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GST Impact: Monthly GST returns to burden professionals

GST Impact: Monthly GST returns to burden professionals

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

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

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

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

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

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

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

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

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

industrial lease rent : GST

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

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

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

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

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

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

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

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

Ministry of Road Transport and Highways : GST

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

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

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

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

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

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

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

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

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

Impact of GST on Top Five Insurance Plans


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

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

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

Unit Linked Life Insurance Plans

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

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

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

Term Life Insurance Plans

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

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

Traditional Life Insurance plans – Recurring Premium 

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

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

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

Traditional Life Insurance Plans – Single Premium

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

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

Health Insurance, Motor and Travel Insurance

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

Source :  News18
GST impact: Maharashtra may revise incentives plan

GST impact: Maharashtra may revise incentives plan

gst impact : psi

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

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

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

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

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

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

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

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GST impact on cigarettes: Council hikes cess after surprise windfall gains

GST impact on cigarettes: Council hikes cess after surprise windfall gains

GST Impact :cigarettes

The Goods and Services (GST) Tax Council on Monday increased the cess on cigarettes to correct the unintended outcome of a reduced tax incidence on the demerit good after the roll-out of the new tax. Apart from the highest GST rate of 28%, the cess on cigarettes will now be higher by Rs 485-792 per thousand sticks for different varieties of the commodity. “While any reduction in tax incidence on items of mass consumption would be welcome, the same would be unacceptable in case of demerit goods like cigarettes,” the government said in a statement.

Meanwhile, the council reckoned that new registrations on the GST Network (GSTN), the IT backbone of the system, have been more than expected. Nearly 7.4 lakh new businesses have registered for GST since June 25 when the registration for new taxpayers was opened.

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According a study conducted by GSTN, it was estimated that around 4-5 lakh new businesses would register with the system but the near doubling of that number has come as pleasant surprise to the government. GSTN had estimated that growth in the taxpayer base would be 4-5% on an annual basis.

With migration of over 70 lakh existing taxpayers into the GST system and another 7.4 lakh new taxpayers, the total GST taxpayer base is numerically close to the previous Centre-state indirect tax assessee base of 80 lakh. Finance minister Arun Jaitley noted that the taxpayer base must have actually expanded already as a section of taxpayers used to register separately for excise/service tax and VAT in the previous regime.

“With VAT and service tax registrations base of 80 lakh, we had estimated that not more than 4-5 lakh new taxpayers would register, but the numbers prove that businesses have welcomed GST,” GSTN chairman Navin Kumar told FE. He added that while the tax department could better analyse the spurt in numbers, it was possible that businesses realised it would be difficult to carry out trade from outside the ambit of GST.

Moreover, this number could jump further as nearly 35,000 new businesses are registering daily. This daily registration rate has not dwindled since June 25, when the window for new businesses to register was opened. In comparison, the daily migration figure for existing taxpayers had come down to 12,000 from 35,000 since June 25. Over 70 lakh existing taxpayers have migrated to GSTN till July 17 after the the migration window opened again on June 25.

GST : Conrner imageHowever, just 90,000 businesses opted for the composition scheme so far. Kumar said that it was perhaps because the stringent eligibility criteria, which allows only those with intrastate supplies to register, may have played a part in the lukewarm response. Registration to the composition scheme is available to those with less than Rs 75 lakh per annum revenue, and is restricted to manufacturers and traders.

The window for the scheme will close by July 22 and the chairman urged the businesses to register for the scheme as early as possible as the next chance for the same would be available only next year.

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Source: Financial Express
GST impact on companies: What it’ll take for companies to reap gains

GST impact on companies: What it’ll take for companies to reap gains

Indian GSTThe Goods and Services Tax , a radical step towards the country’s transformation into a common market, became a reality at the stroke of midnight on July 1, 2017, and its implication on the industry extends well beyond tax. GST affects every part of the business, right from financial reporting and tax accounting to supply chain, technology enablement and contracts redesign.

The need of the hour is to ensure that the GST registration process is complete and the IT, billing and enterprise resource planning (ERPs) are suitably rejigged to fulfil statutory obligations.

The first key action point is to update the customer and vendor masters. This requires collection of information in terms of the GST Identification Number (GSTIN) of suppliers and vendors, determining the  Harmonized System of Nomenclature (HSN)/ Service Accounting Codes (SAC) of goods/services to be supplied and their applicable GST rates. Second, all the existing documents, such as tax invoices, credit/debit notes, delivery challan, which are to be issued under the GST regime, need to be modified to capture additional information required under Goods and Services Tax .

