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Government eyes one 18% GST rate, or dual slab of 12% & 18%

Government eyes one 18% GST rate, or dual slab of 12% & 18%

Dual slab GST

A little over two months after the launch of goods and services tax (GST), the Centre has reiterated its plan to shift to a single rate of 18 per cent, or a dual slab of 12 per cent and 18 per cent in the future, while advising states against seeking too many exemptions and periodic reduction in rates for products and services as it would impact the long-term objective.

At the meeting of the GST Council in Hyderabad over the weekend, the Centre sought to refrain states from seeking repeated revision in rates for goods and services in the top slab of 28 per cent and specific guidelines were circulated to the ministers, pointing out that states were forwarding a huge number of representations without prior examination. On Saturday, the GST Council reduced the rates for around 40 items, but most were mass consumption items.

The government had finalised a four-slab GST structure, including two standard rates of 12 per cent and 18 per cent, as it sought to shield households from a possible jump in prices even as it has faced criticism from economists for what they said was not a “perfect model”. The recent GST numbers have raised expectations of a rate cut in the future if the buoyancy is maintained but the government has said that it is too early to reach any conclusion.

possible are of convergence

For the moment, states have been asked to refrain from seeking too many cuts. The advisory has said that exemptions should not be sought as those may result in the chain for input tax credit breaking down. It has gone on to suggest that goods or services of local importance should be helped through subsidy instead of seeking an exemption or reduction.

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The government is also worried that manufactured products attracting zero GST will be detrimental to the `Make in India’ initiative as the imported rivals will not be subjected to countervailing duty and may turn out to be cheaper than locally made products. Further, states have been told that concessional levy, which results in finished product facing lower duty than inputs, will generate an additional cost for domestic dealers and put them at a disadvantage to imports.

States have also been advised that they should let prices settle down and input tax credit to flow seamlessly, and any further reduction should be sought after a “reasonable time gap”, of say three months.

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Source: ET
50 days of GST: Tough lessons learnt; road ahead looks good

50 days of GST: Tough lessons learnt; road ahead looks good

50 days of GST

Over the past 50 days, the transformative  GST (goods & services tax) has evolved at a very fast pace. Once the rollout became a certainty, the government and stakeholders have moved in fast to tweak rules, revise taxes and introduce new features in a bid to progress on the stated motto of making India a unified market.

Successive GST Council meetings, interactions with taxpayers and on-ground feedback have enabled smooth functioning of this new tax system that is young and still learning.

Over 71.30 lakh excise, service tax and VAT payers have migrated to the GSTN portal and over 15 lakh new assessees have registered on the platform.

Let’s look at the lessons from the past 50 days and understand the way forward.

Nifty-fifty days

While legislative provisions were framed before July 1, 2017, many of the practical solutions have been announced later. From the date of filing first GST returns, to dealing with trends like deregistration of brands post-GST to avoid taxes, to hike in luxury car cess, to changes in invoice rules – various enabling and implementation procedures and clarifications are being introduced along with the onset of GST.

Here is a brief assortment of important developments in the past 50 days:

• The government has notified the timeline for furnishing final tax returns for July and August under the GST regime. The GST Council had in June allowed businesses extended timeline for filing final GST returns in forms GSTR-1, GSTR-2 and GSTR-3 for July and August. In the interim period, businesses have to file GSTR-3B which is a summary of self-assessed tax liabilities with consolidated details of outward supplies and input credit.

• The GST Council in its 20th meeting decided to reduce the tax rate for job work for the entire value chain of textiles sector to 5 per cent. Alongside, it lowered rate for tractor parts to 18 per cent from 28 per cent. Also, the Council gave the in-principle nod to the e-way bill rules.

• The GST Council will soon start publishing rates of various products to prod companies to pass on gains, including those from input tax credit. To begin with, 150 items will be taken up. Once the rates of 150 items have been released, more items could be added later.

