Category: GST

GST: India’s Great Migration Challenge

New Delhi: Amid all the lobbying in fixing goods and services tax (GST) rates and with the 1 July implementation deadline fast approaching, businesses are busy completing the migration process. Businesses have to migrate from the present value-added tax (VAT), service tax and central excise registration to a GST registration.

Out of 84 lakh entities, 60.5 lakh have registered with the GST Network (GSTN), said a recent finance ministry statement. The enrolment window, which was suspended on 30 April, has been reopened on 1 June for 15 days.

However, it should be noted that those already registered under the GST portal can migrate. Fresh registrations are yet to begin.

Given the very large number of assessees and the plethora of details required to be furnished, migrating to a new tax regime was never going to be a cakewalk. As anticipated, there are a slew of challenges businesses are facing, the most common being of integration and upgradation of existing IT infrastructure to make it GST compliant, tax experts pointed out.

Though there is a certain level of IT enablement even today in excise and service tax, GST will significantly enhance the dependence on the IT interface. While larger organizations are better equipped to overcome this hurdle, small and medium sized enterprises are struggling.

Manual invoicing will soon be a thing of past and even completion of the migration process is an additional task requiring new manpower and costs.

The not-so-user-friendly migration process and inability of the GSTN to bear the load of data at certain times is giving businesses a tough time, tax experts said. The government is firm about GSTN being completely prepared to deal with the sea of data, but it would be interesting to see how things pan out post 1 July.

Secondly, large businesses now have to ensure that not only them, but their vendors too are registered on the GST network.

“This is a key challenge while migrating because dealing with non-registered vendors would increase the compliance burden, affect ability to claim input tax credit and impact compliance ratings,” M.S. Mani, senior director-indirect tax, Deloitte Haskins & Sells LLP, said.

Further, many companies may have to rework long-term contracts with customers and standardize them while migrating to GST. “This may not be acceptable to their customers and hence an elongated negotiation cycle would begin. Re-framing a large number of contacts is certainly a difficult task,” he added.

Also, between service providers and manufacturers, the former are likely to face larger migration challenges than the latter, mainly because manufacturers are used to a slew of indirect taxes and registrations, but service providers in the pre-GST era were not used to dealing with state authorities, with many of them having a centralized service tax registration. Registration at multiple locations comes as a bigger hurdle for them, tax experts said.

To conclude, for a country of our size, migrating to a unique and customized GST regime is nothing less than historic. Though beneficial in the long-term, a run up to GST implementation has led to near-term supply-chain disruption. Complex rules and rate structure are sure to increase the compliance burden, especially for small and medium companies and the jury is still out whether GST will really improve the ease of doing business in India.

Centre, States May Settle For 4 Percent GST on Gold, Silver

NEW DELHI: The Centre and the states may settle for 4% goods and services tax (GST) on bullion and opt for a special rate for financial services, amid intense lobbying from the two sectors in the run up to the rollout from July.

In addition, the GST Council — the apex decision-making body comprising state finance ministers and headed by Union finance minister Arun Jaitley — is discussing whether to include handloom and handicrafts as well as bidis in the tax net, although the house is still divided.

Sources told TOI that bidis, which are currently exempt, may be brought under the net as they are sin goods, like cigarettes, which will face a cess. Cigarette companies have been arguing for a while that bidis should also be subjected to high taxes but there is a lobby that has been making a case for keeping it out, given that thousands depend on it for livelihood.

A similar case is also being made for handloom and handicrafts, where some of the states as well as the textiles ministry is in favour of either exempting them from GST or keeping them at zero rate. But there is an equally powerful argument to ensure that GST of 5% is levied. Sources also said that in case of gold and silver the southern states are in favour of a 6% levy, considering some of them levy up to 5% VAT. In contrast, some of the western states are keen on a low levy of 1% or so. While slabs for goods were finalised by the GST Council, bullion and services were kept out of the decision.

Revenue secretary Hasmukh Adhia recently indicated that there may be two rates for services, although he refrained from disclosing the levels. Experts believe that certain services may be put in the 18% bracket with a lower levy of 12% on others.

