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GST: Tax officers in states to reach out to traders, industry bodies, msmes to list out grievances

Tax officers in states and union territories will reach out to trade and industry bodies, MSMEs, to understand their issues and grievances relating to GST and would place them before the Council on August 4. The Central Board of Indirect Taxes and Customs (CBIC) had earlier this week written to the GST Council secretariat asking them to write to states and UTs asking them to contact MSME taxpayers and their trade and industry associations in their respective states and UTs, collect their grievances/issues related to GST along with suggestions thereof for mitigating the issues.

The GST Council secretariat have been tasked to compile the suggestions and responses and send to the CBIC, which is the apex body for Indirect taxes in the country, by tomorrow. Also Director General GST in the CBIC has been asked to collect information from Goods and Services Tax (GST) zones across the country and report to the GST policy wing in the board.

The 29th GST Council meeting, to be held on August 4, will discuss issues faced by the micro, small and medium enterprises (MSME) and ways to solve their problems. Finance Minister Piyush Goyal had last week said that the next meeting of the Council will focus on simplification, rationalisation and relief to small tax payers. The Council has already allowed companies with turnover of up to Rs 5 crore to file GST returns quarterly. This was hiked from Rs 1.5 crore decided earlier.

Good news for MSMES! more GST relief on anvil in next GST council meet on August 4

The Goods and Service Tax Council would exclusively consider issues related to micro, small and medium enterprises (MSME) taxpayers at its 29th meeting scheduled for August 4, a finance ministry official said. The field formations of the indirect tax department have been asked to prepare a list of grievances and suggestions from small taxpayers, and send the same to the Central Board of Indirect Taxes and Customs (CBIC) by Friday.

Officials said that finance minister Piyush Goyal would hold a meeting with the tax department on Saturday to finalise the issues to be taken up in the council before a formal agenda is prepared. This will be second GST Council to be chaired by Goyal, who has assumed charge as finance minister due to Arun Jaitley’s indisposition.

The council in its 28th meeting last Saturday provided relief to smaller taxpayers by allowing those with a turnover up to Rs 5 crore annually to file returns on a quarterly basis even as they file taxes every month. Similarly, the reverse charge mechanism (RCM), which has been cited as a major hurdle for MSMEs in procuring supplies from unregistered dealers, has also been put on hold till September 30, 2019. RCM puts the onus of tax collection on registered buyers if the supplier is unregistered, which leads to additional compliance burden.

Given that MSMEs largely procure raw material from unregistered suppliers, the RCM provision had been cited as a major bottleneck in conducting business for these taxpayers. This is also reflected in low compliance level for GST where even after a year of the tax’s introduction, only 60% of eligible taxpayers file returns before the deadline.

“The reduction in the periodicity of returns for SME’s would encourage many more of them to be compliant and the fact that the next meeting is going to focus on MSMEs’ issues would encourage further broadening of the GST tax base. It is very clear that the government is trying to address the concerns of a wide cross-section of businesses in order to ensure that GST achieves its objectives,” said MS Mani, partner, Deloitte India.

Experts said that MSMEs face unique issues in GST compliance, which includes bandwidth restrictions, paucity of capital especially due to delay in refunds and issues related to knowledge of the GST Act and related rules. They need to be tackled separately as larger corporates never deal with such problems.

“Stakeholders of the MSME sector have been facing numerous challenges posed by demonetisation, rising inflation, contracting demand, shrinking bank finance and disruptive GST implementation. The next council meeting is focused on easing the difficulties faced by the MSME sector, and the sector anticipates some path-breaking measures beyond rationalisation of compliance formalities and tax rates only,” said Rajat Mohan, partner, AMRG & Associates.

The aforementioned letter, which has been reviewed by FE, has asked the principal commissioners “to contact the MSME taxpayers and their trade and industry associations in your respective zones, collect their grievances/issues related to GST along with suggestions thereof for mitigating the issues”.

