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Exporters draw DRI wrath for alleged GST violations

Exporters draw DRI wrath for alleged GST violations

The country’s primary anti-smuggling intelligence agency has begun resending notices to exporters for availing GST exemptions where exports preceded imports. The Directorate of Revenue Intelligence (DRI) move followed a Supreme Court stay on a Gujarat High Court order favouring the exporters. The high court had quashed a revenue department notification allowing DRI to penalise exporters for allegedly not following “pre-import condition” and availing wrongful Goods and Services Tax (GST) exemptions.

Many exporters will now have to cough up Integrated Goods and Services Tax (IGST) and penalties as these notices mean that the tax department will not wait for another apex court directive. These companies had first exported goods and then imported raw materials but still claimed export benefits in the form of tax leeway.

About 1,000 exporters have been issued such notices. “The exporters will have to opt for the legal remedy of moving to the respective high courts for obtaining a stay on such show-cause notices,” said Abhishek A Rastogi, partner at Khaitan & Co, who is representing some of the exporters in the case.

The exporters have been asked to pay IGST first as the foreign trade policy has been amended and several notifications were issued in the last few months. ET has seen a notice issued to an exporter on October 10, while the Supreme Court stay was ordered on October 4. The IGST rate in these cases is 18% on the average, while for some products it is 12% and 5% for very few. Industry trackers say that under the earlier tax regime and foreign trade policy (FTP), there was no duty if imported raw materials were used for exports, even when exports
preceded imports.

The current GST framework has laid down certain conditions for exporters to avail certain benefits. A revenue department notification said raw materials cannot be imported after export of the final product. The government introduced an amendment in the GST framework that led to DRI chasing down the exporters.

The amendment spoke mainly of a “pre-import condition” that every exporter needs to follow to avail duty exemptions on imports. “In cases where exports preceded imports, availment of exemption does not seem legal and proper.

This office has initiated an inquiry in wrongful availment of exemption,” a notice read. “While the stay has been granted by the Supreme Court, it does not mean that the other exporters must pay the amount towards pre-import,” Rastogi said.

Source: Economic-Times

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Goods bought at duty free shops exempt from GST: Bombay HC

Goods bought at duty free shops exempt from GST: Bombay HC

In a relief to duty free shops at the Chhattrapti Shivaji International Airport, the Bombay high court has held that the state or central government cannot charge GST on goods sold at these shops.

The high court was hearing a petition filed by a duty free shop (DFS) opposing a show cause notice and criminal case against by the sales tax department.

The court held that though duty free shops were in India they did not come under the taxable territory and hence were exempt from paying GST.

A division bench of Justices Ranjit More and Bharati Dangre while hearing a criminal application filed by Sandeep Patil, a petitioner in a previous public interest litigation, was informed that the application was filed for a review of the order in the PIL. The high court had dismissed the PIL that sought directions to the deputy commissioner of sales tax department to refund the GST collected from the duty free shop.

The court was also seized of two petitions filed by Flemingo Travel Retail Limited which runs duty free shops at the airport seeking similar reliefs as Patil.

The petitioners informed the bench that as per the Customs Act the shops were involved in sale of goods that were imported both for arriving and departing passengers.

The petitioners pointed out that as the goods sold to departing passengers were not taxed they were able to provide them at international rates.

They also submitted that the duty free shops were paying a consideration to MIAL to run the business and hence the additional tax in the form of GST would render it impossible for them to offer goods at prevalent rates internationally.

The counsel for GST argued that as the duty free shops were operating in the state of Maharashtra they were liable to pay GST.

The petitioners then referred to a Karnataka high court judgment which held that duty free though functioning on state land, technically were beyond the customs frontiers and outside taxable territory and hence exempt from GST.

After hearing the submissions, on October 7 the court held that it was clear that both arriving and departing passengers were either importing goods or exporting goods. However as the goods being bought from the duty free shops were to be construed as being brought from abroad, as per Baggage Rules under duty free allowance they were exempt from paying GST on crossing the customs frontiers.

The court also said as the departing passengers were taking goods from duty free shops that were beyond the customs frontiers and they too were exempt from paying GST.

Source: Hindustan-Times

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Tourism ministry plans promotions around GST rate cut for hotels

Tourism ministry plans promotions around GST rate cut for hotels

The tourism ministry is planning to highlight the recent tax cut on room tariffs in promotional campaigns overseas to lure travellers ahead of the peak winter holiday season.

The India Convention Promotion Bureau (ICPB), which works closely with the tourism ministry on promoting India as a MICE (meetings, incentives, conferences and exhibitions) destination, said it will also look at raising awareness around the announcement of lower GST (goods and services tax) rates last month.