There is a requirement for issuing certain other documents, such as payment vouchers at the time of making payment to vendors for supplies on which tax is payable under reverse charge, receipt and refund vouchers related to advances and a self-invoice in case of procurement from unregistered dealers. All these documents need to be incorporated in the IT system. Further, all internal reports and periodical MIS reports also need to re-aligned from GST perspective.

Another significant requirement in terms of GST is payment of taxes on advances. The law requires that GST is to be paid in the month in which advance has been received, but the same can’t be adjusted either fully or partly at the end of the month. Goods and Services Tax  is payable only on the amount of advance which is pending at the month end. In such cases, though the tax is paid on advances, the tax invoice will be issued only when the goods are being supplied. Customers can get the credit only when the goods are received by them. There are separate reporting requirements under GST for taxes paid on advances and their adjustment. IT systems should be able to track down the month-end advances on which GST is to be paid and their adjustments made in subsequent months.

The readiness of internal IT system is one of the key requirements for successfully continuing the business with minimum glitches. Further, eligibility of input tax credits are dependent upon the electronic reconciliation of the sales information uploaded by vendors and purchase information uploaded by the recipient on the GSTIN system. This creates a significant onus to correctly upload the sales and purchase data in order to ensure electronic reconciliation between the information uploaded by vendors and customers. Further, each assessee will be able to download the information uploaded by her/its suppliers and reconcile the same with the information uploaded by them.

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For filing the GST returns, assesses will have to access the Goods and Service Tax Network (GSTN) portal and upload the information in requisite formats. GSTN has appointed GST Suvidha Providers (GSPs) who would assist in filing of returns as IT conduits. In order to work with GSPs, there is a requirement of Application Service Providers (ASPs) solution. Some GSPs have developed their own ASP solution to provide an end-to-end solution to assesses.

ASPs will focus on taking taxpayers’ raw data on sales and purchases and converting it into GST returns (in case of multiple registrations, it is a huge task manually). These GST returns, or GSTRs, will then be filed on behalf of the assessee with GSTN via the GSP network.

GSP provides a secured tunnel which feeds in data from ASP (in other words, ASP’s output becomes input for GSP) to the GSTN and generates an acknowledgement.

Companies dealing with a large number of invoices every month need to automate and upgrade their ERP software to provide data points on a timely basis to cope with the increased number of returns. A good ASP-GSP is required to make the process of reconciliation under the GST regime seamless and hassle-free.

Relooking the manpower requirement to carry out the tax compliances is another area which needs consideration by organisations. Companies have to rethink their organisation structure for GST compliance, as to whether they can undertake all compliances at a central level as much of the work is online or if they still need to work at a decentralised level as in the pre-GST regime.

Goods and Services Tax  calls for a behavioural, infrastructural and technological change among enterprises so that they can reap the potential gains of its implementation. In this context, information technology/ERP software are going to play a pivotal role.

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Source: Financial Express
GST impact: Companies face jail term for not reprinting revised MRP on inventory

GST impact: Companies face jail term for not reprinting revised MRP on inventory

GST:Ram Vilas Paswan

Consumer Affairs Minister Ram Vilas Paswan today warned of a fine of up to Rs 1 lakh, including a jail term, if new post GST rates are not printed on the inventory in the interest of consumers.

Manufacturers have been allowed to clear the unsold stocks by September with new MRP.

A committee of the consumer affairs ministry has been set up to address consumer grievances on GST and even helplines have been increased to 60 from 14 to address tax related queries, he said.

More than 700 queries have been received by the consumer helplines and the ministry has sought expert help from its finance counterpart to resolve them.

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“There are initial hiccups while implementing GST, but all those will be resolved soon. All ministries concerned, including finance and consumer affairs, are alert and a redressal mechanism is in place to resolve the concerns of consumers and traders,” Paswan told reporters here.

Under the GST regime, he said some prices of goods have fallen and some have risen.

“We have told companies to reprint revised rates on unsold goods. Stickers of new MRP should be pasted so that consumers are aware of the change in rates after GST,” he said.

It is mandatory to print revised MRP on the inventory, else stringent action will be taken for violation of the Packaged Commodities Rules, he warned.

Non-compliance of this will attract a fine of Rs 25,000 for first time offence, Rs 50,000 for second time and up to Rs 1 lakh penalty for third offence onwards and even imprisonment of up to one year, he told PTI separately.

