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To iron out issues concerning implementation of the goods and services tax (GST), the Centre on Monday proposed several pro-business amendments to GST laws.
To iron out issues concerning implementation of the goods and services tax (GST), the Centre on Monday proposed several pro-business amendments to GST laws such as restricting GST liability under reverse charge basis on procurements from unregistered vendors to specified class of registered persons to be notified by the GST Council and allowing businesses to have separate registration for each place of business in a state. Also, the input tax credit entitlement on vehicles will be relaxed to cover the passenger vehicles having seating capacity of not more than thirteen persons, in case these are used for specific (rather than personal) purposes. So ITC will now be available for dumpers, work-trucks, fork-lift trucks and other special purpose vehicles.
While the changes are termed business-friendly and supportive of ease of doing business, sections of the industry could be affected by the provisions relating to restriction on transfer of credit balance of education cess, secondary and higher education cess, Krishi Kalyan cess, additional duties of excise (textile and textile articles) etc. “Specific denial of transition of credit of cesses like education cess etc would be against the tax position that some tax payers had taken.” said Abhishek Jain, tax partner, EY India.
Pratik Jain, partner and leader, Indirect Tax, PwC, said: It is a welcome step to invite public comments for the proposed amendments in the GST law. The amendments such as amendment in definition of supply, widening of credits on vehicles and restricting reverse charge liability for procurements from unregistered vendors to specified set of persons are welcome.”
He, however, added that the proposed amendments do not cover some of the amendments which were already highlighted to the GST Council such as the tax liability on services deemed to be provided by the branch offices to foreign offices/parents. “It would be interesting to see which provisions are proposed to be given retrospective effect and which are given effect prospectively, Jain said.
In all, the Centre’s draft proposals to amend GST laws contains 46 amendments on which the public could give their suggestions till July 15. Significantly, an option is proposed to be given to every person to obtain separate registration for each place of business in a state. Previously, a single registration is required to be obtained for all the places of business in a state, except when they were operating as a separate business vertical. Further, the provisions for individual registration of multiple SEZ units have also been proposed to be introduced.
In a tax-payer friendly amendment, it is now proposed to allow ITC in respect of food and beverages, health services and travel benefits to employees, which are obligatory for an employer to provide to its employees under law. Merchant sale transactions where the goods do not enter India, sale of goods stored in customs bonded warehouse and high sea sales transactions are specified as transactions which do not amount to supply of goods as well as services, resolving the ambiguity of treatment of such transactions.
As reported by FE recently, a group of ministers (GoM) led by Bihar deputy chief minister Sushil Modi is set to recommend to the GST Council that a section in the GST Act concerning the reverse charge mechanism be scrapped as “it discriminates against unregistered dealers while not adding much to the revenue.” Under the RCM rule, registered dealers are now required to make tax payments in case they procure goods from unregistered ones. This has been resisted by the registered small businesses as they find it cumbersome to comply when goods are purchased from dealers outside the GST ambit. Since the GST’s rollout in July last year, RCM has remained suspended and has recently been further deferred till September 30.
The amendments also seek to give effect to some of the decisions taken by the GST Council in the past like raising the turnover threshold for availing composition scheme increased from Rs 1 crore to Rs 1.5 crore. In the suggested amendments, definition of supply is proposed to be amended to remove specific inclusion of activities referred to in schedule II to remove an anomaly that in some cases, even though the activity specifically mentioned in schedule II did not amount to supply, due to deemed inclusion of such activities in definition of supply, it attracted tax.
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The Confederation of Indian Textile Industry (CITI) stated the cotton MSP hike would make domestic fibre relatively expensive compared with international prices. CITI has requested the Centre to establish a delivery mechanism for the industry to procure raw material at reasonable prices.
The officials stated that in the recent years, it has been seen that Indian cotton MSP acts as a price floor for the global fibre as well, given Indias status as the largest producer and the second largest consumer. Accordingly, higher prices are expected to support output, not just in India but also across the world.
Reimbursement of incentives under the Gujarat Textile Policy of 2012 will be limited to sales within the state, and will not cover those made outside, according to the state Industries and Mines Department.
