GST - Goods and Services Tax (India)

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Thursday, 13 July 2017

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.

How GST will operate in India? Your quick guide to our new tax reform

GST is one of the most revolutionary tax systems to be rolled-out in the country. However, as with all tax things, there exists some confusion like division of taxation powers between the Central and State government. But, producers and manufacturers believe it would make the entire taxation system more fair, transparent and efficient. This blog throws light on how GST will operate in India.

Indian government is set to implement dual GST tax system, which would be administered at both Central and the State Government levels. Dual GST will comprise of SGST (collected by the State government), CGST (collected by the Central government) and IGST (collected by the central government on inter-State supply of goods and services).

Under the new levy, a transaction of sale within the state shall have the following taxation structure:

SGST, collected by the State government
CGST collected by the Central government
Sale from one state to another shall have only one type of tax i.e., IGST collected to the Central government.

Now let us look at how GST will operate in India with a simple example.

1: Sale and resale within a state

Suppose goods are being transported from Mumbai to Nagpur. As the sale took place in the same state, both SGST and CGST will be levied on the goods. Thus, the tax amount will go to both Central as well as State government. Now if the goods are resold from Nagpur to Nasik, the sale is again within the state thus, CGST and SGST will be applicable on the goods. Talking about resale, input credit of SGST and CGST is claimed, whereas the remaining taxes go to both the governments. For a graphical illustration, refer the below diagram.

Since the Input Tax Credit comes from the same government, which is also entitled to receive the output tax, there is no question of credit transfer within both the governments.

2: Sale within the state and resale in another state

Suppose goods are moving from Mumbai to Pune. As the sale is within the state, SGST and CGST will be levied on the goods. Therefore, tax will go to both State as well as Central government. Now if the goods are resold from Pune to Amritsar (Maharashtra to Punjab), IGST comes into play and will be levied on the goods. In this case, only Central government will collect the tax.

Here, both the input taxes are taken as credit against IGST. Here, SGST did not go to the Central government, but the credit was claimed thus, in such cases, State government would have to compensate the Central government by transferring the credit to them.

3: Sale outside the state and resale in the same state

Suppose goods are moving from Mumbai to Bhopal. Now is an interstate sale, IGST will be levied on the goods and therefore, tax will be collected by Central government only. Later, if the goods are resold from Bhopal to Gwalior. Now this it is a sale within the state SGST and CGST will be levied. Hence, both State as well as Central government will collect tax.

In this particular example, 50% of the IGST i.e. 100 is taken as credit against SGST and CGST, but IGST never went to the State government and yet credit was being claimed against SGST. As this a loss to the State Government, the Central government would have to compensate the State government by forwarding credit to them.

The GST is all set to knock the doors of India the coming financial year. Nonetheless, there is much confusion around how GST will actually work and how much tax percentages would be levied on goods and services.

Thus, it is advisable to buckle up for our all-new tax reform, as it is expected to throw many surprises. According to experts, India is all set to join the global bandwagon standards in managerial practices, corporate laws and taxation in years to come.

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

How GST can make a difference

The Modi government has taken up different initiatives such as Make in India, Digital India, Smart Cities and Startup India. Such initiatives could possibly boost business growth in India. The proposed Goods and Services Tax (GST) is currently held up in the Parliament. Once the GST bill is passed in the parliament, it is expected to eliminate the cascading tax effect and free flow of goods within the country.

Here’s how GST can make a difference to the economy:

Global market:

India plays an important role in the global market. The proposed indirect tax reform could possibly stimulate the economic growth. The introduction of GST is highly expected not only in India, but also in developed economies. This may enable a better application of ambitious strategies for business and trade.

Central Value Added Tax:

Finance Minister Arun Jaitley’s announcement with respect to indirect taxes in the upcoming budget will indicate various measures to bridge the gap between the current indirect tax system and the GST. The government also needs to trim down the Central Value Added Tax and reintroduce a system to avoid the load of tax generally burdened by businesses at the time of final consumption.

Central Sales Tax (CST):

The Central Sales Tax is generally levied on sales or purchase of goods and services in the course of inter-state trade. According to the department of revenue, ministry of finance, Government of India, reduction of CST rate first from 4% to 3% and then from 3% to 2% has been done as a precursor to the introduction of the goods and services tax, as CST would be inconsistent with the concept and design of GST.

Service Tax and Central Excise:

The government needs to put in place a system that can align service tax and central excise in order to meet the anticipated threshold of central indirect taxes. It is also expected to reduce central excise. This move may further simplify the nation’s tax structure.

India’s GDP:

The implementation of GST has the potential to raise the country’s GDP. In the recent past, Arun Jaitley estimated that GST may likely increase India’s GDP by 2%.

All the information, opinions, and views depicted in this article are solely those of its original author/publisher/web source and doesn’t reflect or imitate the views, principles or objectives of Sage Software Solutions (P) Ltd.