India moved to the Goods and Services Tax (GST) on July 1. A relaxation was given to manufacturers and importers to reprint the new maximum retail price (MRP) after GST on the inventory to be sold by September.

Paswan also said the new rates to be printed on the inventory should be communicated to the consumer affairs ministry and advertised for better awareness of consumers.

Source :  Business Standard
GST impact: As car prices fall by way of up to Rs 3 lakh, check out which all grew to become inexpensive

GST impact: As car prices fall by way of up to Rs 3 lakh, check out which all grew to become inexpensive

GST Impact : car prices

Auto companies are adjusting the prices of their products after the government rolled out goods and services tax (GST) on 1 July.

Under the GST rates, cars will attract the top rate of 28 percent with a cess in the range of 1 to 15 percent on top of it.

While small petrol cars with engine less than 1,200 cc will attract 1 percent cess, that with a diesel engine of less than 1,500 cc will attract 3 percent cess.

Large cars with engine greater than 1,500 cc and SUVs with length more than 4 metres and engine greater than 1,500 cc will attract cess of 15 percent over and above peak rate of 28 percent.

Hybrid vehicles will also fall in the category under GST. In comparison, tax on electric vehicles has been kept at 12 percent. At present hybrid vehicles attract excise duty of 12.5 percent, similar to the ones on entry level small cars such as Tata Nano or Maruti Alto.

Earlier, the tax incidence on cars ranged between 28 percent and 45 percent. Under GST, the maximum rate is 43 percent.

Here’s how companies are reacting to the GST rollout:

Maruti Suzuki

The country’s top automaker Maruti Suzuki India (MSI) cut prices of most of its models by up to 3 percent. It has cut the price of the Alto in the range of Rs 2,300 to Rs 5,400, the WagonRRs 5,300-Rs 8,300 and that of the Swift between Rs 6,700 and Rs 10,700.

It has also reduced the price of the Baleno in the range of Rs 6,600 and Rs 13,100 and that of the Dzire ranging between Rs 8,100 and Rs 15,100.

Representational image. Reuters

Price of Ertiga petrol has been cut by up to Rs 21,800 while that of petrol powered Ciaz by up to Rs 23,400. The SUV Vitara Brezza has become cheaper by Rs 10,400-14,700, while the S-crossby Rs 17,700-21,300.

However, the Ciaz and Ertiga models with smart hybrid technology have become costlier due to withdrawal of tax concessions on mild hybrid vehicles under the GST. Diesel versions of the sedan Ciaz and MPV Ertiga with mild hybrid technology saw prices increase by over Rs 1 lakh.

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Toyota Kirloskar Motor

The company cut prices ranging between Rs 10,500 and Rs 2.17 lakh (ex-showroom Bengaluru).

It has reduced prices of all new Fortuner by up to Rs 2.17 lakh, Innova Crysta by up to Rs 98,500 and Corolla Altis by up to Rs 92,500, Platinum Etios by Rs 24,500 and that of Etios Liva by up to Rs 10,500.

However, the prices of hybrid variants Toyota Camry and Toyota Prius increased by Rs 3.5 lakh in Bengaluru and up to Rs 5.24 lakhs in Delhi as per applicable tax under GST.

Honda Cars India

The company cut the prices of its models by up to Rs 1.31 lakh.

The company has cut price of its hatchback Brio by up to Rs 12,279 and that of the compact sedan Amaze by up to Rs 14,825. It has slashed price of the Jazz by up to Rs 10,031 and that of its recently launched model WR-V by up to Rs 10,064.

The mid-sized sedan City has seen a reduction in the range of Rs 16,510 and Rs 28,005. The BR-V prices will come down by up to Rs 30,387.

The premium SUV CR-V has also seen a price drop of up to Rs 1,31,663.

Honda is yet to decide on the revised pricing of Accord Hybrid. The revised prices are for ex-showroom Delhi and will vary from state to state.


The company has cut the prices by up to 4.5 percent. The steepest cut will be in Mumbai with the company’s flagship SUV Endeavour becoming cheaper by up to Rs 3 lakh.

In Delhi, the price of Figo has been cut by Rs 2,000, that of the compact SUV Ecosport by up to Rs 8,000, and the SUV Endeavour by up to Rs 1.5 lakh.

In Mumbai, the prices will go down in the range of Rs 28,000 on the Figo to Rs 3 lakh on the Endeavour.