A July 7 General Resolution (GR) of the Department said that units will be eligible to avail of reimbursement only for State Goods and Services Tax (SGST), and it will not include Integrated Goods and Services Tax (IGST), i.e. GST on inter-state sales.
Textile is the first industry for which the incentive has been announced, while amendment of other policies for replacing VAT incentives with SGST is under process, said a senior government official.
So far, eligible textile units were being given Value Added Tax (VAT) incentives. However, following introduction of GST from July 1, last year, the state government had formed a committee to suggest modalities for SGST incentives. After considering its recommendations, the government has decided to extend SGST incentives in the form of reimbursement under the Policy.
“The eligible manufacturing unit will get reimbursement of the aggregate of SGST paid through cash ledger against output liability of SGST on sale of eligible products / intermediates, and eligible SGST ITC (Input Tax Credit) of inputs and input services used in production,” the GR states.
The GR also states that the unit shall not be entitled to reimbursement of IGST on inter-state supply, reimbursement of SGST input tax credit utilized for payment of IGST, and reimbursement of IGST input tax credit utilized for SGST payment.
Unlike VAT, where tax was received by the state where goods were manufactured, under GST, the tax goes to the state where goods or services are consumed. The tax collected is divided equally between the state and Centre.
This means units will get 50% of the tax paid on eligible products as reimbursement. In other words, the GR means the state government will refund to eligible textile units part of the tax that comes into its own coffers.
GST expert Monish Bhalla said that large textile process houses would not get any benefit of the policy because of the provision about SGST paid through cash ledger.
“In Ahmedabad, majority of the textile processors do not pay SGST in cash, as they have surplus Input Tax Credit. When tax is not paid in cash, even eligible units will not get any incentives according to the GR,” Bhalla said.
He added that the ITC reimbursement is only in case of intra-state supply, which again goes agianst the ground reality as majority of the large units are either exporting or supplying pan-India.
Meena Kaviya, board member of Association of Apparel Manufacturers and Exporters of Gujarat, welcomed the incentives, but she too said that sops should also be given for sales outside the state.
“Most of the textile sector’s sales are outside Gujarat. Orders from organised retailers are from other states,” she added.
Textile products were put in the tax bracket of 12 and 18% originally, but majority of the items were moved to GST rate of 5% after several protests.
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Textile products were put in the tax bracket of 12 per cent and 18 per cent originally, but majority of the items were moved to GST rate of 5 per cent after several protests
To iron out issues concerning implementation of the goods and services tax (GST), the Centre on Monday proposed several pro-business amendments to GST laws.
To iron out issues concerning implementation of the goods and services tax (GST), the Centre on Monday proposed several pro-business amendments to GST laws such as restricting GST liability under reverse charge basis on procurements from unregistered vendors to specified class of registered persons to be notified by the GST Council and allowing businesses to have separate registration for each place of business in a state. Also, the input tax credit entitlement on vehicles will be relaxed to cover the passenger vehicles having seating capacity of not more than thirteen persons, in case these are used for specific (rather than personal) purposes. So ITC will now be available for dumpers, work-trucks, fork-lift trucks and other special purpose vehicles.
While the changes are termed business-friendly and supportive of ease of doing business, sections of the industry could be affected by the provisions relating to restriction on transfer of credit balance of education cess, secondary and higher education cess, Krishi Kalyan cess, additional duties of excise (textile and textile articles) etc. “Specific denial of transition of credit of cesses like education cess etc would be against the tax position that some tax payers had taken.” said Abhishek Jain, tax partner, EY India.
Pratik Jain, partner and leader, Indirect Tax, PwC, said: It is a welcome step to invite public comments for the proposed amendments in the GST law. The amendments such as amendment in definition of supply, widening of credits on vehicles and restricting reverse charge liability for procurements from unregistered vendors to specified set of persons are welcome.”
He, however, added that the proposed amendments do not cover some of the amendments which were already highlighted to the GST Council such as the tax liability on services deemed to be provided by the branch offices to foreign offices/parents. “It would be interesting to see which provisions are proposed to be given retrospective effect and which are given effect prospectively, Jain said.
In all, the Centre’s draft proposals to amend GST laws contains 46 amendments on which the public could give their suggestions till July 15. Significantly, an option is proposed to be given to every person to obtain separate registration for each place of business in a state. Previously, a single registration is required to be obtained for all the places of business in a state, except when they were operating as a separate business vertical. Further, the provisions for individual registration of multiple SEZ units have also been proposed to be introduced.
