Trading community on Sunday urged Union Finance Minister Nirmala Sitharaman and Goods and Goods and Services Tax (GST) Council to withdraw certain provisions of the new GST notification issued a few days back. The government had notified certain changes to the GST Rules on December 22 and some of the rules are set to be applicable from January 1 next year.
In a memorandum, Federation of All India Vyapar Mandal - a national body of small traders - advocating for a single- point GST collection, urged for certain changes in the recently issued GST notification.
"Scrap Rules 86B and 36(4), to be effective from 1st January 2021. These provisions are against the fundamental spirit of GST as it obstructs seamless input tax credit," association general secretary V K Bansal said.
The Central Board of Indirect Taxes and Customs (CBIC) has introduced Rule 86B in GST Rules, to be applicable from January 1, 2021, which restricts use of input tax credit for discharging GST liability to 99 per cent.
This means businesses with monthly turnover of over Rs 50 lakh will have to mandatorily pay at least 1 per cent of their GST liability in cash, the letter to the minister said.
Rule 36(4) restricts claim of Input Tax Credit (ITC) in respect of invoices/debit notes not furnished by the suppliers which has now been reduced from 10 per cent to 5 per cent of the credit available in GSTR 2B.
Source: The Economic Times
India Inc’s recommendations for the Budget 2021-22 take cognizance of the stressed fiscal situation due to a sharp decline in revenue collections following the Covid-19 outbreak-induced economic slowdown, the Confederation of Indian Industry said.
The industry body’s recommendations on taxes are focused on clarity in law, simplification of procedures, reduction of litigation and facilitating business transitions, which will make doing business easier, it said.
CII suggested that the limit prescribed under Section 36(1)(viia)(a) of the Income-Tax Act for provision of bad and doubtful debts of banks should be increased to 15% from the existing 8.5%.
With regard to facilitation of foreign investment, specific clarification should be provided so that banking and broking service providers are not held as representative assessees of their clients, CII said.
The Covid-19 pandemic induced a global economic downturn that is fraught with severe challenges, but India is looking to not let the crisis go waste by developing policies that create opportunities for the country, it said.
CII also suggested a graded roadmap towards competitive import tariffs over the next three years, with lowest or nil slab 0-2.5% for inputs or raw materials, highest slab of 5-7.5% for final products and 2.5-5% for intermediates.
“This will help Indian industry integrate into the global value chain while becoming competitive with its goods and services in the world markets,” it said.
Besides, following the vision of Prime Minister Narendra Modi on Atmanirbhar Bharat (self-reliant India), CII has proposed a set of general principles to guide the import tariff structure along with a roadmap to encourage and calibrate domestic manufacturing in line with global trade trends. This is expected to strengthen manufacturing in line with global trade trends. This is expected to strengthen manufacturing capacities and boost its export competitiveness as per shifting global value chains in the next three to five years.
Source: The Economic Times
A large number of small businesses claim that they would not be able to abide by the income tax deadlines and want the government to extend it, a LocalCircles survey has found.
As per the survey 41% of small businesses have said that it would be impossible for them to file income tax returns by December 31. The government has already extended the deadline for filing the tax returns due to the Covid pandemic.
LocalCircles conducted the survey to understand the pulse of taxpayers related to filing Income Tax Return by December 31, 2020. It also tried to understand small businesses' position in filing their ITR and audit report for FY 19-20 by the given deadline. The individual taxpayers survey received more than6600 responses while the small business survey received more than 2300 responses.
The last date for filing ITR (income tax return), which is usually on 31 July of each year, was extended due to Covid pandemic and subsequent lockdowns in the country. More than 4 crore ITRs for AY 2020-21 for individual tax payers have been filed till December 25, 2020. Failure to file ITR by 31 December 2020, could lead to a penalty of a minimum of 50% or a maximum of 200% of the assessed tax will be levied on the taxpayers, Local Circles said.