In addition, sources said, a special dispensation may be made for financial services — such as banking and insurance — which has been lobbying with the GST Council for a simpler regime, including an exemption from state-wise registration.

The decision on rates is expected at the next meeting of the GST Council, scheduled in Srinagar on May 18 and 19, where product-specific levies are expected to be finalised along with rules that will govern the new tax regime. The commerce ministry is also keen that some of the concerns such as refund of taxes to exporters be reworked.

http://timesofindia.indiatimes.com/business/india-business/centre-states-may-settle-for-4-per-cent-gst-on-gold-silver/articleshow/58635963.cms

GST: Tax Headache in India Is a Bonanza for Global Accounting Firms

What is taxing for some in India has become brisk business for others.

With seven weeks to go before the nationwide Goods and Services Tax is implemented, Indian companies are rushing to bring in experts to help prepare their accounting and information technology systems for the tax-system overhaul. That’s created a windfall for international professional services firms, including PricewaterhouseCoopers LLP and KPMG LLP.

Providing advice on everything from taxation regulations to business finance will generate as much as 150 billion rupees ($2.3 billion) in extra consulting fees, according to a council member of India’s accounting regulator, the Institute of Chartered Accountants of India. PricewaterhouseCoopers said it’s pulled in a specialist from Australia to help bring Indian companies into compliance with the new taxation regime, which starts July 1.

“We are helping our clients’ transition to GST in phases,” said Pratik Jain, a partner leading the firm’s indirect taxes arm in India, in a telephone interview. The firm has a team focused on GST-driven demand that’s drawing on advice from abroad “plus a pool of international experts when needed,” he said.

Representatives from Ernst & Young LLP and KPMG said they are also fielding calls for help from businesses struggling to assess the impact of the GST’s implementation and how best to implement computer-based systems to manage their supply chain, procurement and accounting processes.

KPMG India

KPMG India has a team of more than 1,100 people with skills across GST, IT and supply chain management to support about 400 clients from a wide range of industries transition to the new tax system, said Sachin Menon, a partner and the firm’s national head of indirect taxes. International experts have also been drawn in to help clients, he said.

The complex process of converting an economy with more than 1 billion consumers into a unified, common market has bolstered demand for enterprise resource planning, or ERP, said Ashish Mittal, co-founder of EasemyGST, an IT service provider in Gurugram near Delhi.

“We are in touch with 1,000 companies of which half have agreed to go with us,” Mittal said. About 200 inquiries were from medium to small businesses, he said.

Helping companies be fully compliant with the new system is difficult, as detailed guidelines aren’t yet available to provide the necessary clarity, PricewaterhouseCoopers’ Jain said.

“Corporate clients want more detailed guidelines and illustrations based on specific sectors,” he said. So far, clients have indicated that guidelines for getting credit for taxes paid are more restrictive, and lack of clarity on registration of taxpayers with multi-state operations is “a huge issue” under the new system.

More Clarity

Rules and specific rates of taxation aren’t yet finalized, according to the council member of the Institute of Chartered Accountants of India, who asked not to be identified because only the institute’s president is authorized to speak to the media. Without more granular detail, it will be impossible for organized industries to comply from July 1, let alone India’s 40 million small-scale enterprises, 70 percent of which are unorganized and haven’t started the process of readying their businesses the member said.

India has about 300,000 sales-tax accounting practitioners who help mostly small businesses file returns and comply with tax laws. In addition, there are 150,000 chartered accountants employed in India of which 80,000 need to be trained, the member said.

Businesses with more than 10 billion rupees in revenue typically spend 6 million-to-10 million rupees on accounting services, representatives of two accounting firms said. This cost will probably double at least in the first year of the GST’s implementation, they said.

Assam Assembly Passes GST Bill

Guwahati, May 11 () Assam Assembly today passed the GST Bill, paving the way for introduction of single taxation system by eliminating levies by multiple authorities.

The Assam Goods and Services Tax Bill, 2017, which had been tabled on Monday, was passed unanimously by the Assembly in a three-day special session to pass the bill.

