Relief to consumers, under GST, tax rates for most goods to fall

Source: Financial Express, Apr 18, 2017

New Delhi: The Goods and Services Tax (GST) Council’s resolve to minimise rate shocks will result in reduction in the nominal tax rates for a vast majority of goods. Half of the items in the Consumer Price Index (CPI) basket will be exempt from GST and another tenth will be taxed at the lowest rate of 5%. The balance CPI goods would come under either of the two standard rates of 12% or 18%, rather than the highest rate of 28%.

Though the current nominal tax rates for some CPI goods and many other mass-consumption and everyday use items like mobile phones, refrigerators, cosmetics and baked food are close to the highest GST rate of 28%, these too will likely fall under 18% GST, sources privy to the discussions in the council’s technical committee on fitment of rates told FE.

The government had iterated that the GST rate for an item will be, to the extent possible, the one that is nearest to the current rate. However, according to the sources, what the council will take into account is the real tax incidence at present rather than the nominal rate. For instance, if the nominal tax rate on an item with maximum retail price of `150 and ex-factory price of `100 is 26.5% (12.5% excise and 14% VAT), the real tax incidence on the price to the consumer could be just over 22%, as the excise duty is virtually levied on the ex-factory price, with abatement for post-manufacturing value addition.

Manufacturing units below the `1.5-crore turnover threshold enjoy excise exemption and currently pay only VAT on the final products. If the items manufactured by such units are brought under 28% GST rate, for the reason that nominal tax rate on the items is close to it, they would be hit hard. So the council would take the real excise incidence on the ex-factory value of the item as the basis for GST rate determination. Assuming that half of the sector manufacturing the item mentioned above is excise exempt, the real tax incidence, when nominal tax rate is 26.5%, could be just 18% (see chart).

“Under the GST regime, tax would apply on the transaction value of the product. Therefore, the correct excise incidence would be the actual excise duty paid expressed as a percentage of the final price to the customer,” said R Muralidharan, senior director, Deloitte Haskins & Sells.

However, items that currently suffer a real tax incidence around 28% and above will come under the highest GST rate of 28%, and so will the four demerit items — tobacco and tobacco products, aerated beverages, luxury cars and pan masala — on which the nominal taxes now are 40-60%, including cesses. Analysts also noted that since the VAT rates on items vary across the states, the fitment of GST rates should be on the basis of the weighted average VAT incidence.

Currently, over 300 items are exempt from excise duty and an average of 100 items are exempt from state VAT.

5 crucial ways how doing business will be different under GST

Source: Business Standard, Apr 18, 2017

New Delhi: The goods and services tax (GST) regime is less than 75 days away — assuming July 1 as the roll-out date. Here is a look at how doing business will be different in the GST-era. Read the rest of this entry »

70% of all goods and some consumer durables to become cheaper under proposed GST regime

download (7).jpgSource: The Economic Times, Apr 11, 2017

NEW DELHI: A number of goods such as cosmetics, shaving creams, shampoo, toothpaste, soap, plastics, paints and some consumer durables could become cheaper under the proposed goods and services tax (GST) regime as most items are likely to be subject to the rate of 18% rather than the higher one of 28%.

India is likely to rely on the effective tax rate currently applicable on a commodity to get a fix on the GST slab, said a government official, allowing most goods to make it to the lower bracket.

For instance, if an item comes within the 12% excise slab but the effective tax is 8% due to abatement, then the latter will be considered for GST fitment. Going by this formulation, about 70% of all goods could fall in the 18% bracket.

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Companies can avail up to 40 per cent GST Credit for excise already paid on stocks

downloadSource: The Economic Times, Apr 03, 2017

NEW DELHI: Companies can get credit of up to 40 per cent of their goods and services tax liability against excise duty already paid on stocks lying with traders or retailers when GST is rolled out. According to the latest set of rules put out by the government, credit would be given once the central GST has been paid on the supply and the applicant has provided evidence of purchase of these goods. The company would not need to provide any duty paid document.

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E-commerce companies to pay up to 1% TCS under GST

Source: Business Standard, Mar 19, 2017

New Delhi: E-commerce firms like Snapdeal and Amazon will have to mandatorily deduct up to 1 per cent TCS (Tax Collected at Source) while making payments to their suppliers under the GST regime which is expected to kick in from July 1.

The model Goods and Services Tax (GST) law, finalised by the GST Council, provides for 1 per cent TCS to be deducted by the e-commerce operators.

The model law provides that every electronic commerce operator, not being an agent, shall collect up to one per cent TCS, as may be notified on the recommendations of the Council, of the net value of taxable supplies made through it by other suppliers where the consideration with respect to such supplies is to be collected by the operator.

Experts had raised concerns saying this would mean that a similar amount will have to be levied on inter-state movement of goods, taking the total TCS deduction to 2 per cent.

“We have included the word ‘up to’ in the final model GST law. This would mean that TCS would not exceed 1 per cent of the sale proceeds,” an official said.

Industry has been expressing concern over the TCS provisions saying it would mean a lock-in of capital and also dissuades companies from selling through online aggregators.

E-commerce companies will also have to file returns on the TCS deductions, but in case of return of goods by the consumer, these companies will not have to deduct TCS as there is no actual sale.

The model law had defined ‘electronic commerce’ as supply of goods or services, including digital products, over electronic network.

‘Electronic commerce operator’ would mean those persons who own, operate or manage digital or electronic facility or platform for electronic commerce.

GST Council approves key Bills

images.jpgNew Delhi: Clearing the decks for introduction of a major indirect tax reform in Parliament, the Centre and States on Thursday approved draft Bills for implementing the goods and services tax (GST) in States and Union Territories (UTs).

“The GST Council has granted its formal approval to all five legislations,” Finance Minister Arun Jaitley said after the meeting here on Thursday, adding that he would try to take them to Parliament expeditiously.

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Draft GST compensation Bill passed

Source: Indian Express, Feb 19, 2017

NEW DELHI: In what could speed up the rollout of the goods and services tax (tax) by July 1, 2017, Finance Minister Arun Jaitley-led GST Council met in Udaipur on Saturday and agreed on the draft of the compensation Bill that looks into how much states should be paid for the losses they would incur once GST is implemented. The compensation Bill is one of the four enabling laws under the GST constitutional amendment.

According to Jaitley, the remaining laws – state GST, integrated GST (IGST) and central GST (CGST) – will be cleared in the next meeting slated for March 4-5 in Delhi.

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