No proposal to include aviation turbine fuel (ATF) under gst, says government

Notwithstanding the demand from the airlines, the government said there was no proposal to bring Aviation Turbine Fuel (ATF) under GST. “At present, there is no proposal to include ATF under GST,” Minister of State for Civil Aviation Jayant Sinha said in the Rajya Sabha. Civil Aviation Minister Suresh Prabhu had earlier told PTI that the move will help cut the cost as airlines would get input tax credit. ATF constitutes approximately 35-40 per cent of operational cost of an airline in India. Sinha’s statement come against the backdrop of Civil Aviation Secretary R N Choubey meeting senior officials of the Finance Ministry to impress the need for bringing ATF under GST.

Airlines, which are making a persistent demand for this, maintain that they would get an annual relief of Rs 3,000 to Rs 5,000 crore if ATF is included in GST. In his written reply, Sinha said no analysis has been made on the impact of higher jet fuel prices on the airlines.

No 28% GST in next 1 year? outgoing CEA arvind subramanian says it may become virtual “hollow shell

Outgoing Chief Economic Adviser Arvind Subramanian exuded confidence that the highest slab of 28 per cent tax under GST would be “virtually a hollow shell” over the next year or so. The all-powerful GST Council comprising state finance ministers and headed by Union Finance Minister has pruned the highest 28 per cent slab by cutting tax rates on 191 goods over the last one year, including ACs, digital cameras, video recorders, dish-washing machines and automobiles.

There are just 35 items left in the highest tax bracket. When the 28 per cent tax rate was imposed on certain items under GST, there was a political reaction against it, and the GST Council responded by “really whittling down…quite substantially” the number of products in that slab, Subramanian said in an interview to Rajya Sabha TV’s ‘To The Point’ programme.

“I am very confident that over the next year so that 28 per cent hopefully will be virtually a shell hollow shell,” he said. The CEA also said that a lot of effort and time was devoted to the simplifying the burden on small and medium enterprises. To a question regarding lateral entry into government, he said: “I am lateral entrant myself. So how can I argue against that?”

He stressed on the need to get talent from everywhere outside the government or outside the country as well. “You need specific expertise. I think the lateral entry is a good thing. Govt needs more talent than silicon valley,” said Subramanian, who would be leaving the finance ministry on July 30. He had joined the ministry in October 2014. Subramanian further said he had a wonderful working relationship with all colleagues both in the ministry and the government and “a very close working relationship with PMO”.

When asked about what he would be doing after leaving the Ministry, Subramanian said he would go to Harvard and get back to research and writing. On contesting elections, he said: “I will be an utter failure in politics”


Big trouble now for likes of Vijay Mallya, Nirav Modi; fugitive economic offenders bill passed in Rajya Sabha

The Fugitive Economic Offenders Bill, aimed at preventing loan defaulters and financial frauds from evading legal process and fleeing the country, has been passed in the Rajya Sabha. The upper house of the Parliament passed the bill almost a week after the Lok Sabha passed it following a heated debate between the government and the opposition.

On April 21, the Union Cabinet had passed the proposal to promulgate Fugitive Economic Offenders Ordinance 2018. The bill allows the confiscation of properties and assets of economic offenders like loan defaulters who flee the country. The bill also allows tagging a person as a fugitive economic offender if that person has been found involved in any offence with a value over Rs 100 crore and has fled the country and refuses to face prosecution at home.

The government had explained earlier that the bill will allow a person to put in the list of the fugitive economic offender if that person has committed a scheduled offence, has a legal warrant issued against, and refuses to face criminal prosecution by fleeing the country. This will allow the authorities to confiscate the person’s assets.

On June 30, a special Prevention of Money Laundering Act (PMLA) court summoned Vijay Mallya to appear before it on August 27 on a plea filed by Enforcement Directorate’s (ED) that seek action him under the Fugitive Economic Offenders Ordinance for a bank fraud case of Rs 9,000 crore.

