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Tuesday, October 18

ICAI Admits It Has Right to Make Revision in Marks

By an announcement dated 15-10-2016 made on 17-10-2016, ICAI has accepted that they have right to make revisions in marks obtained under Regulation 39 (2) of the CA Regulations, 1988, and only marks shown in Marksheet are final.

The announcement read as follow-

"Clarifications regarding exemptions in a paper(s) in CA Examinations - (17-10-2016)

October 15, 2016
Certified copies of answer books in respect of CA examinations are being made available to those candidates who apply for the same, under the scheme formulated for the purpose.

It is seen that upon receipt of certified copies of answer books, some candidates notice that in some papers, marks awarded to them on the answer books are at variance with those on the statement of marks issued to them and seek clarifications.

In this connection, it is hereby clarified that-

- Variance of marks between those on the answer books and those on the statement of marks issued to candidates is on account of revision of marks by the Examination Committee, under regulation 39(2) of the CA Regulations, 1988 prior to declaration of results of the examination;

- Such revision is taken into consideration while processing the results and the revised marks are shown on the statement of marks;

- Such revised marks are not indicated on the answer books of the candidates and Marks in the statement of marks issued to candidates are final.

Therefore, candidates are hereby advised to be guided only by the marks/exemptions that are indicated in the statement of marks issued to them, which may include the revision of marks, if any, that might have been effected by the Examination Committee under regulation 39(2) of the CA Regulations 1988 and not by the marks on the copies of answer books, which do not include the revision of marks, if any, effected by the Examination Committee.

Further, it is hereby informed that exemptions, if any, granted to a candidate in an examination are indicated on the statement of marks by way of a “ # “ sign against the marks of the paper in which exemption is granted and in such cases, where a candidate is granted exemption, the result of the group would be shown as “F-EX”, i.e. failed with exemption. 
Candidates are advised to take note of the above and verify the status of exemptions, if any, that they think that they had been granted in a paper, from the statement of marks sent to them and not on the basis of marks stated on the certified copies of answer books.

Further candidates may also visit and read the FAQs on the subject, hosted thereon. 
Exemptions granted to candidates valid for the November 2016 exams are also hosted on
Candidates are advised, in their own interest, to visit the website and check the status of their exemptions valid for the exams to be held in November 2016.

ICAI Examination Department."

Now this fully clarifies the air that exist among whole fraternity that marks in CA exams are subject to revision by ICAI. 


Friday, October 14

CA Course May Be Tweaked to Accommodate Globalisation and Competitiveness

The country’s toughest examination is about to change with the changing times. After a decade, the Institute of Chartered Accountants of India (ICAI) which conducts the CA exam, has approached the ministry of corporate affairs to improve the curriculum, introduce new subjects, electives, and open book tests in a few papers. 

In a complex world where tracking financial crimes calls for special skills like forensic audit and lower trade barriers along with free flow of capital emphasise the importance of transfer pricing rules, an updated course for CA students, it’s felt, could better prepare future Indian auditors, accountants, finance executives and CFOs. 

“Globalisation,” said ICAI President M Devaraja Reddy, “has brought to the fore not only opportunities in areas of national and international financial reporting, taxation, finance and corporate laws but also challenges to the chartered accountancy profession.” The institute fs decision comes at a time the rules as well as the language of business are undergoing a change. Besides grasping the nuances of a new indirect tax regime like goods and services tax (GST), chartered accountants will have to master the International Financial Reporting Standards (IFRS) . the new, uniform global accounting order that is aimed at comparing financial statements and books of companies across borders. 

The institute has been conscious and proactive towards the ever-changing needs. We have proposed the revision of the curriculum after considering the views of various stakeholders. We are awaiting the views of the ministry, ICAI President M Devaraja Reddy said. 

Every year about a lakh students take the exam and only 10,000 clear it. 

Students planning to pursue CA as a profession may make a mental note of some of the changes that have been suggested by the institute: 

The entry-level exam, according to the proposed changes, would become comparatively more stringent as examinees would have to answer subjective questions over and above the regular objective (or multiple-choice) questions. 

Two new papers Business correspondence and reporting and Business and commercial knowledge will be introduced at the Foundation level while a new subject, Economics for financ e, will be included at the Intermediate level. 

At the Final level, electives would be introduced as the eighth paper . wherein students will appear for an open-book examination to handle questions based on case studies. The electives offered include Risk Management, International Taxation, Financial Services and Capital Markets, Global Financial Reporting Standards, Economic Laws and Multi-Disciplinary Case. 

