Category: GST

NEW DELHI: Indian venture capitalists and private equity firms that pumped $15 billion into companies in 2016 are wary that come July, when the goods and services tax (GST) rolls out, their representatives/directors could be vulnerable to tax dues of investee companies even retrospectively.

The new law gives tax authorities the right to extract the full claim with interest and penalties from these directors exposing their personal assets and property to the risk of confiscation. This can happen only if it is proven that the non-recovery is attributed to gross neglect, misfeasance or breach of duty by the directors.

For instance, if company A, in which a fund Y invested in March 2016 and appointed a nominee on its board, were to receive a notice from the tax authorities in August this year for an unpaid claim pertaining to the financial year 2015, the nominee directors of fund Y are liable to satisfy the claim amounts if the company is unable. Otherwise the directors have to prove that they were not guilty of negligence, misfeasance or breach of duty.

These provisions incorporated in Section 89 of the Central Goods and Services Tax Act have the industry divided over its interpretation with some experts saying it does not clearly classify which category of directors would be liable. Others say that they contain only minor variations from previous laws and can be defended in court if punitive actions were to be imposed.

“This is a very draconian provision buried in an otherwise very welcome legislation and very retrograde for the ease of doing business objective of the government,” Avinash Bajaj, managing director of Matrix Partners, which manages $600 million in a combination of venture capital investments, said. Matrix Partners funded companies such as cab-hailing app Ola, online classifieds platform Quikr and Treebo Hotels among a dozen other investments in India.

http://economictimes.indiatimes.com/news/economy/policy/vcs-pes-fear-taxing-times-for-directors-under-gst/articleshow/58368618.cms

Revenue Secretary Hasmukh Adhia on Tuesday held out the assurance that prices of goods and services will not see an increase under the Goods and Services Tax (GST) regime.

For instance, goods that currently have a tax incidence of 32 per cent will be taxed at about 28 per cent under GST, he told reporters at a GST Conclave organised by the Finance Ministry.

“Almost 60 per cent of the income of the Centre and the States comes from items that attract 14 per cent value added tax and 12.5 per cent excise duty. There will be a likely decrease on the tax on each of these items under GST,” he said, adding that GST will reduce the cascading of taxes and help ease inflation.

In the case of services, which will see a higher tax of 18 per cent under GST (as against the 15 per cent service tax rate now), Adhia said the tax incidence will be the same. This is because a majority of the services will get input tax credit on purchases and the overall tax incidence will remain the same. This will be especially so in the case of banks and insurance companies.

“There could be a marginal increase of tax for some services,” he said.

Adhia also stressed that the government plans to roll out GST from July 1 and urged industry and trade not to be complacent.

The government will try to finalise the rates of tax for each item at the earliest, he said.

The GST Council, chaired by Union Finance Minister Arun Jaitley, is scheduled to take up fitment of commodities in the four-tier rate structure under GST at its next meeting on May 18 and 19.

Meanwhile, to reflect the integrity of businesses towards timely payment of taxes and filing of returns, each registered taxpayer under GST will be given a ‘compliance rating’.

Adhia said the rating will be based on their track record.

Adhia also said that GST will give a big fillip to domestic manufacturing and the Make in India programme as it will equalise the tax treatment for both imports and domestic products. Imported goods will attract Integrated GST (IGST) for which credit can be claimed at the time of sale.

Similarly, for locally manufactured goods, a similar GST rate will be applicable and hence, there will be no advantage for the imported goods, he said. “IGST is just an interim tax or a washout tax, which is equivalent to the GST rate on a specific product,” Adhia added.

http://www.thehindubusinessline.com/economy/no-significant-hike-in-tax-burden-under-gst-revenue-secretary/article9662453.ece

As GST is a destination-based levy, states will not be able to waive it to encourage industry

With the goods and services tax (GST) being destination-based, states might be unable to provide incentives to encourage local industry.

At the GST Conclave in New Delhi, Revenue Secretary Hasmukh Adhia on Tuesday said, “States are wondering how to continue with promised benefits. Any incentive has to be by way of the Budgets.”

States offering the incentives might not even be able to collect taxes, he added. In inter-state sale of goods, the destination states would collect the tax.

Some states currently offer incentives through refunds. As the value-added tax is origin-based, some states pay back the producers, irrespective of whether or not goods move out of the state.

Once the new indirect tax regime is rolled out, states may only be able to offer business-to-consumer (B2C) incentives, but not business-to-business (B2B) ones.

Adhia gave the example of goods produced in Gujarat but consumed in Bihar “What right will Gujarat have to forgo the tax of Bihar?” he said.

The Centre would continue with area-based exemptions to hilly and Northeastern states by way of refunds, the revenue secretary said.

Pratik Jain, leader, indirect tax, PwC-India, said incentives offered by states would likely get limited to goods consumed within the states.

“Besides, the effective rate of VAT may also go down from 13-14 per cent to 9 per cent on most products under the GST, narrowing the relative advantage industry enjoys,” said Jain.