TVS Motor

The two-wheeler major TVS Motor Company has reduced prices of its models by up to Rs 4,150 to hand down GST benefit to customers.

Honda Motorcycle and Scooter India

The company has slashed prices of its products by up to Rs 5,500 depending on model and state

Hero MotoCorp

The company has cut prices by up to Rs 1,800. The company sells a range of bikes priced between Rs 40,000 and Rs 1.1 lakh. It said, in one or two states, such as Haryana, where the pre-GST rates were lower than the post-GST rate, the prices of a few models may go up marginally.


The German luxury car maker cut prices ranging from Rs 70,000 on base end version of X1 to Rs 1.8 lakh on the top end of its sedan 7 series.

However, the hybrid model i8 will witnessed a hike of Rs 4.8 lakh to Rs 2.28 crore.

Jaguar Land Rover

The Tata Motors-owned company has reduced prices of its entire vehicle range in India on an average by 7 percent.

The Jaguar portfolio in India includes XE with a starting price of Rs 34.64 lakh, XF starting at Rs 44.89 lakh, F-PACE Rs 67.37 lakh onward and XJ with a starting point of Rs 97.39 lakh (ex-showroom prices across India).

On the other hand, the Land Rover range includes the Discovery Sport starting at Rs 40.04 lakh, Range Rover Evoque at Rs 42.37 lakh upward, Range Rover Sport beginning at Rs 89.44 lakh and Range Rover with a starting price point of Rs 1.59 crore (ex-showroom in India).

Mercedes Benz

The company has cut prices of its vehicles produced in India by up to Rs 7 lakh.

Mercedes Benz India locally produces nine models — CLA sedan, SUVs GLA, GLC, GLE and GLS, luxury sedans C-Class, E- Class, S -Class and Maybach S 500 — which are priced between Rs 32 lakh and Rs 1.87 crore (ex-showroom Delhi).

The price reduction ranges from Rs 1.4 lakh on the CLA sedan to Rs 7 lakh on Maybach S 500. Price reduction varies by state between 2 percent to 9 percent and is dependent on current tax
structure and local body taxes of states, the company said.

Latest Updates on GST – Goods and Services Tax Info‎‎‎


Source: firstpost
GST impact: Insurance premium, bank charges to increase

GST impact: Insurance premium, bank charges to increase

GST Insurance

The impending implementation of GST would undoubtedly impact one’s personal finances especially when it comes to financial services, albeit marginally. From the present rate of 15 percent, the GST on banking, insurance and investments such as real estate, mutual funds will see a hike of 3 percent as the GST will now be 18 percent on them.

Let’s see how each of them gets impacted.

GST and Insurance
Primarily, there are three major kinds of life insurance products – Term insurance plans, Ulips and Endowments (including money back). The applicability of service tax (in the current format) on their premium is not similar in all three of them.

The premium paid in life insurance policies represents two portions – risk coverage and savings. The service tax is only on the risk portion of the premium and not on savings portion.

As per the GST rules, the value of services (on which GST is to be imposed) in relation to life insurance business shall be:

(a) The gross premium reduced by the amount allocated for investment, or savings on behalf of the policy holder.

(b) In case of single premium annuity policies, ten per cent of single premium charged from the policy holder.

(c) In all other cases, 25 per cent of the premium in the first year and 12.5 cent of the premium in subsequent years. So, if the premium of an endowment plan is Rs 100, the GST of 18 percent will be applicable on the 25 percent of the premium i.e.on Rs 25, so, Rs 4.5 will be the GST amount.

(d) If the entire premium paid by the policy holder is only towards the risk cover in life insurance such as in term insurance plans, the GST of 18 percent will be on the entire premium.

Therefore, the immediate impact of GST would be the higher outgo (premium plus GST) in term and endowment plans, due to the increase in rate of tax on insurance following implementation of the GST. “In theory, this could mean an increase of 3% in premium from the existing applicable premium effective from 1st July 2017, across life, health and general insurance, however, some of this should be offset if tax on services availed by the industry are allowed to be taken into account to decrease insurers’ tax paid,” says Mathieu Verillaud, Chief Financial Officer, Bharti AXA General Insurance.

The policyholders may stand to benefit only if the insurance companies are allowed the benefit of input tax credit. “This unfortunately is not clear as of yet given the complexity of the state/centre structure of GST, this might drive some confusion as well as higher compliance and administrative costs for insurers. If these are not passed on to customers, prices might either go up, or stay low but will affect the market’s solvency and financial health,” says Verillaud.

