Posts Tagged ‘GST’

GST – upadate: the dual control percentages decided, draft laws to be approved and classification codified on the next meeting to be held on February.18, 2017!

January 17, 2017

GST – update: the dual control percentages decided, draft laws to be approved and classification codified on the next meeting to be held on February.18,  2017!

gst-16-01-2017-pti-graphics-the-telegraph

More than Rs.1.5 crores divided into 90% and 10% and the 10% into 50-50 between States and Centre: The Centre and the states managed to hammer out a broad consensus over the contentious issue of division of administrative control over tax assessees at the ninth meeting of GST Council Monday (16-01-2017) though it will be at the cost of a three-month delay in the rollout of the proposed indirect tax regime[1]. Finance Minister Arun Jaitley said 90 per cent of tax assessees below the annual turnover threshold of Rs 1.5 crore will be under the control of states and the remaining 10 per cent will be under the Centre’s jurisdiction[2]. For a turnover of Rs 1.5 crore and higher, there will be equal division of assessees between the states and the Centre[3]. Calling it a significant headway, Jaitley said[4], “The states would do 50 per cent of assessees above Rs 1.5 crore turnover and 90 per cent of less than Rs 1.5 crore turnover. The Centre would get to assess 50 per cent of above Rs 1.5 crore turnover and 10 per cent of less than Rs 1.5 crore turnover.” 90% of all assessees with a turnover of Rs. 1,5 crore or less will be sesses for scrutiny and audit by the state authorities, for the remaining 10% by the centre[5]. However, if there is a dispute between states over the place of supply, the Centre will have the power to administer those assessees. In all situations, the Centre will retain the power to collect this tax[6].

gst-4West Bengal and Kerala opposing, and Tamilnadu supporting the ratio: Some ministers, including West Bengal Finance Minister Amit Mitra, are learnt to have objected to the 90:10 ratio of division between the states and the Centre, instead seeking exclusive control over all tax assessees below the annual turnover threshold of Rs 1.5 crore[7].  It had argued that states did not have experience in dealing with service tax and states led by Bengal saw it as intrusion into their domain[8]. Mitra later told reporters this agreement pertained to services only. Mitra said 13 pending issues were raised by him — such as the definition of agriculture and definition of deemed exports — were being referred to the law ministry, which will revert by the first week of February, 2017. Left with little choice after holding out for nearly three hours, West Bengal finance minister Amit Mitra submitted a dissent note. The agreement hammered out was based on a proposal by Tamilnadu[9]. “As far as the dual control is concerned, the Centre has come, finally, very close to the position that the empowered committee had taken, where under Rs 1.5 crore, all goods, all deemed goods, and the decision taken on which I had to put a dissent, that 90 per cent of all goods and services will be with the states. Only 10 per cent of services are with the Centre, on which I had to dissent because I wanted 100 per cent. So we have come very close to 100 per cent but unless it is 100 per cent, I was constrained to dissent, because I wanted that extra 10 per cent,” Mitra told reporters after the meeting[10]. Kerala Finance Minister Thomas Isaac, who left the Council meeting early, said that there was no decision and an agreement was being worked upon. “The discussions are still going on. There is no agreement as to how the taxes will be administered… territorial waters, taxation powers will be delegated to the states… some compromise will be worked out. Below Rs 1.5 crore could be under the administrative control of states. Centre would have certain limited amount of audit functions that could be one possible compromise. Discussions are going on,” he told reporters. On the dissent by Mitra, Jaitley said it was confined to the extent of the 90:10 division between states and the Centre, and on other issues, he was in agreement with all other GST Council members[11]. Amit Mitra termed 90 per cent of the assessees being with states as a victory to protect small traders[12]. As per the agreement reached earlier, businesses earning upto `20 lakh in a year will be exempt from GST.  For the North-eastern states this limit will be Rs 10 lakh[13].