The paper on Information system control and audit has been renamed as Information system risk management and audit which will be part of the Advanced integrated course on information technology and soft skills . 

Instead of the current practice of registering for the CA course after clearing the Class 10 exam, it has been proposed that students will be allowed to register only after appearing for the Class 12 examination and can appear for the Foundation f exam following a four-month study period after passing the Class 12 examination. This may be aimed at helping students take a more matured and conscious decision and discourage private tutorials attracting students soon after leaving school. 

Till now, students had to register for three years of practical training on passing Group I (set of papers) or both groups of the Intermediate examination. The institute has proposed that students may register for three years of practical training on passing either or both groups of the Intermediate examination. 

As per the new programme, students going through the Foundation course will take roughly four-and-a-half years to become CAs while those qualifying for taking direct admission will take approximately three-and-a-half years. The institute will continue to allow students to appear for Final f exam in the last six months of practical training.


The story has been first published on ET.

Saturday, October 1

Five sets of GST draft rules approved by council

In signs of fracture, the Centre and states on Friday disagreed on decisions reached at the first meeting of the on service tax assessment although they reached a consensus on area based exemption in the new tax regime. The second meeting of the all-powerful GST council, headed by finance minister , agreed on five subordinate legislations dealing with issues ranging from registration to invoicing under the new goods and service tax (GST) regime. It also agreed on the treatment of exemption from GST. Currently, the Centre gives exemption to 11 states mostly in northeast and hilly regions from excise duty as also many states give the same as incentive for setting up industry. The council decided that under GST, which will subsume excise duty and VAT among other levies, taxes will have to be collected and it can be reimbursed from the annual budgets to the exempted categories. But there were divisions over ratifying or approving the minutes of the first meeting of the council, held last week, after at least two states disagreed with what was documented as decided on the Centre's assessing 11 lakh service tax filers in the new dispensation. "Obviously the first item has to be approval of minutes of the last meeting. With regard to one item recorded in the minutes with regard to the service tax assessments in the new dispensation, there was a long discussion on the interpretation on the decision taken in the last meeting and that discussion consumed a lot of time today. "That discussion was inconclusive and therefore it will continue in the next meeting on 18th (October)," Jaitley told reporters. Non-ratification of even one item on the minutes means the whole minutes are not agreed. Initially, it was thought that the minutes should be put to vote as those objecting to them were far less than those agreeing but Jaitley wanted to take decisions with consensus and so it was postponed. Uttar Pradesh's minister for vocational education and skill development Abhishek Mishra said the minutes were not approved in entirety. The second meeting of the GST council finalised rules for registration, rules for payments, returns, refunds and invoices. With this as many as 6 issues have been settled by the council, that has representatives of all the states, in two meetings in a span of one week. Discussions on service tax assessment and the formula for calculating compensation to be paid to states in case of revenue shortfall as a result of implementation of the GST regime, possibly from April 1, 2017, would be taken up at the next meeting on October 18-20. It will also decide on the all important GST rate, Jaitley said, adding that the government is targeting November 22 for completing major work on deciding tax rate, exemptions and draft legislation by the council. There were two items regarding draft GST rules on agenda of today's , he said. "Now these rules are with regard to registration, rules for payments, return, refund and invoices. These rules are notified once the Act is passed... These 5 sets of rules were taken up for consideration and have been approved. So we are in a state of readiness with the subordinate legislation once the act itself is approved," he said. The rules approved will form part of the supporting legislations needed to rollout GST. "So once the act is passed by Parliament or by the state legislatures as the case may be, we want the draft rules to be ready so that the rules can be notified immediately," he said. Stating that the second item on agenda was treatment of existing tax incentives by the Centre, he said, has given some exemptions from excise duty to 11 northeast and hill states. Similarly, states too give out a series of incentives. "It is possible that some of the exemptions may get phased out. But for the exemptions which may remain how will these exemptions fit into the GST system. So the council took up for discussion the management of these exemptions. And it was agreed that there would be a levy of tax under the GST system on all exempted entities. "Once the tax is levied, the central govt or state government, which gets that tax, would then reimburse from the budget, that quantum of tax back to exempted entity," he said. Under the GST system, everybody will have to pay tax but those exempted would be entitled to be reimbursed the levy they pay. On the issue of service tax assessment, he said the central government's understanding is that an arrangement as been finalised for continuing with the existing system and transferring it to states when their officers are trained. On services that are taxed partly by the Centre and partly by states, he said experts will examine and report it in next meeting for a final decision. Asked if tax exemptions would be grandfathered, Jaitley said: "It is not necessary to grandfather everything but if you do grandfather it then the process of payment of tax and reimbursement, it will be like a direct benefit cash being returned. Today, we discussed the principle by which exemptions would be dealt with." 