• The GST Council in its first review meeting since the implementation of India’s biggest tax reform since independence hiked the fixed cess on cigarettes by Rs 485-792 per 1,000 sticks, depending on the length of the stick. This is in addition to the 5% ad valorem cess which continues. The government has fixed a peak GST rate of 28% on cigarettes, with the cess being levied on top of the tax.

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Dynamic approach required

The quick and evolving nature of GST tax system has kept assessees on their toes for monitoring regular updates on various aspects with respect to GST. Hence, tax payers, be it trading houses to large global corporations, will be best-placed if they have a single window solution.

The approach needs to be a proactive one since the old way of reacting to changes slows down the compliance and may lead to temporary business disruptions. As the GST regime evolves, businesses that are open to new changes, and modifications around rates, processes and systems will ultimately be able to come out with flying colours.

With a deluge of tax-content and developments, a calculation-to-compliance approach enabled by technology will be necessary to accurately calculate GST based on the place of supply rules for the sale and acquisition of goods and services.

Given that transactions may be for intrastate, interstate, import, export, and stock transfer, it is important that the right logic be applied to enable CGST, SGST, and IGST calculations for domestic sales and purchases as well as imports and exports. Businesses will also need support for the Goods and Service Tax compensation fund cess on luxury and sin tax items.

Finally, perfect integration with the GSTN, supporting notifications, signatures and required validations are as important as automation of the import of data from existing ERP systems. Only a seamless and systematic approach, driven by technology and practical sense, can help a business furnish three returns a month and one annual return.

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Source :  The Economic Times
Here’s how a missing column in GST return form is creating trouble for India Inc

Here’s how a missing column in GST return form is creating trouble for India Inc

GST Return

A top conglomerate may have to shell out a bit extra in advance tax this quarter due to an unusual glitch in the tax returns form. Another Delhi-based firm, which does not want to bear any extra tax, may simply deduct the dues before the GST kicked in on July 1 and pay a smaller net amount.

The absence of a column in the new GST form for claiming credit on sales made before July 1 this year is causing a lot of worries for India Inc as the filing deadline for the first month of tax returns under GST comes up this week.

Many companies don’t know whether the government will rectify this problem by Friday, the deadline for filing returns, and are following different options for resolving the quandary.

Multinationals and some of India’s biggest companies are not taking into account past input credit while paying GST while smaller companies that can’t afford to let their working capital rise are paying the tax after deducting the input tax credit.

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“A procedural lapse by the government doesn’t take away companies’ right to what’s prescribed in the law. GST law prescribes that companies can adjust past credits with July and August liabilities,” said the CFO of a Delhi-based company.

Industry trackers, however, say that doing so may be “technically incorrect.” “Certain businesses may prefer being cautious and pay the tax for July and August without considering the opening credit balance, while other businesses would adjust the credit and pay the tax, leading to disparities in tax treat ment from the first GST return,” said MS Mani, partner, Deloitte Haskins & Sells.

The deadline for filing the GST Transition Credit Form, titled GSTTran 1, is September 28, while that of making payments for July and August is much earlier. There is no column in GSTR 3B form where companies can mention the advance taxes paid before July 1. The government had said last week that it would sort out the issue, but with just four days left for filing the GSTR 3B form companies are not waiting for clarification.

“Companies are puzzled by what they should be doing and why they could be required to fork out large sums as GST in July and August and the apparent inability of the government to simply permit the utilisation of the opening credit while computing the tax liability for July and August,” said a tax expert advising four of the biggest Indian companies.

Back of envelope calculations by two tax consultants show Indian companies may end up paying anywhere around Rs 13,000 crore more to government for July and August. If this happens, working capital costs are likely to rise across the board.

“There would be a significant impact on the working capital of several companies if they are not permitted to use the opening balance of credits. It does appear that the legislative intent of permitting carrying forward of credit from the earlier regime without any timing intervals has not been appropriately reflected in the GST returns for July and August,” said Mani.

The government may just see a windfall gain for July and August GST in advance tax collection thanks to this procedural lapse.