Originally published at https://in.finance.yahoo.com/photos/budget-2016-how-gst-can-make-a-difference-slideshow/kim-k-bares-again-latest-photo-110015354.html

What GST means for banks and financial services

By now you would have woken up to the news of Rajya Sabha passing GST bill and being one step closer to implementation of the biggest tax reform in India since 70 years. GST is set to replace at least 17 federal and state taxes to implement a single and unified tax – Goods and Services Tax. The reason that our Hon’ble Prime minister Mr. Narendra Modi was vouching fervently for the bill to pass because it will help to increase at least 2% in the current GDP and that is a huge amount in itself, stemming India as one of the fastest growing economies in the world.

For long India’s tax system had layers of direct and indirect taxes which added somewhere between 25% and 40% to the COGS. Currently, abolishing all the taxes in between, GST is pegged at between 18% and 20%, with only 8 months left to implement the same – a timeline that Mr. Narendra Modi has set for the rollout.

It is beyond doubt that all industries will get affected by this news. With a standard of 18% being speculated to being implemented, there will be some areas that the consumers may benefit and some places where it might not. Looking at banking and financial sector, one of the crucial sectors for consumers, one might say that it can get a bit expensive for the consumers.

While today financial and banking services come with a ST of 14.5%, definitely with the implementation of GST at 18% – 20%, the services will get expensive for the consumer. Along with the taxes, comes the compliances that the banks and consumers need to follow. In IGST, the GST will be internally divided between SGST and CGST, hence, there might need to be a different set of processes and compliances required to do.

One of the major fears that consumers may have is that the interest of loans, foreign currency, retail services and trading in securities will fall under the scope of GST and if that happens, the cost for everything will increase fundamentally. Though banks have put forward their recommendation to not include these in the ambit of GST, it will be only time which will say if these recommendations will be accepted or no.

Banks on the other hand will be beneficiaries of this reform since all said and done, individuals and businesses deal with banks on a regular basis. Though if the operations are not streamlined and well – defined, there might be an increase in the operational cost which cannot be passed onto the customer. There will be care required while managing compliances along with a whole lot of services and also training of internal staff.

While GST has been claimed to the biggest reform in India, there needs to be some thought given to the banking and financial services since they are very crucial to the consumers and their investment pattern.

How GST would affect the Media and Entertainment Industry

GST and its impact on consumers

The finance ministry released the recently released draft of goods and sales tax. And, based on the current scheme of affairs, consumers are expected to pay a service charge tax of around 14.5-15% for all broadcast services like Television that includes Cable and DTH also films and digital content. Besides this, an entertainment tax of around 8-12% is further levied increasing the average tax to as much as 25%

However, once GST comes into play, consumers would have to pay a single tax between that can be anything between 18-20%. Hence, the overall tax burden on consumers is set to reduce.

GST and its impact on Multiplexes and Film Production Houses

GST bill would introduce a nationwide goods and services tax through which multiplexes would be able to evade 27% tax on ticket sale as well as levy on food and beverage revenue. It further states that, Multiplexes would pay a GST tax to the federal government as well.

This could mean a hike of 4-5% on the company’s margin, which used to range between 14 to 18% for the past five years.

On the contrary, as per the current laws, film producers are expected to pay exorbitant amounts of money in the form of service tax for processes like theatrical rights, satellite rights, etc.

As soon as GST comes into play, all taxes would come under the same category. The bill would also benefit multiplexes that are currently dealing with tax processes from different states of the country. This means that the tax rates would go down and the profits for companies would shoot up. Also, the hassles of dealing with several state Governments with varied rules would be solved for good.

Conclusion

To conclude, the proposed GST module sounds flawless on paper, but in actuality, its efficiency is still unknown. Also, a major fear with the GST module is that it would allow local municipalities to decide the tax rate on movies. But on a general note, the bill would most likely do a lot more good than harm, as it would basically empower both the centre and the states to levy GST.

This can’t be done now as the centre cannot impose any sort of tax on goods beyond the manufacturing process, while the state cannot tax services. GST would include central excise duty, additional excise duty, service tax, countervailing or customs, etc. as well as State level indirect taxes like VAT/sales tax, entertainment tax, luxury tax, octroi, entry tax, etc.

Once the bill is rolled-out, there will only be a single national level GST and a state level GST spanning the entire value chain for all goods and services with some exceptions.

Finally!!! Welcoming a new chapter in Indian Economics, “the GST”

The Wednesday of 3rd Aug 1016, a day when Rajya Sabha finally took the big step in, by passing the GST bill in India, after a period long wait and arrays of debates and discussions over it. GST is the biggest transformation in tax reforms India has seen in years and has left everyone, from a common consumer to business entrepreneurs, curious over what changes it may bring upon.

So let us dig in further, beginning with how GST is different from VAT

GST and VAT:

VAT, abbreviated for Value Added Tax, is a tax that the State government levies upon the local sales, with the percent tax differing form state to state. Though VAT has been designed with a concern to minimalize the cascading effect, the business entrepreneurs still have piles of additional taxes and tax on taxes such as Central Sales tax, Excise, Octroi, etc.