“Small businesses have had a highly challenging year this year due to the COVID-19 pandemic with lockdown for the months of April-May and extremely slow period from June to August as economic activity and consumer demand was significantly impacted. It is only after September when signs of pick up in business activity emerged and for many small businesses it has been about recovering some of the accumulated losses from March to August this year. Also, for many small businesses, there is dependency on GST returns and business returns are typically more complicated than individual returns and for many of them, they require several sittings and information exchange with their accounting professionals which has become difficult due to the pandemic. Small Businesses are keen that the deadline be extended to Feb 28, 2021 and at the very least till Jan 31, 2021,” the survey said.
Source: The Economic Times
The amended GST rules are targeted at fly-by-night operators engaged in availing input tax credit (ITC) fraudulently through fake invoices, sources in the tax department said, adding it will not impact the cash flow of small businesses. In fact, the new rule about mandatory cash payment to discharge 1% of tax liability applies to only 45,000 GST taxpayers, which is 0.37% of all the registered businesses.
Earlier this week, the government notified that any business that supplies goods or services worth over Rs 50 lakh will have to pay at least 1% of the tax liability in cash instead of discharging their entire liability through the ITC.
Sources in the revenue department said data analysis showed that of 1.2 crore registered taxpayers under GST, only around 4 lakh taxpayers have supply value greater than Rs 50 lakh, and only around 1.5 lakh of these 4 lakh taxpayers pay less than 1% tax in cash.
“This means the rule applies to only about 40,000-45,000 taxpayers. This would be around 0.37% of the total GST tax base of 1.2 crore taxpayers,” sources said.
They further explained that the cash payment of 1% for a supplier making, for example Rs 1 crore taxable supply comes to about Rs 12,000 in a month, an amount that is significant to cause any cash flow problems for dealers of this size, sources said.
“The rules were brought about on the recommendations of the GST Council Law Committee to curb the menace of GST fake invoice, and it is aimed at identifying where the risk to revenue is high so that multi-layered frauds involving invalid ITC can be curbed,” a source said.
Source: The Financial Express
Trading community on Sunday urged Union Finance Minister Nirmala Sitharaman and Goods and Goods and Services Tax (GST) Council to withdraw certain provisions of the new GST notification issued a few days back.
The government had notified certain changes to the GST Rules on December 22 and some of the rules are set to be applicable from January 1 next year.
In a memorandum, Federation of All India Vyapar Mandal - a national body of small traders - advocating for a single- point GST collection, urged for certain changes in the recently issued GST notification.
"Scrap Rules 86B and 36(4), to be effective from 1st January 2021. These provisions are against the fundamental spirit of GST as it obstructs seamless input tax credit," association general secretary V K Bansal said.
The Central Board of Indirect Taxes and Customs (CBIC) has introduced Rule 86B in GST Rules, to be applicable from January 1, 2021, which restricts use of input tax credit for discharging GST liability to 99 per cent.
This means businesses with monthly turnover of over Rs 50 lakh will have to mandatorily pay at least 1 per cent of their GST liability in cash, the letter to the minister said.
Rule 36(4) restricts claim of Input Tax Credit (ITC) in respect of invoices/debit notes not furnished by the suppliers which has now been reduced from 10 per cent to 5 per cent of the credit available in GSTR 2B.
Source: The Business Standard
The Finance ministry today defended the recent move of asking companies above a threshold to pay at least one per cent tax liability through cash under the goods and services tax system, on the grounds that it will impact only risky or fly-by-night operators. Earlier a section of traders cried foul over the new rule, sayin it would apply to just 40,000-45,000 taxpayers, representing 0.37 per cent of the total GST base.
Last week, the Central Board of Indirect Taxes and Customs (CBIC) had inserted a rule under the Central GST Act that businesses with monthly turnover of over Rs 50 lakh will have to mandatorily pay at least one per cent of their GST liability in cash. The rule will become effective on January 1.
Reacting to the rule, trader body CAIT wrote to finance minister Nirmala Sitharaman to defer its implementation.
Finance ministry sources in the know of the matter explained that the new provision applies to those whose annual turnover is more than Rs six crore and large number of exemptions and exclusions have been provided.
