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News Indirect Tax-GST

  • Jul 04, 2020
  • GST regime may undergo 2 major reforms this year

    The Goods and Services Tax (GST) regime is expected to see two major reforms in its fourth year--rationalisation of tax rates based on prudence rather than political considerations, and further easing of compliance--people aware of the matter said.

    The people said three-slab GST rates instead of four could be considered--8%, 18%, and 28% in place of current slabs of 5%, 12%, 18%, and 28%. They said the GST Council is also considering correcting duty distortions for sectors like textile, furniture, and fertiliser, where taxes on inputs are more than the finished goods.

    “Both the reduction in tax slabs and correction of inverted duty structure would lead to both increase and decrease in tax rates of some items. As the economy is still recovering from nationwide lockdown due to the coronavirus pandemic, the council may take a decision on rate rationalisation at an appropriate time so that both businesses and consumers would not be adversely affected. But ease of compliance is an ongoing process and it would continue,” one of the persons said on condition of anonymity.

  • Jul 03, 2020
  • Major GST reforms likely this fiscal: Ajay Bhushan Pandey, Finance Secretary

    Even as the GST regime entered the fourth year on July 1, it is encountering the issue of low revenue growth and the resultant inability of the central government to fully compensate the states for their ‘revenue shortfall’ versus the constitutionally guaranteed annual growth of 14%. FE’s Sumit Jha spoke with finance secretary Ajay Bhushan Pandey on the reforms being undertaken to remedy the situation.

    GST collection in June is close to Rs 91,000 crore, about 9% less than the year-ago month. What proportion of the revenue is from taxes paid for transactions during May?
    We are performing that exercise to find out from the available data but my guesstimate is that 70-80% of June collection would have come from transactions in May.

    Lower-than-estimated collections have made it difficult to fully compensate the states for their revenue shortfall. What is the solution to this issue?
    Last year (FY20), nominal GDP growth was around 7.5% but the domestic GST collection, leaving aside the import part as GDP growth can be compared only with tax growth from domestic consumption, was around 9%. Hence, the notion that lack of GST revenue growth is the sole reason for the compensation issue is not correct.

  • Jul 03, 2020
  • Govt caps late fee on GSTR-3B returns at Rs 500; zero late fee for returns with no tax liability

    In a major relief to the taxpayers, the government has capped that maximum late fee on GSTR-3B returns at Rs 500. CBIC said that the government has decided to cap the maximum late fee for filing GSTR-3B returns for the tax period of July 2017 to July 2020, given that such returns are filed before 30 September 2020. Earlier, in the GST Council meet, Finance Minister Nirmala Sitharaman had announced that cap of Rs 500 will be imposed on the late fee for filing GSTR-3B returns for the period of July 2017 to January 2020. Also, it was announced that there will be zero late fees for those with no tax liability.

    In the 40th GST Council meeting, FM Sitharaman made important announcements on GST return late fee waiver and reduced interest rate further being extended on account of the coronavirus crisis but refrained from bringing changes in the inverted duty structure. The Council also deferred the decision of raising rates on textiles, fertilisers, and footwear to correct the inverted duty structure. States unanimously agreed on correcting the inverted duty structure but said that now is not the right time to raise rates when the idea is to revive demand in the economy.

  • Jul 02, 2020
  • GST Council may consider rationalising rates: Report

    The Goods and Service Tax (GST) Council might consider rationalising the rates, finance secretary Ajay Bhushan Pandey has said. The measures may include reducing the number of GST rate slabs, and improvement in IT systems, Pandey told The Economic Times.

    "Rate rationalisation, removal of inverted duty structure to reduce friction among trade… at the same time we can have a lesser number of slabs," Pandey told the publication.
    Moneycontrol could not independently verify the report.

    The finance secretary said the GST Council will have to implement the "most practical option".
    During the lockdown, several states complained of delays n compensation payouts.
    "The GST compensation law provided that in case if there is a revenue shortfall then the GST Council will decide as to what needs to be done… That is exactly what is being discussed," Pandey told The Economic Times.
    In 11 months of FY20, the Centre released over Rs 1.5 lakh crore to states as GST compensation cess payout, the report said.

  • Jul 02, 2020
  • Delhi HC issues notices to govt, GST Council on retro amendment

    The Delhi high court has issued notices to the Union government and the GST Council on a petition filed against retrospective amendment in the GST law.

    The amendment relates to limiting the transitional input tax credit to 90 days form the roll out of the goods and services tax (GST) from July one, 2017.

    The petition has challenged the constitution validity of this amendment, said Abhishek Rastogi, counsel for petitioner and partner at Khaitan & Co.