In a tax-payer friendly amendment, it is now proposed to allow ITC in respect of food and beverages, health services and travel benefits to employees, which are obligatory for an employer to provide to its employees under law. Merchant sale transactions where the goods do not enter India, sale of goods stored in customs bonded warehouse and high sea sales transactions are specified as transactions which do not amount to supply of goods as well as services, resolving the ambiguity of treatment of such transactions.
As reported by FE recently, a group of ministers (GoM) led by Bihar deputy chief minister Sushil Modi is set to recommend to the GST Council that a section in the GST Act concerning the reverse charge mechanism be scrapped as “it discriminates against unregistered dealers while not adding much to the revenue.” Under the RCM rule, registered dealers are now required to make tax payments in case they procure goods from unregistered ones. This has been resisted by the registered small businesses as they find it cumbersome to comply when goods are purchased from dealers outside the GST ambit. Since the GST’s rollout in July last year, RCM has remained suspended and has recently been further deferred till September 30.
The amendments also seek to give effect to some of the decisions taken by the GST Council in the past like raising the turnover threshold for availing composition scheme increased from Rs 1 crore to Rs 1.5 crore. In the suggested amendments, definition of supply is proposed to be amended to remove specific inclusion of activities referred to in schedule II to remove an anomaly that in some cases, even though the activity specifically mentioned in schedule II did not amount to supply, due to deemed inclusion of such activities in definition of supply, it attracted tax.
Representatives of more than 30 Uzbek companies – manufacturers of textile and garment-knitted products headed by the senior officials of the “Uztuqimachiliksanoat” (Uzbekistan Textile Industry) Association will participate in the international exhibitions “Apparelsourcing”, “TexWorldUSA”, “HomeTextilesSourcingExpo-2018” in New York on July 23-25, 2018.
Participation in the exhibition will contribute to the promotion and presentation of local textile and clothing-knitting industry, innovative achievements, the comprehensive familiarization of foreign visitors and exhibitors with the production potential of the country, as well as will provide broad opportunities for various joint investment projects with participation of US and international companies.
This is the third visit to the USA of the representatives of the “Uztuqimachiliksanoat” (Uzbekistan Textile Industry) Association over the past two years.
The Trump administration raised the stakes in its trade war with China on Tuesday, saying it would slap 10 percent tariffs on an extra $200 billion worth of Chinese imports.
US officials released a list of thousands of Chinese imports the administration wants to hit with the tariffs, including hundreds of food products as well as tobacco, chemicals, coal, steel and aluminium.
It also includes consumer goods ranging from car tires, , furniture, wood products, handbags and suitcases, to dog and cat food, baseball gloves, carpets, doors, bicycles, skis, golf bags, toilet paper and beauty products.
“For over a year, the Trump administration has patiently urged China to stop its unfair practices, open its market, and engage in true market competition,” US Trade Representative Robert Lighthizer said in announcing the proposed tariffs. “Rather than address our legitimate concerns, China has begun to retaliate against US products …
There is no justification for such action,” he said in a statement.
Last week, Washington imposed 25 percent tariffs on $34 billion of Chinese imports, and Beijing responded immediately with matching tariffs on the same amount of US exports to China. Investors fear an escalating trade war between the world’s two biggest economies could hit global growth.
President Donald Trump has said he may ultimately impose tariffs on more than $500 billion worth of Chinese goods – roughly the total amount of US imports from China last year.
The new list published on Tuesday targets many more consumer goods than those covered under the tariffs imposed last week, raising the direct threat to consumers and retail firms.
The tariffs will not be imposed until after a two-month period of public comment on the proposed list, but some US business groups and senior lawmakers were quick to criticize the move.
‘Tariffs Are Taxes’
Senate Finance Committee Chairman Orrin Hatch, a senior member of Trump’s Republican Party, said the announcement “appears reckless and is not a targeted approach.” The US Chamber of Commerce has supported Trump’s domestic tax cuts and efforts to reduce regulation of businesses, but it has been critical of Trump’s aggressive tariff policies.