nautical-taxNautical Taxes – GST on the economic activities at the coasts and on the seas: The Council also resolved a logjam over the right to tax economic activities within 12 nautical miles from India’s coasts. The Centre also gave the right to tax economic activities within 12 nautical miles to coastal states, even as it will be the territory of the Union. At present, these states have the right to tax these activities[14]. The government is constitutionally mandated as per the Constitution (One Hundred and First Amendment) Act, 2016, passed by Parliament last year, to roll out the indirect tax regime by September 16 this year, 2017. On the issue of taxation powers in offshore areas, which was raised by states in the previous GST Council meeting, Jaitley said states will have taxation powers up to 12 nautical miles in offshore areas. Since the GST will miss the April 1 deadline, the indirect tax receipts estimates in the upcoming Budget for 2017-18 will include a combination of excise and service tax for three months and GST for the next nine months, a senior government official said.

gst-16-01-2017-business-standard-graphicsDefinition of “territory” has to be decided specifically: The definition of ‘territory’ in the Goods and Services Tax (GST) Model Law proposes to push the “physical boundaries” of India that could create aberrations for transactions on the high seas, according to a leading trade group. The territory of ‘India,’ for the purpose of the levy and collection of the Integrated Goods and Services Tax (IGST) proposed to be collected by the Centre on all inter-State supplies of goods and services and to be roughly equal to Central GST plus State GST, is proposed to be 200 nautical miles, FIEO Director General and CEO Ajay Sahai told the Empowered Committee of State Finance Ministers. This compares with the 12 nautical miles plus specified structures up to 200 nautical miles as specified in the Customs Act. The difference can create aberrations, Sahai told the meeting chaired by West Bengal Finance Minister Amit Mitra. For example, sales on the high seas between 12 and 200 nautical miles could get taxed twice to the IGST— once as a supply and later at the time of import, Mr. Sahai said. The model law also lacks clarity on the taxation of supplies terminating and originating in territorial waters and in the continental shelf and the exclusive economic zone beyond 12 nautical miles, according to FIEO.

gst-16-01-2017-the-hindu-graphicsThe draft laws are to be approved on February 18, 2017: The changes would be incorporated in the draft legislations relating to Integrated GST (IGST), state GST (SGST) and Central GST (CGST), following which they would be shared with the Council at its next meeting on February 18, 2017. Citing that the whole process will take time till March, Jaitley said that July 1 will be a “more realistic date” to roll out GST. “…once they are free from making the drafts, the officials who are lending technical support will start working out the fitment of rates in various slabs. This exercise will, in all probability, take us into the month of March. The ministers and Council then assessed the realistic date by when the three important things pending — final draft legislation and rules, secondly, approval of these by the legislative bodies and fitment of rates can take place. I requested the ministers to give their opinion about the realistic dates and there was a broad view that July 1 appears to be more realistic,” Jaitley said. He said since it is a transactional tax, it can be introduced any time. The Council members felt that industry and trade should be given some adequate notice and once the rates are decided, the systems of GSTN will have to be modified suitably, he said.

gstDiscussion about “classification,” penalty etc: Also, the penal arrest provisions, which were part of the draft law, have been diluted. Officials said default in payment of taxes amounting up to Rs 2 crore will be a bailable offence. The arrest powers will be invoked only in cases of criminal offences like forgery and tax not deposited in government coffers. Tax experts said that the consensus on cross empowerment and a delayed rollout date has ended uncertainty and will give enough preparation time to the industry. “Resolution of contentious issues such as dual control in today’s meeting signifies the most decisive step that we have seen on the GST front in the past three months. The announcement that GST rollout would be from July 1 instead of April 1 is welcome as it ends the anxiety of the industry to have a firm rollout date in place,” M S Mani, Senior Director, Indirect Tax, Deloitte Haskins & Sells LLP said. Harishanker Subramaniam, National Leader — Indirect Tax, EY India, said, “It’s indeed a very positive development and takes the GST journey forward. What remains now are the rates for various goods and services which I am sure will be decided in March 2017.” A bureaucrats’ panel is working on “classification”— a comprehensive, if not exhaustive, list specifying the tax rate that each good and service will attract[15]. “The officials will start working out on the fitment of the rates on the various slabs,” Jaitley said[16]. “This exercise will take us well into the month of March. The broad view was that July 1 appears to be more realistic (date for rolling out GST). Since it is a transactional tax, it can be introduced at any time of the year,” he said. GST is expected to transform India into a single market, boost revenues through better compliance and a simpler procedure[17]. The power to levy and collect Integrated-GST, a tax on inter-state movement of goods and services, will lie with the Centre but by special provisions in law, states will also be cross-empowered[18].

