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Taxpayers may have to pay extra tax or reverse the credit they availed for the cess paid before the Goods and Services Tax was rolled out. The government has excluded the credit that taxpayers could avail at the time of transitioning to GST for the cess paid in the previous indirect tax regime, according to amendments in the Central Goods and Services Tax Act moved in the Lok Sabha. The change in the amendment bill has been made effective from from July 1, 2017 ie retroactively. Prior to the amendment, Section 140 (1) didn’t place a bar on transition of various cesses which were part of the Central Value Added Tax credit ledger of companies, said Badri Narayanan, partner at law firm Lakshmikumaran & Sridharan. Krishi Kalyan Cess and Swachh Bharat Cess were included in the CENVAT credit ledger of companies.
The retroactive amendment made in the proposed law seeks to limit the credit available for transition only to “eligible duties” defined in the section. They are:
Additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957.
Additional duty leviable under sub-section (1) of section 3 of the Customs Tariff Act, 1975.
Additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, 1975.
Additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978.
Excise Duty specified in the first schedule of the Central Excise Tariff Act, 1985.
Excise duty specified in the second schedule of the Central Excise Tariff Act, 1985.
National Calamity Contingent Duty leviable under section 136 of the Finance Act, 2001.
The government had made its stand clear in a frequently-asked-questions document by stating that credit on cess paid cannot be transitioned in the GST regime, Abhishek Jain, an indirect tax partner at EY India, told BloombergQuint. However, as there was no specific restriction for transition of this credit under GST, many taxpayers took a view that the cess paid can be carried forward in the GST regime, Jain said.
The Impact
Since businesses or taxpayers aren’t eligible to transfer the credit of various cesses, they may be required to reverse the credit they have availed, said Narayanan. “This will be a major point of scrutiny by the tax department in their audits.” Taxpayers may question the retroactive applicability of the proposed amendment and this may lead to litigation, Jain said.
Bigger Problem?
Amendment to Section 140 (1) may have greater ramifications if the tax department takes a narrow view of the term “eligible duties”, Narayanan said. Section 140 (1) was amended to include the term “eligible duties”, covered in the explanation of the CGST Act.
The term was used in the context of inputs used by a taxpayer and doesn’t include service tax as one of the components, Narayanan said. He said the move creates ambiguity over eligibility of credit transitioned for service tax paid in the pre-GST regime. The amendment creates ambiguity over whether the transition credit for service tax paid in the pre-GST regime also requires a review, he said.
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In its annual country report, the IMF said the government’s decision to ensure a 50 per cent premium over cost of farm production “could skew farmers’ production decisions, add to inflation, and enlarge the fiscal burden”
The $2.6-trillion Indian economy is like an “elephant starting to run” and will remain one of the world’s fastest-growing economies, aided by structural reforms, the International Monetary Fund (IMF) said on Wednesday. However, it needs to simplify the goods and services tax (GST) structure and take advantage of strong growth to trim debt more aggressively than planned.
In its annual country report, the IMF said the government’s decision to ensure a 50 per cent premium over cost of farm production “could skew farmers’ production decisions, add to inflation, and enlarge the fiscal burden”, so “their use (backed by assured procurement) should only be temporary and limited to correcting market failures”.
It cautioned that India’s debt (at 70.4 per cent of the GDP in FY18) is “close to the thresholds that raise the likelihood of debt distress among emerging market economies”. So, a more ambitious medium-term fiscal consolidation path is required that is consistent with the FRBM review committee’s target of trimming the government debt to 60 per cent of the GDP by FY23. The government wants to achieve this target by 2025.
Surat: Manufacturers of nylon fabrics in the country’s largest man-made fibre (MMF) sector in the city have opposed the recommendation by the commerce ministry’s investigation arm, Directorate General of Trade Remedies (DGAD), for imposing antidumping duty up to $719 per tonne on import of nylon filament yarn from European Union and Vietnam.
The nylon fabric manufacturers feel that the increase in anti-dumping duty on nylon filament yarn will allow indigenous yarn manufacturers to monopolize prices of nylon yarn, thereby creating problems for nylon fabric makers in Surat and other parts of the country.
The unprecedented increase in yarn prices has cast a dark shadow on the city’s weaving sector, which is totally dependent on various types of synthetic yarns. City’s textile industry, which contributes to nation’s 40 per cent of the man-made fibre demand, has more than 6.5 lakh powerloom machines weaving about 3 crore metres of cloth per day with the annual consumption of 6 lakh metric tonnes of different types of yarns and fibres.
