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GST Council plans to take up three contentious laws for discussion; targets 1 July roll-out Aiming towards a smooth roll out of Goods and Services Tax (GST) from 1 July, the GST Council will look into the three GST laws in its next meeting, scheduled for 18 February. The session by the Secretaries Panel at CNBC-TV 18 Mint’s ‘Budget 2017: The Verdict’ programme in New Delhi on Thursday evening discussed in detail the GST and its power to arrest, disinvestment plans, mergers and acquisitions, proposals for a new financial year, and other factors. West Bengal finance minister Amit Mitra, who also heads the empowerment panel on GST. AFP file image “Industry is looking forward to the laws and rules. Once they are finalised by the GST council, it will pave the way towards the implementation of GST from 1 July. The agenda of the next meeting is to look into all the three laws. In the subsequent meetings, we’ll take up the rules. As far as rates are concerned, it’s going to be a simplistic formula. The council has said that there would be four slabs: 5 percent, 12 percent, 18 percent and 28 percent, ” said revenue secretary Hasmukh Adhia. After the announcement of the Budget on 1 February, West Bengal finance minister Amit Mitra, who also heads the empowerment panel on GST, sent 16 demands to the Finance Ministry to look into, including the arrest clause, which was described as “draconian” by the West Bengal government. “The power to arrest tax defaulters is already there under excise and service tax laws, and also under VAT in some states. After an extensive debate, a majority in the GST Council decided that no arrests should be made in cases of tax evasion up to Rs 2 crore. However, evaders between Rs 2 and Rs 5 crore could face bailable arrest. Above tax evasion of above Rs 5 crore, it may invite non-bailable arrest, ” he said. Is there a new financial year on cards? Economic affairs secretary Shaktikant Das said, “The report to change the financial year is under consideration by the government. We are examining it, and once the decision is taken, it will be communicated.” On IDBI Bank’s disinvestment plan The government announced in the Budget that it hopes to raise Rs 72, 500 crore in FY18 by divesting stakes in public sector firms. Compared to the revised estimate of Rs 45, 500 crore for FY17, this is an increase of around 60 percent. While discussing the disinvestment plan of the state-run IDBI Bank, Das said, “The divestment of IDBI Bank is not off the table. The work is in progress. Its share value in the market doesn’t reflect the real estate it holds in Mumbai. The real estate valuation needs to be done carefully and a transparent decision needs to be taken in this case.” “We’ve not derailed from the path of financial prudence. Today, our economy needs investment in certain sectors. As per the NK Singh panel, our fiscal deficit target is 3 percent and we’ll improve it in 2017-18, ” Das added. Priorities in 2017: “To ensure people pay tax and society becomes more tax compliant”: Ashok Lavasa, finance secretary. “Budget 2017 is very strong on reforms, and our focus is on implementation”: Shaktikant Das, economic affairs secretary. “Roll out of GST from 1 July 2017 will be the Year of GST”: Hasmukh Adhia, revenue secretary. “Look for a stable and buoyant market”: Neeraj
GST roll out next fiscal: Is the govt looking at changing the financial year? Aiming towards a smooth roll out of Goods and Services Tax (GST) from 1 July, the GST Council in its next meeting on 18 February will look into the three laws in GST. The session by Secretaries Panel at ‘Budget 2017 The Verdict’ of CNBC-TV 18-Mint at Hyatt Regency in New Delhi on Thursday evening discussed GST and its power to arrest disinvestment plan, merger & acquisition, proposal for a new financial year among others in detail. “Industry is looking forward to the laws and rules. Once they are finalised by the GST Council – it’ll pave way towards implementation of GST from 1 July. The agenda of the next meeting is to look into all the three laws. In the subsequent meetings we’ll take up the rules. As far the rates are concerned, it is going to be a simplistic formula. The council has said that there would be four slabs of rates—5%, 12%, 18% and 28%, ” said Revenue Secretary, Hasmukh Adhia. After the announcement of Budget 2017 on 1 February, West Bengal’s finance minister, who also heads the empowerment panel on GST, sent 16 demands to finance ministry to look into, including the arrest clause. The arrest clause has been described as ‘draconian’ by the West Bengal government. “Power to arrest the tax defaulters is already there in excise and service tax, and also under VAT law in some states. After an extensive debate, majority in the GST Council decided that no arrest would be made in the case of tax evasion up to Rs 2 crore. However, evader between Rs 2-5 crore will face arrest but get a bail. But above, Rs 5 crore, it’s non-bailable, ” he said. Is there a new financial year on cards? Economic Affairs secretary, Shaktikant Das said, “The report to change the financial year is under consideration by the government. We’re examining it, and once the decision is taken, it will be communicated.” On IDBI Bank’s disinvestment plan The government announced in the Union Budget on 1 February that it hopes to raise Rs 72, 500 crore in FY18 by divesting stakes in public sector firms. Compared to the revised estimate of Rs 45, 500 crore for FY17, this is an increase of around 60 percent. While discussing the disinvestment plan of the state-run IDBI Bank, Das said, “The divestment of IDBI Bank is not off the table. The work is in progress. The share value of it in market doesn’t reflect real estate it holds in Mumbai. The real estate valuation needs to be done carefully and transparent decision needs to be taken in this case.” “We’ve not derailed from the path of financial prudence. Today, our economy needs investment in certain sectors. As per the NK Singh panel, our fiscal deficit target is 3% and we’ll improve it in 2017-18, ” added Das. Priorities in 2017 Ashok Lavasa, Finance Secretary: To ensure that people pay tax and it should be a more a tax compliant society. Shaktikant Das: Budget 2017 is very strong on reforms and our focus is on implementation. Hasmukh Adhia: Roll out of GST from 1 July. Year 2017 will be the Year of GST.
