Flipkart gearing up to deal with the GST bill

The Indian offline and online retail ecosystem will be strengthened and organized with a comprehensive roll out of policies such as FDI and GST. The recently passed Goods and Services Tax bill is expected to address several key issues faced by e-commerce companies today.

In India, the e-commerce segment has successfully attracted customers by throwing away products at discounted rates. Moreover, by conducting regular shopping deals, the companies managed to catch the attention of customers. Moreover, the government has pushed smaller companies to regain space in the online sector with Digital India initiatives.

Flipkart made changes in the pattern for GST

According to sources, Flipkart has formed a core group to study the implications of GST. Moreover, the company has made few refreshed changes in the overall working patterns as per the guidelines framed by the government.

Detailed to-do list for the GST framed

As per reports, Flipkart has framed a detailed to-do list for the GST mandate, which the company is planning to rollout in April 2017. It showcases the modifications made the management around the various operational aspects which include training across the network of sellers on its platforms.

Responding to media, a spokesperson of Flipkart disclosed that the main priority of the company over the next few months would be to make the required changes to its ERP system.

Flipkart to provide training for sellers and internal staff

Moreover, the company has reportedly established partnerships with consultants to provide training for both sellers and internal accounting staff. In the meantime, the company will also actively engage with the government during deliberations in the law-making process.

According to proposed GST guidelines, each and every online marketplace should collect taxes at the source and pay it on behalf of registered sellers on their platform. However, this is a significant roadblock for many e-commerce companies because they lack clarify on the aggregators versus the operator’s model. As per the newly launched GST policy, aggregators need not have to pay tax while operators have to.

Meanwhile, Flipkart is gearing up to open a new warehouse in Lucknow. With this, the company will have a total of 18 fulfillment centers across India. Flipkart also hired 1000 temporary employees to cater to the demands of the large section of people due to the upcoming Big Billion Days and festive season.

GST council sanctions last two draft bills, limits cess on demerit merchandise

In a subversive move, the Goods and Services tax (GST) council on Thursday approved the last two remaining draft bills for State Goods and Services tax (SGST) as well as Union Territory Goods and Services tax (UTGST) and restricted the cess on cigarettes (290%), aerated drinks (15%) and luxury automobiles (15%).

Sliding an inch closer to the July 1 rollout date, the council cleared the remaining two GST bills to implement the biggest tax reform of the country paving its way into the state and parliament legislative bodies. The council’s approval of these two bills is being deemed as a landmark development in the country’s exhaustive journey to implementing a unified tax system, according to experts.

The council also approved to limit cess on demerit (and luxury or sin) merchandise. The newly introduced cess rates are as follows:

• For automobiles and aerated drinks (colas), the cess has been limited at 15% meaning that the total tax on cars and sweetened beverages cannot go beyond 43% (28% cess + 15% cess).
• For cigarettes and other tobacco products, the cess can be either 290% or 4,170 INR per 1000 sticks or a combination of both.

Admittedly, these newly introduced cess rates are just qualifying provision, since the actual tax rates could be lower, and the decision rests solely on the GST council. 

Interestingly, the GST council has also decided to introduce a qualifying provision cess rates on all the automobiles and not just luxury automobiles. This infers that the council could decide to levy cess on non-luxury automobiles as well at a later date, which can be over and above the 28% tax rate.   

For goods produced in SEZ (special economic zones), the council has decided to levy tax rates that are similar for exports. Procurement of goods by SEZs would be zero-rated, whereas in the previous draft, SEZs were required to pay the tax first before claiming refund. 

“In the previous meetings, the GST council already cleared bills for state compensation (for revenue loss that would occur while transition to GST reform), Integrated GST (IGST) and central GST (CGST),” said Finance Minister Arun Jaitley, who heads the council.  

Four of the proposed bills excluding the state GST bill will be put forward for Union and Lok Sabha cabinet’s approval, whereas the state GST draft will need approval by state legislatures.  

Further, it is expected that the NDA government would table the proposed bills in the current budget session as revenue bills for smooth passage into the parliament house. 

The bills are expected to eradicate tax hurdles across states and include certain indirect taxes to be levied by the states and centre subsuming luxury tax, entry tax, entertainment tax, value added tax (VAT), service tax and excise duty. 

Next, the council has to validate nine sets of taxation rules along with wrapping up the tiring task of allotting various goods and services into different tax buckets. 

These rules along with the ones on input and valuation tax credit, invoice returns, refunds, payment, and registration will be decided in the next GST council meet on March 31. 

“We have set aside sufficient buffer time to decide the rates for different tax slabs to ensure that we meet the July 1 rollout deadline,” added Mr. Jaitley.  

Bottom Line:

Industry and tax experts opine that the government should quickly release all the approved GST tax rates and slabs along with accompanying schedules and rules in order for businesses to evaluate the final impact of GST tax reform and align critical business processes around it.

Disclaimer: All the views, opinions and information expressed in this blog are those of the author and the respective sources and in no way reflect the principles, views or objectives of Sage Software Solutions (P) Ltd. 

Source: Firstpost and Livemint