Market sources said yarns and fibres, including nylon filament yarn (NFY), polyester filament yarn (PFY), polyester yarn (POY), viscose filament yarn (VFY) etc. manufactured in Vietnam and EU is 20 per cent cheaper than the ones made by domestic players. Following imposition of anti-dumping duty, the domestic manufacturers of yarns and fibres will get a free hand to increase the prices, especially when the demand increases from local market.
“The domestic spinners are taking advantage of anti-dumping duty, as they know that import of yarn from Vietnam, China and other countries has become a costly affair. They want to earn as much profit as possible from the weavers,” said a yarn dealer Mayur Golwala, leader of powerloom weaving industry, said, “We urge the central government not to accept the recommendation of DGAD for anti-dumping duty on nylon yarn. The government should not think of only five to six nylon yarn manufacturers in the country, but thousands of weavers and workers who are attached with the industry.”
Chief Minister N Chandrababu Naidu announced several sops for the weavers’ community at Vetapalem in Prakasam district on Tuesday on the occasion of National Handloom Day.
Chief Minister N Chandrababu Naidu announced several sops for the weavers’ community at Vetapalem in Prakasam district on Tuesday on the occasion of National Handloom Day. Addressing the weavers at a public meeting in Tallareddypalem of Vetapalem mandal, he said he will take care of all the problems of weavers. “Despite Centre’s objection, my government has waived Rs 114 crore worth weavers’ loans. Now, I am thinking of waiving individual loans of weavers instead of the societies,” he said.
Promising to speed up the setting up of NIFT in the region, he said 20 acres of land will be allocated for a textile park in Amaravati. He promised 100 units of free power to weavers for the work sheds and said it will put an additional burden of Rs 29 crore on the State exchequer. When he agreed to provide Rs 8,000 as financial aid to the weavers’ families for two months during the lean period of rainy season, when the loom pits are flooded, the entire area echoed with huge applause from the weavers. He also promised to enhance input subsidy and market rebate. Naidu also agreed to clear Rs 49 crore dues to APCO from the State government at the earliest.
Serifed centre at Chirala, weavers park in 20 acres with 10 acres for residential localities and 10 acres for work sheds, G+3 housing for weavers, were other sops announced by him. Earlier in the day, he laid the foundation stone for Dr APJ Abdul Kalam IIIT at Dubagunta village of Pamur mandal. Speaking on the occasion, he said the State government is determined to ensure development of the backward regions educationally. “My only aim is to see the State become number one in every aspect,” he averred.
FICCI welcomes the increase in basic custom duty on several textile items. The move is very much in the direction to encourage domestic manufacturing.Increase in import duty on over 300 textile items to 20% will give a further relief to domestic textile and carpet manufacturers, said Mr. Shishir Jaipuria, Chairman, FICCI Textile Committee. Mr. Jaipuria added, “The measures taken by the Government in last few months for the textiles sector have been very encouraging and given confidence to the domestic textile industry that has been reeling under the pressure of growing competition and rising cost.” “This has also given us the hope that the Government will address the issue of rising garment imports from Bangladesh, which remains an area of concern for the industry, due to full exemption of basic custom duty from Bangladesh,” noted Mr. Jaipuria. Mr. Jaipuria stated that the garment & carpet industry was under immense pressure after implementation of GST. After GST, substantial drop in import duty was observed which has encouraged cheaper imports.
The Modi government is presently in the process of introducing labour law reforms. Over the years, several administrative and e-governance initiatives have been undertaken by both the Centre and state governments to generate employment and facilitate the ease of doing business. But outdated labour laws have remained a deterrent to economic growth in the country and the government seeks to change this.
The reform will see the repealing of 38 of the existing labour laws, and replace them with four new labour codes with the stated objective of streamlining labour law and making it more efficient. These are the Industrial Relations Code (replacing three labour laws), the Code on Wages (replacing four labour laws), the Code on Social Security (replacing 15 laws) and the Code on Occupational Safety and Health and Working conditions (replacing 16 laws).
The government aims to restructure the employment sector by bringing in administrative ease and making the sector more employer-friendly through the four central codes. Making it, in effect, easier for businesses and corporate biggies.
The informal sector engages 94 per cent of the workforce of the country. Some of these workers in the informal sector have found their way into the workers’ schedule, which makes them recognised by the government. However, like the domestic workers who fall into the informal sector, there are several other sections of workers that remain informal. The trade unions are struggling for greater recognition of these workers and regulation of the conditions of employment.
