More than a 3rd of state taxes to stay out of GST

Source : Economic Times 15 May 2017

NEW DELHI: While states and the Centre celebrate the shift to goods and services tax (GST), they have managed to keep at least one-third of the revenue outside the new regime and in the process denied consumers the benefit of a lower levy.

A study based on the projected tax collection in 17 states by Motilal OswalBSE 3.08 % Securities in 2017-18 showed that alcohol, real estate and petroleum, oil & lubricants accounted for 37% of the own tax revenue of these provinces. Although there is an annual review in case of the oil sector, no such mechanism exists for alcohol and real estate. State finance ministers have been keen to retain their control over these three sectors, as they are cash cows, where tweaks can help meet control over these three sectors, as they are cash cows, where tweaks can help meet their revenue targets.

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Gear up for supply chain disruption after GST implementation

Source :LiveMint 9 May 2017

Concerns over potential losses arising from mismatch between tax payout and tax refund after GST implementation has led to traders reducing stock-in-trade In the run-up to the implementation of the Goods and Service Tax (GST), distributors and wholesalers in various sectors could be tempted to de-stock, in a bid to avoid losses on the tax credit front. Since product-wise GST rates will be finalized at the end of June, concerns over potential losses arising from mismatch between tax payout and tax refund once GST is in place, has led to traders reducing stock-in-trade.

Media reports state that de-stocking has already begun in the pharmaceutical sector, where some stockists have started maintaining low stock levels and some others have begun returning a big chunk of their stocks to companies.

Secondly, the GST Council has guided for lower tax on items of mass consumption such as spices, tea and mustard oil. This means certain items of this category may attract lower taxes in the GST regime than currently levied on them, thus presenting a case for holding lower stock levels of such goods


Commerce and Industry Minister Smt. Nirmala Sitharaman has said that mid-term review of Foreign Trade Policy would be completed early to synchronise its roll out with GST

download.jpgSource : IBEF 9 May 2017

New Delhi: Commerce and Industry Minister Smt. Nirmala Sitharaman has said that the revised Foreign Trade Policy (FTP) would be released early to synchronise the same with roll out of GST. The core focus of the revised FTP would be promoting exports from the SMEs and high employment potential sectors. Smt. Nirmala Sitharaman was chairing a meeting on the Mid-Term review of the Foreign Trade Policy 2015-20 organised jointly by Department of Commerce and Research and Information System for the Developing Countries (RIS) .

Commerce Secretary Ms Rita Teaotia, Chairman RIS Shri Hardeep Singh Puri and DGFT Shri Ajay Bhalla also participated in discussions. The event was attended by the trade policy experts from the industry, academia, Research and Government .

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GST to push Indian growth to over eight per cent: IMF

indexSource: Financial Express, Apr 28, 2017

Washington: The ambitious Goods and Services Tax to be implemented from July 1 would help raise India’s medium-term growth to above eight per cent, the International Monetary Fund has said adding that the reforms being done is expected to pay off in terms of higher growth in the future. “The government has made significant progress on important economic reforms that will support strong and sustainable growth going forward,” Tao Zhang, Deputy Managing Director of the International Monetary Fund, told PTI in an exclusive interview.

“We expect that the goods and services tax (GST), which is targeted to be applied starting in July, will help raise India’s medium-term growth to above 8 per cent, as it will enhance production and the movement of goods and services across Indian states,” the IMF official said.

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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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