[aaykarbhavan] source Business standard

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GST in House, biggest tax reform gets rolling

BS REPORTER New Delhi, 19 December With time running out in the winter session of Parliament, the government moved swiftly to introduce the Goods and Services Tax ( GST) Constitution Amendment Bill on Friday. The Centre allayed states' concerns over the treatment of petroleum products under the new tax regime and compensation for any revenue loss. Aimed at creating a common market for the entire country, GST is proposed to subsume a number of central taxes — central excise duties, additional excise duties, service tax, additional customs duty and special additional customs duty — and state taxes — valueadded tax, sales tax, central sales tax, entertainment tax, octroi, entry tax and luxury tax — according to the Bill tabled by Finance Minister Arun Jaitley in the Lok Sabha. The Bill seeks to make the GST rate uniform across the country. However, to give some fiscal autonomy to the states and the Centre, there will be a provision of a narrow tax band over and above the floor rates. Earlier, a sub- panel of the empowered committee of states had recommended state GST at 13.99 per cent and central GST at 12.77 per cent. But, the rates will be decided later. After GST is rolled out, both the Centre and states will simultaneously levy GST across the value chain. The Centre would levy and collect central GST and states would levy and collect state GST on all transactions within a state. Except for alcohol, all goods and services would come under GST, though some of these may be exempted from tax. The Centre would also levy and collect integrated GST ( IGST) on all inter- state supply of goods and services. Proceeds of IGST will be apportioned among the states. GST is a destination- based tax. All state GST on the final product will ordinarily accrue to the consuming state. A new Article 246A is proposed to be included in the Constitution to confer simultaneous power to the Union and state legislatures to legislate on GST. Turn to Page 12 > ECONOMY 5> >GST to snap up IT talent from pvt sector >Tamil Nadu opposed to Constitutional Amendment Bill >Why FMCG companies are cautiously optimistic on GST >GST to offer boost to e- commerce CREATING A SINGLE NATIONAL MARKET |Uniform rate in the country, but a narrow band may be allowed |Central levies, including excise and services, to be subsumed |State VAT, sales tax, central sales tax, entertainment tax and octroi to be replaced |GST to be destination- based tax; consuming state to get tax |States to be compensated fully for the first three years of rollout |Compensation to be reduced in the fourth and fifth years |GST council to decide on changes in GST |Council to include Union and state finance ministers All goods, except alcohol, and services covered; states allowed to initially charge VAT and Centre excise on petroleum products GST in House, biggest tax reform gets rolling  >FROM PAGE 1 This was required since the Centre and states would have to bring in their own GST Bills in Parliament and the respective Assemblies, after the Constitutional Amendment Bill would becomes a law. The government expects GST to be rolled out from 2016- 17. The government, until Thursday evening, had said the Bill would be introduced on Monday. The Bill wasn't discussed in the House's business advisory committee and Lok Sabha MPs discovered the introduction of the Bill when its copies were circulated among them on Friday. Some states such as Tamil Nadu opposed the Bill, while West Bengal criticised the manner in which it was sought to be presented. Their MPs, along with those of some Left parties, spoke against the Bill or the manner in which it was tabled in the Lok Sabha. Jaitley reached out to the Opposition by giving credit for GST to former West Bengal finance minister Asim Dasgupta and the United Progressive Alliance ( UPA) government for the progress made on the Bill. " The UPA Budget of 2006 spoke about GST, an idea originally conceived by the Atal Bihari Vajpayee government, for seamless transfer of goods and services across India," the finance minister said. He said the states were not divided politically on the issue. Addressing a press conference later, Jaitley clarified the Bill need not go to the standing committee as it was already cleared by the committee of the previous Lok Sabha. The Bill was tabled in the Lok Sabha in 2011, when Pranab Mukherjee was finance minister. After that, the standing committee had given its recommendations. The Bill has included petroleum products in the ambit of GST. However, it will be at zero rate. The industrial and transport fuels would be taxed at the GST rate at a date decided by the GST council, comprising the Union and state finance ministers. Till the time the GST council does not arrive at the date, the Centre will continue to impose excise and states will impose VAT on petroleum products. As part of easing the transition to the GST regime, the states would be allowed to levy an additional 1 per cent on supply of goods in the course of inter- state trade for a period of two years, over and above the IGST. The Bill has proposed to subsume Central Sales Tax, which is a tax on inter- state movement of goods in the present regime, into GST.