    Earlier, the Delhi high court had allowed availing of tax credits for pre-GST period up to June 30 this year.

    However, the Supreme Court had stayed the Delhi high court order.

    The apex court was hearing a special leave petition filed by the Union Government against the Delhi High Court judgement.

    That case relates to the rule 117 of the CGST Act, which imposed the time limit of 90 days for claiming transitional Cenvat credit.

    However, there was also amendment in the GST law carried out through retrospective amendment to set time limit for these credits.

  • Jul 02, 2020
  • FM asks GST officers to proactively address issues faced by biz in tax compliance

    Finance Minister Nirmala Sitharaman on Wednesday asked GST officers to foresee the issues faced by domestic businesses and address them proactively so that they can compete on a global scale and build a self-reliant India.

    In a message to tax officers on the third anniversary of Goods and Services Tax (GST), Sitharaman also said there is scope for easing compliance further for taxpayers, especially MSMEs.

    Asking taxmen to focus on the clarion call by Prime Minister Narendra Modi for an 'Atmanirbhar Bharat', she said for this motto of self reliance tax, especially GST, administration will have a large role to play.

    "We must foresee the issues faced by our business community and proactively address the same to enable them to compete on a global scale. Only by this proactivity can we ensure much needed economic growth in near future," she said in the message on the occasion of GST Day, 2020 .

  • Jul 01, 2020
  • At Rs 90,917 cr, GST collections fall for third consecutive month in June

    The goods and services tax (GST) collections stood at Rs 90,917 crore in June, contracting for the third month in a row year-on-year.

    However, the rate of decline has come down considerably to just 9.02 per cent from 38.17 per cent in May and 71.63 per cent in April as returns for earlier months were also filed in June due to a relaxed timeline given by the government amid the outbreak of Covid-19.

    The first quarter GST collections were down by almost 70 per cent due to sharp fall in the mop up in April and May.

    The government could collect just Rs 62,009 crore in May and Rs 32,294 crore in April. But the collections have been rising after the government eased the lockdown which was imposed to fight coronavirus.
    The GST revenues in June this year are 91 per cent of Rs 99.940 crore collected in the same month of the previous year.

    The government collected Rs 18,980 crore from Central GST in June this year, Rs 23,970 crore from the state GST and Rs 40,302 crore from the integrated GST. The compensation cess stood at Rs 7,665 crore.

  • Jun 30, 2020
  • Centre, state tax officers can take intelligence based enforcement actions for all purposes: CBIC

    Tax officers at the level of Centre and state can take intelligence based enforcement actions for all purposes including refunds, the Central Board of Indirect Taxes and Customs has said.

    The Board's policy wing clarified that cross-empowerment of tax officials is absolute and non-conditional, in an internal note to the Director General of GST Intelligence (DGGI), last week.

    The communication was issued in response to reference on whether intelligence based enforcement actions initiated by Central Tax officers against tax payers assigned to state tax administration get covered under the provisions of Central GST Act or a specific notification is required for cross-empowerment. Also, whether a notification is needed if conditions are imposed on powers given to the officers.

  • Jun 29, 2020
  • Double Whammy: Realtors’ GST burden to rise

    Real estate companies face a double whammy following the lockdown. Not only did work come to a halt, builders will now have to pay a higher rate of goods and services tax if they haven’t bought at least 80% of the construction material from registered dealers.

    The Central Board of Indirect Taxes and Customs (CBIC) has mandated the payment of 18% GST if procurement of materials from registered dealers falls short of the threshold. CBIC field offices have been asked to inform the trade that the tax for the financial year ended March must be paid before June 30. The requisite forms have been issued as well.

    “CBIC has cleared its stand that there will be no Covid extension for any taxpayer in the real estate sector for tax payments due to procurements from unregistered persons below an 80% threshold,” said Rajat Mohan, senior partner at AMRG Associates.

  • Jun 26, 2020
  • CBIC waives off late fee on late GST return filing

    The Central Board of Indirect Taxes and Customs (CBIC) has notified waiver of late free, capping of late fee at Rs 500 in some cases, interest payable on late payments and extension of due dates for businesses to file goods and service tax (GST) returns for the Covid-19 impacted period, till October.

    The decisions were taken by the GST Council on June 12.

    Taxpayers who do not have any tax liability but were yet to file returns for the period from July 2017 to January 2020 - prior to the Covid period – no late fee will be charged, the notification issued Wednesday said.

    For taxpayers having liability but not having filed their returns, they can do so with a late fee of maximum Rs 500, if returns are submitted by July 1, 2020.