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GST Compliance Products Are Indian IT Industry’s Flavour of the Month

GST Compliance Products Are Indian IT Industry’s Flavour of the Month

India’s new Goods and Services Tax (GST), its biggest tax reform since independence, will unify a $2 trillion (roughly Rs. 12,94,715 crores) economy into a single market – and demand massive changes for small businesses that will have to go online to file their taxes.Major software and service players, IT companies and tax advisers are teaming up to market GST compliance products to firms large and small.

But the new requirements have also led to the emergence of boutique players offering to help firms connect to the new GST Network, the vast IT back-end system that will crunch up to 5 billion invoices a month.

Rahul Garg, a former Google executive, is positioning his e-commerce firm Moglix for the GST’s launch on July 1 when, at a stroke, at least 6 million companies will have to start filing taxes returns online.

Moglix, founded in August 2015 with $5.9 million (roughly Rs. 38.1 crores) in venture capital, is a marketplace for industrial equipment that links 200 large manufacturers and 40,000 small- and medium-sized enterprises, or SMEs. Garg will offer a GST compliance product to this ecosystem for free but also sees a wider opportunity.

“We’ll put it out as a commercial model that will be a no-brainer for all SMEs,” said Garg.

While a public-private partnership will run the GST Network, the design of the tax is creating a new class of businesses that enables firms to connect to this network through their secure data pipes.

Already, 34 of these so-called GST Service Providers, or GSPs, have been accredited. Another 160 have applied for accreditation – including Moglix.

The other key element of the GST’s architecture is the Application Service Provider, or ASP, a software interface that ensures invoices are properly formatted and reconciled with those of counterparties. In a bid to reach smaller businesses, some companies are marketing “bundled” software that includes both ASP and GSP solutions.

gst compliance infographic

GST Challenge
India’s GST is the world’s most complex, with four separate tax rates for different classes of goods and services: 5, 12, 18 and 28 percent. Firms must file three tax returns a month. For those operating across state lines, the compliance burden can quickly multiply.

Major IT companies like SAP, Oracle or Microsoft are providing consulting and software “patches” that enable their bigger clients to manage the transition to the GST.

Microsoft has teamed up with tax firm EY to offer DigiGST, a cloud-based solution, while HP Inc has linked with KPMG to sell a GST laptop with two years’ support for a flat fee of Rs. 33,990 ($530).

GST Network head Prakash Kumar, for his part, wants many service providers to step up so that compliance costs stay low and to avoid market monopolies.

“The market has to take care,” he told a recent GST seminar. “Let’s get out of this ‘Licence Raj’ situation.”

SAP, which reckons that its systems will handle 40 percent of all invoices uploaded to the GST Network, is working with larger clients to get their sales, procurement, manufacturing and supply chain GST-ready and compliant.

SAP also offers products for smaller firms but says it is also “GSP agnostic”, meaning it is willing to connect with new market entrants, like Moglix.

Neeraj Athalye, head of SAP’s GST adoption drive, sees many smaller firms that adopt basic GST packages graduating, eventually, to SAP’s premium range.

“Although they have a competing solution, the reason we have decided to go together is because, jointly, we have a more compelling reason to work together,” said Athalye.

© Thomson Reuters 2017

Traders, businesses learn the ABC of GST as roll-out deadline nears

Traders, businesses learn the ABC of GST as roll-out deadline nears


With just three weeks left for the roll-out of the goods and services tax (GST) from July 1, millions of traders and businesses, including big and small, are making a beeline for classes to learn the ABC of the new tax system.

Industry bodies, such as the Confederation of All India Traders (CAIT) and the Retailers Association of India (RAI), are organizing nationwide classes to teach people the nitty-gritty of the GST and how to become GST-compliant.

According to industry experts, while the value added tax (VAT) was not a tech-heavy tax regime and did not have many implications for businesses, the GST is based on technology and has a complex structure. “For traders who might not be very tech savvy and have problems understanding the tax intricacies, it is important we provide them with some hand-holding,” said Praveen Khandelwal, secretary general, CAIT.