On September 20, the GST Council tweaked taxes on several products and services, including hospitality. The GST rate for room tariffs of Rs 7,500 and above was reduced to 18% from 28%, while those between Rs 1,000 and Rs 7,500 would have to pay 12%. Hotels with tariffs of less than Rs 1,000 do not attract tax as per an earlier decision. Earlier, the slab of Rs 2,500-7,500 attracted 18% tax.

“We were waiting for the official notification which has come now. We will be launching marketing campaigns across markets on the move. It’s a very big step for boosting tourist numbers and we will provide this widespread publicity,” said Rupinder Brar, additional director general at the tourism ministry. “This was one of the main demands of the industry. We are very sure that this will boost tourist numbers,” she added.

Chander Mansharamani, vice-chairman of ICPB, said, “When an international conference comes to India, the accommodation is booked by overseas agencies. We have sent a circular to all our clients saying GST on hotel accommodation has (been) reduced to 18%. We are looking to work out something where we can convey this message further.”

Online travel aggregators (OTAs) said bookings for the coming quarter are looking up as hotels have begun factoring in the tax benefits for bookings done for stay after October 1.

“We started displaying hotel bookings with revised taxes from September 27 onwards. Over the past few days, we have seen an uptick in bookings for four- and five-star properties where the impact is fairly significant,” said Sharat Dhall, COO, B2C at Yatra.com. “The reduction of GST of 10% has definitely had an impact in terms of driving growth. We are witnessing an uptick in bookings for leisure destinations such as Goa and Rajasthan for the months of October, November and December.”

A spokesperson from MakeMyTrip said that with the revision in tax rates coming around the peak festive season, the company hopes to see a boost in tourist arrivals in Goa, Darjeeling, Jaipur and Gangtok—destinations that continue to remain favourites among domestic travellers.

Dipak Haksar, chief executive for ITC Hotels and WelcomHotel said ITC Hotels has implemented the new GST rates with effect from October 1, 2019 and has passed on all benefits to the consumers. “The rate reduction of GST will definitely result in an uptick in arrivals and hotel stays,” he said.

Sanjeev K Nayar, general manager at ITC WelcomHeritage Hotels said there has been an increase in the queries and also the bookings are getting materialised as well and that he is optimistic that this trend will now continue.

“We are very happy that a reasonable GST regime for hospitality comes at an opportune time as we are just getting into the high season and we would definitely see more traction and demand,” said Ankur Bhatia, executive director, Bird Group which runs Roseate Hotels & Resorts.

Balu Ramachandran, senior vice president at Cleartrip said any deduction in GST will be passed on and will ultimately benefit customers.

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Source: Economic-Times
GST Council Meet highlights: Cuts rates on various items

GST Council Meet highlights: Cuts rates on various items

Finance Minister Nirmala Sitharaman on Friday announced the reduction of GST rates on a slew of items. All rate changes would be effective from 1 October

Higlights:

  • A uniform GST rate of 12 % will be levied on woven/non-woven polyethylene bags
  • GST council cuts tax rates on job work in diamond industry to 1.5% from 5%
  • In a major boost to gems and jewellery sector, the Council recommended to reduce GST on cut and polished semi-precious items to 0.25 per cent from 3 per cent now
  • GST Council cuts tax on hotel room tariffs of ₹1,000 to ₹7,500/night to 12%; those above ₹7,500 to 18%
  • The GST on caffeinated beverages has been hiked to 28% plus additional cess of 12% as against the current rate of 18 per cent.
    GST council cuts tax rates for outdoor catering to 5% from 18%
    GST Council recommends lower 12% cess on 1,500 cc diesel, 1,200 cc petrol vehicles with capacity to carry up to 13 people
  • A uniform GST rate of 12% will be levied on woven/non-woven polyethylene bags
  • Uniform GST rate of 12% to be levied on polypropylene bags and sacks used for packing of goods
  • the Council has reduced rates for cups and plates made from leaves and hides to nil.
  • The tax on almond milk has been set at 18%
  • GST rate hiked on railway wagon, coaches from 5% to 12%
  • Exemption from GST/IGST is being given on import of specified defence goods not being manufactured indigenously, it’s being extended only up to 2024
  • Supply of goods & services to FIFA & other specified persons also exempted for U17 Women’s World Cup in India
  • GST rate on slide fasteners has been reduced from 18% to 12%,
    Marine fuel from 18% to 5%
  • 12% to 5% on wet grinders consisting of stone as a grinder,
    5% to nil on dried tamarind.
  • The GST Council on Friday cut tax rate on hotel room tariffs, a move aimed at giving a boost to the hospitality sector.