    Small taxpayers whose aggregate turnover is up to Rs 5 crore will be provided a waiver of late fees and interest if they file the form GSTR-3B for the supplies affected in months of May, June, and July 2020, by September 30, 2020, the notification added.

  • Jun 23, 2020
  • Companies facing cash crunch may have to reverse GST credit on delayed payments to vendors

    Companies which have postponed vendor payments due to a liquidity crunch brought on by the Covid-19 crisis will have to face further working capital woes due to credit reversal with interest under the goods and services tax framework, in case they don’t clear the dues within 180 days of the date of invoice.

    These cash-strapped companies will have to either make payments within 180 days or reverse the tax credit they have availed of. They will also have to pay interest at 18% to the government from the date the credit was taken.

    "While this provision may be a blessing in disguise for vendors as it indirectly encourages timely payment of consideration to vendors, it has opened up a can of worms for businesses during this pandemic.

  • Jun 22, 2020
  • Developed land sold as plots will attract GST: AAR

    GST will be levied on sale of land for which primary amenities - such as drainage, waterline and electricity - have been provided by real estate developer, the Authority for Advance Ruling (AAR) has said. The AAR has also concluded that sale of developed plots will be covered under the clause 'construction of a complex intended for sale to a buyer' and accordingly GST would be levied.

    An applicant had approached the Gujarat bench of AAR on whether Goods and Services Tax (GST) is applicable on sale of plot of land for which, as per the requirement of approved by the respective authority (i.e. Jila Panchayat), primary amenities such as, drainage line, water line, electricity line, land levelling etc are to be provided by the applicant.

    "We find that the activity of the sale of developed plots would be covered under the clause 'construction of a complex intended for sale to a buyer'. Thus, the said activity is covered under 'construction services' and GST is payable on the sale of developed plots...," the AAR said.

  • Jun 22, 2020
  • Can input tax credit be availed on GST paid for hiring vehicles for employees? Find out

    Companies will not be able to claim input tax credit (ITC) for GST paid on hiring commercial vehicles for transportation of employees, if providing such a service is not obligatory under any law, the Authority for Advance Ruling (AAR) has said.

    On an application filed by Prasar Bharti Broadcasting Corporation (All India Radio), Shimla, the Himachal Pradesh bench of AAR cited GST law to state ITC shall be available on fulfilment of one condition “such goods or services or both shall be obligatory for an employer to provide to its employees under any law for the time being force”.

    The applicant, who is a public service broadcaster, sought to know whether ITC will be available on taxi hiring services like pickup/drop-off staff, including ladies and handicapped employees, in odd hours.

  • Jun 19, 2020
  • Goods purchased, sold overseas liable to GST in India: AAR

    A domestic company buying goods from abroad and selling to another country will have to pay GST on such transactions even if the said products are not entering the Indian territory, the Authority for advance ruling (AAR) has said.

    On an application filed by Sterlite Technologies, the Gujarat-Bench of AAR has ruled that GST is payable on goods sold to customer located outside India, where goods are shipped directly from the vendor’s premises (located outside India) to the customer’s premises.

    The applicant had sought to know whether the goods and services tax (GST) would be levied on merchant trade transactions (MTT).

    “It appears that the transaction is covered under the ambit of inter-State supply and is neither exempted nor covered under export of services. Thus, the theory of elimination takes us to the conclusion that such supplies will be subject to levy of IGST (integrated GST),” the AAR has ruled.

    The AAR verdict means that GST would be levied on MTT where applicant will receive an order from the customer located outside India and as per their instruction, the vendor would directly ship the goods to customer located outside India.

  • Jun 18, 2020
  • GST trouble for aviation, hospitality and travel companies

    Several aviation, hospitality and telecom companies are facing the dual burden of paying Goods and Services Tax (GST) dues in cash even as input tax credits keep piling up, stretching the working capital cycle at these companies and creating cash-flow problems.

    As per the GST framework, the burden of tax payments on certain services and raw materials used in the input or making of the product is one the buyer. This GST cost is then set off and passed on to consumers when they buy these services.

    However, the GST on input services and raw material has to be paid first. This reverse charge liability has to be paid in cash.

    Due to the Covid-19 pandemic, companies facing revenue hit can’t pass on this GST cost to consumers. Even so, they have to pay the tax on raw materials and input services in cash, say industry trackers.

