Monday, 6 February 2017

Refund of Service Tax paid from 1st July, 2010 on Property Construction Services

Budget 2017-18 was presented on 1st February, 2017, ahead in time and unlike usual presentation of Budgets on 28th day of February of each year.
One of the pertinent amendments proposed under service tax provisions in context of Real Estate Sector is, that -
Retrospectively and wef 01.07.2010, value of service portion in execution of work contract involving transfer of goods and land or undivided share of land, as the case may be, shall not include value of property in such land or undivided share of land.
 (Clause 128 of the Finance Bill 2017-18)

Budget 2017-18 Update: GST seems to be coming in July, 2017

An early Budget and Finance Proposals were presented for FY 2017-18 by the Finance Minister Mr. Arun Jaitley on the 1st of Feburary, 2017.
GST, which is seen as one of the largest tax reforms in India is still being hoped to be made a reality in July, 2017. 
In his Post Budget Addresses, the FM has said that he plans to introduce the Draft of the GST laws in the second half of the ongoing Budget Session of Parliament.
While the Central GST Law is required to be passed by the Parliament, the State GST Laws need approval of the respective State legislatures.  

Tuesday, 26 January 2016

Service Tax Threshold Increase- would it Really Make Life Easier?

It is being envisaged that in the 2016 Budget the Government may raise the service tax exemption threshold limit for the small service providers.
It is being thought that a further exclusion of small businesses will help their businesses by not having to undergo the compliance rigors and allowing them to do business with greater ease. It is also being seen as a step that would "significantly ease the compliance burden on indirect tax administration", a move towards the awaited GST.
A few thoughts on the above proposal. We as tax advisors, have often seen that our clients, even those who are startup companies/service providers, accumulate input taxes both at the time of setting up their businesses and along the day. These input taxes become a cost to their businesses for they, by availing a threshold exemption,  are not required to be registered with the Service Tax Department and hence are not allowed an input tax credit.
In such case, it is rather prudent that they choose to exercise the option given under the Small Scale Exemption notification and be registered with the Service Tax Department. This is for several reasons, one is that the input credit will be set off against the output liability on a continual basis. The output tax being only pass through, it is a win-win for all, the input tax is no longer a cost in the hands of the small business owner, plus the business gets to stay in the VAT chain and not break it, giving a wider tax assessee base and more compliant business regime viz the tax administration. On a practical front also, it saves the embarrassment of having to disclose to each of its client asking for its ST registration number, that its small business has yet not crossed even the Rs. 10 Lacs (which could also lead to a shaky faith in the client for future businesses to be given how so ever good the small business owner may be :-) )
While it is imperative that threshold limits be incorporated even under the GST regime more so to also keep in line with the trend and requirement of the industry;  since it has been time and again highlighted that more the exemptions, the lesser robust and effective any Value Added chain mechanism based regime shall become. It is recommended that any exemption being allowed should be kept optional, which one can choose to avail or no.  The assessee keeping in mind his own business model and its requirements may be allowed to decide whether to register or instead avail the threshold exemption.
 To also think that keeping small businesses out of the tax ambit may have connotations of a social cause as mostly the day to day shopping is done through small kirana neighborhood shops may also not be a very realistic approach. The small kirana neighborhood shops cannot be seen as service providers at all these are mostly sellers of goods. Also, having all types of businesses under the tax regime (with the flexibility of allowing less rigorous compliance viz. smaller  businesses) will not only pave way for a more successful and complaint indirect tax regime but shall also deter tax leakages. 

For more GST and Service Tax updates, pls.visit 

Friday, 22 January 2016

A Ray of Hope – GST may see Light of the Day in 2016!

