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 »

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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MAT extension a benefit for companies

Source: The Economic Times, Feb 02, 2017

MUMBAI: The extension of the minimum alternate tax (MAT) credit carry forward period to 15 years from 10 years may come as a positive step for Indian companies even though there was a strong demand to scrap it, industry experts said.

The extension means MAT could be carried forward in the books of accounts for another five years. Currently MAT is at 18.5% on business income.

“There was an expectation that MAT would be removed completely. However, the increase in carry forward is a positive sign, too, for many companies,” said Samir Gandhi, a partner at Deloitte Haskins & Sells.

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New tax norms target shell firms, rule to impact auto, pharma, software cos

Source: Business Standard, Jan 25, 2017

New Delhi: The government on Tuesday issued guidelines to plug tax evasion by shell companies or foreign firms set by groups in India to retain income outside the country.The rules will affect companies in industries like pharmaceuticals, automobiles, energy, manufacturing and software.

The guidelines have a few safeguards that were not present in draft norms issued in 2015 such as a collegium of officers to vet whether companies are to be taxed on the basis of their place of effective management (PoEM) and test of active business.

However, experts warned even then there could be subjectivity in establishing PoEM.

The rules outline companies incorporated overseas but with effective control of business and majority of board meeting in India will be considered a tax resident. The rules will not apply to companies with a turnover or gross receipts of Rs 50 crore or less in a financial year.

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A double whammy for FPIs from April

Source: The Hindu Business Line, Jan 22, 2017

When Finance Minister Arun Jaitley presents the Union Budget this year, foreign portfolio investors (FPI) will be listening with rapt attention. They will want to know if there is any concession from two significant regulatory changes set to take effect from April 1, 2017.

Come April, foreign investors using the Mauritius and Singapore routes will have to pay capital gains tax on fresh investments, albeit at a reduced rate for some time. Tax authorities will also have more power to question investments through shell companies set up in tax havens. Read the rest of this entry »

GST now set for July 1 roll-out, dual control hurdle finally over

Source: Business Standard, Jan 17, 2017

New Delhi: The Goods and Services Tax (GST) Council on Monday broke a deadlock over issues of administrative control over assessees and broadly agreed to roll out the GST from July 1, instead of the earlier deadline of April 1. Whether a state or the Centre will assess an entity would be decided by a computer programme. The Council also resolved a logjam over the right to tax economic activities within 12 nautical miles from India’s coasts.

Against the earlier proposals of reserving administration of assessees up to Rs 1.5 crore in annual turnover for states, or of allowing both the Centre and states to jointly administer these, the Council decided to blend the two suggestions. The entire tax base would be shared between the Centre and states in a predetermined ratio, Union Finance Minister Arun Jaitley, the chairman of the Council, said at a press conference after the meeting.

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