There will be a levy under the GST tax on exempted entities, he said. 

"Once the tax is levied, the central government or the state government which gets that tax would then reimburse from the Budget that quantum of tax to the exempted entity. 

"So you will have the GST system in operation where everybody has to pay the tax but if you are an exempted entity and the state or Centre decides to continue that exempted entity then they would be entitled to that amount being given back to them," he said, adding that the details in each case will be worked out. 

Which exempted entities will remain or not will be decided by states and the Centre, he said, adding that states would have to decide on exempted entities as they will reimburse tax to them. 

Jaitley said there were discussions on interpretation of service tax, division of authority between centre and states, but they were inconclusive. 

"Now after this, two items remain. The rates would be the big item to discuss and then after we will go to draft rules of GST law," he added. 

Explaining how the area-based exemptions would be doled out, Jaitley said the centre gives incentives to North Eastern states. But the tax that comes to the central kitty, 58 per cent belongs to Centre and 42 per cent is devolved to the states. 

"Hence, we (Centre) will reimburse only 58 per cent. How the remaining 42 per cent will be reimbursed that arrangement has to be worked out. I can't get 58 per cent tax and reimburse 100 per cent," he said. 

The 14th Finance Commission in its report has scaled up devolution to states from the central pool of taxes to 42 per cent from 32 per cent. 

"We are trying to build every decision through consensus. And as far as possible there is no voting because in that way federal spirit is maintained. Wherever possible dissent should not arise and wherever there is dissent it should be taken up in next meeting," Jaitley said. 

Asked how the supply contracts, where both goods and services components are there, would be taxed in the GST regime, revenue secretary Hasmukh Adhia said that has been referred to the officers committee. 

"So the question is what happens to those kind of cases where there is both goods and services. Now it will become supply contracts. Now the officers committee will look into this and come back to GST council," Adhia said.

(Source: TOI)

Tuesday, August 16

145 IT Raids during Apr-Jul 16 leads to Rs. 3375 Cr. Undisclosed Income

The government's income disclosure scheme, the window for black money declaration may not have started yielding desired results yet, but the government has started building pressure on the suspect tax evaders by increasing the number of Income Tax raids across the country, which went up nearly three times in the first four months of this year—from 55 last year to 145 this year.

Income Tax Raid

During the first four months of this fiscal (April-July), at least 145 Income Tax (I-T) raids have been conducted with more than Rs 245 crore unaccounted cash (black money) seized. The total undisclosed income admitted during these raids has been an unprecedented Rs 3,375 crore, excluding the cash and jewellery seizures.

According to top I-T officials, the I-T department's strategy to increase search and seizure operations against suspect evaders has been successful and the cash seizures have been an all-time high, most of it has been netted from leading educational institutions and builders in Chennai, Mumbai and Delhi among other cities.

During the first four months of 2016, at least 145 I-T raids unearthed unaccounted income and cash worth Rs 3,375 crore as against Rs 2,252 crore in the first four months of 2015.

As against Rs 76 crore of cash seized last year during the four months, the department managed to lay their hands on over Rs 245 crore this year during April-July. Seizure of jewellery accounted for Rs 85 crore as against Rs 21 crore last year.

Income Tax Raid


The I-T department is also working on at least 90 lakh high-value transactions which have not been declared by people in their tax returns. These high-value transactions include multiple cash deposits of more than Rs 10 lakh each in bank accounts, and property purchase in excess of Rs 30 lakh. The I-T department has identified at least 7 lakh such high-risk individuals who have been put under scanner and their travel details and business operations are being investigated.

The I-T department has prepared a new unified data bank of these suspect black money holders across the country, particularly those who have taken help of 'entry operators' to launder huge unaccounted cash through the banking channels over the past few years.

Income Tax Raid


A country-wide massive identification drive of these tax evaders has been launched involving around 800-1,000 supervisory officers of the ranks of commissioners and above to 'force' disclosures of black money under the Income Declaration Scheme launched by the government on June 1. The four-month window will remain available till September 30.