According to labour law expert Govind Yadav, the new codes are “outright unconstitutional”. He claims it is clear when one takes a closer look at Part IV of the Directive Principles in the Constitution, which states that it is the state’s duty to provide “equal pay for equal work for both men and women”.
The Code of Wages Bill, 2017 states that the overall minimum wages will be fixed nationally based on which each states can fix wages, thus promoting migration from low wage states to high wage states. The struggle of equal pay for equal work has, therefore, been diluted and will impinge consequently on the rights of women. The struggle for the “aam aadmi” in the country will only get worse.
Yadav further emphasised that the Contract Labour Amendment Bill, 2017 reduces a man to a slave, “sabko saman adhikar hai jeene ka, kisi ko bandhu mazdoor banana ha haq nahi diya hai constitution mein” (everyone has an equal right to live, the Constitution does not give the government any right to create slave labour). He claims that such a reform would only increase labour exploitation in the country, especially with the easing of clauses such as hiring and firing, and that the state is ignoring its duty to apply the Directive Principles when forming a crucial policy.
At the base of the problem, there remains an absence of uniformly applicable and comprehensive set of laws that guarantee fair terms of employment and decent working conditions. Although labour law reform is welcome, many activists and experts say the new codes seem to be initiated from a perspective of globalisation and ease of doing business. They claim that in the name of universalisation, many important protective provisions will be withdrawn and social security privatised. Hence, central trade unions have raised their joint protest to these codes, which would strengthen the hands of the employers and weaken the hands of workers.
The rights to collective bargaining and to strike have been made complicated and easily deemed illegal along with the tripartite character of negotiations removed and the government taking a back seat. Moreover, the threshold of the workers in the factories will be increased to 300, which means that all small factories will be out of the control of labour law. This also means that without permission from the government, lay-offs and closures can easily take place in companies employing up to 300 workers.
Furthermore, no non-workers or retired workers will be permitted to take leadership positions in trade unions, especially in the unorganised sector. There will no longer be any labour schedules and minimum wage will no more be sector-specific.
The campaign for a nationally applicable and effective labour law for domestic servants in India has resurged recently. In light of this, the National Platform of Domestic Workers held a press meeting and national rally of domestic workers on August 2 in New Delhi from Mandi House to Parliament and presented a petition to Union labour minister Santosh Gangwar as well as to the Petitions’ Committee of the Lok Sabha.
The national rally was organised to demand withdrawal of the central codes and enactment of Comprehensive Legislation for Domestic workers. “It is essential to fight for a separate legislation for domestic workers as a policy such as the one the government proposes does not give any support to the domestic workers,” says Sr Kalaiselvi, one of the individuals who led the rally on Thursday. Various legislations like the Unorganized Social Security Act, 2008, Sexual Harassment against Women at Work Place (Prevention, Prohibition and Redressal) Act, 2013 and Minimum Wages Schedules notified in various states refer to domestic workers. While informal workers are mentioned in the new codes, these do not seem to take serious measures to improve on their needs. Laws like the Contract Labour (Regulation and Abolition) Act, 1970 and Unorganised Workers’ Social Security Act, 2008 have been far from being effectively implemented.
There are over five crores domestic workers and they are a growing number in India. According to the NPDW for the past five years, they have been voicing the demand for a comprehensive legislation on domestic workers, including ‘decent conditions of work’ and regulation of work, wages and placement agencies and social security through tripartite boards as well as ratification of ILO Convention 189 on domestic workers. The government, meanwhile, is pushing for a bill that will create central codes to ease the contracts of employment for the employers and scrap existing labour laws for small labour-oriented communities and small-time labourers.
There seems to be a growing fear that even privatisation of social security in India could result in millions of rupees being collected by private companies, which will do so under the direction of the central government. The fear essentially lies in accessing such welfare accounts, especially by those living on the margins. There needs to be an inclusion of clauses that would help support people if they are unable to provide certain documents to access their welfare accounts, and for necessary spaces to appeal if there is any wrong-doing.
Under the code of Universal Social Security, workers are divided into four categories, with no clarity on who will belong to which category. The Code III envisages repealing of various labour laws, including the Employees’ State Insurance Act, a self-financing social security and health insurance scheme for workers and the Employees’ Provident Fund Act. One welfare board is to be created for organised and unorganised workers wherein the unorganised workers will have to pay 12 per cent of wages towards the fund (similar to organised workers) and the employers 17 per cent of wages.
