Goods and GST Bill passed

[Ganeshan Kalyani]

Dear All,

GST Bill is passed in Rajya Sabha on 03. 08.2016.

A panel under chief economic adviser Arvind Subramanian has recommended a revenue-neutral rate of 15-15.5%, with a standard rate of 17-18% be levied on most goods and all services.

But, there has been no agreement yet on rates of various goods and services, which remains a tricky issue. According to the Bill, passed in the Lok Sabha in May 2015, the rates were to be decided by a GST council headed by the central finance minister with state finance ministers as members.

Let us wait.

Thanks.

[Ganeshan Kalyani]

Existing registration shall get temporary registration which will be valid for 6 months. The dealer shall submit the updated information based on which the certificate shall be issued under GST.

[Ganeshan Kalyani]

The State government is contemplating asking the Central government to vest with it the administrative control over all tax-payers whose turnover is less than ₹ 1.5 crore, irrespective of goods or services they deal in. The government also wants the Centre to allot the tax-payers whose turnover is above ₹ 1.5 crore in proportion to the number of VAT dealers and service tax assessees dealt at present by the State and Central government tax authorities respectively.

The third meeting of the GST Council is slated to be held in New Delhi from November 18 to 20. As a prelude to it, Finance Minister Yanamala Ramakrishnudu held a preparatory meeting here on Friday.

On the occasion, the Minister said that the Central government proposed certain options to ensure single interface under the GST. It was the unanimous decision of the Empowered Committee of State Finance Ministers that the administrative control over the tax payers be vested with the State governments. The committee also favoured proportionate allotment of VAT and service tax assessees.

 

[Ganeshan Kalyani]

GST is a Destination based Tax. Tax is levied on consumption of Goods and Services. The burden of taxation moves from the manufacturing /producing states to the consuming states.

The constitution had to be amended because Centre will tax goods beyond the stage of manufacture & states will tax services. Also states to impose interstate tax on Imports.

Around 160 countries in the world follow GST. Canada has a dual GST similar to India.

But implementing GST in India will pose a major challenge because of its federal structure.

GST will help goods move seamlessly across all states in India. It is a single tax on Supply of goods and services. Under GST the taxable event is Supply whereas under the earlier regime the Taxable event was Production (excise duty) or Sale of goods (VAT or CST) or Provision of Service (Service Tax).

[Ganeshan Kalyani]

GST is a tax on Value Addition at every stage. It aims at providing seamless credit at every stage. This will reduce the cascading effect of taxes levied under different Acts.

[Ganeshan Kalyani]

When goods or services are supplied within the state (Intra State) SGST & CGST would apply

When goods or services are supplied from one state to another (Inter State) IGST would apply

When goods or services are imported from different countries IGST (CVD/RCM) would apply

In case of Exports to different countries the tax would be Zero Rated

[Ganeshan Kalyani]

Area-based tax exemptions will undergo a key change in the proposed goods and services tax (GST) regime-industrial units in the specified areas will need to pay the duties first and get a refund later. This is to ensure that the credit chain in the GST regime is not disturbed. The government, however, has decided not to accept the Thirteenth Finance Commission's recommendation that these exemptions be replaced by a new system of cash subsidy, official sources said. The government believes that cash subsidy is not ‘sound economics.’ The policy stance is clear: area-based exemptions are being phased out, but units set up on the promise that the bounty would be available for them for specified periods cannot be duped. The pay-first-get-refund-later policy is already there in Jammu and Kashmir, one of the states where tax holidays are given to industries. Industries set up in the North East, Sikkim, Uttarakhand and Himachal Pradesh enjoy exemption from payment of Cenvat due to the geographical location. While in Jammu and Kashmir, the duty is first paid and then refund claimed, in Uttarakhand and Himachal Pradesh the industries do not pay duty at all. “We are mulling over various methods to re-design the area-based exemption scheme. A cash-subsidy in lieu of the tax-sop would be a complicated thing and needs to be studies economically. We are looking at system of tax payment and refund rather than no payment at all,” a senior finance ministry official told FE. The official said while doing away with host of exemptions during the GST regime, the GST chain should not break so that an offset of input taxes is available to both units manufacturing the exempt goods and also to units consuming the exempt goods in subsequent manufacture or trade. Area-based exemptions also said to create economic distortion and affect the economic viability of units located in non-exempt areas. They are prone to misuse and difficult to administer, the TFC task force had said. The Finance Commission had suggested that direct investment linked cash subsidy may be given, rather than area based exemptions, if it was considered necessary to provide support to industry for balanced regional development. It suggested that excise duty exemptions given to industrial units be converted into a subsidy scheme. – www.financialexpress.com