For instance, they said this rule is not applicable in the cases where the registered person deposited more than Rs one lakh as income tax in each of the last two years. Also, if registered person has received a refund of more than Rs one lakh in the preceding financial year on account of export or inverted tax structure, he does not come under the ambit of this rule.
Besides, this rule is not applicable to the government departments, public sector undertakings and local authorities.
Further, all small businesses including MSMEs and Composition dealers have been excluded from the rule.
After all exclusions, the rule would apply to only 40,000-45,000 taxpayers, the sources said adding this would be around 0.37 per cent of the total GST tax base of 10.2 million.
Explaining the raison d’etre of introducing this rule, a highly placed Source said that a legitimate business runs for profit and a minimum value addition is expected from them. It is only where a lot of fake credit is used that no tax payment in cash is made.
Further, dummy companies which generate fake ITC or are used to be a layer in multi-layer fake credit flow pays no tax in cash.
“This provision is a very smart rule against fraudster and would not affect any genuine business entities or Ease of Doing Business in any manner,” he said.
Sources said that the new measures provided in the recent notification are very diligently and selectively designed after thorough discussions in the law committee of the GST Council over a month to pin-pointedly identify and control only fake invoices and ITC fraudsters.
The seriousness of this menace to GST ecosystem may even be understood by the fact that in the recent nationwide drive against GST fake invoice frauds that was launched in the second week of November and still going on, has resulted in the arrest of more than 175 fraudsters and more than 1800 cases are booked against 8000 fake entities in just 40-45 days, sources said.
Source: The Business Standard
Exporters have raised their concerns regarding changes in GST rules as they believe that these changes will give more powers to departmental officers; they now feel it has set alarm bells ringing for assesses, and should be now extremely cautious while doing GST compliances.
The major changes notified by the GST Council included increase in time limit for system-based GST registration from 3 to 7 days.
Besides, now there are more powers to GST department in cancellation of GSTIN; restriction on claim of ITC as per Rule 36(4) has now been made as 5 per cent of the credit available in GSTR 2B; GSTR 1 to be blocked in case of non-filing of GSTR 3B, wherein if a taxpayer fails to file GSTR 3B for 2 subsequent months, his GSTR 1 shall now be blocked.
Also, a taxpayer who is restricted to avail ITC as per Rule 86B shall also not be permitted to file GSTR 1 where he has not filed GSTR 3B for the preceding tax period. There will also be restriction on utilisation of input tax credit – Rule 86B and narrowing the validity of e-way bill.
Unhappy with the changes, Ravi K. Passi, Chairman, Export Promotion Council for Handicrafts (EPCH), said that a lot of restrictions have been imposed on assesses, particularly, input tax credit can only be availed if it is appearing in form GSTR 2A, input tax can be blocked if GST officer has reason to believe that assesse has wrongly availed credit and GST registration can be cancelled by the department if any activity is found suspicious.
He further said that these changes need a relook and assesses intent to comply with GST rules and the interest of all genuine assesses should be kept in mind as GST compliance is a way forward and after three years of GST implementation, there is a widespread understanding and acceptability of the system amongst exporters.
On the other hand, the Government has said that GST Council notifies various measures to curb fake dealers and invoice rackets.
Source: Apparel Online
INTERNATIONAL
A landmark post-Brexit trade deal between the EU and the UK brightens the prospects of a free trade agreement (FTA) between New Delhi and London, exporters told FE.
At the same time, India’s planned FTA with the EU, excluding Britain, loses some of its sheen. This will likely prompt India to recalibrate its offers to the 27-member bloc for tariff reductions, factoring in the changed realities, a source said. For instance, Britain made up for 26% of India’s apparel exports in FY20 to the EU, which was the largest export destination for Indian apparel with a 37% share.
Ever since the Brexit decision in June 2016, both India and the UK have been keen on initiating dialogues on a potential FTA, which couldn’t be held without a formal divorce deal between London and Brussels.
The UK accounted for 16% of India’s $53.7-billion exports to the EU in FY20. The EU, including Britain, was the largest export destination for India last fiscal, with a 17% share in the country’s overall outbound shipments. Apart from garments, India ships out gem and jewellery, pharma products, footwear and organic chemicals, among others, to the UK in large volumes.