The GST (goods and services tax) rate on hotel rooms with tariffs of up to ₹7,500 per night has been cut to 12%from the existing 18%, officials attending the GST Council meet here said.

Similarly, the tax on room tariff of above ₹7,500 has been slashed to 18% from the existing 28%.

There will be no GST on room tariffs of below ₹1,000 per night.

Commenting on the decision, Sanjay Sethi, CEO, Chalet Hotels said the reduction would give a major fillip to the hospitality and tourism industry and make hotels more competitive globally.

“For companies like Chalet, reduced taxation helps us focus our efforts on key aspects like fresh investments in portfolio expansion, job creation and creating sustainable green hotels,” he said.

With most engines of growth stuttering and GDP declining to six-year low of 5% in the April-June quarter, pressure has been mounting on the government to revive the economy. Some external factors like US-China trade war has added to the woes.

In the wake of domestic and external headwinds, the Reserve Bank of India recently lowered its GDP forecast and pegged it at 6.9 per cent in 2019-20. Several rating agencies and research firms expect the growth to be in the range of 6.5-7 per cent.

The poor show in the first quarter of the current fiscal has prompted the Modi government to take measures to boost growth and lift business sentiment. Starting August 23, Finance Minister Sitharaman has announced four set of measures to put economy on fast track.

Source: Live-Mint

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No GST on everyday items like milk and meat

No GST on everyday items like milk and meat

Bollywood actor Rahul Bose tweeted how a Chandigarh-based five-star hotel billed him a staggering ₹442, including GST (goods and services tax), for just two bananas. The GST amount was ₹67.50—a 9% central GST of ₹33.75 and a 9% Union Territory GST of ₹33.75. The news seem to have fizzled out, but as a consumer, it’s important to know what’s the right GST amount you need to pay, and which items are exempt from GST altogether. Here are a few everyday items, across three categories, on which you don’t need to pay GST.

Food items: There is no GST on fresh or pasteurized milk, butter milk, curd, chena or paneer, and non-vegetarian items like eggs, chicken, fresh meat, and fresh or chilled fish. Fruits, vegetables, as well as unit container-packed frozen branded vegetables (uncooked or steamed) are also exempt.

Other items on this list include natural honey, hulled cereal grains like barley, wheat, oat and so on. Palmyra jaggery, all types of salt, flours like gram or pea flour, coconut, fresh or dried, whether or not shelled or peeled, all kinds of whole spices like seeds of anise, fennel, coriander, cumin or caraway, are exempt. Even items like papad, except when served for consumption, bread (branded or otherwise), and pizza bread are exempt. Water (other than aerated, mineral, purified, distilled, medicinal, ionic, battery, de-mineralized and water sold in sealed containers) have no GST.

Personal items: Several personal items too feature on the zero GST list. For instance, sanitary pads, kajal (other than kajal pencil sticks), glass and plastic bangles, hearing aids, slates, pencils, chalk sticks, passenger bags, bindi, and all types of contraceptives, including condoms.

Miscellaneous items: These mostly include stationery items and items bought from the government. For instance, picture, colouring and drawing books for children, music books, manuscripts, postal items like envelope and post cards sold by the government, newspapers, journals and periodicals, whether illustrated or containing advertising material. Maps and hydro graphic or similar charts of all kinds, including atlases, wall maps, topographical plans and globes, that are printed are also included. Cheques, loose or in a book form, printed books, including Braille books, judicial and non-judicial stamp papers, court fee stamps when sold by government treasuries or vendors authorized by the government, and rupee notes when sold to the Reserve Bank of India are part of the list.

Religious routine ritual items like rudraksha attract no GST. Even items like earthen pots, clay lamps are not in the GST list. Medical items like blood from blood banks attract no GST either.

Remember that some items may attract zero GST only if they are not packaged.

Source: LiveMint
Written By: Bindisha Sarang

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Will hear everyone on GST rate cut but Council will take final decision: Sitharaman

Will hear everyone on GST rate cut but Council will take final decision: Sitharaman

Finance Minister Nirmala Sitharaman on Tuesday said she is willing to listen to people from different sectors regarding deduction in Goods and Services Tax (GST) rates but the final decision will be of the GST Council.

“On GST rate reduction, I am willing to hear any number of people and sectors. But it is not in my hand. It has to go to the GST Council. Ministers of all the states are members of the council. It has to be discussed there. And there are committees, which will analyse it,” she told reporters here.

When asked whether the Centre is planning some more measures regarding the automobile sector, the minister said: “I have announced some measures for the automobile sector. I will have to see how it goes. I will also have to take inputs from the sector about the impact of the announcements we have already made.”