Is modicare really a ‘hoax’? how numbers add up at Rs 10,000 crore budget – a reality check

In the Budget 2018 when the Narendra Modi government announced Rs 5 lakh healthcare coverage each to 10 crore poor families, loosely dubbed as Modicare, the questions that popped up were how is this plan going to work, and is the budgetary allocation enough?

Health Minister J P Nadda later said that the government has allocated Rs 10,000 crore for the programme. Narendra Modi is reportedly planning to launch it on August 15, which will mark India’s 72nd Independence Day. So far, the government has finalised the beneficiaries and has put in place IT infrastructure and is working on the involvement of hospitals, and public and private insurance companies, it is reported earlier.

The yet to be implemented National Health Protection Scheme (NHPS) aka Ayushman Bharat aka Modicare seems “well-intended” and can boost health insurance penetration from the current 34% to 50%, Crisil said in a research report. However, there is a concern: a projected premium of Rs 216 per person or Rs 1,082 per family, at a budget of Rs 10,000-11,000 crore, “looks very low”, Crisil report said.

The NHPS programme subsumes centrally-funded state-level Rashtriya Swasthya Bima Yojana, which provided a coverage of Rs 1-2 lakh to about 3.63 crore families in the fiscal year 2016-17.

The research by Crisil points out that net incurred claim ratio (ICR) for government-sponsored schemes including RSBY has remained above 108% in the last three years, while that of most private insurers have stayed below 85% for overall health insurance business. Incurred claim ratio is the ratio of total claim paid by health insurance and the total premium collected in the same period.

Assuming that the ICR for private players that participate in the Modicare plan remains 85% and the hospitalisation ratio is at 7.5% families, the national average premium for an average claim of Rs 20,000 per family will come to Rs 1,765, which is 63% higher than the NHPS premium rate of Rs 1,082 per family, Crisil calculation showed.

Besides premium, frauds can also pose a big challenge. Recently, NITI Aayog member V K Paul hinted at the possibility of fraud in Modicare when asked about Rajasthan’s healthcare scheme — Bhamashah — in which the premium increased from Rs 300 to Rs 1,300 in just two years.

US open to steel duty waiver for India if it lowers export volume

The US has indicated that it will consider a waiver to India from its 25% additional tariff on steel, provided New Delhi offers an acceptable proposal to lower the volume of its supplies of the metal to the world’s biggest economy, sources told FE.

The move is important, as a failure to strike a deal soon will intensify a trade tussle between the two countries, with India having already notified its plan to slap retaliatory measures worth $235 million against 29 American items from August 4.

Senior officials of the two countries huddled in Washington last week to hammer out a ‘trade package’ in which all the contentious issues — including the Trump administration’s decision to levy extra duties on steel and aluminium (10%) from India — were discussed. India is now working on a proposal to see if lower volume of steel supplies, with the exemption from the extra tariff, will serve its interest better. Once it finalises the proposal, it will be submitted with Washington to carry forward the negotiations, said the sources.

For its part, the US hasn’t yet suggested any volume threshold for steel supplies from India to qualify for exemption; instead, it has asked India to submit the proposal first which can then be considered, according to the sources.

Earlier, the US had rejected India’s proposal to offer it an exemption from the extra tariff, prompting New Delhi to submit its retaliatory plans with the World Trade Organisation (WTO) in June.

New Delhi has estimated that the US could mop up $198.6 million from additional duty on steel and $42.4 million on aluminium. Its submission to the WTO was based on the fact that the US imported Indian steel worth $794.6 million and aluminium worth $424.3 million in 2017.

Accordingly, New Delhi has notified retaliatory plans — the duty on American apples will be raised by 25% and almonds by 20%. Among other items, India has notified an extra tariff of 10% on diagnostic reagent and binders for foundry moulds, 15% on certain steel products, 10% on select pulses and 15% on phosphoric acid. These duties are proposed to be made effective from August 4 unless both countries work out a solution.

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