Quick Points:

• Vat is eligible for the sales within the state

• Every state has its own compliances

• It is applicable for goods only.

Now with GST in action, the very first change it brings upon is the shift of base from state to central government, which means central government would be managing and collecting tax revenue henceforth. this not only centralizes taxation reforms but also provides a national market for business entrepreneurs to grow.

Quick Points:

GST is a hassle-free replacement for VAT, CST, Service tax etc.
Better control over inflation
Reduction in consumer pricing
Reduction in state government revenue
Uniformity in national tax reforms

Thus, GST can probably show few good signs for consumers and a great time for SMBs to hit the national market. Having said that, let us have a look how GST can effect business in India

benefits of GST in India:

• Hassle free tax and compliances management

• Better SCM and Distribution in absence of any additional taxes like Octroi

• Reduced manufacturing production, better profit margin

• Availability of national market, with one single tax.

To conclude with, the effect of GST bill can only be seen in the years to come, depending upon co-operation from states, adaptability of businesses and skills of the working staff. Until then, it is just the best foot forwards, to provide the nation a leading leap in economic development.

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Unveiling the GST Tax Rates

GST or the Goods and Services Tax is one of the much awaited and biggest tax reforms in India in last 70 years. GST claims to unify all the taxes levied throughout the country in a bid to eradicate inflation and induce economic growth. On 3rd of November, 2016, the GST council decided to get rid of the “the rich get richer and poor get poorer” catchphrase in India, as it revealed its four tier tax rates, applicable from the month of April.

So, what does the council has for the country folks?

The tax system has been categorised into four range i.e. 5%, 12%, 18% and 28% (steeper to the pre-proposed 6%, 12%, 18% and 26%). Let us apprehend them for a better understanding:

The 5% slab: The GST council has been very keen on eradicating inflation. as it has cut out the taxes levied upon grain and food (which constitutes up to 50% of the consumer inflation basket). To add more to it, the 5% tax slab is levied upon the common use products, in comparison to the earlier 9%.

The 12% & 18% slab: The two standard rates that would be applicable upon bulk items such as processed products, oils, soaps, etc. will be further categorised in the upcoming session as which commodity falls in which slab.

The 28% slab: The council has been keen on uplifting the economic equality, as the top percentile slab will be applied upon luxury and white goods along with tobacco and aerated drinks. An addition cess will also be implied on these goods to compensate for the rollout losses.

Another rate slab is yet to be decided for gold and other precious metals, which is likely to be around 4% (as proposed earlier). (Source: Economic Times)

Though these slabs are yet to be approved by the Parliament, the GST council has put their best foot forward to get rid of the indirect taxations in an attempt to gain a steady control over the administration of the overall tax system.

Restrainers:

An amount of 50,000 crore would be needed to compensate for the loss that the states had to bear from GST rollout, for which a lapsable clean energy cess and additional cess will be levied for the initial five years, said the Finance Minister. (Source: TOI)

The service tax shoots up to 18% from the previous 15%.

It may take a considerable amount of time for the governments as well as the common people to acclimatize with the new system.

However, these restrainers are momentary and assure long-term benefits for both the common man and the government. And, the council is more likely to get into training and testing mode in preparation of the new taxation system, that could be the game changer for a developing nation like India.

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

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

Wednesday, 21 June 2017

GST impact: Credit card bill, insurance premium to get costlier

New Delhi: Credit card providers, banks and insurers have started alerting their customers to pay higher tax post implementation of Goods and Services Tax (GST) from 1 July.

Customers currently pay 15 percent service tax for such services. Starting from July 1, 2017 the GST will replace all indirect taxes like service tax and VAT.

Financial services and telecom have been put in the 18 percent GST slab.

Representational image. Reuters

SBI Card has sent SMS to its customers alerting about the higher incidence of tax.

"Important: The Government of India proposes to implement the GST which is likely to be effective from 1 July, 2017. Consequently, the existing service tax rate of 15 percent shall be replaced by a GST rate of 18 percent," the SMS sent by SBI Card read.

Banks like Standard Chartered and HDFC are also sending messages related to GST to their customers.

ICICI Prudential Life Insurance, in email messages to its customers, said premium payable on term policy and fund management charges on a Unit Linked Insurance Policy will attract 18 percent GST post implementation of the new indirect tax regime.

These products currently attract 15 percent service tax.

GST will be levied at the rate of 2.25 percent on premium payment for endowment policy. Currently, customers pay 1.88 percent service tax on endowment policies.

Parliament's historic Central Hall will host a midnight function on June 30 to launch the nation's biggest tax reform GST.

President Pranab Mukherjee, who had piloted the first Constitutional Amendment Bill to bring in GST in 2011 when he was finance minister in the previous UPA regime, will share the dais with Prime Minister Narendra Modi on the occasion.