The entry operators are chartered accountants or middlemen who launder money on behalf of their clients by operating multiple bank accounts and companies. These intermediaries provide cheques to beneficiaries against cash deposits in their accounts and raise bogus bills for a commission of 1-2%.



Originally Published in the Times Of India.

Wednesday, August 3

FAQ on GST released by Ministry of Finance

Frequently Asked Questions (FAQs) on Goods and Services Tax (GST)

Following are the answers to the various frequently asked questions relating to GST:

Question 1.What is GST? How does it work?

Answer: GST is one indirect tax for the whole nation, which will make India one unified common market. GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.


Question 2. What are the benefits of GST?

Answer:The benefits of GST can be summarized as under:

· For business and industry

o Easy compliance: A robust and comprehensive IT system would be the foundation of the GST regime in India. Therefore, all tax payer services such as registrations, returns, payments, etc. would be available to the taxpayers online, which would make compliance easy and transparent.

o Uniformity of tax rates and structures: GST will ensure that indirect tax rates and structures are common across the country, thereby increasing certainty and ease of doing business. In other words, GST would make doing business in the country tax neutral, irrespective of the choice of place of doing business.

o Removal of cascading: A system of seamless tax-credits throughout the value-chain, and across boundaries of States, would ensure that there is minimal cascading of taxes. This would reduce hidden costs of doing business.

o Improved competitiveness: Reduction in transaction costs of doing business would eventually lead to an improved competitiveness for the trade and industry.

o Gain to manufacturers and exporters: The subsuming of major Central and State taxes in GST, complete and comprehensive set-off of input goods and services and phasing out of Central Sales Tax (CST) would reduce the cost of locally manufactured goods and services. This will increase the competitiveness of Indian goods and services in the international market and give boost to Indian exports. The uniformity in tax rates and procedures across the country will also go a long way in reducing the compliance cost.

· For Central and State Governments

o Simple and easy to administer: Multiple indirect taxes at the Central and State levels are being replaced by GST. Backed with a robust end-to-end IT system, GST would be simpler and easier to administer than all other indirect taxes of the Centre and State levied so far.

o Better controls on leakage: GST will result in better tax compliance due to a robust IT infrastructure. Due to the seamless transfer of input tax credit from one stage to another in the chain of value addition, there is an in-built mechanism in the design of GST that would incentivize tax compliance by traders.

o Higher revenue efficiency: GST is expected to decrease the cost of collection of tax revenues of the Government, and will therefore, lead to higher revenue efficiency.

· For the consumer

o Single and transparent tax proportionate to the value of goods and services: Due to multiple indirect taxes being levied by the Centre and State, with incomplete or no input tax credits available at progressive stages of value addition, the cost of most goods and services in the country today are laden with many hidden taxes. Under GST, there would be only one tax from the manufacturer to the consumer, leading to transparency of taxes paid to the final consumer.

o Relief in overall tax burden: Because of efficiency gains and prevention of leakages, the overall tax burden on most commodities will come down, which will benefit consumers.

Question 3. Which taxes at the Centre and State level are being subsumed into GST?


At the Central level, the following taxes are being subsumed:

a. Central Excise Duty,

b. Additional Excise Duty,

c. Service Tax,

d. Additional Customs Duty commonly known as Countervailing Duty, and

e. Special Additional Duty of Customs.

At the State level, the following taxes are being subsumed:

a. Subsuming of State Value Added Tax/Sales Tax,

b. Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States),

c. Octroi and Entry tax,

d. Purchase Tax,

e. Luxury tax, and

f. Taxes on lottery, betting and gambling.

Question 4. What are the major chronological events that have led to the introduction of GST?

Answer: GST is being introduced in the country after a 13 year long journey since it was first discussed in the report of the Kelkar Task Force on indirect taxes. A brief chronology outlining the major milestones on the proposal for introduction of GST in India is as follows:

a. In 2003, the Kelkar Task Force on indirect tax had suggested a comprehensive Goods and Services Tax (GST) based on VAT principle.

b. A proposal to introduce a National level Goods and Services Tax (GST) by April 1, 2010 was first mooted in the Budget Speech for the financial year 2006-07.

c. Since the proposal involved reform/ restructuring of not only indirect taxes levied by the Centre but also the States, the responsibility of preparing a Design and Road Map for the implementation of GST was assigned to the Empowered Committee of State Finance Ministers (EC).