In fact, the Federation of Indian Export Organisations (FIEO) has now urged the government to sign a memorandum of understanding for an FTA with Britain when British Prime Minister Boris Johnson visits India next month, its president Sharad Kumar Saraf told FE.
“Any India-UK trade talks won’t have the same level of complication that exists between India and the EU. We can clinch an FTA with the UK without much hiccups,” Saraf said. Having pulled out of the China-dominated RCEP deal, India has been seeking to expedite trade talks with large markets. Against this backdrop, Brexit augurs well for New Delhi, analysts said.
After 16 rounds of talks between 2007 and 2013, negotiations for an India-EU FTA were stuck due to differences, as the bloc insisted that India cut import duties on automobiles and wine (which would benefit mainly Germany and France), among others. The UK is unlikely to be much too rigid over these issues, analysts reckon.
While details of Thursday’s deal between the UK and the EU are being studied by trade analysts to gauge the precise impact on India, exporters say the agreement lends more clarity about the way forward, although fresh uncertainties may crop up.
Mahesh Desai, chairman of engineering exporters’ body EEPC, said: “Initially (after the formal Brexit deal), there could be some heightened trade issues like dual technical certification as also perhaps different rules of origin (for Indian exporters). But if India quickly seals a trade deal with the UK, with tariff preferences like the EU GSP (generalised system of preference) or a better tariff preferences schedule for Indian products, our exports may benefit.”
Analysts believe that foreign direct investments (FDI) inflows into India from either the EU or the UK won’t be affected, as such inflows depend more on the prospect of returns and the strength of the economy than on other factors. The UK is India’s sixth largest source of FDI. It accounted for FDI (in equity) worth close to $30 billion between April 2000 and September 2020, representing 6% of such inflows into India during this period.
Former chairman of the Apparel Export Promotion Council, Ashok G Rajani, had earlier said India enjoyed a 20% tariff preference in the EU under its GSP programme. It is to be seen how this gets impacted after Brexit, for exports to UK. It would also be interesting to see how the competition unfolds in the EU, with countries with zero duty benefit in the EU (like Bangladesh) also losing out with Britain’s exit.
Source: The Financial Express
India, which appears to have been pushed back to being the world’s sixth biggest economy in 2020, will again overtake the UK to become the fifth largest in 2025 and race to the third spot by 2030, a think tank said on Saturday. India had overtaken the UK in 2019 to become the fifth largest economy in the world but has been relegated to 6th spot in 2020.
“India has been knocked off course somewhat through the impact of the pandemic. As a result, after overtaking the UK in 2019, the UK overtakes India again in this year’s forecasts and stays ahead till 2024 before India takes over again,” the Centre for Economics and Business Research (CEBR) said in an annual report published on Saturday. The UK appears to have overtaken India again during 2020 as a result of the weakness of the rupee, it said.
The CEBR forecasts that the Indian economy will expand by 9 per cent in 2021 and by 7 per cent in 2022. “Growth will naturally slow as India becomes more economically developed, with the annual GDP growth expected to sink to 5.8 per cent in 2035.” “This growth trajectory will see India become the world’s third largest economy by 2030, overtaking the UK in 2025, Germany in 2027 and Japan in 2030,” it said.
The UK-based think tank forecast that China will in 2028 overtake the US to become the world’s biggest economy, five years earlier than previously estimated due to the contrasting recoveries of the two countries from the COVID-19 pandemic. Japan would remain the world’s third-biggest economy, in dollar terms, until the early 2030s when it would be overtaken by India, pushing Germany down from fourth to fifth.
The CEBR said India’s economy had been losing momentum even ahead of the shock delivered by the COVID-19 crisis.
The rate of GDP growth sank to a more than ten-year low of 4.2 per cent in 2019, down from 6.1 per cent the previous year and around half the 8.3 per cent growth rate recorded in 2016. “Slowing growth has been a consequence of a confluence of factors including fragility in the banking system, adjustment to reforms and a deceleration of global trade,” it said.
