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GST primer: What new tax regime means for businesses and individuals

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GST

New Delhi, June 29 : The significance of Saturday’s roll out of the GST can be understood from its launch at a midnight session of Parliament, in a repeat of the joint midnight sitting of both Houses to ring in India’s Independence on August 15, 1947.

The idea of a pan-India Goods and Services Tax (GST) unifying the Indian market was a vision that guided the nationalist bourgeoisie in joining the Gandhian struggle to liberate India from the British.

From July 1, GST will replace around a dozen central and state taxes into a single national tax. The movement of goods will become much simpler across the country and may become cheaper replacing the current system, where a product is taxed multiple times and at different rates.

At the state level, the taxes that GST will subsume include state cesses and surcharges, luxury tax, state VAT, purchase tax, central sales tax, taxes on advertisements, entertainment tax, all forms of entry tax, and taxes on lotteries and betting.

Central taxes being replaced by GST are service tax, special additional customs duties (SAD), additional Excise duties on goods of special importance, central excise, additional customs duties, excise on medicinal and toilet preparations), additional excise duties on textiles and textile products, and cesses and surcharges.

GST will to be levied at the first point of transaction in sales of goods and services, while the liability to pay the tax will arise at the time of supply. All forms of “supply” of goods and services such as sale, transfer, barter, exchange, license, rental, lease and import of services of goods and services made for a consideration will attract GST.

GST would be payable on “transaction value”, being the price actually paid or payable, and would include all expenses in relation to sale, such as packing and commission. GST would be applicable depending on whether a transaction is “intra-state” or “inter-state” and there are separate provisions to help an assessee determine the place of supply for goods and services.

Traders, manufacturers and restaurants with turnover of up to Rs 75 lakh can avail themselves of the composition scheme. While those with less than Rs 20 lakh turnover are not required to register, traders with Rs 75 lakh turnover will have to pay 1 per cent tax, manufacturers will have to pay 2 per cent while restaurant businesses will have to pay 5 per cent if they opt to go for the Composition Scheme under GST.

All the states have enacted their own State GST laws, except Jammu and Kashmir. The Union finance minister has urged the state to join the new indirect tax regime so as not to incur losses on taxation.

There are four tax slabs of 5, 12, 18 and 28 per cent, plus a levy on cesses on luxury items like cars, aerated drinks and tobacco products to compensate states for any revenue losses in the first five years. An overwhelming 81 per cent of items will attract tax of 18 per cent or below. Only 19 per cent of items will be taxed at the highest rate of 28 per cent.

In addition, there are 55 different kinds of cesses imposed on products varying from 1 per cent to 290 per cent. Many of the so-called “sin goods” come under the cess category, including cigarettes, pan masala and tobacco but also included are aerated water, cars, motorcycles and yachts. The cesses are being imposed to compensate the states for any revenue loss for the first five years of implementation of GST. The GST Council has suggesed cess on aerated drinks and luxury automobiles at 15 per cent and on cigarettes at 290 per cent.

Goods and services providors will get the benefit of input tax credit for the goods used, effectively making the real incidence of taxation lower than the headline taxation rate.

The GST regime has been simplified with assessees being required only to enter the sales invoice, with the subsequent returns getting auto-populated on the the GST Network (GSTN). The Council has allowed businesses a relaxation of time for the first two months (July-August) for filing their return in order to mitigate the teething troubles in the running of the GSTN digital system.

The Council has also postponed applying the Tax Deducted at Source (TDS) and Tax Collection at Source (TCS) provisions for the time being for two categories –e-commerce companies and government agencies.

While the government expects buoyancy in revenue collection with better compliance under the GST, the effective rate of indirect taxes under the new regime regime still remains unclear.

According to the Central Board of Excise and Customs (CBEC) taxes were likely to increase a bit from the current level.

GST will lead to lower transportation and distribution costs and so logistics companies stand to gain.

Among items of mass consumption like textiles, sarees and readymade apparel are expected to get more expensive under GST. Five per cent GST will be levied on garments and apparel of up to Rs 1,000, beyond which they will be taxed at 12 per cent.

Besides, synthetic and other manmade fibres will attract a higher tax of 18 per cent while other natural fibres (except silk and jute) will be taxed at 5 per cent, which will also impact the cost of sarees.

Gold, which is an item dear to Indians, will be taxed at 2 per cent.

Exporters stand to benefit as export taxation under GST is zero per cent, while they will also get input credit. GST has to be paid initially but the input credit on raw materials can be claimed by way of refunds. The downside to this is that an exporter’s money would be blocked because of the gap between the payment of GST and its refund.

Petroleum, including oil and gas, is a strategic sector that is still not under GST, while the industry has been pushing for its inclusion so as not to be deprived of the benefits of input credit. The matter is pending before the GST Council.

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Equities trade flat-to-positive; Yes Bank, RIL top gainers

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SENSEX-

Mumbai, April 24: Key Indian equity indices on Tuesday traded on a flat note with marginal gains as broadly positive global cues, along with healthy buying in oil and gas and healthcare stocks kept investors’ sentiments buoyed.

Yes Bank, Reliance Industries (RIL), Adani Ports, ICICI Bank and HDFC were the top gainers on the BSE during mid-afternoon trade session.

However, heavy selling pressure in metals, IT and consumer durables stocks trimmed gains of the benchmark indices, market observers said.