d. Based on inputs from Govt of India and States, the EC released its First Discussion Paper on Goods and Services Tax in India in November, 2009.

e. In order to take the GST related work further, a Joint Working Group consisting of officers from Central as well as State Government was constituted in September, 2009.

f. In order to amend the Constitution to enable introduction of GST, the Constitution (115th Amendment) Bill was introduced in the Lok Sabha in March 2011. As per the prescribed procedure, the Bill was referred to the Standing Committee on Finance of the Parliament for examination and report.

g. Meanwhile, in pursuance of the decision taken in a meeting between the Union Finance Minister and the Empowered Committee of State Finance Ministers on 8th November, 2012, a ‘Committee on GST Design’, consisting of the officials of the Government of India, State Governments and the Empowered Committee was constituted.

h. This Committee did a detailed discussion on GST design including the Constitution (115th) Amendment Bill and submitted its report in January, 2013. Based on this Report, the EC recommended certain changes in the Constitution Amendment Bill in their meeting at Bhubaneswar in January 2013.

i. The Empowered Committee in the Bhubaneswar meeting also decided to constitute three committees of officers to discuss and report on various aspects of GST as follows:-

(a) Committee on Place of Supply Rules and Revenue Neutral Rates;

(b) Committee on dual control, threshold and exemptions;

(c) Committee on IGST and GST on imports.

j. The Parliamentary Standing Committee submitted its Report in August, 2013 to the Lok Sabha. The recommendations of the Empowered Committee and the recommendations of the Parliamentary Standing Committee were examined in the Ministry in consultation with the Legislative Department. Most of the recommendations made by the Empowered Committee and the Parliamentary Standing Committee were accepted and the draft Amendment Bill was suitably revised.

k. The final draft Constitutional Amendment Bill incorporating the above stated changes were sent to the Empowered Committee for consideration in September 2013.

l. The EC once again made certain recommendations on the Bill after its meeting in Shillong in November 2013. Certain recommendations of the Empowered Committee were incorporated in the draft Constitution (115th Amendment) Bill. The revised draft was sent for consideration of the Empowered Committee in March, 2014.

m. The 115th Constitutional (Amendment) Bill, 2011, for the introduction of GST introduced in the Lok Sabha in March 2011 lapsed with the dissolution of the 15th Lok Sabha.

n. In June 2014, the draft Constitution Amendment Bill was sent to the Empowered Committee after approval of the new Government.

o. Based on a broad consensus reached with the Empowered Committee on the contours of the Bill, the Cabinet on 17.12.2014 approved the proposal for introduction of a Bill in the Parliament for amending the Constitution of India to facilitate the introduction of Goods and Services Tax (GST) in the country. The Bill was introduced in the Lok Sabha on 19.12.2014, and was passed by the Lok Sabha on 06.05.2015. It was then referred to the Select Committee of Rajya Sabha, which submitted its report on 22.07.2015.

Question 5.How would GST be administered in India?

Answer:Keeping in mind the federal structure of India, there will be two components of GST – Central GST (CGST) and State GST (SGST). Both Centre and States will simultaneously levy GST across the value chain. Tax will be levied on every supply of goods and services. Centre would levy and collect Central Goods and Services Tax (CGST), and States would levy and collect the State Goods and Services Tax (SGST) on all transactions within a State. The input tax credit of CGST would be available for discharging the CGST liability on the output at each stage. Similarly, the credit of SGST paid on inputs would be allowed for paying the SGST on output. No cross utilization of credit would be permitted.

Question 6.How would a particular transaction of goods and services be taxed simultaneously under Central GST (CGST) and State GST (SGST)?

Answer :The Central GST and the State GST would be levied simultaneously on every transaction of supply of goods and services except on exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits. Further, both would be levied on the same price or value unlike State VAT which is levied on the value of the goods inclusive of Central Excise.

A diagrammatic representation of the working of the Dual GST model within a State is shown in Figure 1 below.

Figure 1: GST within State

Question 7.Will cross utilization of credits between goods and services be allowed under GST regime?

Answer :Cross utilization of credit of CGST between goods and services would be allowed. Similarly, the facility of cross utilization of credit will be available in case of SGST. However, the cross utilization of CGST and SGST would not be allowed except in the case of inter-State supply of goods and services under the IGST model which is explained in answer to the next question.

Question 8.How will be Inter-State Transactions of Goods and Services be taxed under GST in terms of IGST method?