The COVID-19 pandemic, the think tank said, has been a human and an economic catastrophe for India, with more than 140,000 deaths recorded as of the middle of December. While this is the highest death toll outside of the US in absolute terms, it equates to around 10 deaths per 100,000, which is a significantly lower figure than has been seen in much of Europe and the Americas.
“GDP in Q2 (April-June) 2020 was 23.9 per cent below its 2019 level, indicating that nearly a quarter of the country’s economic activity was wiped out by the drying up of global demand and the collapse of domestic demand that accompanied the series of strict national lockdowns,” it said. As restrictions were gradually lifted, many parts of the economy were able to spring back into action, although output remains well below pre-pandemic levels.
An important driver of India’s economic recovery thus far has been the agricultural sector, which has been buoyed by a bountiful harvest. “The pace of the economic recovery will be inextricably linked to the development of the COVID-19 pandemic, both domestically and internationally,” it said.
As the manufacturer of the majority of the world’s vaccines and with a 42-year-old vaccination programme that targets 55 million people each year, India is better placed than many other developing countries to roll out the vaccines successfully and efficiently next year. “In the medium to long term, reforms such as the 2016 demonetisation and more recently the controversial efforts to liberalise the agricultural sector can deliver economic benefits,” the think tank said.
However, with the majority of the Indian workforce employed in the agricultural sector, the reform process requires a delicate and gradual approach that balances the need for longer-term efficiency gains with the need to support incomes in the short-term. The government’s stimulus spending in response to the COVID-19 crisis has been significantly more restrained than most other large economies, although the debt to GDP ratio did rise to 89 per cent in 2020.
“The infrastructure bottlenecks that exist in India mean that investment in this area has the potential to unlock significant productivity gains. Therefore, the outlook for the economy going forwards will be closely related to the government’s approach to infrastructure spending,” it added.
Source: The Financial Express
President Donald Trump signed a $900 billion COVID-19 relief package Sunday, despite a remarkable video message he posted to social media days earlier in which he called the bipartisan legislation a "disgrace."
"I am signing this bill to restore unemployment benefits, stop evictions, provide rental assistance, add money for PPP, return our airline workers back to work, add substantially more money for vaccine distribution, and much more," Trump said in a statement announcing he had signed the bill.
After weeks of negotiation and bipartisan votes of approval in the House and Senate, Trump on Tuesday unexpectedly slammed the COVID stimulus legislation but stopped short of saying he would veto it. The message upended Washington, drew bipartisan condemnation and threatened to end a chaotic year with a government shutdown.
But after a growing number of Republicans pushed back on Trump's reticence – and Democrats quickly embraced Trump's idea of larger direct payments and used it as a cudgel against GOP lawmakers – Trump relented. The president, who has been spending the holidays at his Florida resort, hinted he had won concessions from lawmakers but it was not clear if that was actually the case.
The bill, which was attached to a $1.4 trillion spending measure to keep the government running through September. Without the bill, government funding had been set to run out at midnight on Monday.Trump said he would request that Congress rescind some of the funding it approved, but the prospects for those requests were slim given that President-elect Joe Biden will be inaugurated in less than a month.
Republicans on Capitol Hill, caught between a vote to approve the stimulus they thought would be popular and a president who appeared bent on undermining the measure after it was approved, appeared to breathe a sigh of relief.
"I am glad the American people will receive this much-needed assistance as our nation continues battling this pandemic," Senate Majority Leader Mitch McConnell said in a statement that was released minutes after the White House announced Trump's signature.
The relief package provides up to $600 in direct stimulus checks to millions of Americans and extends unemployment benefits, as well as a program intended to help small businesses retain their employees during the coronavirus pandemic.
The dispute between Trump and lawmakers came as the coronavirus pandemic continues its winter march across the United States, dramatically increasing infections and deaths. A growing number of Republicans argued that Trump should sign the bill.
