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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.
Single authority to issue GST refund for exporters: GST Council had earlier decided that central officers will have 10% of assessees and the states the other 90% of taxpayers with annual turnover up to Rs 1.5 crore The government has streamlined the issuance of goods and services tax (GST) refund to exporters, by a single authority. These would, however, still be issued by the Centre for its part of the GST and states for their portion. This arrangement would also be streamlined soon, said Hasmukh Adhia, finance secretary. The GST Council had earlier decided that central officers will have 10 per cent of assessees and the states the other 90 per cent for taxpayers with annual turnover up to Rs 1.5 crore. Over this threshold, assessees would be divided equally between the Centre and states. On that basis, the Centre and 20 states have worked out their jurisdictions, also covering refund issue to exporters. Adhia added that delay in refunds arose because some exporters were not filing accurate data in their returns. He says they’re filing for more claims than the taxes they paid, leading to a mismatch. A little over 10, 000 assessees had given their returns for input tax credit since the launch a fortnight earlier. The government, contended, had been very sensitive on exporter concerns. A package had been approved by the GST Council to resolve the problem of blocked working capital. Input tax credit and Integrated GST refunds for exporters are being expedited. He explained in detail the process and procedure for refund of exporter claims. A Central Board of Excise and Customs official disputed the charge that Rs 50, 000 crore of exporters’ GST refunds were stuck. Every paisa would be refunded, he said. GST, said Adhia, who’s also revenue secretary, is appreciated by one and all as a game changer. Which also means that those gaming the system by evading taxes will have to change. Referring to the earlier system, Adhia said exporters had to wait for long to get refunds of state-level value added tax. In some states, this could take two years. Some of the levies, such as octroi in Maharashta, were not refundable, he said, to buttress his point that GST was much friendlier to exporters than the earlier system. The present problems was teething trouble; exporters would benefit in the long term.
Conditions for distribution of input tax credit by an ISD The following are the conditions applicable for distribution of input credit by an ISD: 1. An ISD invoice clearly indicating ‘issued only for distribution of input tax credit’, should be issued by the distributor to the recipient of credit. The unit to which the input tax credit is distributed is referred as the ‘Recipient of credit’. The tax invoice should contain the following details; Name, address, and GSTIN of the Input Service Distributor A consecutive serial number containing only alphabets and/or numerals, unique for a financial year Date of its issue Name, address, and GSTIN of the supplier of services, the credit in respect of which is being distributed, and the serial number and date of invoice issued by such supplier Name, address, and GSTIN of the recipient to whom the credit is being distributed The amount of credit distributed, and Signature or digital signature of the supplier or his authorized representative 2. The amount of credit distributed shall not exceed the amount of credit available for distribution. 3. The input tax credit available for distribution in a month shall be distributed in the same month, and the details of the same shall be furnished in Form GSTR -6. 4. The input tax credit should be distributed only to that branch which has consumed the input services. Let us understand this with an example: For example, Top-In-Town Home Appliances Ltd, is located in Bangalore, Karnataka. They also have branches located in Mysore (Karnataka), Chennai (Tamil Nadu), and Mumbai (Maharashtra). The unit in Bangalore is the Head office and they procure common services in bulk which are used by the other branches too. Top-In-Town Home Appliances Ltd (HO) receives an invoice of Rs.1, 00, 000 + GST of Rs.18, 000 towards advertisement services provided exclusively to the Mysore branch. The total credit of Rs.18, 000 will be distributed only to the Mysore branch. 5. The credit of tax paid on input services, availed by more than one recipient of credit or all, should be distributed only amongst such recipients or all recipients. Method of input tax distribution The distribution shall be on pro rata basis based on the turnover for the previous year of such recipients. In the absence of turnover in previous financial year, the turnover of the last quarter of the month in which ITC is distributed, will be considered. Let us consider the above example and understand in detail. Amount of credit to be distributed Rs.90, 000 Number of recipients of credit Mysore and Chennai Aggregate turnover of Mysore unit in previous financial year (PY) Rs.60 Lakhs Aggregate turnover of Chennai unit in previous financial year (PY) Rs.90 Lakhs Aggregate turnover of all recipients of credit Rs.150 Lakhs The credit of Rs.90, 000 will be distributed in the following manner: Distribution of ITC by an ISD Example 6. Any additional amount of input tax credit on account of issuance of a ‘debit note’ by a supplier to the ISD shall be apportioned to each recipient in the same ratio in which the input tax credit contained in the original invoice was distributed. The distribution should be on the basis of method illustrated in Point No. 5 7. In case the input tax credit already distributed gets reduced for any reason, an ISD credit note should be issued for the reduction of credit. The following details have to be captured in the ISD credit note : Name, address, and GSTIN of the ISD A consecutive SL.No containing alphabets or numerals or special characters such as hyphen or dash or slash, symbolized as, “-“ “/” respectively, and any combination thereof, unique for a financial year Date of its issue Name, address, and GSTIN of the recipient to whom the credit is distributed The amount of credit distributed, and The signature or digital signature of the ISD or his authorized representative 8. Any input tax credit required to be reduced on account of issuance of a ‘credit note’ by a supplier to ISD should be apportioned to each recipient in the same ratio in which the input tax credit contained in the original invoice was distributed. The distribution should be on the basis of method illustrated in Point No. 5 9. The reduction amount so apportioned should be: Reduced from the amount to be distributed in the month in which the credit note is included in the return in FORM GSTR – 6 and Added to the output tax liability of the recipient.
E-Way bills may not be the best solution for small transport companies . As per the new tax reforms, Movement of goods worth more than 50, 000 will require the generation of E-Way bills. The generation will be initiated prior to the consignment via online registration. The entire process of bill generation shall include detail uploading on the GSTN portal. The supplier and the receiver can then be identified with the help of a unique e-way bill number. A new bill has to be generated by the transporter if the goods are transferred from one vehicle to another. The transporter needs to indicate the serial number of e-way bills generated in respect of each consignment when multiple consignments are to be considered. Although, the process seems to have no frills attached, it's a rather complicated one. There is no provision for a condition where goods carrying trucks suffer a break down. Also, technology cannot be relied on completely. Revenue secretary Hasmukh Adhia says that ample time will be given to the transport companies to adjust to the changes.
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