http://WWW.GSTPROFESSIONAL.NET
SENANDASSOCIATES 5842879069ef8c0b50abf052 False 121 4
OK
background image not found
Found Update results for
'public comments'
5
Arguably the biggest indirect tax transformation will be upon us in a few weeks from now. The law makers are deliberating on the specific clauses and contours of it – so that the appropriate legislations can be passed. There is no doubt that this will be one of the great levelers in the market, and open out the Indian market for the businessman. The barriers of inter-state trade will disappear, and one will be able to find more customers and more suppliers than the present. Less people will be able to take undue advantage of law provisions, or by evasion of taxes, and so more businesses will flourish since competition will have a level playing field. Absorbing multiple current taxes into a single tax regime will reduce time and cost of compliance. It is indeed time for celebration. Except for the Small Businessman. CLICK TO TWEET In general, Small Businesses are generally ‘more honest’, and generally suffering ‘more cash flow problems’. Whether the increased relative honesty comes due to fear of social stigma, or inability to ‘settle’ when problems are detected, or the benefit of dishonesty is not large enough to be a temptation, or just the basic moral fibre not being tested with enough temptation, is actually a moot point. It is well known that the Micro Lending space sees the highest repayment ratios of any other lending business. At the same time, the Small Business suffers frequent unevenness of cash flow. Even a simple one-week delay in receiving money for goods sold throws their routine out of gear. A marriage in the family? The cycles take several weeks to repair. A promising auction or offer for materials which would give them higher profitability, and they have to readjust their cash cycles for a few weeks to take advantage of it. A marriage in an employee’s family? Their desire to help out comes at a cost of their cash flow management. The current statement by the Government in their Draft Model Law for GST has a few proposals which will slowly, but with certainty, drive almost every Small Business to eventual closure. This is not the INTENT of the Government, it is simply an unexpected consequence of other good intent. It is also CORRECTIBLE, provided the causes, and the consequences, are appreciated. The provision for ‘input tax credit available to buyer only if supplier has paid tax inside a given window’ is one problem which a reasonable percentage of Small Business will face in their life-cycle. Most (if not all), will have no bad ‘intent’ of evasion or not paying. Nor will they be taking the Govt. for granted. It is just that they may sometimes need to delay payment, due to other exigencies – some of which I described above. Sometimes, the choice of ‘paying salary to my workers on time’ and ‘paying a penalty to the Govt. for delayed payment’ is a conscious call they take, otherwise they may lose their people. Sometimes, the pressure of paying their supplier becomes critical, else their material cycle is broken and they may permanently lose business of their customers – so again the ‘penalty for delayed payment’ becomes acceptable. And, they eventually pay. A related and even more frightening provision is that the Government intends to make public a ‘Compliance Rating’ – so you will know before you buy whether your supplier has a ‘good or poor’ rating. The objective being, that since your input tax credit is dependent on this ‘quality’ of the supplier, you will try to avoid buying from people with ‘poor’ rating – which means, that people will do everything they can to AVOID a poor rating. And the rating becomes ‘poor’ not just because you delay filing your data, but because you may have delays in your payment. In essence, when you take these provisions together, any difficulty a Small Business may have faced, will now have ‘visible and public’ knowledge and corresponding snowball impact. So, the moment you face a problem, the problem magnifies the next month since your buyers will ‘play it safe’ and buy from others (the fact that the market is now a ‘more open market’ is a boon here). This will simply increase your problem, leading to further payment delays and/or further reduction of your rating, losing even more customers – till you eventually face closure. The need of ‘emergency funds at any cost to pay GST and avoid bad rating’ for Small Business is going to lead to usurious scenarios, and cost burdens which they will be unable to sustainably bear. As it is, they are unable to manage costs through economies of scale. Now, just trying to keep their ‘business afloat’ in a GST regime, will become prohibitive. And the paradox is, GST was expected to REDUCE compliance costs! CLICK TO TWEET There is no doubt at all that the Government has every right to deny input credit for possibly fraudulent claims on false bills. With the current provisions of suppliers needing to register their supplies with GSTN, and input credit only being available on such invoices, this is already a plugged problem. By demanding that all businesses must have uploaded their invoices fully establishes their liability, and their payment (or the right of the Government to demand/collect the payment) is almost certain. It is rumored that the key reason for such an unsustainable provision in law is due to the problem of IGST distribution to various states, particularly when a given business fails to pay. Alternate methods to deal with this are all under consideration by the Government, but the present Draft Law continues to reflect the provisions above – but the unofficial sentiment is that this problem can be solved later, and the first implementation happen along the present Draft Law framework. Yet, this is not a problem to solve later. There is no such thing as temporary death. Enough small businesses will be wrongly ‘branded’ as ‘why take risk in dealing with them’, and they will not be able to recover even if law changes later. The reverse is true. If the Government does not find tax fraud dramatically going down even WITHOUT this provision, they can always introduce it later as ‘the only way to control’. The change being requested is – do not link ‘payment’ to statement of ‘valid return’. Let a ‘valid return’ be one which is correct in its computation, and defines the liability of the tax payer. Let a ‘valid return’ of a supplier be the only basis on which a customer can claim ‘input credit’ (this is already the current provision of law, except that it is treated as ‘valid’ only if the liability is ‘paid for’). This simple change will anyway unlock the businesses, improve compliance, and dramatically reduce fraud due to the triangulated nature of GST. Linking payments