  • Jun 17, 2020
  • The GST compensation imbroglio

    The impact of the pandemic on the revenue receipts of the Central and state governments has been devastating. The total average collection of GST revenue in April and May is only Rs 94,323 crore, just 46 per cent of the previous year’s average bimonthly receipts. The states have been guaranteed 14 per cent annual growth in GST revenue over the base year of 2015-16. Any shortfall has to be compensated from the receipts of Compensation Cess imposed on selected commodities that attract a GST of 28 per cent .

    The Compensation Cess Fund had already been under severe stress as the GST revenues have been far from buoyant. The increase in revenue in 2019-20 has been a meagre 3.8 per cent compared to the previous year. The result is that even after paying Rs 1.2 lakh crore as compensation, the payments were three months in arrears at the end of the financial year. And now with the pandemic, the fund requirement for compensation has dramatically increased. The payments are in arrears by more than Rs 1 lakh crore already.

  • Jun 17, 2020
  • Undue Protection? State GST ‘shortfall’ for March-May at a whopping Rs 80,000 crore

    Despite the recent release of Rs 36,500 crore by the Centre from the integrated GST pool, the state governments will require to be paid a whopping Rs 80,000 crore more as compensation for their State Goods and Service Tax (S-GST) shortfall in the March-May period, going by the formula of 14% assured annual revenue growth.

    What has inflated the compensation requirement is a sharp fall in revenue in April-May due to the Covid lockdown: the gross GST collections shortfall during the two months was over 50%. Given that the monthly protected S-GST revenue under the compensation mechanism is Rs 63,700 crore for FY21, the shortfall in the state’s revenue in the first two months of this fiscal is roughly the same, if not slightly higher. Add another Rs 13,000 crore of unpaid S-GST compensation dues for March and the states’ claims for the March-May period approach the Rs 80,000-crore mark.

    For perspective, the compensation cess proceeds in the whole of FY20 were nearly Rs 96,000 crore.

  • Jun 17, 2020
  • GST late fee waiver unfair, say those who have paid

    GST council's decision to waive late fee for assesses who have not filed any of their GST returns from July 2017 till March 2020 has raised several eyebrows. As the waiver has been given with the condition that such return should be filed between July 1st till September 30th, 2020, huge resentment is being witnessed amongst those assesses who have already paid huge penalties and filed their delayed GST returns.

    Such tax payers are now seeking refund of the late fees paid by them citing the reason that this is injustice to them. Several tax professionals too are of the view that the waiver of late fee should be extended to the tax payers who already paid these.

    According to Narinder Bhamra, president of Fasteners Manufacturers Association of India, "It is really shocking that the tax payers who defaulted on filing of GST returns for months but later filed these by paying huge late fees have been shown no leniency for their compliance.

  • Jun 13, 2020
  • GST Council eases compliance burden for businesses

    The Goods and Services Tax Council on Friday decided to further ease compliance burden of businesses by providing relief on late free and interest payable on late payments.

    It reduced late fee and interest for those with tax liabilities and waived off late fee completely for those with no tax liabilities.

    Finance minister Nirmala Sitharaman said that GST collections had fallen to about 45%, aggravating the problem of compensation to states, even as states demanded they be funded through market borrowing. The Council will meet again in July to specifically discuss this issue.

    “For all those who have no tax liabilities but have not filed their returns between July 2017 and January 2020 there will be zero late fees,” FM Nirmala Sitharaman said.

    “For people who have tax liability, maximum late fee for non-filing of GSTR-3B returns for period July 2017 - January 2020 has been capped to Rs 500,” she added.

  • Jun 12, 2020
  • Parotas are not rotis and will attract 18% GST, says authority

    A non-finicky eater couldn't care less if he or she is having rotis or parotas for dinner. After all, they are a kind of Indian bread, typically dunked into gravy or even savoured with grilled or fried food such as kebabs.

    But, in the realm of Goods and Service Tax (GST), there can be a huge chasm. In a recent GST ruling, Authority for Advance Rulings (Karnataka bench) distinguished between the two, holding that parotas would be subject to a higher GST rate of 18%. AAR differed from the view of the applicant, a private food manufacturing company based in Whitefield, that parotas should be classified under the product description of 'Khakhara, plain chapati or roti' (or to be more technical, under heading 1905). Owing to Entry 99A, of Schedule 1 to GST notifications, rotis are subject to a lower rate of 5%.

    ID Fresh Food, which was engaged in preparation and supply of a wide range of ready-to-cook meals and fresh foods, such as idli and dosa batter, parotas, curd and paneer, had approached AAR to seek a ruling on the GST rate applicable to whole-wheat parotas and Malabar parotas. Pratik Jain, partner and leader, indirect tax, PwC India, said: "AAR has not appreciated that the term 'roti' is generic and can cover different types of Indian breads."