Answer:In case of inter-State transactions, the Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supplies of goods and services under Article 269A (1) of the Constitution. The IGST would roughly be equal to CGST plus SGST. The IGST mechanism has been designed to ensure seamless flow of input tax credit from one State to another. The inter-State seller would pay IGST on the sale of his goods to the Central Government after adjusting credit of IGST, CGST and SGST on his purchases (in that order). The exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The importing dealer will claim credit of IGST while discharging his output tax liability (both CGST and SGST) in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST.Since GST is a destination-based tax, all SGST on the final product will ordinarily accrue to the consuming State.

A diagrammatic representation of the working of the IGST model for inter-State transactions is shown in Figure 2 below.

Figure 2

Question 9.How will IT be used for the implementation of GST?

Answer:For the implementation of GST in the country, the Central and State Governments have jointly registered Goods and Services Tax Network (GSTN) as a not-for-profit, non-Government Company to provide shared IT infrastructure and services to Central and State Governments, tax payers and other stakeholders. The key objectives of GSTN are to provide a standard and uniform interface to the taxpayers, and shared infrastructure and services to Central and State/UT governments.

GSTN is working on developing a state-of-the-art comprehensive IT infrastructure including the common GST portal providing frontend services of registration, returns and payments to all taxpayers, as well as the backend IT modules for certain States that include processing of returns, registrations, audits, assessments, appeals, etc. All States, accounting authorities, RBI and banks, are also preparing their IT infrastructure for the administration of GST.

There would no manual filing of returns. All taxes can also be paid online. All mis-matched returns would be auto-generated, and there would be no need for manual interventions. Most returns would be self-assessed.

Question 10.How will imports be taxed under GST?

Answer :The Additional Duty of Excise or CVD and the Special Additional Duty or SAD presently being levied on imports will be subsumed under GST. As per explanation to clause (1) of article 269A of the Constitution, IGST will be levied on all imports into the territory of India. Unlike in the present regime, the States where imported goods are consumed will now gain their share from this IGST paid on imported goods.

Question 11.What are the major features of the Constitution (122nd Amendment) Bill, 2014?

Answer :The salient features of the Bill are as follows:

g. Conferring simultaneous power upon Parliament and the State Legislatures to make laws governing goods and services tax;

h. Subsuming of various Central indirect taxes and levies such as Central Excise Duty, Additional Excise Duties, Service Tax, Additional Customs Duty commonly known as Countervailing Duty, and Special Additional Duty of Customs;

i. Subsuming of State Value Added Tax/Sales Tax, Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States), Octroi and Entry tax, Purchase Tax, Luxury tax, and Taxes on lottery, betting and gambling;

j. Dispensing with the concept of ‘declared goods of special importance’ under the Constitution;

k. Levy of Integrated Goods and Services Tax on inter-State transactions of goods and services;

l. GST to be levied on all goods and services, except alcoholic liquor for human consumption. Petroleum and petroleum products shall be subject to the levy of GST on a later date notified on the recommendation of the Goods and Services Tax Council;

m. Compensation to the States for loss of revenue arising on account of implementation of the Goods and Services Tax for a period of five years;

n. Creation of Goods and Services Tax Council to examine issues relating to goods and services tax and make recommendations to the Union and the States on parameters like rates, taxes, cesses and surcharges to be subsumed, exemption list and threshold limits, Model GST laws, etc. The Council shall function under the Chairmanship of the Union Finance Minister and will have all the State Governments as Members.

Question 12.What are the major features of the proposed registration procedures under GST?

Answer:The major features of the proposed registration procedures under GST are as follows:

i. Existing dealers: Existing VAT/Central excise/Service Tax payers will not have to apply afresh for registration under GST.

ii. New dealers: Single application to be filed online for registration under GST.

iii. The registration number will be PAN based and will serve the purpose for Centre and State.

iv. Unified application to both tax authorities.

v. Each dealer to be given unique ID GSTIN.

vi. Deemed approval within three days.

vii. Post registration verification in risk based cases only.

Question 13.What are the major features of the proposed returns filing procedures under GST?

Answer:The major features of the proposed returns filing procedures under GST are as follows:

a. Common return would serve the purpose of both Centre and State Government.

b. There are eight forms provided for in the GST business processes for filing for returns. Most of the average tax payers would be using only four forms for filing their returns. These are return for supplies, return for purchases, monthly returns and annual return.

c. Small taxpayers: Small taxpayers who have opted composition scheme shall have to file return on quarterly basis.

d. Filing of returns shall be completely online. All taxes can also be paid online.