to tax credit is not just a ‘flaw’, but a major ‘anomaly’. CLICK TO TWEET Taking a simple chain of 3 businesses, assume Company A raises an invoice of 1 Cr + 20 Lacs GST (total value 1.2 Cr) on Company B. Company A also discharges the tax of 20 Lacs to the Government. Company B now raises an invoice of 1.2 cr + 24 lacs GST (total value 1.44 cr) on Company C. Company B is liable to pay 24 lacs, and take credit of 20 lacs, and therefore, needs to pay 4 lacs to the Government. However, due to some situations, it fails to pay it. Company C now raises an invoice of 1.5 cr + 30 lacs GST (total value 1.8 cr) – and assume this is end of the chain (that is, sold to an end consumer). Company C was liable to pay 30 lacs after taking input credit of 24 lacs – or net of 6 lacs. However, due to Company B’s inability to pay the tax on time, this input tax credit is denied, and Company C has to pay the full 30 lacs. Now, IF Company B had paid the tax, the total tax collected by the Government would have been 20 by Company A, 4 by Company B, and 6 by Company C – or a total of 30 lacs. However, since Company B failed to pay in time, the Government actually collected 50 Lacs! 20 by Company A, and 30 by Company C. Suddenly, non-payment of Tax by Company B has become a bonus to the Revenue Department! Also, it is entirely possible, that Company B either voluntary, or through recovery action initiated by the Government, lands up paying a part of the 4 lacs. Making the total collections become even more than 50 lacs! This anomaly of law will be inherently unsustainable. Suddenly, non-payment of tax by Company B will be seen (albeit wrongly) as something good for the nation, since the revenue of the country will go up! Suddenly, non-payment of tax by Companies will be seen (albeit wrongly) as something good for the nation, since the revenue of the country will go up! CLICK TO TWEET That is certainly neither the intent of the law, nor can it be upheld as a valid outcome. It is VERY IMPORTANT that all of us, as citizens, help the Government to formulate a law which will give the benefits that it has the capability of, rather than create the problems which are not required to be created. The present laws are already giving tremendous security and protection against tax evasion, and only some minor technicalities require to be resolved (for IGST, for example) – and this artificial and unsustainable provisions can be replaced with the simpler ‘input tax credit available only on invoices registered with GSTN’. In fact, the current laws also allow for ‘provisional input credit even if the invoice is currently not registered’, and businesses will be more than happy to give up this ‘luxury’, if the ‘payment linkage’ is removed. Let us all pray for a Great GST Law which we will welcome with open arms, and not one which we will struggle under.
GST boost for logistics With many state and central taxes subsumed in GST, the logistics industry will be ridden of inefficiencies April 1, 2017, marks the beginning of the new financial year (FY) 2017-18. In many ways, FY 2017-18 is going to be a landmark one. First, this would the first FY when the budgetary outlays are available for expenditure right from the onset. This was made possible by preponing the Union Budget and realigning Parliament sessions to facilitate early passage of the Finance Bill 2017. Second, after decades of work in progress, Goods and Services Tax (GST) is finally expected to be rolled out from July 1, 2017. Possibly the biggest and boldest tax reform since Independence, GST seeks to overhaul the indirect taxation regime. And the logistics sector is likely to be one of its biggest beneficiaries.Studies estimate the average logistics cost in India to be around 13-14 per cent of GDP. This is much higher compared to other developed countries (which is around 8-9 per cent of GDP). Though various issues contributed to this, the structure of indirect taxes that exists today is a significant cause. Currently both Centre and states levy a bunch of taxes on goods. Note that we are saying “goods” here, as states are not empowered to levy service taxes. To continue, Centre’s levy includes taxes such as Excise, Customs, and Central Sales Tax, while states levy includes VAT/Sales tax, Octroi, Entry tax and Luxury Tax. Additionally, both Centre and States may levy other duties, cesses, surcharges over and above these. While levy of multiple taxes by Centre and states itself makes the tax structure complex, limitations to offset taxes paid along the value chain amplifies the problem further. For example, excise and VAT cannot be offset. So they cascade. So taxes get levied upon taxes. Further, it is difficult to claim VAT credits across states. The GST is poised to be a game-changer for the logistics industry. With GST, India will become a seamless unified market without any difference between inter-state or intra-state sales. This will essentially disrupt the existing inefficiencies and facilitate structural re-engineering of the logistics network. Service providers would be incentivised to leverage hub-and-spoke supply chain networks by operating large central warehouses and remodeling transportation routes. This can enable increased consolidation in the industry with large players operating efficiently. Phasing out the inter-state check posts would significantly reduce transportation costs and enhance “ease of doing business”. For industries, this would mean lower logistics cost and possible opportunities for increasing margins and/or reducing prices. For government agencies, all this may translate to increased formalisation and tax compliance. In fact, independent analyst estimates suggest that GST implementation can reduce overall logistics cost by around 30-40 per cent, thereby leading to an overall saving of about 0.3-0.4 per cent of GDP. All this would ultimately benefit the public. That said, there are still some issues that need to be resolved. The All-India Transporters Welfare Association (AITWA) and All India Motor Transport Congress (AITC) had recently organised a technical session on GST. The authorities were apprised of key areas that need more clarity. There could be some teething troubles but the government is determined to sort all these as we go along. Meanwhile, there is another interesting development. The government is reportedly considering changing the fiscal year from April-March to Jan-Dec. An expert committee has recently submitted its recommendations which is yet to be made public. But, if the government does go ahead with effecting this change, then FY 2017-18 could as well be the last FY to start from 1st April. Will this impact the existing scheme of GST? Mostly should not, but we are not sure. Only time will tell
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.