“The GST will be a win-win for all the three stakeholders — country, state and consumers,” Assam Finance Minister Himanta Biswa Sarma said.

Presently, inflation was likely to fall by 0.5 per cent and after fourth year, the state’s revenue would increase substantially and stabilise possibly after 10 years, he said adding that five/six taxes would be abolished.

Corruption was likely to go down with introduction of GST as everything would be computerised and manual interference would almost be abolished, the minister said.

Former chief minister Tarun Gogoi said that Congress supported the GST Bill, but there were some concerns like the fate of local small industries on the face of free flow of goods from outside after withdrawal of entry taxes.

Chief Minister Sarbananda Sonowal termed the day as historic.

“Today is a historic day for Assam as the GST Bill has been passed in the state assembly which will go a long way in promoting the spirit of cooperative federalism in the country,” Sonowal said at a programme outside the Assembly.

This would also ensure transparency in governance and lead to economic growth, he said.

http://timesofindia.indiatimes.com/business/india-business/assam-assembly-passes-gst-bill/articleshow/58637172.cms

Andhara Pradesh State ready for GST: Commissioner

Centre will compensate loss of Rs. 2,600 crore per annum for 5 years

Andhra Pradesh is geared up to migrate to the Goods and Services Tax (GST) regime expected to be rolled out on July 1 from the existing Value Added Tax (VAT) system, according to Commercial Taxes Commissioner J. Syamala Rao.

Addressing a press conference here on Wednesday, Mr. Rao said the AP was one of the top States in terms of preparedness for the GST with 92% of traders enrolling themselves to migrate to it.

There were 2.5 lakh dealers registered with the government. Of this, about 70,000 dealers had turnover less than Rs. 20 lakh.

The dealers whose turnover was above Rs. 1.5 crore would be covered under the GST. About 5,000 dealers with turnover less than Rs. 20 lakh and were into the service sector would also come under its purview, he said.

The Commissioner said the government was expecting a loss of Rs. 2,600 crore per annum due to the regime. The Central government would compensate it for the next five years.

The loss would have been another Rs. 600 crore but for the State government’s efforts relating to taxation on territorial waters.

 

http://www.thehindu.com/todays-paper/tp-national/tp-andhrapradesh/state-ready-for-gst-commissioner/article18422988.ece

Levy 5% GST on budget hotels, say stakeholders

PANAJI: Small-hotel owners called on chief minister Manohar Parrikar on Thursday urging him to ensure that a low tax rate of 5% was levied on budget hotels under Goods & Services Tax (GST) instead of the 18% that is likely to be levied on the service sector.

The hoteliers, backed by the Federation of Indian Chambers of Commerce and Industry (FICCI), said that a low tax rate would ensure that the tax burden was not passed on to the customer.According to industry stakeholders, budget category hotels, which charge a tariff of less than Rs 2,000 per room night comprise 80% of Goa’s hotel market.

“We want to be a part of one-nation-one-tax regime. We just don’t want it to happen at the cost of our business – there is no way the budget hotel industry will be able to sustain a high GST slab,” said Randhir Thakur, proprietor of Sodder’s Renton Manor.

The Union government has invited representations to hear concerns and feedback from the industry ahead of a critical discussion on GST during the third week of May.

Hoteliers stated that low tax rates will significantly increase foreign and domestic travel in India and that budget hotels are a source of gainful employment for thousands of people.

http://timesofindia.indiatimes.com/city/goa/levy-5-gst-on-budget-hotels-say-stakeholders/articleshow/58634794.cms

Series of lessons on GST for twin city traders

Noida: With the Goods and Services Tax (GST) regime set to roll out from July 1, the Federation of Trade, Industrial and Jewellers Association (FTIJA), Gautam Budh Nagar, an umbrella body of traders and jewellers in the twin cities, will start a series of workshops for traders and market owners across Noida and Greater Noida this week.