Question 14.What are the major features of the proposed payment procedures under GST?

Answer:The major features of the proposed payments procedures under GST are as follows:

i. Electronic payment process- no generation of paper at any stage

ii. Single point interface for challan generation- GSTN

iii. Ease of payment – payment can be made through online banking, Credit Card/Debit Card, NEFT/RTGS and through cheque/cash at the bank

iv. Common challan form with auto-population features

v. Use of single challan and single payment instrument

vi. Common set of authorized banks

vii. Common Accounting Codes

Source: Press Information Bureau

#GST: Revolution in the way India Inc does Business

By Anand Laddha & Sahil Kapoor 

Indirece taxes in India have driven businesses to restructure and model their supply chain and systems owing to multiplicity of taxes and costs involved. With hopes that the Goods and Services Tax (GST) will see the light of the day, the way India does  business will change, forever.  

Total tax collection in India (direct & indirect), currently stands at Rs 14.6 lakh crore, of which almost 34 per cent comprises indirect taxes, with Rs 2.8 lakh crore coming from excise and Rs 2.1 lakh crore from service tax. With the implementation of the GST (Goods and Services Tax), the entire indirect tax system in India (excise, state-level VAT, service tax) is expected to evolve.  

The tax revenue mix can change as per the economic condition of the country. In developing countries, indirect taxes comprise a higher share of total taxes; in developed countries, their contribution is significantly lower.  

For example in Australia, indirect tax contributes just 13 per cent of total tax collection. After GST, the percentage of indirect tax is expected to increase in India.  

Not covered under the GST purview  

Petroleum products  

Entertainment and amusement tax levied and collected by panchayat /municipality/district council  

Tax on alcohol/liquor consumption  

Stamp duty, customs duty  

Tax on consumption and sale of electricity  

GST objectives:- 

Some of the primary objectives of GST-based taxation are:  

1. Ensuring availability of input credit across the value chain  

2. Minimising cascading effect of taxation  

3. Simplification of tax administration and compliance 

4. Harmonisation of tax base, laws, and administration procedures across the country  

5. Minimising tax rate slabs to avoid classification issues  

6. Prevention of unhealthy competition among states  

7. Increasing the tax base and raising compliance  

Implementation challenges:- 

Lack of adaptation  

Lack of trained staff  

Double registration can increase compliances and cost 

Lack of clear mechanism to control tax evasion  

Hard to estimate the exact impact of GST  

Impact on inflation: 

Under the proposed GST, effective tax rate on goods (comprising around 70-75 per cent of the CPI basket) will decline.  

A significant proportion (35-40 per cent) of goods (majorly agriculture products) are not subject to tax and we expect a status quo in future.  

At present, services-oriented components constitute ~25-30 per cent of the CPI basket with a major share belonging to housing, transport and communication sector . Service tax is not imposed on certain (12 per cent of the CPI basket) services and these services are expected remain exempt under GST regime. A hike in tax rate on services is unlikely to have any material direct impact on CPI.  

Thus, the overall transition to GST will not have a significant impact on inflation  

Sector wise impact of GST:- 

Automobiles: The effective tax rate in the sector currently ranges between 30 per cent and 47 per cent.  


> On implementation of GST the tax rate is expected to oscillate between 20-22 per cent.  

> It is expected to drive overall demand and reduce cost for the end user by about 10 per cent.  

> The transportation time and the overall cost will be reduced as the goods will be transferred from one state to another by easily surpassing various octroi and check points.  

> In addition to this, the cost for the logistics and supply chain inventory will be curtailed by almost 30-40 per cent.  

Impact: In a long run, GST is expected to remain positive for automobile sector.  

Key beneficiaries: Maruti Suzuki, Hero MotoCorp, Bajaj Auto, Eicher Motors, Ashok Leyland  
Consumer durables 

The current tax rate for the sector ranges between 7 per cent and 30 per cent.  


> The implementation of GST will essentially benefit companies, which have not availed tax exemptions in the past.  

> It will lead to the reduction of the price gap between the organised and unorganised sector.  

> The warehouse/logistics costs across the operational and non-operational segments will be curtailed. This will improve the operational profitability by almost 300-400 bps.  

> The 7th Pay Commission is also expected to boost demand and fund inflow in the consumer durables sector by the end of the year.  

Impact: The impact may remain neutral or negative, specifically for companies which either enjoy tax exemptions or fall under the concessional tax bracket. 

