Goods and GST Bill passed, Goods and Services Tax - GST

[Ganeshan Kalyani]

Dear All,

GST Bill is passed in Rajya Sabha on 03. 08.2016.

A panel under chief economic adviser Arvind Subramanian has recommended a revenue-neutral rate of 15-15.5%, with a standard rate of 17-18% be levied on most goods and all services.

But, there has been no agreement yet on rates of various goods and services, which remains a tricky issue. According to the Bill, passed in the Lok Sabha in May 2015, the rates were to be decided by a GST council headed by the central finance minister with state finance ministers as members.

Let us wait.

Thanks.

Posts / Replies

[Ganeshan Kalyani]

In the five years Samiksha Dhingra has been running a small business of gift packaging, She has not felt the need to apply for a sales tax number. “My business is very small and doesn't require sales tax registration,“ says the Gurgaon-based entrepreneur. But this will soon change because Dhingra plans to take her business online. The Goods and Services Tax (GST), which comes into effect from 1 July, requires all e-commerce businesses, including tiny outfits like Dhingra's, to register under the new tax regime.

[Ganeshan Kalyani]

In Surat, textile manufacturer Devrishi Arora is vaguely aware that GST will soon come into effect but is yet to take concrete steps for migrating his business to the new tax. “I have read a lot of newsreports on the GST and we are in touch with some tax professionals for this,“ says Arora.

[Ganeshan Kalyani]

Dhingra and Arora are not alone. Even though the new tax comes into effect barely three weeks from now, many businesses have not prepared themselves for GST. In a recent survey by CA Club India, a platform for finance professionals, only 38% of the 1,100-odd respondents said they were ready for the rollout on 1 July. The others either needed more time or their clients were not fully prepared.

[Ganeshan Kalyani]

“The GST is not just a tax reform or even a business reform. It is a lifestyle reform that will change the way business is conducted in the country,“ says Minal Agarwal, a chartered accountant who advises corporate houses on GST compliance and related issues. “Nearly 50% of Indian businesses are not aware of the changes that GST will usher in. Most of them think it is just another tax regime,“ says Bharat Goenka, Managing Director of Tally Solutions.Tally's accounting software is widely used by Indian companies. It is waiting for the GST rules to be finalized so that it can roll out its GST software for Indian companies.

[Ganeshan Kalyani]

The level of unpreparedness is even greater among small businesses and tiny outfits. Many small entrepreneurs feel they can bypass the GST if their turnover is less than ₹ 20 lakh. That is true, but this exemption comes with its own set of problems. “If you are not in GST, the businesses you supply to will have to bear the burden of your compliance. They may eventually switch to vendors who are registered under GST,“ she warns. It is adviced even if you are a small business with a turnover of less than the GST threshold of ₹ 20 lakh, get yourself registered.

[Ganeshan Kalyani]

It may come as a surprise, but joining the GST is not the Himalayan task that some entrepreneurs and small businessmen presume it to be. One can register online by logging on to gst.gov.in. Some companies, such as tax filing portal ClearTax.in, charge a small fee for assisting companies and small businesses to get on board . “We offer a bouquet of services, including cloud-based GST software, an end-to-end platform for filing GST returns and GST compliant billing supported by integrated learning modules. This single software can be used to do full GST compliance,“ says Archit Gupta, founder and CEO of ClearTax.in.

[Ganeshan Kalyani]

Taxmann, a leading name in tax and corporate law and a GST Suvidha Provider, has also introduced One Solution, an integrated software that does all the GST-related compliances. Though the rates vary depending on the size of the organisation, they start as low as 99 paise per invoice.

[Ganeshan Kalyani]

Other smaller outfits are also doing their bit to spread awareness about GST and get businesses to register. Delhi-based chartered accountant Aditya Agarwal has set up GSTsamadhan.in. His team not only helps in the registration formalities but also conducts training workshops for companies.In the past six months, Aditya has conducted training sessions for nearly 25 corporate clients, with charges varying according to the size and complexity of a company's account books.

[Ganeshan Kalyani]

GST will require a very high level of compliance. Out go the hand-written ledgers, accounting books and notepads. Everything will now be online and will need to be updated regularly. A business will have to file 37 returns in a year (three returns per month and one annual return) per state. If it does business from offices in more than one state, the number of returns will go up accordingly. A business with a offices in three states will have to file 111 tax returns in a year.