“Tariffs are taxes, plain and simple. Imposing taxes on another $200 billion worth of products will raise the costs of every day goods for American families, farmers, ranchers, workers, and job creators. It will also result in retaliatory tariffs, further hurting American workers,” a Chamber spokeswoman said.
The Retail Industry Leaders Association, a lobby group representing the largest US retailers, said: “The president has broken his promise to bring ‘maximum pain on China, minimum pain on consumers.'”
“American families are the ones being punished. Consumers, businesses and the American jobs dependent on trade, are left in the crosshairs of an escalating global trade war,” said Hun Quach, the head of international trade policy for the group.
There was no immediate reaction from the Chinese government.
Although it was not a direct reaction to the new move from Trump’s administration, the official English-language newspaper China Daily said in an editorial that Beijing had to stand up to Washington. “China has no option but to fight fire with fire. It has to resolutely fight back while taking proper measures to help minimize the cost to domestic enterprises and further open up its economy to global investors,” it said.
Kenya has licensed India- based firm Maharashtra Hybrid Seeds Co (Mahyco) to import genetically modified cotton seeds for sale to local farmers after the ongoing field trials.
Mahyco will distribute the seeds on behalf of Monsanto Company, which this year was granted permission by the National Environmental Management Authority (Nema) to conduct the National Performance Trials on biotech cotton.
The licensing of the firm implies that the country is set to lift a six-year ban on importation of GMO material.
Commercialisation is expected in the next two years.
“Monsanto has been working with Mahyco in Africa including in licensing of Bt cotton technology for commercialisation in Nigeria and Malawi,” said Mr Jimmy Kiberu, head of Corporate Communication at Monsanto Kenya.
Mahyco is a global agricultural company founded in India in 1964 with operations in Asia and other African countries.
The field trials are currently being conducted in Mwea, Bura Tana, Katumani, Kampi ya mawe (Makueni) and Perkerra in Baringo County.
The project is expected to be completed within 24 months, which is the validity period for the permit issued by Nema.
After the trials, Kenya Plant Health Inspectorate Service (Kephis) will then asses the seeds to find out if they have all the qualities that have been attributed to them.
READ: Cotton farmers to benefit as foreign firms eye value addition
If Kephis find out that the seeds are resistant to pests and has higher production than the current variety, then they will allow the scientists to release it for commercialisation.
Kenya imposed a ban on GMO crops in November, 2012, citing danger to public health, a decision that locked out many countries, including South Africa, from exporting maize to the country.
The taskforce formed to establish the safety of GMO crops following the ban, and influenced by a scientific journal that linked GMO crops to cancer, recommended the lifting of the ban on a case-by-case basis.
President Uhuru Kenyatta in January said he was betting on mass production of biotech cotton to create 50,000 jobs and generate Sh20 billion in apparel export earnings this year as part of his final term economic revival plan.
India has proposed a slew of changes to the year-old goods and services tax law, including an amendment to deny credit in lieu of accumulated balances of education cess, secondary and higher education cess, Krishi Kalyan cess, and additional excise duties levied on textile and textile articles.
The GST Council, the apex decision-making body for the tax, on Monday unveiled the draft of changes proposed to the GST law before they are introduced in the upcoming monsoon session of parliament. India Inc.’s key demand on transfer of cess credits has been turned down, but substantial changes have been proposed to provide relief to businesses. In a significant easing of compliance norms, businesses have been allowed to amend GST returns.
It appears that the feedback from businesses on the need to simplify the compliance processes and streamline the input tax credit provisions is being acted upon and once these amendments are approved, there would be a considerable degree of comfort for all businesses,” said MS Mani, a partner at Deloitte India. Aimed at benefitting smaller businesses, the turnover threshold for composition dealers is proposed to be raised to Rs 1.5 crore from.`1 crore now. GST liability under reverse charge basis on procurement from unregistered vendors is proposed to be restricted to specified classes of registered persons
This is in line with the changes proposed by the group of ministers tasked by the GST Council to look into the issue. Ecommerce companies with a turnover of less than Rs 20 lakh and not liable to deduct tax at source will not be required to register with the tax authorities. The provision barring input tax credit for food and beverages, health services and travel benefits provided to employees is being amended to allow the tax benefit where it is obligatory for entities to provide such goods and services under any law.
