Developments in September 2014

September's Goods and Service Tax News Round Up

 

 No Opposition to GST : Chhattisgarh CM

Date : 26th Septmeber 2014
Chhattisgarh has no objection to implementation of the Goods and Services Tax (GST), state Chief Minister Raman Singh said on Friday "Chhattisgarh has no objection on GST. We only want that state's loss of revenue is taken care of as there will be annual loss of Rs 1,000-1,200 crore," Singh told reporters here. The Chief Minister said he had raised the matter earlier with the then Finance Minister Pranab Mukherjee.

Source : DNA -

GST Implementation From April 2016, Feasible: Revenue Secretary

Date : 20th Septmeber 2014
As negotiations with states on GST enter a critical stage, the Centre is looking forward to implementation of the new indirect tax regime from April 1, 2016. "The deadline for actual implementation of GST from April 1, 2016, would be feasible. It all depend on how quickly we are able to reach consensus on critical issues," Revenue Secretary Shakti Kanta Das said at an event here.

"The discussions are at a very critical stage and we hope to make very good progress. We are quite optimistic we will be able to reach convergence in the coming weeks or months," Mr Das added. He said there are 4-5 issues with the states that are outstanding and on each there have been discussions in recent weeks.

Earlier this week, Prime Minister Narendra Modi held a meeting to take stock of the proposed new indirect tax regime and decided to soon clear the pending CST compensation for revenue loss incurred by states.
Source: NDTV , India TV , Economic Times

No objection to Goods and Services Tax: Madhya Pradesh CM Shivraj Singh Chouhan

Date : 20th September 2014
Madhya Pradesh has no objection to the implementation of the Goods and Services Tax (GST) in the country, Chief Minister Shivraj Singh Chouhan said.

"We were never against GST. We have put forth our stand on a GST structure through which states were to face losses in state taxes. The (central) government will find a solution to that... There is no objection to it (GST)," Chouhan told PTI here today. Madhya Pradesh has been demanding a mechanism for full CST (Central Sales Tax) compensation.
Source : Economic Times

Telangana state favours the introduction of Goods and Service Tax : CM, Rao

Date : 19 September 2014
Stating that the state favours the introduction of Goods and Service Tax (GST), Rao called for ensuring that there is no accentuation of vertical imbalances and compromise of autonomy of states. He said an adequate compensatory mechanism should be put in place. He suggested that petroleum and liquor be kept out of the purview of the GST.
Source : India.com

Modi gives approval for introducing Goods and Services Tax

Date : 15th September 2014
Prime Minister Narendra Modi has given the approval for going ahead with the biggest tax reform initiative - the Goods and Services Tax. The government will now try to introduce the Constitutional Bill for GST in the Winter Session of Parliament.

The government has decided to make a few amendments. In the Constitution Bill, both the Centre and States would be allowed to levy GST on petroleum products. But practically, the states would continue to levy their excise rates, preventing a revenue loss for them.
The official said the ministry was considering keeping petroleum under GST, instead of excluding it constitutionally, as demanded by states, but to address the latter’s concerns on loss of revenue from this source, these could be zero-rated. Meaning, states can continue to levy sales tax or value-added tax on petroleum products, while the Centre would retain its right to impose excise duty.

The Centre is also trying to convince the Sates on allowing a GST compensation mechanism. Finance Minister Arun Jaitley will be meeting state finance ministers next month. He met the Prime Minister over the issue on Tuesday.
Several states have expressed concerns over losing autonomy and facing revenue losses if GST comes into play.

Source: IBN Live , Busniess Standard , Hindustan Times , Money Control

Central excise & service tax dept plans revamp

Date : 6th September 2014
A one taxpayer-one table formula was also proposed by the BIA members. who said the current one-stop system was convenient but if the restructuring is imperative, then at least both CE and ST collection should be ensured at one place. "With the cadre restructuring in the pipeline, a number of new posts will be created in the organization and we will be better prepared to implement the goods and services tax (GST) as and when it is enforced,"
Source : Times of India

If implemented, GST can contribute 2% to GDP growth: Adi Godrej

Date : 2nd September 2014
ET Now: But, has the administrative efficiency, which was lacking in the previous government, improved on the ground?

Adi Godrej: Certainly! The new government has taken many steps to improve the ease of doing business. Now, it's but obvious that everything cannot change within 100 days. However, suffice to say that the trend has been good. Looking forward to, say, 6 months to 12 months from now, the ease of doing business in India would have improved considerably.
Moreover, the biggest reform that can help India's growth accelerate is GST - the goods and services tax legislation - which the finance minister Arun Jaitley is working on, to bring in force by April 1, 2015.
Source : Economic Times

FM Says, Threshold limit for goods, services tax proposed by States too low

Date : 1st September 2014
he ?10-lakh threshold limit for imposition of Goods & Services Tax (GST) proposed by States is ‘too low’ for creating a business-friendly tax administration, according to the Finance Ministry. The Empowered Committee on State Finance Ministers, in its meeting on August 20, agreed on setting a ?10-lakh threshold limit for general category States and ?5 lakh for special category and North Eastern States. Earlier, the proposed limit was ?25 lakh.

