| It's possible to have GST by 2014' |
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My first priority will be to build a consensus on GST. The ultimate aim is to introduce GST in a timely manner. Before that, passage of the Constitution Amendment Bill is essential. Till that happens, GST cannot Parliament's standing finance will give its report soon and then the EC will look into it. What is a realistic deadline for GST introduction? Prime Minister Manmohan tax reform by April 2014. All political parties need to join hands for that. Gujarat and Madhya Pradesh have been opposing the GST. How would you convince them? They are not opposed to GST. They have some concerns which need to be addressed. What are the major concerns of the states? Compensation for the Central Sales Tax ( CST) and also GST are the major areas of concern. States have lost a lot of revenue because of reduction in the CST rate from four per cent to two per cent. Besides, we have to resolve concerns regarding the threshold for levying GST, the revenue- neutral rate, and dual control, among others. These are being discussed by the EC and it is possible to address these issues. For full interview, visit www. business- standard. com The Empowered Committee ( EC) of State Finance Ministers got its new chairman on Monday in Jammu and Kashmir's ABDULRAHIM RATHER. A regular at the Goods & Services Tax ( GST) meetings, he faces the challenge of bringing together the Centre and the states on the many contentious issues in the proposed levy. In an interview with Vrishti Beniwal, he says building consensus is his priority. Edited excerpts: ABDUL RAHIM RATHER Chairman, Empowered Committee of State Finance Ministers |
| Excise duty blowto firms selling goods belowcost |
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New Delhi, 22 July Companies selling products below manufacturing cost to enhance market penetration will now have to pay excise duty on the normal price ( production cost plus profit). The finance ministry decision follows the Supreme Court ( SC) ruling of last year that upheld excise demand on sales of carmaker Fiat's discounted Uno brand. This could be a twin blow for companies in sectors like automobiles, oil marketing, fastmoving consumer goods ( FMCG), consumer durables, information technology ( IT) hardware, fertiliser & chemicals — some of those already selling products at loss a to penetrate afiercely competitive market. These companies might soon get notices from the excise department. The Central Board of Excise & Customs ( CBEC), however, is finalising safeguards so that there is no blanket application of the SC judgment on all companies. It will clarify that the excise duty would be levied at discounted prices when a product is sold below cost due to a sudden increase in raw material cost or increase in interest rates, or under some government mandate. The Society of Indian Automobile Manufacturers ( Siam) and some industry bodies have provided CBEC with details of situations other than market penetration when products are sold below cost. They have suggested the ruling should not apply retrospectively and senior officials of a company should not be summoned by revenue authorities. SIAM Director- General Vishnu Mathur said the ministry had been urged to provide relief to companies that had built up huge inventory due to difficult market conditions — as is the case at present — and were having to sell at discounted prices. " We have looked into industry's request. There will be no change in law. So, Fiat and identical cases will not get any relief," said a finance ministry official, adding: "Right now, the Supreme Court judgment is open for interpretation. We can clarify to the field formations the scope of the judgment, so that it's not extended to the areas where it should not apply." Experts said, in the absence of a clarification, field officers might start applying the judgment to other situations to boost the government's revenue collections. "Showcause notices so far are primarily being issued to auto sector companies. But this can go to other sectors like FMCG, too," said Saloni Roy, senior director, Deloitte. Pratik Jain, partner, KPMG, agreed FMCG could be the next target and cautioned amendment to the law was the only longterm solution, as all large companies dealing with multiple products would have a situation where a few products are sold at a loss. At present, field officers are asking auto companies for details of situations when goods are sold below cost. Notices have been sent to many auto firms, seeking information on their cost structure. But the industry is apprehensive about sharing such ' sensitive' data on business strategy. In its representation to Revenue Secretary Sumit Bose recently, the industry sought a relief from the SC ruling. CBEC, however, has made it clear that it is not possible to do so without an amendment to the Central Excise Act. It has ruled out amending the law, justifying the SC ruling and, instead, suggested the industry consider changing its processes. For full report, visit www. business- standard. com Tax relief only when gaining market share not the aim KNOW YOUR DUTY TRIGGER | The August 2012 case between Fiat and Excise Dept in which the SC upheld excise duty levy on manufacturing cost ( higher than the selling price of the picturedUno model) |If a product's manufacturing cost is ₹ 100 but a company sells it at ₹ 80, excise duty will be levied at ₹ 100 plus profit ( say ₹ 10) and the company will have to pay duty on ₹ 110 ( and not ₹ 80) REPERCUSSION | Field officers started sending showcause notices to other auto firms, seeking details of their cost structure and whether the SC ruling could be applied in their cases of excise demand REACTION | The industry was not comfortable sharing cost data for each product; it argued duty at manufacturing cost would cause undue problems, as goods were already sold at loss SOLUTION | Finance Ministry says it won't amend the law but will provide safeguards, so that it doesn't apply on cases where goods are sold below cost for reasons other than competition |
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Company Secretary, Chennai
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