Hopes of GST getting legislative approval soon, have revived afresh among news of Congress signaling its willingness to be flexible on its demands put forth before the NDA Government.  With respect to the GST rate cap to be included in the constitution itself;  for the removal of the 1% additional levy on supply of goods and services; and seeking an independent dispute resolution mechanism under the GST regime,  the Congress has shown its willingness to discuss these issues with the Government and consider a median path.
Congress now seems open to not having the GST rate cap in the Constitution Bill rather it is also open to discussing as to how the GST rate can be capped and laws be framed even without including the same in the Constitution.
The Government, in respect of the 1% additional GST is open to going back to the manufacturing states for its removal from the proposed framework;  on the dispute resolution mechanism, the Government seems to be aligning itself with Congress’ proposals.
Finally, should there be an agreement between the principal Opposition Party and the Government, the bill could be passed in the upcoming budget session which is set to begin in February 2016. This could mean that GST could get rolled out in 2016-17.

For more GST and Service Tax updates, pls.visit 

Thursday, 10 December 2015

How will GST Impact India’s GDP?

What is GST: GST is the acronym for ‘Goods and Services Tax’. It is The most awaited Indirect Tax reform since India achieved its Independence.  An ideal GST system should create a harmonized system of taxation by subsuming a myriad of Indirect taxes into a single tax called GST.
 Introduction of this tax system should help in achieving a less cumbersome indirect tax structure and should alleviate issues of multiple taxation. It is being analysed that a Revenue Neutral Rate (RNR) of 16-18% if adopted, should not only lead to a bolstering of the tax GDP ratio but should also contain the issues of inflation to a good extent. 
Some analysts claim that introduction of GST will lead to a higher GDP. Whether the GDP of our country will actually and immediately go up by the mere implementation of this revolutionary tax proposal, will have to be seen with the passage of time and with the actual implementation of this much awaited tax reform. 
In general, how does GST impact the GDPs: In some countries across the world where GST has already been implemented, it was observed that there was no direct co-relation between the introduction of GST and their GDP growth. It was seen that there were various factors along, that contributed and impacted the GDP growth and hence it was not quite correct to say that by a mere implementation of a unified tax regime the GDP of that country became better.
In the Indian context, studies indicate that should there be a well designed GST and it is well implemented, it can lead to, not only elimination of the multiplicity of taxes but also a higher tax compliance. If the IT systems enables robust data integration wrt the entire supply chain involved and allows a seamless and easy CENVAT Credit mechanism for input tax to be availed at each and every stage,  this tax reform will definitely help in reducing the costs of inputs, machinery & of the capital goods and hence of the overall cost of doing business. This may also lead to a boost in the exports.
It is also being suggested that should the Government implement a simple GST model that shall have least tiers of tax rates and few exemptions and this is coupled with ease of compliance and a greater faith posed in the assessee allowing a self assessment and friendly tax regime; such measures can definitely make a positive impact on the economy by boosting the assessee confidence in the system leading to greater compliance and an overall positive growth of the GDP.  
While the time is running out fast and the Opposition is still waiting for its ball that it has put in the Government’s court once again, to be returned back (pun intended), the rest of the Country and perhaps even the world is optimistically waiting for the GST in India to come alive in April, 2016.
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Sunday, 29 November 2015

GST Bill – Top Things You Must Know!