“States are proposing ?10 lakh and ?5 lakh as the gross turnover. Considering various kind of reliefs and exemptions, the taxable limit will be much lower. Such a limit will not be very conducive for a business-friendly tax administration,” a senior Finance Ministry official told BusinessLine. He, however, refused to divulge the limit which the Centre thinks is appropriate.

Source : Busniess Line

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The Constitutional Amendment Bill - 115th for GST

This Act may be called the Constitution (One Hindered and Fifteenth Amendment).

It shall come into force on such date as the Central Government may, by notification in the official Gazette, appoint, and different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the commencement of that provision.
Goods and services tax on supplies in the course of inter-State trade or commerce shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States in the manner as may be prescribed by Parliament by law.
For the purposes of this clause, supply of goods or of services or both in the course of import into the territory of India shall be deemed to be supply of goods, or of services, or both in the course of inter-State trade or commerce.
Parliament may, by law, formulate the principles for determining when a supply of goods, or of services, or both takes place in the course of inter-State trade or commerce.

Goods and Services Tax Council

The President shall, within sixty days from the date of commencement of the Constitution (One Hundred and Fifteenth Amendment) Act, 2011, by order, constitute a Council to be called the Goods and Services Tax Council.
The Goods and Services Tax Council shall consist of the following members, 4 5
namely :
(a) the Union Finance Minister - Chairperson;
(b) the Union Minister of State in charge of Revenue - Member
(c) the Minister in charge of Finance or Taxation or any other Minister nominated by each State Government - Members
The Members of the Goods and Services Tax Council shall, as soon as may be, choose one amongst themselves to be the Vice-Chairperson of the Council for such period as they may decide.

The Goods and Services Tax Council shall make recommendations to the Union and the States on-
(a) the taxes, cesses and surcharges levied by the Centre, the States and the local bodies which may be subsumed in the goods and services tax;
(b) the goods and services that may be subjected to or exempted from the goods and services tax;
(c) the threshold limit of turnover below which goods and services tax may be exempted;
(d) the rates of goods and services tax; and
(e) any other matter relating to the goods and services tax, as the Council may decide.

While discharging the functions conferred by this article, the Goods and
Services Tax Council shall be guided by the need for a harmonised structure of goods and services tax and for the development of a harmonised national market for goods and services. 0ne-third of the total number of members of the Goods and Services Tax. Council shall constitute the quorum at its meetings. The Goods and Services Tax Council shall determine the procedure in the
performance of its functions. Every decision of the Goods and Services Tax Council taken at a meeting shall be with the consensus of all the members present at the meeting.

Goods and Services Tax Dispute Settlement Authority

Parliament may, by law, provide for the establishment of a Goods and Services Tax Dispute Settlement Authority to adjudicate any dispute or complaint referred to it by a State Government or the Government of India arising out of a deviation from any of the recommendations of the Goods and Services Tax Council constituted under article 279A that results in a loss of revenue to a State Government or the Government of lndia or affects the harmonised structure of the goods and services tax.

The Goods and Services Tax Dispute Settlement Authority shall consist of a Chairperson and two other members. The Chairperson of the Goods and Services Tax Dispute Settlement Authority shall be a person who has been a Judge of the Supreme Court or Chief Justice of a High Court to be appointed by the President on the recommendation of the Chief Justice of lndia. The two other members of the Goods and Services Tax. Dispute Settlement Authority shall be persons of proven capacity and expertise in the field of Jaw, economics or public affairs to be appointed by the President on the recommendation of the Goods and Services Tax Council. The Goods and Services Tax Dispute Settlement Authority shall pass suitable orders including interim orders. No Court other than the Supreme Court shall exercise jurisdiction in respect of any such adjudication or dispute or complain.

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Internationally - Goods and Service Tax

VAT/GST provisions in countries other than India are quite streamlined and stable. As the Law in India is still not a reality we might look into the provisions which are in place since quite long and access the structure of rate, exemptions etc.

Australia
(a)    The standard rate of GST is 10 %.
(b)   There is a reduced rate of 0% which is applicable on some food products, medical and health services, drugs, medical aids and appliances, exports of goods and services, supply of a business as a going concern, etc.
(c)    Supplies of certain goods and services are exempt from GST. For e.g. Financial services, Residential rent, Residential premises etc.

