New Delhi: India is at the threshold of entering into the Goods and Service Tax (GST) era as the much awaited and biggest tax reform is all set to come in force from July 1st 2017.There is a lot of excitement among the industry stakeholders for ‘One Nation One Tax’ with a little uncertainty about the business scenario in coming months. Whereabouts interacted with the industry stalwarts to know their opinion on GST.
The 14th Goods and Services Tax (GST) Council Meeting, chaired by the Union Minister of Finance Arun Jaitley was held at Srinagar, Jammu and Kashmir a couple of weeks ago. The fitments of rates of goods were discussed during the Council meeting. The Council has broadly approved the GST rates for goods at nil rate, 5%, 12%, 18% and 28% to be levied on certain goods. The Council has also broadly approved the rates of GST Compensation Cess to be levied on certain goods.
According to the proposed slabs, the 5% rate of GST will be levied on transport of passengers by rail (other than sleeper class); transport of passengers by air in economy class; transport of passengers with or without accompanied belongings, by air, embarking from or terminating in a Regional Connectivity Scheme Airport; as well as supply of tour operators’ services. There is 12% GST rate levied on transport of passengers by air in other than economy class.
“GST Council levies 5% rate on tours and that is what we were demanding as we have been put under the lowest GST slab, however the GST on hotels should not be more than 18%,” says Pronab Sarkar, President, Indian Association of Tour Operators. “Applying of CENVAT credit with 9% service tax was unwieldy and we were demanding the government to reduce the taxes on tourism industry,” he further informed.
Elaborating on the major changes after the GST roll-out Subhash Goyal, Chairman,Stic Travel Group says, “GST will pave the way for unification of fragmented state markets and it will unify all States & UTs into one national market without border restrictions which exists today. This is similar to the process of European unification of 1992 which had a similar positive economic impact.”
Explaining over the same lines Sandeep Dwivedi, Chief Commercial Officer, Interglobe Technology Quotient says that the implementation of the unified tax structure is a huge step towards preparing the nation that is expected to grow at US$ 160.2 billion by 2026. “Although, the industry presently has mixed reactions towards the introduction, going forward,this step would attract more industry growth as the GST has been planned according to the tax player’s capability,” he added. For example, GST Council reduced service tax on economy class from 6 to 5 percent while increasing business class to 12 percent from the current 9 percent informed Dwivedi.
GST AN OVERVIEW
The new tax structure is expected to bring benefits to all the stakeholders of industry, government and the consumer. It will lower the cost of goods and services, give a boost to the economy and make the products and services globally competitive. As per the government, the GST aims to make India a common market with common tax rates and procedures and remove the economic barriers thus paving the way for an integrated economy at the national level. By subsuming most of the Central and State taxes into a single tax and by allowing a set-off of prior-stage taxes for the transactions across the entire value chain, it would mitigate the ill effects of cascading, improve competitiveness and improve liquidity of the businesses.
GST is a destination based tax. It follows a multi-stage collection mechanism. In this, tax is collected at every stage and the credit of tax paid at the previous stage is available as a set off at the next stage of transaction. This shifts the tax incidence near to the consumer and benefits the industry through better cash flows and better working capital management.
INPUT TAX CREDIT (ITC)
Taxpayer is allowed to take credit of taxes paid on inputs (input tax credit), as self-assessed, in his return. Taxpayer can take credit of taxes paid on all goods and services, other than a few items in the negative list, and utilize the same for payment of output tax. Credit of taxes paid on inputs can be taken where the inputs are used for business purposes or for making taxable supplies. </p>
Full input tax credit shall be allowed on capital goods on its receipt as against the current Central Government and many State Government practice of staggering the credit in more than one installment. Unutilized input tax credit can be carried forward. The facility of distribution of input tax credit for services amongst group companies has been provided for through the mechanism of Input Service Distributor (ISD).
REFUND
Time limit for claiming online refund has been increased from one year to two years. Refund shall be granted within 60 days from the date of receipt of complete application. Interest is payable if refund is not sanctioned within the stipulated period of 60 days. If the refund claim is less than Rs. 2 lakhs, there is no need for the claimant to furnish any documentary evidence to prove that he has not passed on the incidence of tax to any other person.
Only a self-certification to this effect would suffice. Refund of input tax credit shall be allowed in case of exports or where the credit accumulation is on account of inverted duty structure (i.e. where the tax rate on output is higher than that on inputs).
DEMANDS
A new concept of sunset clause for tax disputes has been introduced. It provides that Adjudication Order shall be issued within 3 years of filing of annual return in normal cases and the time limit is 5 years (from the date of filing of annual return) in fraud/suppression cases.
SCN will have to be issued at least 3 months prior to the time limit prescribed for issue of adjudication order in normal cases and at least 6 months prior to the time limit prescribed for issue of adjudication order in cases involving fraud/suppression etc. Penalty is Nil or minimal if the tax short paid / non-paid is deposited along with interest at the stage of audit/investigation.