Service tax rate to remain unchanged

Although the service tax rate will go up from 15 per cent to 18 per cent, Adhia said the effective rate would remain the same, as service providers would be allowed input tax credit for goods used by them to providing services. “Currently, a bank does not get an input tax credit for the stationary or office supply it uses. Under the GST, it will get that, so the effective tax rate will remain the same,” he said.

http://www.business-standard.com/article/economy-policy/gst-cloud-on-states-industry-sops-117042501301_1.html

MUMBAI: If you are an interior decorator based in Mumbai and are providing services on-site to a client in Bengaluru (where you don’t have a fixed place of business), then irrespective of your turnover, you will have to register under Goods and Services Tax (GST) in the state of Karnataka.

Small businessmen or professionals (such as architects, fashion designers, make-up artists, trainers, musicians, stand-up comedians — et al) providing taxable goods or services may find that they have to register under GST if the term ‘casual taxable person’ applies to them. This registration will be required even if they fall below the threshold limit for GST levy. Currently, the exemption limit for GST is a turnover of Rs 20 lakh (Rs 10 lakh in NE states).

The term ‘casual taxable person’ is specifically defined as ‘One who occasionally undertakes transactions involving supply of goods or services or both in the course or furtherance of business, whether as principal, agent or in any other capacity, in a state or a union territory where he has no fixed place of business’.

Nihal Kothari, executive director, Khaitan & Co, a law firm, illustrates: “A jeweller who has a showroom in Mumbai but participates in an exhibition-cum-sale in another city would fall under this category. However, if he sends the consignment from his Mumbai store, then it would be an inter-state sale and would not require his registration as a casual taxable person.”

Bipin Sapra, indirect tax partner at EY India, says, “The facts of each case will determine whether or not it would be a case of an inter-state supply or one falling in the category of supply by a casual taxable person. If both the place of supply and the location of the service provider is in a state where he doesn’t have a fixed place of business, registration as a casual taxable person may be required — more often than not, B2C transactions may fall in this category.”

Casual taxable persons are required to apply for registration five days prior to the commencement of business (or in other words, before entering into the transaction for supply of goods or services). The registration certificate is valid for 90 days and can be extended up to another 90 days. A TOI reader, who is a small businessman, wrote to us to express his dismay. “At the time of application for registration, an advance deposit of tax-equivalent to the estimated tax liability for the period  ..

Non-residents suppliers also require GST registration

On similar lines, even non-residents who occasionally supply goods or services but have no fixed place of business in India, will require GST registration. The modalities relating to registration and payment of estimated tax are the same as for ‘casual taxable person’. “For non-residents who occasionally supply goods or services, it is necessary that the application for registration be signed by an authauthorised signatory in India. Thus, they will need to seek help of an authored agent. On supply goods or services to India, they will have to pay an advance deposit of GST, against which logically they will be able to claim input tax credit with the help of such authorised agent, says Sachin Menon, indirect tax leader at KPMG India.

Menon says this provision is somewhat similar to the CBEC notification issued on December 1 last year, where the place of provision of a service was deemed to be the location of the unregistered service recipient. Consequently, digital supply — such as of music or movies — was subject to service tax, even if the supplier was based overseas. “In the case of equalisation levy (dubbed as Google tax) applicable @6% on gross B2B online advertisement revenues earned by a foreign entity, it is reported that the companies are passing on this tax burden to the customer, by way of higher pricing. A similar scenario could emerge here,” says Bipin Sapra, indirect tax partner at EY India.

http://economictimes.indiatimes.com/news/economy/policy/professionals-may-face-gst-as-casual-taxable-persons/articleshow/58355155.cms

 

NEW DELHI: A body of tax advocates today asked Finance Minister Arun Jaitley to make procedures and paperwork related to the upcoming Goods and Services Tax (GST) regime simple and less cumbersome.

“The draft GST rules have prescribed detailed paperwork for maintenance of records for GST purposes, which are highly complex and cumbersome. This will cause immense problem and hardships to assesees, especially small traders and businessmen,” All India Tax Advocates Forum President MK Gandhi said.

Under the draft rules, detailed records are to be kept not only by suppliers of goods or services, but also by intermediaries such as warehouse owners, transporters and agents, he said.

In addition to goods sold, they have to also track stocks given as free sample or gifts, Gandhi said in a statement.

“Even as concepts of manufacture or trading are no longer relevant under GST, the cumbersome record keeping requirements will continue to be bases on these lines. This will put unwarranted burden and botheration to assessees,” the forum said.

Gandhi further said that under the new tax regime no deletion or overwriting of entries will be allowed in registers, accounts and documents.

Such complicated paperwork will be too much for small time traders and businessmen to cope up with, he added.

The government plans to roll out the GST from July 1, which will subsume host of indirect taxes.

“The consensus on GST will go down in history as a great illustration of cooperative federalism. GST reflects the spirit of ‘One nation, One aspiration, One determination’,” an official statement quoted Modi as saying.