 

EPFO eases norms on deposits in govt banks

SOMESH JHA New Delhi, 19 December The Employees Provident Fund Organisations trustees, on Friday, relaxed the norms for parking funds in bank deposits. And, referred the issue of investing a portion of its funds into the equity market and housing sector to a committee. The trustees also approved a proposal to allow all nationalised banks to handle its PF collections. At present, SBI is the only commercial bank so entitled. Meanwhile, the Union finance ministry has approved the trustees decision to give a 8.75 per cent return to the 50 million subscribers of the retirement fund body for 2014- 15. The Central Board of Trustees ( CBT), highest decision making body of EPFO, also decided to ease the norms on bad debts, to deposit its funds in term deposits of the public sector lenders. This would ensure entities such as State Bank of India ( SBI) remain eligible for this. It would make 20 banks eligible for taking fixed deposits ( FDs) from EPFO, against eight at present. "We have proposed forming an expert committee to look into the overall investment prospects of EPFO funds. We want to properly examine improving the return on investment, by investing in various avenues such as housing," said Union labour minister Bandaru Dattatreya, who chaired the meet. The members said the retirement body wanted to "carefully balance return and risk" before taking a decision. "There are a lot of investment instruments available but we need to calibrate between return and risk, as this is the subscribers' money. Hence, these committees will look into the totality of investment climate," said Union labour secretary Gauri Kumar, also the CBT vice- chairman. The four- member panel on this will have two employers' representatives and two employees' representatives, sources said. EPFO wants to enable subscribers to own house and is looking into various models adopted abroad, such as in Singapore, said Kumar. For this, it has formed a separate committee to look at how the present norms for withdrawing EPF funds for this purpose can be relaxed. This new panel will have investment experts such as retired bankers or highlevel officials working in banks, atop official said. The Prime Minister's Office (PMO) had proposed the body consider deploying 15 per cent of its total funds towards loans for low- cost housing. This is expected to generate a credit flow of ₹ 70,000 crore to the segment, to build 350,000 additional homes. This was discussed in the executive committee ( EC) meeting of the EPFO on Thursday, before taking it up in the CBT meeting. " We were unanimous in recommending that EPF should not get into the business of construction. Rather, a mechanism should be formulated to facilitate members getting their houses built," a source told Business Standard. At present, an employee who is an EPFO subscriber for five years is eligible to withdraw some portion of the EPF money for housing finances but there are stringent conditions. As for the move to help public sector banks such as SBI, the CBT approved parking of its deposits in banks with non- performing assets (NPAs) below three per cent of the total.

GST to snap up pvt sector IT talent

NNEW TAX REGIME AWAITS PARLIAMENT GREEN SIGNAL N SURABHI AGARWAL & KANIKA DATTA New Delhi, 19 December Ahead of the Goods and Services Tax ( GST) getting Parliament's nod, efforts to ready the underlying technology infrastructure are being hurried. The Goods and Service Tax Network ( GSTN), the quasigovernment company tasked with building the technology backbone for the long- pending indirect tax reform, is looking to hire technology professionals from companies such as Infosys, Wipro, Accenture and others. The head- hunting will involve senior to middle management professionals who will oversee the project implementation. However, the body is in the process of finalising the tender for selecting a managed service provider — an IT firm — to which a majority of the mandate will be outsourced. Navin Kumar, chairman, GSTN, has told Business Standard that the idea is to have a strong technology wing, which would be involved with the technology provider during the system development stage. "We need someone to define what we want, know what is being developed and then continue to monitor them. That is why we need senior people with the experience of handling and executing large IT projects," said Kumar. The contract with the service provider is expected to be for about five years. This is a departure from the usual practice of state- owned entities hiring only government employees. In order to make it attractive for professionals to join the company, GSTN will offer marketbased salaries, according to Kumar. "We have been receiving a lot of queries on what kind of pay packages will be offered," he said. To start with, GSTN has 40 per cent of the employees having technology expertise and another 40 per cent from the field of taxation. While more technology employees will be hired from the market, The background work on setting up the portal has begun. Prakash Kumar, CEO, said a request for proposal (RFP) was being designed and the contract would be finalised by next The company appointed PricewaterhouseCoopers as the main consultant to the project last month to assess a pilot created by the CBEC and National Securities Depository Ltd ( NSDL) before GSTN was set up. The pilot has tested the concept by building applications that have enabled both registration and return filing. While the government has indicated a deadline of April 1, 2016, for rolling out the project, GSTN has already started working closely with state authorities to authentic PAN information. The Goods and Service Tax Network ( GSTN), a quasigovernment company tasked with building the technology backbone for the long- pending indirect tax reform, is looking to hire technology professionals from companies such as Infosys, Wipro, Accenture and others TN opposed to constitutional amendment BS REPORTER Chennai, 19 December The Tamil Nadu government has opposed the Centres proposal to introduce a constitutional amendment Bill on a proposed goods and services tax ( GST) and reach a consensus on various aspects of the new tax regime, especially the tax rates and bands, through a GST council. In a letter to the prime minister on Friday, Chief Minister OPanneerselvam said the state government had repeatedly highlighted the impact of the proposed GST on the fiscal autonomy of states, as well as the huge revenue loss such a taxation system was likely to cause to a manufacturing and exporting state such as Tamil Nadu. He emphasised before the constitutional amendment Bill on GST was taken up, the Centre should strive for a broad consensus on important issues relating to GST.