The Government is almost hopeful that with its continuous efforts and engagement with the Congress and other opposition parties and its openness to iron out the differences and rationally accept the demands of the opposition, GST may see the light of the day through the ongoing winter session. 
The former Prime Minister and the brains behind the economics of Congress, Dr. Manmohan Singh seems to be a popular person again. Mr. Modi has asked him to feel free to personally discuss his thoughts on GST with Mr. Modi himself, anytime. Mr. Singh may seem now as one of those important people who can enable a majority approval in the Rajya Sabha.
While all, the political parties, the industry leaders and several professionals such as myself await (with fingers crossed) to see GST come through soon and before the turning of this year into a new one; some top points that we all must know about the GST Bill which seeks to amend the Constitution of India, are being summarized through this article for your quick reference. 
- Main Purpose behind GST: To have a simplified Indirect Tax structure and a harmonized national market for goods and services. To optimize tax collection on all goods and services by both the Centre and the States 
- Taxes to be Subsumed: GST will subsume various central & state level indirect taxes including central excise duty, countervailing duty, service tax,  state value added tax, octroi, entry tax, luxury tax
-Concurrent powers for GST: The Bill seeks to insert an Article in the Constitution to give the Centre and the State government concurrent powers for making laws on taxation of goods & services
-Integrated GST (IGST): The Centre shall levy and collect GST on supplies in the course of inter-state trade or commerce. The tax collected would be divided between the centre and the states in a manner to be provided under law, on the recommendations of the GST Council
-GST Council: A Goods and Services Tax Council must be constituted within sixty days of the Act coming into force.
-Composition of this Council: The GST Council shall consist of a Union Finance Minister (as the Chairman); a Union Minister of State in charge of Revenue or Finance; and the Minister in charge of Finance or Taxation or any other, nominated by each state government
-Functions of the GST Council: The Council’s responsibilities shall interalia include making recommendations on: 
(i) Taxes, cesses, and surcharges that should be subsumed in the GST
(ii) Goods and services that should be subjected to and exempted from GST
(iii) model GST laws, principles of levy, apportionment of IGST and principles that govern the place of supply
(iv) Threshold limit
(v) Rates including floor rates & Special rates
-Dispute Resolution: The GST Council may decide upon the modalities for the resolution of disputes arising out of its recommendations
-Restrictions on imposition of tax: The Constitution imposes certain restrictions on the states for the imposition of tax on the sale or purchase of goods. The Bill seeks to amend this provision to restrict the imposition of tax on the supply of goods and services and not on its sale 
-Additional Tax on supply of goods: An additional tax (not to exceed 1%) on the supply of goods in the course of inter-state trade or commerce would be levied and collected by the centre. Such additional tax shall be assigned to the states for two years or as recommended by the GST Council. (Congress dissents this proposal)
-Compensation to states: Compensation to states for revenue losses arising out of the implementation of the GST would be provided by the Centre on the GST Council’s recommendations. This would be up to a five year period
-Exempt Goods: Alcoholic liquor for human consumption is exempted from the purview of the GST. Further, the GST Council is to decide on a date when GST would be levied on: (i) petroleum crude, (ii) high speed diesel, (iii) motor spirit (petrol), (iv) natural gas and (v) aviation turbine fuel
- Tax Rate: While Congress desires a 18% cap on the tax rate in the constitutional bill, the Government seeks to rather put any such tax rate cap in the GST legislation hence keeping a scope for flexibility and change in future years. The Government itself is keen on keeping the GST rate in the vicinity of 18%, keeping the interests of both the consumer and the industry, in mind.

 Awaiting some positive developments and good news soon… 
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Tuesday, 24 November 2015

GST - is it Really coming this April?

This Parliament Winter Session, to commence in two days from now on 26th Nov, 2015 will be the key decisive session for the future and for the  implementation of GST .
The proceedings of this session will decide not only whether this much awaited tax reform should be implemented effective April 2016 but also determine what should be the tax rate. Some of the other important factors which will play into the implementation of the tax will also have to be decided now. 
 It is possible that in view of the recent recommendations of one of the key panels on GST being headed by the Chief Economic Adviser Mr. Arvind Subramanian, a Revenue Neutral Rate (RNR) of about 18% be brought in .
This rate of 18% against the earlier thought of rate of around 25-26%, will be industry friendly being quite lower than the existing indirect tax rate on goods and will be somewhat (3.5%) higher than the existing service tax rate. Thus will also be more at parity with the global GST rates and should prove to be consumer friendly aswell.  
A well designed, well integrated and implemented GST regime, which is simple to follow by the assessee and which will actually lead to elimination of the multiple existing Indirect Taxes may also lead to an overall GDP growth by 1.5-2.0%. 
Industry is eagerly awaiting the implementation of GST in India. Hope the ruling party and opposition parties can bridge their political differences for once and think towards a common goal, take a rationale decision and bring about GST through this winter session.
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