Are banks actually ready for GST to set in ? Tax rates for banking services delivered will now increase from 15 percent to 18 percent. If banks are conducting a transaction in several small towns in each state, records should be maintained on what services were delivered in each village and town. This will increase the workload on bankers as GST has to be tracked down. The problem with compliance is going to get tougher too. The major question yet to remain answered is whether the banks across the country are actually thorough with the steps to be taken under GST regime.
First arrests for fraud made under GST Act In a first in the country, the Central Goods and Service Tax (CGST) department arrested two Mumbai-based dealers in two separate cases under the CGST Act for allegedly defrauding the exchequer and banks by showing fake transactions. The dealers have been identified as Sanjiv Mehta, director, Shah Brothers Ispat Private Limited at Trust House in Parel, and Vinaykumar D Arya, director of M/s VN industries at Darukhana in Sewri. Mehta and Arya have been arrested by CGST Mumbai Central Commissionerate for availing ineligible credit of Rs 5.20 crore and Rs 2.03 crore, respectively. The officials claimed that the duo was only exchanging invoices for the sale and purchases, but actual goods were not being bought or sold, and no physical transport of goods was taking place. “Prima facie, the investigations revealed that this was being done with mala fide intentions to defraud the exchequer and banks by opening letters of credit (LCs) on fake purchase transactions, ” said a CGST official. The official said, “The law is very clear that whoever commits the offence of issuing any invoice or bill without supply of goods or services or both in violation of the provisions of the CGST Act, or the rules made thereunder leading to wrongful utilization of input tax credit or refund of taxes, or using such invoices or bills, may be arrested. Our probe is still going in.” This is the first arrest in India after GST implementation for fraud under CGST Act. It has been approved by Commissioner KN Raghavan, Mumbai Central, and executed by additional commissioner Manpreet Arora, assistant commissioner Anand Gokhle and superintendent Sh Parecha.
The Goods and Services Tax (GST), the country’s biggest tax reform, is scheduled to be rolled out from July with the Parliament passing all the crucial laws on April 6. The main problem now is implementation, which politicians and experts say, will not be smooth as companies have to file as many as 37 forms in every state. While the compliance cost will increase, businessmen will have to brace for penalties, harassment and even jail term. Many smaller units will have to buy software and hire professionals to compile the transaction details to get tax refunds. For those having units at remote places, filing returns online will be a challenge in absence of internet connections. One of the main architects of the GST and former prime minister, Manmohan Singh, has warned that the new indirect tax regime could be a “game-changer” but fraught with “difficulties”. Congress leader Veerappa Moily has cautioned the government that the rushed GST rollout from July will make it a “technological nightmare” for businesses. Here are the 10 things that taxpayers have to look out for in the new GST regime: 1.Multiple tax forms Companies will have to go through a grueling exercise of filling up and filing multiple forms for central GST (CGST), the inter-state integrated GST every month. “The basic returns under GST could be 37 in a year for a single GSTIN—GSTR-1, GSTR-2 and GSTR-3—for each month, and one annual return. For a company with operations in 20 states, it means 740 annual returns, ” says Archit Gupta, founder and CEO of Cleartax.com. For an e-commerce company, it could even be as high as 432 returns in a year. 2.Can GSTN support a flood of data? GST Network is geared to accept up to three billion invoices a month from 8.5 million taxpayers from day one. The common portal (www.gst.gov.in) acts as an interface between different stakeholders in the GST ecosystem, namely taxpayers, tax departments, banks, the Reserve Bank of India, external service providers, among others. The portal becomes the touch point for taxpayer registration, invoice upload, tax payment, getting input tax credit, maintaining the cash ledger and stock holding etc. This would mean that the network must have the capacity to handle massive amounts of data, and hence the fear of a breach. Given the experiences of online filing of income tax and VAT, experts doubt the new GSTN will be able to seamlessly match billions of vouchers, facilitate tax collection, provide refunds and check evasion. 3.Go digital without hard copies GST will herald not only a new tax but also a 100% digital system to file returns and payments., further raising questions about adaptation, especially in arear of low internet adoption. “All filings, communications and payments will be through a common portal. There will be a discontinuance of hard copy filings and a move towards digital India. It will be a Herculean task as a large number of people especially the small traders do not have access to electronic facility, ” says Priyajit Ghosh, a partner looking into indirect taxes at KPMG. 4.Data privacy Subramanian Swamy, a leader of the ruling Bharatiya Janata Party, has openly expressed reservation at the security and privacy of the GSTN, which will be 51% owned by private players. Opposition leaders—Congress’ Kapil Sibal and CPI’s D Raja—have expressed concerns about data privacy under a private company GSTN. Finance minister Arun Jaitley has assured lawmakers in Parliament that there will be IT firewalls and penal provisions for any leak of information. Given the rise in cyber crimes, can leak of information and technical glitches be ruled out? 5.Allegations of draconian provisions Some of the Parliamentarians raised objections to some of draconian provisions of arrest for fraud in the initial years as many new firms will be using the GSTN system for the first time and are bound to make genuine mistakes. Although Jaitley has assured that small businesses will not be covered by the harsh provisions, every offence of tax evasion will be compoundable. There will be no arrest for frauds up to Rs 2 crore. For offences between Rs 2 crore and Rs 5 crore, it is going to be bailable. For offences over Rs 5 crore, it is going to be non-bailable.
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