Bangladesh
(a)    The standard rate of VAT is 15%.
(b)    There are reduced rates of 0% - 9% and these reduced rates are applicable  on certain categories of advertisement, supply of electricity, air conditioned bus services, engineering services, security services, services rendered by construction contractors, audit and accounting firms, consultants, printing presses, architects, interior and graphic designers, immigration advisers, coaching centers, english medium schools, non-government medical and engineering colleges, photo producers, courier and EMS services, specialized doctors, legal advisers; supplies of goods and services through participation in a tender/quotation and for pathological laboratory work, supplies of goods and services by hospitals and petroleum carriers, maintenance and cleaning of building floors/premises, dental medical centers, trading services, land development and construction of apartments, retail sales of furniture and exports of goods and services.
(c)    Examples of certain supplies which are exempt from VAT:-
    a.       Certain food items (such as meat, fish, potatoes, vegetable and fruits);
    b.      Jute and jute goods;
    c.       Social welfare & cultural training;
    d.      Rehabilitation services; and
    e.       Agricultural development.

Cayman Islands
 No VAT or GST is applicable in Cayman Islands.

France
(a)    The standard rate of VAT is 19.6 %.
(b)   There are reduced rates of 5.5 %, 2.1 %, and 0%, and these reduced rates are applicable on food, water, passenger transportation, some pharmaceutical products, books, hotel accommodation, newspapers, medicines for human health when reimbursed by social security, and export of goods and intra-community supplies.
(c)     Certain supplies of goods and services are exempt from VAT:-
      a. Medical supplies;
      b. Postal services;
      c. Education;
      d. Certain Financial transactions; and
      e. Insurance services.

Germany
(a)    The standard rate of VAT is 19 %.
(b)    Reduced rates can be applied on certain examples like on  food, plants, animals, books/newspapers, entrance fees to cultural sites, and short distance passenger transport, for cross-border air passenger transport, financial services to non-EU recipients, exports and certain transactions involving ships and aircrafts.

Hong Kong
No VAT or GST is applicable in Hong Kong.

Japan
(a)    The standard rate of consumption tax is 5 %.
(b)   There is a reduced rate of 0%, and this reduced rate is applicable on sale or leasing of goods as export transactions; sales or leasing of foreign cargoes; international transportation services; services provided to non-residents.
(c)     Supplies of certain goods and services are exempt from consumption tax, for example, sale and leasing of land; rental of housing; sales of securities, and similar instruments; medical treatment under public medical insurance laws; social welfare activities; school tuition; and examination services.

Mauritius
(a)    The standard rate of value-added tax is 15 %.
(b)   There is a reduced rate of 0 % which is applicable on export of goods other than exempt goods, sugar, wheat flour, books, booklets, supply of electricity, water, certain pharmaceutical products, international transport of passengers and goods,  supplies of services to non-residents.
(c)    Supplies of certain goods and services are exempt from VAT, for example, rice, wheat, bread, butter, milk and cream, medical, hospital and dental services, educational and training services provided by registered institutions, postal services, cargo handling, and certain residential buildings.

Pakistan
(a)    Indirect taxes in Pakistan include a sales tax and a federal excise duty.
(b)    The standard rate of sales tax is 16 %; however, certain goods are subject to sales tax at higher rates of 18.5 % and 21 %.
(c)    There is a reduced rate of 0 %, which is applicable on, all export of goods, local supplies of raw materials, supplies of specified export sectors, import and local supplies of capital goods.
(d)    Certain examples of supplies which are exempt from sales tax are agricultural products, unprocessed food items, animals and their meat, fisheries, dairy products, construction materials, computer software, ships, navigation equipments, sale to hospitals and educational non-profit organizations.

Russia
(a)    The standard rate of VAT is 18 %.
(b)    There are reduced rates of 10% and 0 % and these reduced rates are applicable on food products, specific goods intended for children, books and periodicals, pharmaceutical and other medical products; exports of goods related services, services related to transit of goods through Russia, international passenger transportation and fuel for ships and aircraft.
(c)    Examples of certain supplies which are exempt from VAT are lease of premises to foreign companies accredited in Russia, medical services and certain medical products, educational services, public transportation, sale of securities, banking and insurance services, rent of apartments, sale of apartments and residential property.

Singapore
(a)    The standard rate of GST is 7 %.
(b)    There is a reduced rate of 0 %, which generally applies to export of goods and international services.
(c)    Supplies of certain financial services and sale or lease of residential properties are exempt from GST.

Thailand
(a)    The standard rate of VAT is 7 %.
(b)    There is a reduced rate of 0 % which is applicable on export of goods or services.
(c)    Supplies of certain goods and services are exempt from VAT, for example, domestic transportation, health care, education, leasing of immovable property, sale of agricultural products, newspapers, magazines and textbooks, services rendered by libraries, museums, and zoos.

United Arab Emirates
No VAT or GST applicable in the United Arab Emirates.

This article is written by CA Rajat Mohan

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