This may bring cheer from labourers, nurses, security guards and working women and would align the GST law with the labour laws and other employee friendly laws. Banks can now get input tax credit on the life insurance premium paid for security guards, hospitals for medical insurance premium paid for nurses and companies for canteen fees charged to labourers. In places where the state law mandates that women employees be dropped home at night, the facility would count for input tax credit.
“While ideally, input tax credits should be permitted on all business expenditure without any restrictions, as is prevalent in many other jurisdictions, this directional change would be very beneficial to businesses across sectors,” said Mani. Among other amendments, passenger vehicles with a seating capacity of over 13 will be eligible for input tax credit, resulting in vehicles such as dumpers, trucks, fork lifts becoming eligible to claim credit for tax paid on inputs. Goods stored in warehouses will face tax only once and not twice.
Transactions involving goods that do not enter India, the sale of goods stored in customs bonded warehouses and high-sea sales will be specified as those that do not amount to the supply of goods, resolving the ambiguity over the treatment of such transactions. Tax experts said that while some of the proposed changes remove inconsistencies, some key issues have not been touched.
The proposed amendments are aimed at streamlining the current GST law and correcting inconsistencies and errors. The new compliance mechanism is prescribed, which will simplify return-filing and credit availment,” said Bipin Sapra, a partner at EY. However, Sapra said a number of areas of significance still remain outside the ambit of the present amendment, including centralised registration and assessment/audit, broad-basing of eligible credits, simplification of availing credit and provisions like TCS.
Mumbai: The Reserve Bank of India’s intervention in the currency market may have halted the slide of the Indian rupee, but it may be temporary as the repayment demand of short-term debt of Indian companies could soon exert pressure taking it to new lows.
Foreign exchange reserves have dipped more than $20 billion from the peak in the past two months as the Reserve Bank of India sold to stabilise the rupee. It is said to have sold another $20 billion in the forwards market as well.
India’s short-term debt at $222 billion is more than half the total foreign exchange reserves. These are funds that Indian companies raised to take low interest rate advantage in the West.
While some of them have hedged their positions and others have export income to pay for, many are exposed to the lower value of currency that could erode their profitability as well.
The currency may slide to a low of 72 to the US dollar in the next few quarters as rising oil prices, slowing foreign portfolio flows and the demand for debt repayment put pressure.
“Given that oil prices are rising and with a pick-up in import demand, we expect current account deficit to widen to 2.6 per cent of GDP,” said Siddhartha Sanyal, chief India economist at Barclays. “With FDI flows funding only part of the gap and uncertainties over FII inflows, we expect the rupee to touch 72 against the dollar by the end of 2018.”
Indian Rupee has been under pressure this year along with other emerging market currencies as the US Federal Reserve raises rates in its efforts to normalise the decade- old easy monetary policy. As leveraged funds begin to unwind their carry trade, EM currencies are facing pressure.
Central banks of Indonesia and Turkey, along with India, have raised interest rates to arrest flight of capital.
India’s foreign exchange reserves are at $406 billion. Rising import bill is already shrinking the import cover, too. Crude oil prices have risen more than 90 per cent from its low touched two years ago. India imports more than three fourths of its oil needs. The RBI has already sold $24 billion in both the spot and forward markets this fiscal. Yet the rupee has slipped 6 per cent against the dollar. It touched a life low of 69.09 last month.
In the June quarter, foreign investors pulled out close to $ 7 billion or Rs 45,571 crore from the Indian markets. The reserves are now adequate to fund about nine months’ imports. Pressure of funding our current account deficit will likely push beyond Rs 70 by September, according to Bank of America Merrill Lynch.
“If FPI flows do not revive by the December quarter, the RBI would then have to sell $20 billion to fund $65 billion current account deficit,” said Indranil Sengupta of Bank of America Merrill Lynch.
India needs to create an export culture, address fundamental issues like shortages of transport network, logistics, energy, bring down transportation costs, improve ease of doing business and constantly review our FTAs, said said Dr. Rupa Rege Nitsure, Group Chief Economist, L&T Finance Holdings.