Titled, ‘GST Ki Pathshala’, the series aims to educate traders and market owners about the benefits of GST and the adjustments that they will have to make during the introduction of GST. The workshop is also designed to address the concerns of traders from at least 50 markets across Noida and Greater Noida.

“The GST regime is set to usher in smoother transactions. In these workshops, we will explain how businessmen of different categories are going to benefit from GST. Small set-ups with a turnover of less than Rs 20 lakh are exempted from GST; but those who fall under its regime should know the subtle details of utilising various benefits and concessions in the regime,” Sushil Kumar Jain, chairman, FTIJA, said.

Jain said the traders could significantly increase their profitability by implementing the GST norms in their business. “The mid-level businessmen are yet to understand the practical consequences of the GST implementation,” Jain said.

http://timesofindia.indiatimes.com/city/noida/series-of-lessons-on-gst-for-twin-city-traders/articleshow/58601544.cms

What to Expect When GST Rates Are Announced

While details have not been announced, essential items including food, which presently constitute roughly half of the consumer inflation basket, will be taxed at zero rate.

The Goods and Services Tax (GST) will be levied at several rates ranging from 0 to 28 percent. GST Council has finalised a four-tier GST tax structure of 5 percent, 12 percent, 18 percent and 28 percent, with lower rates for essential items and the highest for luxury and ‘demerit’ goods that would also attract an additional cess.

Service tax will go up from 15 percent to 18 percent.

While details have not been announced, essential items including food, which presently constitute roughly half of the consumer inflation basket, will be taxed at zero rate.

The lowest rate of 5 percent would be for common-use items – usually items of mass consumption.

There would be two standard rates of 12 percent and 18 percent into which the bulk of goods and services would fall. Most commonly used items as well as household items would fall under these two categories.

The highest tax slab will be applicable to ultra-luxuries, demerit and sin goods (like tobacco and aerated drinks). The demerit goods will attract a cess for a period of five years on top of the 28 per cent GST.

The GST will subsume the multitude of cesses currently in place, including the Swachh Bharat Cess and Krishi Kalyan Cess and the Education Cess. Only the Clean Environment Cess is being retained.

The collection from the GST cess as well as that of the clean energy cess would create a revenue pool which would be used for compensating states for any loss of revenue during the first five years of implementation of GST.

The principle for determining the rate on each item will be to levy and collect the GST at the rate slab closest to the current tax incidence on it.

In addition to compensating the origin states for any loss in revenue that may incur on account of the introduction of GST, it is proposed to levy a 1 percent additional tax on the interstate sale of goods for a period of two years (or such other period as may be recommended by the GST Council). This levy is not in line with the objectives the GST regime seeks to achieve, i.e. fungibility of input credits and removal of tax cascading.

Commodities to not fall under GST

Alcohol for human consumption will not fall under the purview of GST in India at present.

Petroleum crude, motor spirit (petrol), high speed diesel, natural gas and aviation turbine fuel etc. will not attract GST.

Electricity has also been kept aside from the purview of GST at present.

The Central-GST and Integrated-GST Bills passed by the Lok Sabha extend to the whole of India, except J&K. Article 370 of the Constitution grants special autonomous status to J&K and Parliament has power to make laws only on defence, external affairs and communication related matters of the state. The J&K Assembly will have to pass a legislation saying the two laws are applicable to the state.

Will GST lead to profiteering?

The GST law contains an anti-profiteering clause that mandates that a manufacturer and others in the supply chain have to pass on the benefits arising out of input credit and lower taxes to consumers or face penalty.

An anti-profiteering authority in a GST regime is not unique to India (Australia and Malaysia also have it) but clarity on the calculation, time-frame, penalties, etc. is awaited. Officials have clarified that this will be a transitional mechanism that will be required in certain sectors, which can tend to be oligopolistic.

How will tax holidays be treated under GST?

GST does not have any provisions for tax exemptions and the central government and individual states will have to reimburse the exemption amounts under extant excise and VAT exemption schemes.

How will goods move under GST?

Under GST, e‐way bills will need to be issued before goods are dispatched. It would be important to carry e‐way bills for the goods in transit as an authorised officer could intercept the conveyance/trucks to verify e‐way bills. This will ensure that unaccounted/non-tax paid goods are disallowed and restricted from moving easily.