[Ganeshan Kalyani]

"Goods fully exempted from the levy of excise duty and VAT by all the states be categorised as exempted goods in the GST regime as well," Federation of Indian Chambers of Commerce and Industry (FICCI) said in a release following a meeting here with the Empowered Committee of State Finance Ministers on the Goods and Services Tax.

[Ganeshan Kalyani]

FICCI also requested the empowered committee that certain existing exemptions such as the area based exemptions under excise legislation and incentives under states' industrial policies should be converted into an effective, non-discretionary tax refund mechanism.

[Ganeshan Kalyani]

The GST Council will meet next on October 18-20, when the rates for the tax are on the agenda. The Minister expressed the hope that the rates and the draft GST laws would be finalised by November 22 .

[Ganeshan Kalyani]

In ths GST Council first day meeting it is proposed that there will be four slab GST rates as under:
6% on precious metal, gems, stones, essential food items.

12% on FMCG and non-essential food items

18% Standard GST rate (most of the goods and service would be covered in this rate)

26% some specific items including luxury cars.

40% peak rate (this was proposed by Economic advisor which is not ruled out).

Source : GST update

[Ganeshan Kalyani]

The GST Council today met as part of a three-day meeting where it agreed upon a number of contentious issues, such as the compensation formula, and it is set to deliberate the remaining ones over the next two days.

[Ganeshan Kalyani]

State finance ministers told CNBC-TV18 that the central government had proposed a four-tier goods and services tax (GST) structure of about 6 percent, 12 percent, 18 percent and 26 percent. Additionally, sale of precious metals such as gold should be taxed at a special rate of 4 percent, it was suggested, while most essential items that form a part of the CPI basket have anyway been decided to be kept out of GST.

Source : money control

[Ganeshan Kalyani]

A panel led by Chief Economic Advisor Arvind Subramanian had earlier proposed a four-tier tax structure of 2-6 percent for precious metals, 12 percent for essential commodities, 16.9-18.9 percent standard rate and 40 percent for demerit goods.

Source: money control

[Ganeshan Kalyani]

Experts say that 26% shall tend to attract more and more goods in its net. I.e. more and more goods shall be proposed to list done for this rate. So such variation varying from 6% to 26% is worry.

[Ganeshan Kalyani]

States will be fully compensated till five years for potential revenue loss.

[Ganeshan Kalyani]

A revenue-neutral rate is a single rate at which there will be no revenue loss to the centre and states in the GST regime.

[Ganeshan Kalyani]

Sources said that food items are proposed to be exempt from the tax and 50 percent of the items of common usage will be exempt to keep the inflation under check.

[Ganeshan Kalyani]

A few hours after the three-day meeting of the newly-formed GST Council commenced, there are indications that there may be another round of discussion required as differences between Centre and the states persist, according to people privy to the meet, reports CNBC-TV18’s Sapna Das.

[Ganeshan Kalyani]

A panel headed by Arvind Subramanian, chief economic adviser to the finance ministry, had proposed a "sin tax" rate of 40 percent for GST on limited items such as aerated drinks, luxury cars and tobacco products.

[Ganeshan Kalyani]

GST council next meeting to be held on November, 4 - 5 & 9 - 10

AI Summary

Goods and Services Tax consolidation creates a dual GST framework with GST Council oversight and a shared IT platform for compliance.
Goods and Services Tax establishes a destination based, dual tax framework subsuming central and state indirect levies, administered through a GST Council and implemented via a shared IT platform (GSTN). The model law sets out registration and return regimes, HSN/SAC classification by turnover bands, input tax credit carry forward, composition and reverse charge rules, refund and valuation procedures, compensation to states during transition, and institutional arrangements for cross empowerment, adjudication and dispute resolution.