Around 1 p.m., the wider Nifty50 of the National Stock Exchange (NSE) traded flat at 10,585.20 points — up 0.50 points.

The barometer 30-scrip Sensitive index (Sensex) of the BSE, which opened at 34,491.38 points, traded at 34,520.38 points — up 69.61 points or 0.20 per cent from its previous session’s close.

The Sensex has so far touched a high of 34,612.43 points and a low of 34,465.49 points during the intra-day trade.

The BSE market breadth was bearish with 1,291 declines and 1,168 advances.

“Indian markets opened mixed, Sensex rose 147 points and Nifty reclaimed 10,600 mark in early trade on Tuesday on sustained buying by domestic institutional investors amid firm Asian cues,” said Dhruv Desai, Director and Chief Operating Officer of Tradebulls.

On Monday, the equity indices closed a volatile trade session on a flat-to-positive note as healthy quarterly results drove investors’ sentiments.

The Nifty50 closed higher by 20.65 points or 0.20 per cent at 10,584.70 points, while the Sensex closed at 34,450.77 points — up 35.19 points or 0.10 per cent.

IANS

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Xiaomi, Jio top India market

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xiaomi jio

New Delhi, April 24: Xiaomi continued to lead the Indian smartphone market with 31.1 percent market share while Reliance Jio topped the feature phone market with a massive 35.8 percent share in the first quarter of 2018, a new report has said.

Xiaomi was the leader with 25 per cent market share in Q4 of 2017.

According to Counterpoint’s “Market Monitor” service, Samsung with 26.2 per cent share was second, followed by Vivo at 5.8 per cent share in the smartphone segment.

Driven by the feature phone segment which doubled owing to strong shipments of Reliance JioPhone, India’s overall mobile phone shipments grew 48 per cent (YoY) in Q1 2018.

Honor (Huawei) entered top five smartphone brands for the first time. Honor (146 per cent), Xiaomi (134 per cent) and OnePlus (112 per cent) were the fastest growing smartphone brands.

“Q1 2018 started off with some brands sitting on inventory post the festive season in Q4 2017, which continued throughout the quarter as industry moves to a Full View display portfolio,” Karn Chauhan, Research Analyst, said in a statement.

Furthermore, the quarter was also marked with less than normal smartphone launches as very few brands refreshed their portfolio, except for Xiaomi and Samsung which benefitted from the new launches.

“However, we expect the demand to start picking up from early Q2 2018 onwards, driven by faster replacement rate of existing 2G and 3G smartphone users upgrading to 4G mobile phones,” Chauhan added.

This is the first time that the top five smartphone brands accounted for more than 70 per cent market share in a single quarter.

“Xiaomi and Samsung alone captured 58 per cent of the total smartphone market. Xiaomi’s Redmi Note 5 and 5 Pro were the most popular models for the Chinese brand, whereas Samsung Galaxy J7 NXT and J2 (2017) drove volumes for the Korean vendor,” said Anshika Jain, Research Analyst.

The performance of Chinese brands remained strong, accounting for 57 per cent of the total smartphone market in Q1 2018, up from 53 per cent during Q1 2017.

“The demand for JioPhone continued through Q1 2018 as Reliance Jio’s feature phone market share raced from 0 per cent last year to 36 per cent in Q1 2018. This demand was catalysed by the introduction of a cheaper data plan,” said Tarun Pathak, Associate Director.

China based Transsion Group (the holding group of Tecno, Itel and Infinix) has become the fifth largest player with four per cent market share in Q1 2018 (combined for all three brands).

The race for the fifth position is quite close between Lava, Micromax, Honor, Nokia (HMD) and Lenovo (+Moto) brands.

Itel is the third largest player in the feature phone segment with 17 per cent growth (YoY).

IANS

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Key equity indices provisionally end in green

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Mumbai, April 23: The key Indian equity indices provisionally closed in the green on Monday on the back of healthy buying in consumer durables, healthcare and IT stocks.

However, selling pressure on metal and fast moving consumer goods (FMCG) stocks trimmed gains in the market.

At 3.30 p.m., the wider Nifty50 of the National Stock Exchange (NSE) provisionally closed higher by 20.65 points or 0.20 per cent at 10,584.70 points.

The barometer 30-scrip Sensitive index (Sensex) of the BSE, which opened at 34,493.69 points, closed at 34,450.77 points (3.30 p.m.) — up 35.19 points or 0.10 per cent — from its previous session’s close.

The Sensex touched a high of 34,663.95 points and a low of 34,259.27 during the intra-day trade.

The BSE market breadth was bullish with 1,399 advances and 1,284 declines.

On Monday, the major gainers on the BSE were IndusInd Bank, Mahindra and Mahindra, Sun Pharma, Asian Paints and Yes Bank while HDFC Bank, Tata Motors (DVR), Coal India, Hero MotoCorp and ICICI Bank were among the major losers.

On NSE, the top gainers were IndusInd Bank, Mahindra and Mahindra and BPCL. The major losers were Hindalco Industries, Indiabulls Housing Finance and UPL.

On Friday, negative global cues such as high crude oil prices, along with a weak rupee and heavy selling pressure in banking stocks subdued the key Indian equity markets.

The Nifty50 closed at 10,564.05 points on Friday, down 1.25 points or 0.01 per cent from its previous close and the Sensex closed at 34,415.58 points, down 11.71 points or 0.03 per cent.

IANS

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