He was speaking at a Panel Discussion on ‘How to Revive Stagnant Exports’ organized by World Trade Centre Mumbai & All India Association of Industries in association with Business Standard at World Trade Centre, Mumbai.
“Over the years, we have diversified export destinations and basket. From 45% share of US and EU in the year 2000, it has now come down to 30%. The share of emerging markets is 50% today. But quick, short-term fixes are not helping much,” he said.
Dr. Rege said “Export deceleration has been significant in the past five years. Both traditional and non-traditional exports have weakened. To promote exports, we come out with sops, subsidies, interest subvention etc. But these do not help to revive exports on a sustainable basis”.
Sharing his views, Mangesh Soman, Joint President (Corporate Economics Cell), Aditya Birla Group, remarked “Although overall merchandise exports have stagnated, there are two numbers that have grown in recent years – the share of MSMEs in India’s exports have increased from 42% in FY14 to 50% in FY16, and the amount of export incentives under the Merchandise Exports from India Schemes, has expanded to around 8000 tariff lines, covering nearly three-fourth of the product lines.”
Suggesting that export–intensive manufacturing operations which include labour-intensive sectors like apparel, leather and gems and jewellery, as also auto components and engineering seek to be long-term, steady players in the export market, he added “Nearly two-third of the global trade is through participation in Global Value Chains which requires adherence to strict quality norms, timely supplies and continued productivity growth. It is also necessary to keep moving up the value chain”.
He concluded his remarks saying “India should be more tolerant of a moderately undervalued currency. While this cannot be an officially stated objective and cannot be ensured at all times, given the other macroeconomic considerations and objectives, still, to the extent possible, the extent of intervention can be skewed towards maintaining the rupee at a more competitive level.”
Addressing the gathering, Keyur Parekh, Vice President, Welspun Global Brands Limited, said “Textile plays a major role in the Indian economy, as it contributes 14% to the industrial production and 4% to GDP. Under the impact of GST roll out, textile and garment exports have missed the USD 45 billion target for 2017-18 (only close to USD 40 billion was achieved) and has resulted in tariff advantages being enjoyed by competitors like Bangladesh and Vietnam”.
Offering measures to revive exports, Parekh said “We need to focus on ‘Ease of Doing Exports’. India needs a single platform like a Green Channel as we compete with emerging markets. Effective exchange rate management would be critical to achieve a significant increase in exports from India. The government should encourage setting up of more integrated textile units to increase productivity and efficiency, ensure a level-playing field with country peers competing in EU/UK markets, sign free trade pacts with major markets like the EU, US, Canada and Britain to equalise market access positions with key competitors and iron out all the glitches arising out of GST implementation. Indian players need to gear themselves with the changing landscape & its requirements such as e-commerce, millennials, etc.”
Prahalathan Iyer, Chief General Manager, Research & Analysis Group, EXIM Bank opined that, “There are structural difficulties in developing countries – ranging from lack of know-how in local banks, mistrust, large collateral requirements and high fees for loans. These challenges were present even before 2008, bust have now aggravated.”
Iyer added “ADB has estimated in its survey that the unmet global demand for trade finance could be as high as USD 2 trillion. In Asian developing economies alone, the estimated shortage could be as high as USD 1 trillion. With the introduction of risk-based capital standards by BASEL, the role played by credit rating agencies and their country risk models have high influence on the financial markets. It is estimated that BASEL III regulations would make the trade finance costlier to the tune of 15% – 37%, which in turn could take down the trade finance capacity by as much as 6%”.
In his remarks, Krishanlal Dhingra, Regional Chairman (WR), EEPC India said “GST implementation has not been smooth. We are recommending the government to raise it to 75 per cent. Further, we need a shipping regulator like telecom and insurance regulators to remove malpractices in the industry”.
Vijay Kalantri, Vice Chairman – MVIRDC, World Trade Centre Mumbai and President – All India Association of Industries, remarked “Trade infrastructure should be upgraded to meet international standards as this will facilitate exports from India and also make MSMEs competitive in the global markets. Depreciation of rupee may not be an answer to revive exports. We should also try to promote import substitution to strengthen MSMEs’ productivity, innovation and competitiveness. There is a need to lay thrust on improving infrastructure, boost the manufacturing sector and reduce transaction costs to revive our stagnant exports”.