March 2, 2017 • No Comments Why is Technology the Epicentre of GST Implementation Share 262 Tweet Share 12 +1 2 SHARES 276 Technology-assisted compliance is not an entirely new concept in India. Way back in the 1990s, taxation departments used technology for tax administration. However, this was mainly as a backend mechanism. A major shift in behaviour occurred when online filing of returns was introduced. This was largely a result of different computer systems being integrated, thus enabling taxpayers to directly interact with the tax department. Under the current taxation system, data or information broadly flows in one direction to the Government, which we can describe as a B to G or Business to Government data flow. With the use of technology, the time and cost has reduced significantly while accuracy of compliance has been greatly enhanced. Technology for GST compliance – what is different this time? With technology already a driving force for compliance today, what then is the need to revisit issues that concern the right technology for GST implementation and compliance? Why will technology play a pivotal role in GST implementation and administration from both a government and business perspective? With GST, the two major goals that the government intends to achieve are: • Reduce tax evasion • Simplify compliance for taxpayers In the prevailing tax systems, there are several cases where the government has not been able to detect evasion and loss of tax revenues. As a result, it has become a challenge for the department concerned to track the input claims against the liability of the seller. There have also been numerous cases of duplication of claims on input tax, fraudulent claims, input tax claims that do not correspond with tax liability declared by the seller, or seller who has not furnished his tax liability. In order to overcome this, GST has introduced invoice matching of buyer and seller. It has been estimated that the taxpayer base under GST is around 8 million. With billions of invoices to be matched on a monthly basis, there is a critical need for a real time invoice matching capability, supported by robust IT infrastructure. There is no way invoice matching at this scale can be achieved manually. What is GSTN’s role in simplifying compliance for taxpayers? The GSTN is currently working on rolling out state-of-the art IT infrastructure that will introduce changes that are significantly different from the current system. Equipped with an open API (Application Program Interface), the GSTN server will seamlessly connect with third party applications used by taxpayers, thus providing an all-user interface, and convenience via desktops, mobiles, and tablets. This will assist taxpayers to automate their invoice matching from within their software rather than by logging onto the portal. This will save time, and drive simplicity of compliance procedures. GST will drive a lot of discipline in filing returns at regular intervals, and automation will help businesses achieve this with less pain. Use of technology will also enable efficient tax administration for registration, returns filing, data exchange, and effective investigation, monitoring, auditing and performance analysis with little or no human intervention. It will also provide several user-friendly features such as offline capabilities, alerting capabilities, mobile/tablet interface, and additional mechanisms to avoid duplicity of data. As this tax system is being implemented for the first time in India, businesses will encounter several challenges during the initial stages of implementation. However, once systems are streamlined, the two important objectives envisaged – curbing tax evasion, and increasing tax revenue and ease of compliance for taxpayers will be achieved. The success of this transformation will help our nation create history in the world of GST compliance. So what should businesses do now? The GST regime which begins on July 1, 2017, will ride on the strength of technology with seamless interface with the GSTN server. Businesses must automate their manual systems, and install software that is robust enough to interact with the GSTN system, and assist in immediate, accurate, and reliable compliance. Invoice matching is a very critical requirement of GST. Because of the clear timelines dictated by GST, compliance will no longer be a month-end or quarter-end activity. Therefore, invoice matching and other compliance related activities cannot be achieved using a manual or a low-tech system. Speed and accuracy are both critical. Businesses will have to start interacting frequently with the GSTN system. This will require a GSTN-enabled business application or accounting software so that the task ahead become seamless and efficient.
1
false