The provision of pension, sickness benefit, medical benefit, and gratuity will be provided, but the quantum of benefits has not been stated. The unorganised workers have negligible representation within the proportion of workers’ representation in welfare boards not even being one-third. All informal workers are to be brought under the universal ‘poor’ category in the name of universalising social security. The trade unions and workers complain that there is negation of workers’ rights and regulation of work, which is being masked under the garb of universal social security coverage.
According to the Code on Social Security, the central government would make no contribution towards social protection, but it will have majority representation and control of the social security organisations, national social security council, central board and state boards. Moreover, workers would have to register again as various groups of unorganised workers will not exist. Social security measures in terms of registration of workers, management of contribution, record keeping, services and provision of benefits will be privatised; hence, the Employees’ State Insurance Corporation (ESIC) and Employees’ Provident Fund Organization (EPFO) will be either privatised or completely demolished with all the unorganised labour boards being wiped out.
The case for insurance scams among various another infamous scams is well-known and being suffered by one too many in India. It can only be hoped that the social security scheme does not end up the same by helping businesses grow at the cost of the nation’s citizens. The government’s ambitious labour reform needs more work to be done in terms of inclusion and representation.
The U.S. Trade Representative’s office published its final tariff list targeting 279 import product lines.
Only five product lines were deleted from the list that was initially proposed on June 15, according to USTR. The new tariffs will go into effect on $16 billion in Chinese goods on Aug. 23. The United States will begin collecting tariffs on another $16 billion in Chinese goods on Aug. 23, the U.S. Trade Representative’s office said on Tuesday as it published a final tariff list targeting 279 import product lines.
USTR said that only five product lines were deleted from a list initially proposed on June 15, but semiconductors, among the largest categories, remained on the list.
The latest list brings to about $50 billion in goods that now face a 25 percent tariff that U.S. President Donald Trump has imposed on Chinese imports in an escalating trade war over China’s intellectual property practices and industrial subsidy policies. China has vowed to match Washington’s tariff moves with duties on an equivalent worth of U.S. products.
Bangladeshi readymade garment exporters, already enjoying duty-free access, see further opportunity in Indian market as the country (India) has doubled the import tax on 328 textile products to 20 per cent, mainly to reduce its imports from China.
India on Tuesday hiked the tax hoping to bring down textile imports to $6 billion in current fiscal year 2018-19 from $7 billion in last fiscal year, according to a Reuters report on Tuesday.
‘The decision of India for doubling import tax on more than 300 textile products will benefit Bangladesh as we have duty-free market access to the country,’ Faruque Hassan, senior vice-president of Bangladesh Garment Manufacturers and Exporters Association, told New Age on Tuesday.
It was obvious that India’s import of textile products from China would decrease due to the tax hike and Bangladesh would be benefited as the next nearest import source, he noted.
Faruque also said that the decision of India would create opportunity for increasing bilateral trade and business between Bangladesh and India.
‘If India increases its import of RMG product from Bangladesh, Bangladesh will also increase its import of yearn, febrics and dies chemicals from India,’ he added.
Reuters reports that India has doubled the import tax on more than 300 textile products as the world’s biggest producer of cotton tries to curb rising imports from China.
It was the second tax hike on textiles in many months after an increase of tax on other products including fibre and apparels last month.
The moves are expected to provide relief to the domestic textile industry, which has been hit by cheaper imports.
Total textile import of India jumped by 16 per cent to a record $7 billion in the fiscal year to March 2018. Of this, about $3 billion were from China, according to Reuters.
The Indian government did not disclose details of the 328 textile products that will be subject to the duty increase announced on Tuesday.
‘It is logical that if India’s textile products import from China decreases, Bangladesh can grab the space. But it is not confirm whether India would meet their demand through import or local production,’ former Bangladesh Knitwear Manufacturers and Exporters Association president Fazlul Haque said.
Bangladesh’s RMG export to India in the financial year 2017-18 increased by 114.68 per cent to $278.67 million, according to the data of Bangladesh Export Promotion Bureau.
Reuters reports that rising imports sent India’s trade deficit with China in textile products to a record high $1.54 billion in 2017/18, alarming industry officials as India had been until recently a net exporter of textile products to China.
Sanjay Jain, president of the Confederation of Indian Textile Industry, told Reuters he did not expect China to retaliate to the Indian duty increases as it still had a trade surplus with India.
He said India’s textile product imports could fall to $6 billion in 2018/19 as a result of the tax hike to 20 per cent.
India’s imports of textile products from Bangladesh, Vietnam and Cambodia also jumped in the last few years as they are not subject to any duty under free trade agreements signed by India with these countries.