"You don’t get everything you want, even if you’re president of the United States," Sen. Pat Toomey, R-Pa., told "Fox News Sunday." Toomey said that if Trump didn't sign the measure, he would be remembered "for chaos and misery and erratic behavior."
In explaining his decision to not immediately sign the measure, Trump said he wanted it to include $2,000 direct payments to individuals rather than the $600 initially agreed to by the administration and approved by Congress. House Speaker Nancy Pelosi, D-Calif., embraced the idea of larger payments but Republicans were more circumspect.
Pelosi said Sunday that Trump should "immediately call on congressional Republicans to end their obstruction and to join him and Democrats in support of our stand-alone legislation to increase direct payment checks to $2,000." Democrats intend to bring that bill to a vote on the House floor Monday.
Source: USA Today
Similarly, only 11 per cent of inland container cargo got cleared within 48 hours as on Saturday, while 51 per cent of the bills of entries were stuck for over three days, according to ICE-DASH, an interactive visual dashboard.
Industry attributed it to gaps in implementation of the faceless assessment regime, besides delay in clearance of imports from free trade areas that enjoy preferential duty. Meanwhile, the Central Board of Indirect Taxes and Customs (CBIC) has issued fresh instructions to expedite Customs clearance.
According to the Customs department, an internal case study of the Jawaharlal Nehru Customs House, Mumbai, showed that the average release time of imports has been consistently coming down since 2017. It has reduced from 181.34 hours in 2017 to 144.18 hours in 2018, 105.4 hours in 2019 to 91.65 hours in 2020. The fastest import documents were cleared in 14 minutes in 2019 and 6 minutes in 2020, the study revealed.
Dinesh Dua, chairman, Pharmaceutical Export Promotion Council of India (Pharmexil), said, “The reality is very different on the ground. The Customs department has been asked to go into the micro details of issues raised by importers."
He pointed out that Customs officers have been raising multiple queries and asking the same question three to four times over, resulting in severe delays. “That is a big issue. And that's why you're getting delayed. So, the ground reality is different from what the Customs department is projecting," said Dua, who attributed it to the lack of adequate training of officers to operate under the faceless assessment regime.
The matter was also raised by export promotion bodies at the board of trade meeting with commerce and industry minister Piyush Goyal earlier this month.
The department of revenue and Customs had said at the board of trade meeting that the faceless assessment mechanism is working very well and it has reduced the time of clearance. However, industry representatives and associations pointed out that the situation was different on the ground.
“There are a few issues that need to be looked into. One is when the case moves to a faceless officer, and he is on leave, there is no mechanism to get the case diverted to someone else," said Ajay Sahai, director general and chief executive officer (CEO), Federation of Indian Export Organisations (FIEO).
Also, goods originating from least developing countries (LDC) but routed through some other country are not getting the preferential duty benefit.
“Many times, LDC countries do not have marketing capabilities. So, they send the goods from say, Africa, and billing takes place in Dubai or Singapore, where the Customs officers are not allowing preferential duty benefits. Whereas, the whole objective of the LDC agreement was to provide support to goods originating from these countries," said Sahai.
The industry has asked the government to set a time limit for officers for clearing a bill of entry. “If, say, a bill of entry is not cleared within 24 hours, the officer must explain the reason for the delay," said an industry representative. He added that sometimes the objections raised are irrelevant.
In view of the complaints from importers, the CBIC, in a set of instructions issued to field officers, asked them to avoid multiple queries and give importers an opportunity of being heard either through person or video-conferencing.
It further pointed out that the delays were also on account of clearing house agents still submitting supporting documents at the time of personal interaction with the appraising officer. Hence, all supporting documents would be mandatorily required to be uploaded in e-Sanchit from January 15.
ICE-DASH is an interactive visual dashboard that enables comparing the time taken for import cargo clearances at various ports and airports. A consignment cleared within 48 hours blinks green. Those taking more than 48 hours and up to 72 hours show amber, and the ones that take more than 72 hours red.
According to World Bank standards, sea consignments must get cleared within 48 hours and air consignments within 24 hours. India, on an average, takes 105 hours for cargo clearance.
Source: The Business Standard