 

GST expected to offer a boost to e- commerce KALPANAPATHAK& RAGHAVENDRAKAMATH Mumbai, 19 December The proposed national goods and services tax ( GST) will give a big boost to the e- commerce sector. In the absence of specific tax laws for companies in this segment, many are battling various issues on this front. A GST is expected to resolve many supply chain issues which impact this sector. "GST, when implemented, will lead to faster shipment and returns and lesser paperwork. Companies will also be able to execute more efficient supply chain strategies, with warehousing based on strategy rather than tax requirements (like octroi)," says Ashish Jhalani, founder, eTailing India & ISeB. With a uniform tax structure across India, he said, goods can be priced and margins calculated without worrying about where the product is finally shipping. GST is a single tax regime, applicable across states, on the sale, manufacture and consumption of goods and services. Since a uniform tax regulation will apply, e- commerce companies ( and those from other sectors) will not have to struggle with the countrys complex regulatory structure. Ambareesh Murthy, founder at Pepperfry. com, said, " The biggest benefit is transparency and simplification of tax. Each state has its own tax ( now) and GST will lead to a common tax and ease in transportation of goods. It will make life easy for those who sell across the states." GST will replace most indirect taxes with a single tax. It would have a dual structure — a central component, levied by the Centre, and a state component, levied by states. At the central level, GST will subsume central excise duty, service tax and additional customs duties. At the states level, it will include value added tax ( VAT), entertainment tax, luxury tax, lottery taxes and electricity duty. VAT, however, will be charged on each stage of value addition. "GST will help free movement of goods across the states, without different taxes. Since the tax paid in previous state is treated as input credit, it will allow us to reach out anywhere in the country without atax burden. It will bring in more efficiencies and reduce prices for customers," said Rakesh Biyani, joint managing director, Future Retail. The rollout is likely to simplify logistics for e- commerce companies. Also, the practice of minimising their tax liabilities by finding loopholes in existing sourcing, distribution and warehousing strategies will have to change. "Many operational complexities will go away and customer experience will improve. A lot of pockets will get opened for delivery" said Praveen Sinha, co- founder, Jabong. com. GST will also allow retailers to keep their items based on a transportation model than a taxation model. " GST will help reduce retailers inventory levels and improve product availability, due to better efficiencies. It will help e- commerce companies do business easily, since customers and their suppliers are based in different states," said Kumar Gopalan, CEO, Retailers Association of India. GST would also help address challenges such as the one faced by the Karnataka tax authorities, where concerns about alleged tax evasion by Amazon India were brought to the fore. Questions were raised about why Amazon and its sellers were paying no VAT for operating from the company's warehousing facilities on the outskirts of Bengaluru. The situation might have been different if clear laws had been formulated for the ecommerce sector. The standoff is more a result of differences in interpretation of the vague laws by Amazon and the state tax authorities. Jhalani explains that Amazon operates on a marketplace model and only provides aplatform for buyers and sellers to transact -- its not engaging in any selling directly. Thus, Amazons reasoning was that it should not come under the purview of sales Tax or VAT. It gets a commission from sellers for facilitating sales and, thus, only service tax was applicable, it felt. On the other hand, its sellers, who were stocking their goods in Amazon's warehousing facility, were designating it as " an additional place of business", in contravention of the state's VAT rules. "The state tax authorities then ordered Amazon to discontinue selling some products from its Bengaluru warehouse, cancelling the licences of about 100 of its sellers supplying merchandise to that warehouse. Consequently, the company had no choice but to cancel many orders for those particular products and bear losses," says Jhalani. The sector awaits rollout as it would simplify operational and planning issues, beside addressing grey areas such as ongoing standoff between Amazon and Karnataka tax authorities Bill to amend electricityAct tabled in LS BS REPORTER Mumbai, 19 December With an eye to unbundling the power distribution and transmission sector and opening it to competition, the government on Friday tabled the Electricity Amendment Bill, 2014, in the Lok Sabha. The amendments aim to provide those consuming less than one megawatt a choice of power distribution companies, separate the content and carriage businesses, bring renewable energy into the mainstream and rationalise rates. The Bill also aims to empower power generators to sell the surplus power generated within a state to entities outside it. "Opening the sector will ensure the supply of power is in line with market realities," said an executive at a distribution company. The proposed amendments to the Act seek to segregate carriage ( distribution network) from content ( electricity supply business) in the power sector. The government will introduce multiple supply licensees in the content business and continue carriage as a regulated business. The Bill also has a ' duty to connect, supply to request' clause for last- mile supply. With separate businesses, the onus of the development of the network will rest with the carriage provider. The provisions on ' tariff policy' are proposed to be made mandatory for the determination of rates. The Bill also envisages the timely filing of tariff petitions by utilities, as well as their disposal within a specified period. The amendments also seek to empower appropriate commissions to initiate suomotu proceedings to determine the rate in case a utility/ generating company doesn't file its petition on time. It also gives the load despatch centre the power to penalise those not complying with its directions on power supply. To give renewable energy into the mainstream, there are provisions for a national renewable energy policy, in addition to the existing national electricity policy. To increase procurement, the Bill provides for the setting up of renewable energy generating stations by distribution companies. The amendments aim to provide those consuming less than one megawatt a choice of power distribution companies, separate the content and carriage businesses

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