The 20 per cent duty will not be applicable to products sourced from those countries due to the FTA, Jain said.
Industry officials say in the last few months Chinese fibre has been shipped to Bangladesh and processed and exported to India with zero duty.
‘Rules of origin need to be implemented for textile products. Otherwise Chinese products will land from other countries,’ said a Mumbai-based garment exporter, who declined to be named.
Jain said India’s textile and garment exports could rise 8 per cent to $40 billion in 2018/19 due to a weak rupee and as the government was expected to introduce incentives to boost overseas sales.
India’s trade differences with the United States have also been rising since president Donald Trump took office.
India, the world’s biggest buyer of US almonds, in June decided to raise import duties on almonds and some other US imports by 20 per cent, joining the European Union and China in retaliating against Trump’s tariff hikes on steel and aluminum. The increased tariff on US goods will be applicable from September 18.
The government has approved cash incentive for nine new export products with a view to promote their sales in overseas market. These products are frozen soft-shell crab, pharmaceutical products and its raw materials, ceramics, galvanizing sheets, photovoltaic module, razor and razor blade, chlorine, hydrochloric acid, Sodium Hydroxide (caustic soda)(NaOH) and Hydrogen peroxide (H2O2).
The government policymakers at a meeting on Wednesday brought these products under its cash incentive programme. High officials of the Ministry of Finance and Commerce, Bangladesh Bank (BB) and concerned divisions and agencies attend the meeting held in the Bangladesh Secretariat.
“Cash incentive has been approved for nine new products considering their export potentials in global market,” a senior government official told The New Nation yesterday on condition of anonymity. He said the products will receive 10 per cent cash incentives on their exports from the current fiscal year. Besides, export of readymade garments to new markets will enjoy 4 per cent cash incentive from this fiscal instead of 3 per cent earlier.
“The government has expanded the list of the export subsidy eligible products in line with its goal to reach the country’s export earnings to US$60 billion by 2021,” he added. A total of 27 categories of goods and products got cash incentive ranging from two per cent to 20 per cent in the immediate past fiscal year 2017-18(2017-18) fiscal year when the government extended Tk 4,500 crore cash subsidy against their exports. Meanwhile, the government has set an export target of US$44 billion for fiscal 2018-19 (FY19), projecting a 6.4 per cent growth.
Of the target, US$39 billion has been projected from merchandise export while US$5 billion from services.
Export target for readymade garments fixed at US$39.69 billion. Commerce Minister Tofail Ahmed announced the target in a media briefing held in the conference room of the ministry yesterday. He said the government has decided to provide cash incentive to nine new products along with the existing 27 items in the current fiscal to boost export. Bangladesh’s export income stood US$36.67 billion US dollars in fiscal year 2017-18 with ready-made garments accounted for 82 per cent of its total export.
Products on which imports duties are expected to increase includes some fabrics, garments and man-made fibres
The government is likely to hike import duty on about 300 textile products to boost domestic manufacturing and create employment opportunities, sources said. Foreign direct investment norms for the sector may also be relaxed.
Products on which imports duties are expected to increase includes some fabrics, garments and man-made fibres. The duties could be enhanced to 20 percent from the current level of about 5-10 percent.
According to government sources, the Finance Ministry may soon issue a notification in this regard.
If the government decides to notify the duty hikes this week, then it would have to be first tabled in Parliament.
Increase in duties would give an edge to domestic manufacturers as the imported products are relatively cheaper. Increase in manufacturing activity will help create jobs in the sector, which employs about 10.5 crore people.
In July, the government doubled import duty on over 50 textile products — including jackets, suits and carpets — to 20 percent, a move that is aimed at promoting domestic manufacturing.
Through a notification, the Central Board of Indirect Taxes and Custom (CBIC) had hiked import duties as well as raised the ad-valorem rate of duty for certain items.
The imported products which have become expensive include woven fabrics, dresses, trousers, suits and baby garments.
According to trade experts, India would not be able to give any direct exports incentive to the textile sector, so there is a need to support the segment to encourage domestic manufacturing.
Imports of textile yarn, fabric, made-up articles grew by 8.58 per cent to USD 168.64 million in June.
However, exports of cotton yarn/fabrics/made-ups, handloom products grew by 24 per cent to USD 986.2 million. Man-made yarn/fabrics/made-ups exports grew 8.45 pc to USD 403.4 million. Exports of all textile readymade garments dipped by 12.3 per cent to USD 13.5 billion.