For the automobile sector, which has seen faltering sales in recent quarters, Sitharaman had earlier said the higher registration fee has been deferred till June 2020.

Source: ANI

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Auto industry to FM: Bring down GST, raise depreciation rate

Auto industry to FM: Bring down GST, raise depreciation rate

Representatives of the automobile industry, who met Finance Minister Nirmala Sitharaman on Wednesday, have sought a lower Goods & Services Tax (GST) and a higher depreciation rate to tide over the current crisis. They also impressed on Sitharaman the need for a host of others measures to help the sector ride out the rut.

The Finance Minister has been meeting representatives of various sectors to understand the issues concerning them even as several key agencies have lowered growth projection for India.

Wednesday’s meeting, the third in the series, was attended by RC Bhargawa, Chairman, Maruti Suzuki; Pawan Munjal, CMD, Hero Motors; Nirmal Mind, CMD, Uno Minda; Gurpratap Bopara, MD, Skoda India; besides the Presidents of three industry bodies — SIAM, ACMA and FADA.

According to sources, the government is expected to come out with a detailed action plan for boosting the economy.

The auto industry has been on the slow lane for the last one year.

The sale of passenger vehicles declined by 18.42 per cent in April-June 2019 over the same period last year. Within the passenger vehicles category, sale of passenger cars, utility vehicle and vans declined 23.32 per cent, 4.53 per cent and 25.66 per cent, respectively, in April-June 2019 over the same period last year.

2 lakh workers laid off

According to the Federation of Automobile Dealers Associations (FADA), around two lakh people have been laid off across automobile dealerships in the country in the last three months.

Auto companies, which feel that the GST rate of 28 per cent plus cess is hurting sales, have been demanding a reduction, at least temporarily.

However, according to a Finance Ministry official, the problem is that collection from the GST is already below expectations and any reduction now will further complicate matters.

Auto companies also want the depreciation rate raised from the present 15 per cent. A higher depreciation rate will have three consequences: First, the resale value will come down faster, which, in turn, will prompt the customer to replace the car sooner.

Second, a higher depreciation rate will bring down the insurance premium from the second year. And finally, higher depreciation will allow businesses to claim higher business expenses and thus lead to more tax benefits.

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Source: The-Hindu-Business-Line.
Firms may get to raise prices after transferring GST cuts

Firms may get to raise prices after transferring GST cuts

Companies are free to raise prices of products and services as per their business cycle without fear of getting caught in the anti-profiteering provision in the Goods and Services Tax (GST) law once they have passed on the benefit of tax rate cuts to consumers, said a government official.

The clarification from the official, who has knowledge of how the National Anti-profiteering Authority (NAA) and its investigative arm work, comes at a time when ambiguity in the law and the recent extension of the profiteering watchdog’s tenure as well as an increase in penalty for violation have led to concerns that the pricing liberty of businesses stands curtailed.

Analysts said that due to lack of guidelines on how to implement anti-profiteering provisions in the Central GST Act, companies are not sure how long they are expected to maintain a price after they reduce price to pass on the benefit of a tax cut to consumers. This is also worrisome for companies that have faced charges of profiteering for specific periods in the past. The law is silent on how long companies have to maintain the reduced price after a tax rate cut. This open ended provision, in effect, results in price administration, they said. Under GST law, not passing on the benefits of tax rate reduction or availability of input tax credits to consumers by businesses and merchants amounts to profiteering.

The liberty to increase price as per the business cycle will come as a relief to companies, especially large fast-moving consumer goods (FMCG) manufacturers that have faced ‘profiteering’ charges under GST law.

“Whenever there is a reduction in GST rate, businesses have to pass on the benefit to consumers immediately. Thereafter, companies are free to follow their cycle of price adjustments as they deem fit in line with market forces. There is no lock-in period for maintaining reduced prices,” said the first official cited above, who spoke on condition of anonymity. If a company has increased prices of products in a particular month in the past, that is a valid explanation for a price increase subsequent to reducing prices in line with a tax rate cut. Businesses, however, should be in a position to defend themselves in case of a complaint, said the person.

Experts said it may not be a very easy task for businesses to defend price increases considering the complexities in the overall business environment and pricing. They said past price trends may show movement both ways and may not be sufficient to justify a price increase in case of a profiteering investigation.

“Businesses may at times want to increase margins on a better selling product to offset losses in other products. There is still an ambiguity on whether that increase in margin for some products would be acceptable by the authorities as a justification for a price increase. Separately, industry has also been looking forward to detailed guidelines on calculating the amount of benefit to be passed on and in specific, the duration for which the reduced price is to be continued,” said EY tax partner Abhishek Jain.