[Ganeshan Kalyani]

The GST provides some relief for smaller outfits that may not be able to meet these stiff requirements. An enterprise with a turnover of less than ₹ 50 lakh can opt for the composition scheme, which levies a presumptive tax of 0.5-2.5% on the turnover. However, this option is not open to everybody. Only manufacturers and specific service providers (restaurants) can opt for this composition scheme.

[Ganeshan Kalyani]

Though the composition scheme requires lesser GST compliance, it has several drawbacks. For one, only businesses which operate within a particular state can opt for this. Plus, opting for composition breaks the chain of seamless input tax credit.“Those who buy from a composition dealer will not be able to take credit of any input tax. A composition dealer cannot levy and collect any tax from its buyers. Should the composition dealer purchase from registered persons, he will not get input credit on the tax paid by him on inputs,“ says Preeti Khurana, chartered accountant and GST expert with ClearTax.in.

[Ganeshan Kalyani]

In future, the government will also start rating companies and businesses on the basis of how well they have complied with the GST rules. “Right now, not complying with sales tax or excise rules means a penalty and interest. It can be prosecution in extreme cases. But under GST, the Compliance Rating Score (CRS) could mean that a poor score leads to loss of business,“ warns Minal.

[Ganeshan Kalyani]

Credit rating provision is what many tax professionals are worried about. They fear the compliance score will be used to assess the credibility of a business. This could wipe out small businesses that face cash-flow problems and delay payments. Since their problems will now be public knowledge, buyers will avoid this company leading to further payment delays. “This will slowly, but with certainty, drive almost every small business to eventual closure,“ contends Goenka.

[Ganeshan Kalyani]

As the GST deadline approaches, many in the industry and in tax circles are hoping it will be deferred. Almost three out of five respondents to the CA Club India poll wanted the rollout to be postponed. “As Indians, procrastinating is in our DNA. It is also the general human tendency to resist change. Instead, we must embrace this change in a positive light,“ says Vivek Jain, Founder of the CA Club India online forum. “Deferring the roll-out will not help. The government should stick to the 1 July deadline,“ says Lakshmipriya, AVP Finance, Bankbazaar.com.

[Ganeshan Kalyani]

Lakshmipriya says there are likely to be teething troubles when such a massive change is introduced, but over time these problems will get ironed out. “The level of compliance is very high under GST.We hope the government is lenient towards compliance lapses so that businesses get used to the requirements under the new law,“ she says.

[Ganeshan Kalyani]

“GST will be a push for the unorganised sector to become mainstream. See it as a club which offers its members certain benefits such as input tax credit and access to a large number of buyers and sellers, which can impact business pos itively,“ says Khurana of ClearTax.in.

[Ganeshan Kalyani]

GST registrations opened last week and will continue till 15 June. If you have a small business or shop, it will be beneficial to get your company registered under GST. We wish your business good luck and prosperity.

[Ganeshan Kalyani]

All imports shall be deemed as inter-State supplies and accordingly Integrated tax shall be levied in addition to the applicable Custom duties.

[Ganeshan Kalyani]

The IGST Act, 2017 provides that the integrated tax on goods imported into India shall be levied and collected in accordance with the provisions of the Customs Tariff Act, 1975 on the value as determined under the said Act at the point when duties of customs are levied on the said goods under the Customs Act, 1962.

[Ganeshan Kalyani]

The integrated tax on goods shall be in addition to the applicable Basic Customs Duty (BCD) which is levied as per the Customs Tariff Act.

[Ganeshan Kalyani]

GST compensation cess, may also be leviable on certain luxury and demerit goods under the Goods and Services Tax (Compensation to States) Cess Act, 2017.

[Ganeshan Kalyani]

The value of the goods for the purpose of levying integrated tax shall be, assessable value plus Customs Duty levied under the Act, and any other duty chargeable on the said goods under any law for the time being in force as an addition to, and in the same manner as, a duty of customs.

[Ganeshan Kalyani]

The value of the imported article for the purpose of levying cess shall be, assessable value plus Basic Customs Duty levied under the Act, and any sum chargeable on the goods under any law for the time being, in force as an addition to, and in the same manner as, a duty of customs. The integrated tax paid shall not be added to the value for the purpose of calculating cess.

[Ganeshan Kalyani]

Importer would not be required to pay the Integrated tax at the time of removal of goods from a customs station to a warehouse.

[Ganeshan Kalyani]

Input tax credit of the integrated tax paid at the time of import shall be available to the importer and the same can be utilized by him as Input Tax credit for payment of taxes on his outward supplies. The integrated tax shall, in essence, be a pass-through to that extent.