© Vedaprakash

17-01-2017

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[1] Indian Express, Headway on dual control, GST likely in July: Arun Jaitley, Written by Aanchal Magazine | New Delhi | Updated: January 17, 2017 4:25 am

[2] http://indianexpress.com/article/business/economy/headway-on-dual-control-gst-likely-in-july-arun-jaitley-4477739/

[3] The Hindu, GST stalemate resolved, rollout deferred to July 1, NEW DELHI: JANUARY 17, 2017 00:00 IST; UPDATED: JANUARY 17, 2017 04:20 IST.

[4] http://www.thehindu.com/todays-paper/GST-stalemate-resolved-rollout-deferred-to-July-1/article17047888.ece

[5] Economics Times, GST: Centre, States reach consensus dual control, roll out likely from July 1, 2017, ET Bureau, Updated: January 16, 2017, 11.54 IST

[6] Business Standard, GST set for July 1 roll-out, dual control hurdle over, Dilasha Seth & Indivjal Dhasmana, New Delhi January 17, 2017 Last Updated at 01:47 IST.

[7] India Today, Arun Jaitley breaks 3-month-long deadlock, GST rollout on July 1, Mail Today Bureau | Posted by Sonalee Borgohain; New Delhi, January 17, 2017 | UPDATED 07:04 IST

[8] http://indiatoday.intoday.in/story/arun-jaitley-finance-minister-gst-deadlock-taxpayers/1/859095.html

[9]http://economictimes.indiatimes.com/news/economy/policy/april-1-deadline-for-gst-ruled-out-4-options-now-for-arun-jaitley-in-budget-2017/articleshow/56598850.cms

[10] The Times of India, West Bengal cornered as Centre, states clinch GST deal, TNN | Updated: Jan 17, 2017, 06.23 AM IST

[11] http://timesofindia.indiatimes.com/business/india-business/wb-cornered-as-centre-states-clinch-gst-deal/articleshow/56608333.cms

[12] Deecan Chronicle, GST to roll out on July 1, says Arun Jaitley, Published Jan 17, 2017, 12:50 am IST; Updated Jan 17, 2017, 6:35 am IST.

[13] http://www.deccanchronicle.com/business/in-other-news/170117/gst-council-to-meet-on-february-18.html

[14] http://www.business-standard.com/article/specials/centre-states-break-impasse-over-gst-rollout-likely-from-july-1-117011601080_1.html

[15] The Telegraph, GST eyes July date as impasse ends, Tuesday , January 17 , 2017

[16] https://www.telegraphindia.com/1170117/jsp/business/story_130788.jsp – .WH2AYtJ95dg

[17] livemint.com, Stage set for GST rollout on 1 JulyRemya Nair, Last Modified: Tue, Jan 17 2017. 02 31 AM IST.

[18] http://www.livemint.com/Politics/7KHC3cniR8mjzof3fcydSK/GST-rollout-deferred-to-1-July-Arun-Jaitley.html

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GST Council Meeting clears drafts of 3 enabling bills including compensation for states: Next meeting on January 3 and 4, 2017.

December 29, 2016

GST Council Meeting clears drafts of 3 enabling bills including compensation for states: Next meeting on January 3 and 4, 2017.

gst-council-meeting-dec-23-24

Goods and Service Tax Act, 2016 provisions – almost approved by the GST Council: The seventh GST Council meeting was held on 22-12-2016 [Thursday] and 23-12-2016 [Friday] at New Delhi, as usual. On 22-12-2016, [Thursday], the Council had finalised the Central Goods and Service Tax (CGST) clauses. CGST, is one of the three categories under Goods and Service Tax (CGST, IGST and SGST) with a concept of one tax one nation[1]. CGST falls under Central Goods and Service Tax Act 2016. As many as 20 chapters of the model GST law cleared in its last meeting earlier this month. All other provisions of the draft model GST Bill and compensation Bill were cleared[2]. To a query that industry wants more time to prepare for GST, Jaitley said, “That we will decide once we cross all bridges. I am not going to bind myself with anything. Our effort is to do it as quickly as possible. And I think we are making a reasonable headway….. The CGST and SGST laws, a total of 197 provisions and five schedules, have been approved.” The Council approved the draft model GST Bill, except for provisions relating to administrative turf[3]. The bill was passed by the Rajya Sabha on 3 August 2016, and the amended bill was passed by the Lok Sabha on 8 August 2016. In other words, the opposition parties have been dragging the issues for more than four months.

