businesses facing trouble, the GST Council decided in November 2017 to keep filing of GSTR-2 and 3 in abeyance. It also introduced a simpler GSTR-3B to facilitate easier return filing and tax payment.

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Source: Money Control.
GST Authority clarifies on change/transfer in ownership of sole proprietorship

GST Authority clarifies on change/transfer in ownership of sole proprietorship

The GST (Goods & Services Tax) Authority on Thursday made it clear that transfer or change in the ownership of business will include transfer or change in the ownership of business due to death of the sole proprietor. Accordingly, a mechanism has been specified for transferring unutilized input tax credit.

A circular issued by the Central Board of Indirect Taxes and Customs (CBIC) mentioned that the transferee or the successor will be liable to be registered with effect from the date of such transfer or succession, where a business is transferred to another person for any reasons, including the death of the proprietor. Here the applicant will be required to mention the reason to obtain registration as ‘death of the proprietor,’ in the registration form (GST REG-01) to be filed electronically in the common portal.

The legal hire (of the dead sole proprietor) will be required to give application for cancellation of the existing registration. The GST Identification Number (GSTIN) of a transferee to whom the business has been transferred is also required to be mentioned to link the GSTIN of the transferor with the GSTIN of a transferee. In case of death of a sole proprietor, if the business is continued by any person being a transferee or successor of business, it shall be construed as a transfer of business. This means a transfer of unutilized input tax credit and liability to pay tax along with penalty, if any, will also be possible.

In case of transfer of business on account of the death of a sole proprietor, the transferee/successor will file ‘FORM GST ITC-02’ in respect of the registration to be canceled. Also, such an action is required to be completed before applying for the cancellation. This should be filed before filing the application for cancellation of such registration. Upon acceptance by the transferee/ successor, the unutilized input tax credit specified in ‘FORM GST ITC-02’ will be credited to his electronic credit ledger.

New registration

In another circular related to verification of applications for grant of new registration, the CBIC said there have been instances when registration gets canceled due to one reason or any other reason, such businesses prefer to apply for new registration rather than applying for revocation of cancellation of registration. There is a possibility that such a person might not have furnished requisite returns and not paid tax for the tax periods covered under the old/canceled registration.

Further, such persons would be required to pay all liabilities due from them for the relevant period in case they apply for revocation of cancellation of registration. Hence, to avoid payment of the tax liabilities, such persons may be using the route of applying for fresh registration. One can take separate registration on the same PAN in the same State.

Now, CBIC has instructed its officials to exercise due caution while processing such applications. It is clarified that not applying for revocation or cancellation of registration will be deemed to be a ‘deficiency’ and could be a reason for rejection of the application for new registration.

XaTTaX: Cloud and On-Premises Based GST Filing Software For India

Source: The Hindu Business Line.
Caterers want 18% GST to be cut to 5%

Caterers want 18% GST to be cut to 5%

The 18% GST currently being levied on outdoor and industry catering services must be brought down to 5% to ensure the already-fragmented sector does not become more unorganised, said caterers on Monday.

Speaking at the inauguration of the first gathering of the Federation of Karnataka Caterers, the caterers said while only 5% GST is being charged for canteen services, this was not the case for an event and outdoor caterers, forcing many to operate without proper licenses and paying taxes.

They pointed out that out of 10,000 caterers across the state, including 5,000 in Bengaluru, only 500 have registered with the FKC so far.

“FKC is an attempt to bring all caterers under one umbrella. However, there is some resistance and convincing needed as most small caterers operate without proper licenses due to the high GST rate. We’ve been trying to bring government’s attention to this issue, which limits the growth of the industry, but has been unsuccessful so far,” said Pankaj Kothari, founder president of FKC and proprietor of Sagar Hotel and Caterers, Gayatri Vihar.

The FKC, which was inaugurated by governor Vajubhai Vala, will now conduct awareness programmes and seminars to educate small caterers about the business and encourage them to get proper licenses, said FKC president GK Shetty.

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Source: Times of India