The classes elaborate the various rules affecting a particular sector under the new regime, offer on-ground guidance from GST consultants and provide information on software to be used for filing taxes, among other things.

The trader body, which is going to organise as many as six “mega classes” all over the country over the next month, plans to make at least one lakh traders GST-compliant. “We will organise one class each in north, south, west, east, centre and northeast. We already have sponsors lined up to finance these events. The classes are divided into theoretical training and crash course in software, among other things. Not only that, we will teach them how to incorporate use of digital payments in the GST regime,” Khandelwal said.

CAIT, in association with Acer India and Tally Solutions, launched on Tuesday ‘BIZGURU’, a plug-and-play business solution for seamless transition to the GST.

RAI is also organising interactive sessions on the GST in Mumbai and Delhi, with a view to educate the retail fraternity. The sessions will help retailers eliminate hurdles in compliance of the GST rules. It has also started providing help via its official website.

“Members of RAI deal with a variety of goods and services as they represent various retail formats. As they move into a new and complex regime, a help desk, with seasoned experts on the panel, will help extract collective wisdom and ease the move towards GST,” said Kumar Rajagopalan, chief executive officer, RAI.

Many industry bodies are also organising sector-specific GST workshops to ensure that any ambiguity attached to a particular business is addressed. The Associated Chambers of Commerce and Industry of India (Assocham) and Videocon recently organised a GST summit for retailers and traders dealing in consumer durables and electronics. Assocham plans to take this programme to various cities in the next few weeks.


Source : Business Standard
Indian economy likely to grow at 7.2% this fiscal: World Bank

Indian economy likely to grow at 7.2% this fiscal: World Bank

The World Bank on Monday said the government’s November decision to withdraw high-value currency notes may have a disproportionately high impact on the poor and vulnerable while its decision to implement the goods and services tax (GST) will be equitable without any negative impact on the poor.

“Demonetization affected poor and vulnerable households, in all likelihood having an impact on construction and informal retail, where many poor and vulnerable individuals work. While limited data is available, there has been an increase in demand for guaranteed employment, and indicators of rural consumption contracted sharply in November, before recovering,” the multilateral lending agency said in its India Development Update released on Monday.

Although the informal economy may account for only 40% of GDP, it employs 90% of India’s workers, and the disproportionate impact of demonetisation on India’s informal sector suggests that it would have affected those workers the most. The poor and vulnerable are more likely to work in informal sectors (farming, small retail, and construction), and less able to move to non-cash payments,” the World Bank said.

However, it said if the government takes complementary measures, in the long-term, demonetization has the potential to accelerate formalization of the economy, increase tax collection and allow greater digital financial inclusion.

The Bank has projected economic activity to accelerate to 7.2% in 2017-18 against the government’s estimate of 7.1%. The Central Statistics Office will release the revised GDP estimate for 2017-18 on Wednesday, including the new industrial production and wholesale price inflation series data.

In later years, growth is projected to accelerate gradually to 7.7% by FY20, underpinned by a more meaningful recovery in private investment following the recent push to accelerate infrastructure spending, concerted efforts to improve the business climate and (eventually) less leveraged corporate and financial balance sheets “crowd in” the private sector, the Bank said.

Lamenting the low female labour force participation rate in India (120th among the 131 countries), the World Bank said India’s potential GDP growth can go up by a full percentage point if half the gap in the female labour force participation rate with Bangladesh or Indonesia, is closed.

The Bank said the implementation of a multi-tier GST starting 1 July will play an important role in transforming the Indian economy and lead to substantial economic gains.

“The fact that India can achieve a major reform of indirect taxes without increasing the burden on the poor is in itself an achievement. Adding to this, the efficiency gains that the tax will achieve and the fact that the information generated through the GST on spending patterns will facilitate enforcement of personal and corporate income taxes, the impact of the GST introduction on equity and poverty should be positive,” it said.