GST impact: Insurance premium, bank charges to increase

Similar will be the impact on general insurance such as car, health and other non-life policies i.e. service tax (when replaced by GST) will increase by 3 percent of the premium amount. This would increase total outgo (premium plus tax).

Impact : The overall impact could be nominal but once implemented, both, existing and new policyholders will have to bear the additional cost.If the current premium of a term plan is Rs 10,000, (excluding the service tax of 15 percent) the GST impact will up the premium including tax by Rs 300 i.e from Rs 11,500 to Rs 11,800. While, comparing premium especially of term plans, make sure you are looking at premiums including or excluding GST for all the insurers. Nothing changes in the selection process as the GST impact will be same across insurers. Stick to a proper selection process while getting the right insurance policy.

GST and real estate
Real estate sector is marred with plethora of taxes both at the state and central level. GST hopefully will put in a more streamlined tax structure in place. “The heavily taxed real estate sector welcomes a single stable 12% GST rate, inclusive of the value of land and with full input tax credits,” says Rajeev Talwar, Chairman, NAREDCO.

But, will the home prices be lower than they are now in the post GST era? “NAREDCO is of the view that the actual tax incidence under GST would match or be lower than the existing multiple indirect taxes on the sector. The GST rate for work contracts which will also be offset by input credits, will provide for a seamless and simplified tax policy”, says Talwar.

However, it seems arriving at a conclusion regarding price impact could be a bit premature. “The GST rate is not the only important factor. The abatement rules as applicable under the service tax regime and the input tax credit facility for developers will determine if the effective tax incidence on real estate is lower or higher under GST,” says Anuj Puri, chairman of JLL Residential.

According to Puri, here’s why it will take time to conclude if the GST is tax neutral or tax adverse for the real state sector, “Effectively, the composition scheme allowing for abatement against cost of land to the extent of 75% of the house cost for residential units priced under Rs 1 crore and less than 2000 sq. ft. makes the effective rate at 3.75%. In other cases, the abatement goes down to 70%, making the effective rate at 4%. This will go a long way in determining whether GST is tax neutral or tax adverse for real estate”.

The situation may not be same in the luxury segment. Surendra Hiranandani, Chairman & MD, House of Hiranandani says, “In the case of a premium development, the entire input tax credit is not sufficient to bring down the fresh tax liability to nil because of the taxes paid on other expenditures, having negligible impact.”

The actual impact may be few months away after the implementation of GST. “More clarity will prevail once the GST gets implemented and the government clears its stand on the abatement available for the land cost for calculating service tax on under-construction projects.” says Hiranandani .

GST and banking

Transaction fees in financial services are likely to increase as the government has put these under the 18% tax bracket in the new GST regime. These services were so far taxed at 15% and the hike in the tax rate means that individuals will have to pay Rs 3 more for every Rs 100 paid as charges/fees for banking transactions. It may be mentioned that recently several banks starting with SBI introduced or increased service charges for multiple banking transactions including cash withdrawals exceeding a certain number of times in a month.

GST and mutual funds
The impact of GST on the returns of mutual funds will be largely marginal. The levy of GST will be on the total expense ratio (TER) of the mutual fund. The TER, commonly known as expense ratio of mutual fund houses, will also go up by 3 per cent. Expense ratio is the measure of the cost incurred by an investment company to operate its mutual fund.

As per the SEBI guidelines, AMC’s can levy charge within the limits prescribed under the regulations. So, if the limit is say, 2.25 percent of total assets under management, the service tax of 15 percent has to be within it.

Impact : Let’s assume the return on equity (market return) is 15 percent when the scheme’s TER is 2.25 (regular scheme) including the service tax.This means, TER without tax is 1.96. Now, to maintain the same TER (as it is capped), at a higher GST rate of 18 percent, the TER has to be lower at 1.91 percent. The AMC’s may have to absorb this marginal difference unless SEBI increases the TER cap.

Even though the hike will be nominal, taken together for all the insurance covers, the increase in the outflow could be something to account for by many policyholders. For someone paying annual premium for car, household, health, term plan, personal accident cover, a total of say Rs 50,000 a year could see a jump in premium outflow by Rs. 1,500 a year, with no additional risk coverage or benefits. The actual impact of GST on financial services including banking, insurance will however, be known only once it gets implemented. As a policyholder and an investor, no change, as of now, is required to be made in advance when it comes to GST.
 Source: ET