As the name suggests, an e-way bill is an online bill that will be used for inter-State supply of goods under GST. It will provide details of the consignor and the consignee as well as the origin and the destination of the cargo.  Eventually, to eliminate the physical checks, the Ministry has suggested using the ‘Vahan” and vehicle registration number databases as well as RFID tags to establish the identity of the vehicles.

What is the treatment of pre-GST goods?

The draft GST rules has clarified that as a part of transitional provisions, full VAT credit balance will automatically become part of the opening balance availed under GST. Further, for goods lying at warehouses on which excise duty is paid, excise duty so paid would become part of the opening GST balance. However, if the excise value is not ascertainable then 40 percent of CGST otherwise payable on goods will be considered for the purpose of opening the GST balance.

How will GST be levied on services?

There is still ambiguity about some areas like GST on services as consumption of services can be at a different location. An individual from Maharashtra can always avail of banking services in Delhi. Over time, we hope to clarify such finer points as well.

 

http://www.moneycontrol.com/news/business/companies/what-to-expect-when-gst-rates-are-announced-2275765.html

GST to help drive new-age warehouses for India Inc’s ambitions

MUMBAI: New-age warehousing and logistics in India would be midwifed by the Goods and Services Tax (GST), which also aims to transform the South Asian nation into an integrated market for the first time since Independence.

Small and often ill-equipped storage space in the country would now give way to neatly stacked, air conditioned warehouses, with higher levels of automation, as India ushers in the biggest tax reforms since 1947. And driving the change in India’s supply chain landscape are the consumer goods companies, such as Hindustan Unilever, Glaxo Smithkine, and Johnson & Johnson.

These companies are now putting out tenders for consolidating their supply chain operations into bigger warehouses. The new facilities will now cover about 450,000-500,000 square feet of space, almost five times the biggest warehouses in India right now. Logistics majors such as DHL, Allcargo and Mahindra Logistics are leasing bigger logistics spaces, while real estate developers such as Everstone Group’s IndoSpace are investing billions in building bigger storage facilities.

Big Investments, Bigger Facilities

The Indian supply chain arm of the Deutsche Post DHL Group, the world’s largest logistics company, is investing EUR150 million in more than doubling its warehousing space in the country to 7 million square feet. IndoSpace, India’s top builder of such facilities, is investing $1 billion to set up 30 million square feet of warehousing space in the country. IndoSpace is a venture of the Everstone Group and Realterm Global. Mahindra Logistics is leasing 1 million square feet of warehousing space: Avvashya CCI Logistics, the joint venture of the group that owns Allcargo with CCI Logistics, is almost doubling warehousing space to 5.5 million square feet in the next few years.

“There is a major spell of consolidation in the warehousing segment right now,” Pirojshaw Sarkari, CEO of Mahindra Logistics told ET in a recent interview.

“Historically, all warehousing was based on tax laws. That meant that in nearly every state, a company needed to have a warehouse, which was more of a godown. Otherwise it would have to pay central sales tax and state sales tax. Post GST, with a uniform tax structure, large-format modern warehousing will come up in a big way. And they will be closer to consumption centres,” he added.

The historic tax overhaul announced by the Narendra Modi government last year seeks to replace at least seven indirect tax heads including countervailing duty, special additional duty of customs, excise duty, service tax, central sales tax, value added tax, octroi and state cesses with one tax on goods and services.

One Nation, One Tax

Under the new tax regime, a centre and state GST will be levied on a common base of goods and services and an intergrated GST will be levied on inter-state transactions. It seeks to obliterate the multiplicity of taxes, mitigate cascading tax impact, do away with multiple check-posts thus ensuring smoother transportation, make for seamless credits and rationalize the warehousing structure in the country, while improving cargo transportation standards.

FMCG companies are taking the lead on the warehousing side. Mahindra Logistics recently won a bid to manage a 250,000 square feet of warehousing space at Vapi, Gujarat, for Hindustan Unilever, said Sarkari. GSK and Johnson & Johnson have put out tenders to consolidate warehousing functions, he added.

