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




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.


Market zooms: Sensex at 36K, Nifty50 at 11K




Mumbai, Jan 23: Projection of India’s healthy economic growth outlook, along with bullish global cues lifted the key Indian equity indices to their new highs during the early morning trade session on Tuesday.

Accordingly, the S&P BSE Sensex and the NSE Nifty50 breached their previous respective intra-day high levels.

In the process, the barometer Sensex crossed the 36,000-points-mark and the NSE Nifty50 climbed above 11,000 points.

Market analysts pointed-out other factors such as positive Q3 results and buying support in oil and gas, banking, capital goods and consumer durables stocks aided in the key indices’ upward trajectory.

At 9.50 a.m., the 30-scrip S&P BSE Sensex, which had closed at 35,798.01 points on Monday, traded higher at 36,036.51 points, up by 238.50 points or 0.67 per cent.

At the National Stock Exchange (NSE), the broader Nifty50 quoted at 11,039.75 points, up by 73.55 points or 0.67 per cent.


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Gross NPA may rise to Rs 9.5 lakh crore by March: Study

“Fiscal 2018 marks beginning of third phase of ARCs which promises to change the landscape as new regulations and other changes kick-in.”




Gross non-performing assets (NPA) in Indian banks are expected to rise to Rs 9.5 lakh crore by March, from Rs 8 lakh crore in March last year, said a ASSOCHAM-Crisil joint study.

Stressed assets in March 2018 are expected to be at Rs 11.5 lakh crore, the report titled “ARCs headed for a structural shift,” said.

“High level of stressed assets in the banking system provides enormous opportunity size for asset reconstruction companies (ARCs) which are an important stakeholder in the NPA resolution process,” ASSOCHAM said in a statement quoting the study.

It, however, said that owing to capital constraints, growth of ARCs is expected to come down significantly.

“While growth is expected to fall to around 12 per cent until June 2019, however the AUM (assets under management) are expected to reach Rs 1 lakh crore, and that is fairly sizeable.”

The study added that with banks expected to make higher provisioning over and above the provisions made for stressed assets, they may sell the assets at lower discounts, thus increasing the capital requirement.

The study also said that effective implementation of the Insolvency and Bankruptcy Code would be a remedy to the challenge of prolonged litigation and it can help improve the recovery rate of stressed assets’ industry further.

Power, metal and construction sectors contribute the bulk of stressed assets. According to an analysis of 50 stressed assets (forming nearly 40 per cent of stressed assets in the system), sectors like metal, construction and power form nearly 30 per cent, 25 per cent and 15 per cent respectively, while other sectors together form the remaining 30 per cent.

The report stated that 2018 would see a structural shift in the stressed assets’ space as increased stringency in banks’ provisioning norms for investments in security receipts (SRs) is likely to result in more cash purchases.

“Fiscal 2018 marks beginning of third phase of ARCs which promises to change the landscape as new regulations and other changes kick-in.”

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Key Indian equity indices open at fresh highs



Mumbai, Jan 22: Key Indian equity indices opened at fresh highs during the early morning trade session on Monday, with healthy buying observed in oil and gas, energy and consumer durables stocks.

At 9.20 a.m., the wider Nifty50 of the National Stock Exchange (NSE) traded 8.05 points or 0.07 per cent higher at a new high of 10,902.75 points.

The barometer 30-scrip Sensitive Index (Sensex) of the BSE, which opened at 35,613.97 points, traded at a fresh level of 35,613.73 points — up 102.15 points or 0.29 per cent — from its previous session’s close.

The Sensex has touched a new high of 35,664.01 points during the intra-day trade so far.

The BSE market breadth was bullish as 454 stocks advanced as compared to 238 declines.

On Friday, positive global cues, coupled with upbeat quarterly corporate earnings and healthy buying in banking stocks, propelled the key indices to close at new record highs.

The Nifty50 closed at 10,894.70 points, while the Sensex closed at 35,511.58 points.


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