gst-consensus-is-not-yet-reached-21-11-2016-business-standardGST Council keeps dual control for next time: The politicization of the GST is evealed more in the continuing of GST Coulncil meetings that go on discuss the same issues again and again without reaching any consensus. The tricky issues of division of administrative turf over assessees between the Centre and states — which can make or break the roll-out of the goods and services tax (GST) on April 1, 2017 — was not taken up by the GST Council during its two-day meeting that ended 23-12-2016 [Friday][4]. In spite of the last six meetings, if this was not possible, it is intruguing what they were discussing every time. The next meeting of the Council, on January 3 and 4, 2017[5] would try to resolve the issue of dividing the administrative powers between the Centre and states, but signals given by state governments on Friday suggest that it would be a difficult task. The meeting would also take up the Integrated GST (IGST) Bill[6]. “That leaves us with the very important work of IGST law and cross-empowerment,” Union Finance Minister Arun Jaitley told reporters after the meeting on Friday. A state finance minister said states were clear there should be no dual control over assessees with up to Rs 1.5 crore annual turnover[7]. This means that states want sole control till this limit, and share powers with the Centre over this threshold.

gst-council-makes-headway-on-bills-24-12-2016Cross-empowerment model, Territorial limits of states  and distribution of IGST: On the other hand, the Centre has been pushing for a cross-empowerment model of randomly choosing and dividing five per cent of the assessees between itself and the states, using a computer programme.  The division of administrative turf involves another issue — whether or not states can have control over assessees having inter-state businesses. This comes under the IGST Bill and the Centre is empowered to collect IGST and distribute it among states.  The issue of IGST also involves the territorial limits of states[8]. This could also turn out to be a vexed issue, if not resolved quickly. “Definition of the territory of a state itself is a matter of Constitutional interpretation. We will have to discuss it and reach a decision,” Jaitley said[9]. The Centre also wants to take 12 nautical miles[10] beyond coasts as Union territory and tax any item sold there. Coastal states are averse to this.  With the development of science and technology, the coastal activities have been incresasing on many accounts, attracting manufacture of goods with the involvement of many services. If these issues are resolved even in the next meeting, the Bills could come up in the Budget session of Parliament. When asked whether or not the GST could be rolled out from April 1, 2017, Jaitley said, “Well, I am trying my best to do that. I don’t want to hasten the process of discussion. I don’t want to delay the process of implementation. Left to myself, I would like to (implement it from April 1).”

gst-council-keeps-control-for-next-meet-bs-24-12-2016The Compensation Bill: It also decided to provide full compensation to states every two months instead of quarterly payout decided earlier for first five years of the GST roll-out. There are expectations that the total compensation would amount to Rs 50,000 crore a year, but Jaitley said there was no cap on the amount[11]. The Council had decided to levy a cess on luxury and demerit goods over and above the higher rate of 28 per cent under the proposed multi-tier GST rate structure to create a compensation fund to pay states for their revenue losses after GST rollout[12].  The States, where manufacturing activities are more again and again sress that they would be loosing much, because of the taxing on ultimate sale and therefore, they should be compensated accordingly. Compensation law has to be approved by Parliament. The GST Compensation Bill will provide a legal backing to the Centre’s accord to compensate the states to the full extent of 100% if their revenue growth rate falls below 14% in the first five years of GST roll out. The base year for calculating revenue of a state has been decided as 2015-16.  Basic draft of Compensation law was also approved[13]. Compensation law has to be approved by Parliament[14].

gst-in-last-lap-toi-graphics-04-11-2016-1Contentious issues would be decided with consensus: However, the FM indicated that there would not be voting to resolve the contentious issues; these would be settled through consensus. “It would be resolved through a deliberative way. The GST Council meets for a full day. There is discussion for hours on a single subject. There is a high standard of debate. We get alternative suggestions. We accept the best solution after listening to all proposals. We have not decided any issue through a vote or by a give-and-take policy,” he said. It will be drafted in legally vetted language.  Despite the fact that the government failed to table and pass the draft GST laws in the Winter session of Parliament, Mr Jaitley said he was trying his best to meet the government’s deadline of April 1, 2017 for the rollout of GST. “We don’t want to hasten the process of discussion,” he said[15]. “But we don’t want to delay implementation either. The GST Council meetings are all-day and issues are often discussed for hours. No decision has so far been taken by vote, all are by consensus.”