The other factor that has got businesses worried is the perpetual nature of the anti-profiteering provision in the CGST Act although the tenure of the NAA is defined. The provision which mandates immediate price reduction of goods and services commensurate with the tax cut, does not specify a sunset clause. A second government official, who also spoke on the condition of anonymity, said that the anti-profiteering provision may be administered by any designated government official or agency in a less elaborate way after NAA’s term ends as the tax system would have stabilised by then. The GST Council extended the term of NAA by two years in June, which enables it to continue to work till end of 2021. The Council had also in June decided to let NAA impose a penalty equivalent to 10% of the profiteered amount on those who pocket the tax benefit meant for consumers.

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Source: LiveMint
GST evaders beware: Risky taxpayers to be profiled to pre-empt dodging

GST evaders beware: Risky taxpayers to be profiled to pre-empt dodging

In a bid to pre-empt tax evasion under the Goods and Services Tax (GST), the government is looking at options to deal with taxpayers based on their risk profile. Assessees identified as ‘risky’ could face restrictions on issuing invoices, utilisation of input tax credit and sanctioning of refunds.

The government has been grappling with evasion through fake invoice since the GST was launched two years ago. The indirect tax department has detected such frauds worth over Rs 12,000 crore. A tax official said the rule of the thumb indicated that detected frauds were only about 10% in value of actual frauds being committed, which would take actual evasion to nearly Rs 1.2 lakh crore.

The GST Council, which is the apex decision-making body for the GST, has constituted a committee of officers (CoO) to suggest parameters for risk-based profiling so that a taxpayer could be categorised as risky in an automated manner. Further, the CoO will identify methods for assessing financial credibility of a taxpayer vis-a-vis its GST profile. The committee will submit a report to the GST Council on August 15.

According to the terms of reference (ToR) for the committee, it will also suggest changes in GST law and rules to enable profiling and regulating risky taxpayers, including invocation of penal provisions in case of failure to undertake desired know your customer (KYC) verification. Further, the panel is required to suggest “measures for implementation of suggested risk-based management on immediate basis and any other measures, mechanism and machinery to check and curb multiple type of frauds,” the ToR said.

The official quoted above said recovery of tax evasion after it has happened was onerous and doesn’t yield results as often fly-by-night operators are not found at their addresses. It was important, he added, that pre-emptive mechanisms were employed to detect the likely instance of frauds before they took place.


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Source: Financial-Express
Consumer panel fines retail store for charging GST on discounted price

Consumer panel fines retail store for charging GST on discounted price

Clarifying that charging GST on a discounted price of a product is an unfair practice, District Consumer Disputes Redressal Forum has imposed a fine of Rs 4000 on a city based retail store, that had overcharged Rs.3.68 from a customer.
In its detailed order the Forum asked Lifestyle International Private Limited, MBD Neopolis, Ferozepur Road, Rajguru Nagar to pay Rs.2000 as compensation for mental harassment and agony and an equal amount as litigation expenses to the customer Rahul of Modern Housing complex in Manimajra of Chandigarh.

In his complaint to Forum on February 1, 2019, Rahul a resident of Chandigarh said he had purchased a product from the store on July 23, 2017 by paying an amount of Rs.78. The maximum retail price (MRP) of the product inclusive of all taxes was Rs.245. After giving discount of 70% , the discounted price payable was Rs.73.50 but on this price GST at the rate 5% of Rs.3.68 charged. Claiming that charging GST on discounted price was an unfair trade practice, he sought refund of excessively charged GST amount of Rs.3.68 along with compensation of Rs.25,000 on account of mental and physical harassment along with the litigation expenses of Rs 15,000.

The respondent in its reply however pleaded that it was entitled to charge and collect GST after deducting discount from the printed MRP, which was considered as the sales price. “On the advertisement of discount offer, it was clearly mentioned “Tax Extra” and the complainant might have missed to notice this fact, the reply claimed. It added that in case the complainant had objections he could have got cancelled the invoice. But the complainant did not raise any concern in this regard and later filed a complaint with a ‘malafide intention and for unjust enrichment’.

The Forum after going through the arguments and evidence however observed that the practice of charging tax on the discounted price having MRP inclusive of all taxes in this csae certainly was an unfair practice. This practice has been deprecated by National Consumer Disputes Redressal Commission, the Forum comprising President G K Dhir and member Jyotsna held.

The forum in its detailed order directed the retail store to refund the excess received amount of Rs.3.68 with an interest rate of 6% annum from July 23, 2017 till payment. Besides it also issued directions for compensation for mental harassment and litigation expenses to the buyer.

Source: Times of India

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