A spokesperson of Hindustan Unilever said it had “no specific comment to offer”. Emails sent to GSK and Johnson & Johnson remained unanswered when the report was sent for publication.

“The consolidation will incentivize the holding of inventory at select locations,” said V Balaji, CEO contract logistics at Avvashya CCI Logistics. The exercise will potentially lead to a 15%-18% savings in logistics costs for a company, he said.

Balaji said FMCG companies currently have more than 60 warehousing facilities scattered across the country. Those will be clubbed to 12-16. Avvashya CCI currently has 23 warehouses in the country. That number will remain the same even though the space will increase two-fold.

Beyond Consumer Goods

Companies from other sectors are getting into it too. Vodafone, for instance, clubbed its entire warehousing functions of seven different circles in the western region to one mother warehouse in Pune, said Sarkari, whose company got the contract. In Vodafone’s case, the scope of the project also included redesigning the warehousing structure, which meant Mahindra and consultant Ernst & Young also had to map a whole new hub and spoke warehouse network, he added. Vodafone India didn’t respond to emailed queries.

Property developers were the earliest to sense the change in trend.

“As a company, we have always focused on a post-GST scenario and generally stuck to building large warehouses up to 500,000 square feet. Recently, we have seen a pick-up in demand for such facilities among our customers. What GST does is remove the punitive nature of the current structure and the biggest benefit will be in terms of reduced operating costs,” said Brian Oravec, CEO IndoSpace, which has 24 logistics parks across the country.

More companies in the automotive space are now looking at setting up stockyards to stack up vehicles instead of transporting them straight to the dealerships from manufacturing centres. The shift will lead to higher standards in automation with some investments towards robotics.

 

http://economictimes.indiatimes.com/industry/transportation/shipping-/-transport/gst-to-help-drive-new-age-warehouses-for-india-incs-ambitions/articleshow/58605148.cms

Goa Assembly passes state GST bill

Goa Assembly today passed the state Goods and Services Tax (GST) Bill with Chief Minister Manohar Parrikar expressing hope that the state would not face any major losses under the new tax regime.

The Parliament had on April 6 passed four legislations to pave the way for nationwide roll-out of GST from July 1.

“Goa will not face any major loss after the implementation of the GST. Even if we suffer any losses, the Union government will compensate for it,” Parrikar told the House, after tabling the bill.

Later, the bill was passed unanimously by the house, which convened a one-day special session for that.

The Chief Minister said Goa has reasonable or lesser taxes as compared to the rest of the country due to which the implementation of GST would become easier for it.

“With the implementation of the GST, the entertainment tax, value-added tax and additional Customs duty would be a thing of the past,” he said.

Admitting that there would be initial hiccups in implementing the GST bill, Parrikar said it is going to be a boon to several sectors including tourism, which is one of the prominent industries in the state.

Parrikar said he was lucky to be a part of the discussion on GST in the parliament during his tenure at the Centre as defence minister.

“I am lucky to participate in the discussions on GST in the parliament and also now in Goa Legislative Assembly,” he said.

He said during the first year of the implementation of the GST, Goa will gain around Rs 600-1,000 crore due to the implementation of the new tax regime.

The GST will force losses to the tune of Rs 700-800 crore on the state exchequer, but Goa will gain Rs 12,000 crore through new tax regime, he said.

“Goa will be a net gainer,” Parrikar said.

He said that nearly 18,000 small traders who registered with the state government would be educated about it (GST) by holding camps in June month this year.

Special camps for traders would also be held between May 15 and 22 this year, he said.

The opposition also supported the bill on the floor of the house.

“There will be teething problems in implementing this new tax but it is going to be a revolutionary movement for the state,” former Chief Minister Digambar Kamat (Congress) said.

The Congress party supported the implementation of GST bill but said the government should consider its financial implications.

 

http://www.moneycontrol.com/news/business/economy/goa-assembly-passes-state-gst-bill-2274427.html