The effect of demonetization and the GST: “If there are high deposits in banks and we got higher tax receipts after demonetisation, will it be linked to GST?” Jaitley wondered.   The next meeting would also discuss the states proposals for the union Budget of 2017-18. As the ruling party and the opposition had bitter exchanges over demonetisation, a question was asked whether there would be political hurdles in the way of GST. The finance minister said: “We are living in the real world and politics is a part of the real world. At the end of the day, one has to assume that elected representatives of the Centre and states have a sense of responsibilities. So far, despite initial divergence of views, it all ends with convergence.” Ironically, 90% of the press repoting has been based on the Arun Jaitley’s “Press Meet” and therefore, much of the GST Council meeting details were not divulged and the media has been putting up pieces together to give some picture.  The passing of the GST Act is not personal to Arun Jaitley and he need not face any hurdles in implementation[16]. If at all, India has to fall in line with other countries, get FDI for economic development, the States have to cooperate, but, because of their politics, it has been delaying[17]. That they have been harping upon the same points is well noted by the industries, businessmen and common people.

© Vedaprakash

29-12-2016.

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[1] Zeebusiness, GST Council finalises compensation rules; next meet on Jan 3, Updated: Fri, Dec 23, 201607:14 pm

[2] http://www.zeebiz.com/india/news-gst-council-finalises-compensation-rules-next-meet-on-jan-3-9576

[3] The Hindu, GST Council moves a step closer to finalising draft laws, NEW DELHI DECEMBER 23, 2016 18:58 IST;  UPDATED: DECEMBER 23, 2016 19:10 IST.UPDATED: DECEMBER 23, 2016 19:10 IST

[4] Moneycontrol, GST Council to take up dual control issue at Jan 3-4 meet, Dec 23, 2016, 09.11 PM | Source: CNBC-TV18

[5] http://www.moneycontrol.com/news/economy/gst-council-to-takedual-control-issue-at-jan-3-4-meet_8157341.html

[6] Business Standard, GST Council keeps dual control for next time, Indivjal Dhasmana & Dilasha Seth  |  New Delhi December 24, 2016 Last Updated at 01:35 IST.

[7] http://www.business-standard.com/article/economy-policy/gst-council-to-meet-again-on-jan-3-4-to-decide-on-dual-control-and-igst-fm-116122300722_1.html

[8] DNA, GST council fails to break deadlock on dual control, next meet on Jauary 3,4, Fri, 23 Dec 2016-05:59pm , Mumbai

[9] http://www.dnaindia.com/money/report-gst-council-meet-uncertainty-looms-over-issue-of-cross-empowerment-dual-control-2285795

[10] 1 nautical mile = 1.1508 statute miles = 1.85203308 kms

[11] Indian Express, GST council meeting: Compensation Bill to see a redraft on the ‘note ban factor, By: ENS Economic Bureau | New Delhi | Published:December 24, 2016 2:25 am

[12] http://indianexpress.com/article/business/economy/gst-council-meeting-compensation-bill-to-see-a-redraft-on-the-note-ban-factor-4442430/

[13] Doordharshan News,  GST Council clears drafts of 3 enabling bills including compensation for states, Updated on : 23-12-2016 10:55 PM

[14] http://ddinews.gov.in/Home – Top Story/Pages/GSTlaw.aspx

[15] http://www.thehindu.com/business/Economy/GST-Council-moves-a-step-closer-to-finalising-draft-laws/article16932570.ece

[16] Economics Times, Arun Jaitley faces few hurdles in GST implementation, ET Bureau, Updated: Dec.24, 2016, 09.29 AM IST.

[17] http://economictimes.indiatimes.com/news/economy/policy/finance-ministry-states-move-closer-to-draft-gst-bill-arun-jaitley/articleshow/56140269.cms