Prime Minister Narendra Modi said the consensus on Goods and Services Tax (GST) reflects the spirit of ‘one nation, one aspiration, one determination’.

“The consensus on GST will go down in history as a great illustration of cooperative federalism. GST reflects the spirit of ‘One nation, One aspiration, One determination’,” an official statement quoted Modi as saying.

The Prime Minister was delivering his opening remarks at the third meeting of the Governing Council of Niti Aayog.

According to the statement, the Prime Minister also said GST shows the strength and resolve of the federal structure.

Modi gave credit to all chief ministers for coming on one platform for GST, keeping aside ideological and political differences.

President Pranab Mukherjee on April 13 gave assent to four key legislations on GST. The government plans to roll out the new indirect tax regime from July 1.

GST, the biggest taxation reform since Independence, will subsume central excise, service tax, Value Added Tax (VAT) and other local levies to create a uniform market.

http://www.moneycontrol.com/news/business/economy/gst-great-illustration-of-cooperative-federalism-pm-modi-2263877.html

NEW DELHI, APRIL 20:

Businesses will now be permitted to keep accounts and records on their computers under the Goods and Services Tax (GST) as well as file online applications for advance rulings and appeals and revisions against tax orders.

These have been proposed by the Central Board of Excise and Customs in the draft rules for accounts and records under GST.

However, in what could increase the compliance burden for them, they would also be expected to maintain separate accounts of each activity including manufacture, trading, supplies, balance, as well as invoices and bills for all transactions.

The rules have proposed that all registered persons will also have to maintain records of monthly production, including details of raw materials and final goods as well as details of suppliers and retailers and warehouses where goods are stored.

Stock registers would also have to maintain details of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.

“Every registered person shall keep the books of account at the principal place of business and at every related places of business mentioned in his certificate of registration and such books of account shall include any electronic form of data stored on any electronic device,” said the draft rules.

Further, once an entry is made in registers, accounts and documents, they can not be erased or corrected without attestation and if the registers are in electronic form, a log of every deleted entry would have to be maintained.

Meanwhile, a separate set of draft rules on advance ruling under GST proposes that the Centre and the State government will appoint an officer in the rank of Joint Secretary with at least three years of experience at the level as a member of the Authority for Advance Ruling.

Applications for advance rulings can be filed on the GST Network portal along with a fee of ₹5,000. Appeals against the advance ruling would entail a fee of ₹10,000. The draft rules for appeals and revisions that applications to the appellate tribunal can be filed online but physical hard copies of the application and a certified copy of the decision or order appealed would have to be submitted within seven days of filing of the appeal.

Appeal option

The draft rules have also prohibited providing additional information or evidence to the Appellate Tribunal during hearing of the case. In case they are not satisfied with the order of the Appellate authority or Tribunal, taxpayers can then appeal to the High Court.

Experts welcomed the move to allow electronic or digital maintenance of records and filing of appeals. But they said that the compliance burden would significantly increase.

“We will have to see the impact of the proposed move on the service industry and how it plans to maintain accounts showing the quantitative details of goods used in the provision of each service, details of input services utilised and the services supplied as it is now a mandatory norm under GST,” said Rakesh Nangia, Managing Partner, Nangia & Co, on the draft rules for accounts and records.

The CBEC has sought comments from the public on these draft rules by April 27 and these will be taken up for approval by the GST Council in its meeting on May 18 and 19.

http://www.thehindubusinessline.com/economy/policy/draft-gst-rules-allow-efiling-of-appeals-digital-accounts/article9654288.ece

KOLKATA: Gold may become costlier for Indians if the government accepts chief economic advisor Arvind Subramanian’s suggestion to put the yellow metal in the 12% tax bracket under GST.

With an import duty of 10%, tax on gold may turn out to be 22%, which will reduce its consumption in the physical form in the second largest gold consuming nation in the world.

At present, gold attracts an import duty of 10%. In addition, there is a VAT of 1% and an excise duty of 1%.“For a healthy development of trade, GST and import duty combined should not cross 12%; ideally, it should be in the range of 1012 %,” Shekhar Bhandari, business head for global transaction (banking and precious metals), Kotak Mahindra Bank, told ET.

Late last year, there was agreement on five broad GST slabs -0 (the exempted category), 5%, 12%, 18%, and 28%. While retailers and jewellers want the government to peg GST at 1.25%, keeping the customs duty intact at 10%, manufacturers and bullion dealers want a 6% GST and an import duty of 6%. Surendra Mehta, national secretary, India Bullion & Jewellers Association, reckons that import duty should be at 6% and GST should be 6%.

“If the tax incidence remains high, then there’s a propensity among people to evade tax. And that results in entry of gold through the illegal route which no government would like. Smuggled gold affects trade too,” Mehta explained.

Gold demand in the country fell 21.2% last year from the year before to 675.5 tonnes, according to a World Gold Council (WGC) report.

http://economictimes.indiatimes.com/markets/commodities/news/gst-may-make-gold-costlier/articleshow/58041530.cms