Key beneficiaries: CGCE, Havells, Voltas, Blue Star, Bajaj Electricals, Symphony, Hitachi  


Impact: The impact may remain neutral or negative, specifically for companies which either enjoy tax exemptions or fall under the concessional tax bracket. 

Key beneficiaries: CGCE, Havells, Voltas, Blue Star, Bajaj Electricals, Symphony, Hitachi  

Furnishing and home decor 

Impact: Currently, the effective tax rate for the sector ranges above 20 per cent.  


> After the implementation of GST, paints and other construction chemicals companies will benefit from lower tax rate.  

> At present, the market share for the organised sector is about 65-70 per cent. Effective tax correction practices under the GST regime will ensure that the price difference amongst the unorganised sector and the organised sector is narrowed. This will improve opportunities for the organised sector.  

> The overall cost and competitiveness in products such as like ceramic tiles, faucets, sanitary ware and plywood & laminates manufacturer will be curbed.  

Impact: - Implementation of GST is expected to bring the unorganised sector under a uniform tax base and improve growth opportunities for the organised sector.  

Key beneficiaries: Asian Paints, Berger Paints, Kansai Nerolac, Akzo Nobel, BASF India, Pidilite, HSIL , Cera Sanitaryware, Greenply, Greenlam Industries, H&R Johnson (Prism Cements), Kajaria Ceramics  


Highlights: The implementation of GST will lead to lower transit time and thereby generate higher truck utilisation.  

This will boost demand for high tonnage trucks and lead to overall reduction in transportation costs.  

It will facilitate seamless inter-state flow of goods, which is expected to directly accelerate demand for logistics services.  

Impact: The logistics sector is largely fragmented and comprises many unorganized players. Several players in the unorganised sector avoid tax which generates a cost gap between them and the organized players.  

With the GST coming into picture, we expect an overall positive impact, with a reduction in the cost competitiveness as all the players will be brought under a uniform tax base, thereby improving growth opportunities for the organized players.  

Key beneficiaries: VRL Logistics, GATI, Blue Dart, Transport Corporation of India, Snowman Logistics  


Currently, the tax on cement ranges between 27 per cent and 32 per cent.  


> The tax rate for the cement sector is expected to decline to 18-20 per cent under the GST regime.  

> This is expected to lead to savings in the transportation cost, which currently comprises up to 20-25 per cent of total revenue.  

> Thereby, overall realisations of cement companies will substantially improve post GST rollout.  

Impact: The impact of GST will be positive, as the companies will also be able to save on their logistic costs, due to rationalisation of warehouses and lower transportation costs (due to decline transit time).  

Key beneficiaries: ACC, Ultratech, JK Cement, Shree Cement.  


We have divided in two main categories i.e. Multiplexes and Media. We expect a significant impact on both the sectors after implementation of GST.  

Multiplexes: This category attracts different taxes such as service tax, entertainment tax and VAT among others. Currently, the effective tax ranges between 22-24 per cent.  


> It is expected GST tax rate will trickle down to 18-20%.  

> Reduction in taxes will lead to an increase in average ticket price (ATP) and higher revenue.  

> There exist several challenges pertaining to:  

> Availiblity of limited credit for service tax paid on lease rentals, maintenance cost, advertisements, security charges.  

> No credit is available on the taxes paid on capital expenditure.  

> The VAT credit on available on the purchase of F&B can be offset against VAT liability on F&B sales.  

> Entertainment tax rate on box office collections ranges between 22-24 per cent and the same is not cenvatable against any input taxes.  

These will be addressed after the implementation of GST.  

Impact: The overall impact is expected to be positive and the Ebitda margins of the players are expected to increase by 250-350 bps.  

Key beneficiaries: PVR, Inox Leisure  


Currently, the effective tax rate for the DTH providers ranges between 20-21 per cent ( this includes service tax of 14 per cent and entertainment tax of around 5-7 per cent).  

The effective tax range for the broadcasters is around 14-15 per cent.  


> On implementation of GST, a blanket rate of around 18-20 per cent will apply, which is lower than current tax rate for the DTH provider and higher for the broadcaster.  

> Currently the news and print sector is exempted from all indirect taxes. Post GST, we expect concessional rates to be introduced in this sector.  


> Implementation of GST will be healthy for the DTH providers and downbeat for broadcasters.  

> The overall impact on the news and print sector will be neutral.  

Key beneficiary: Dish TV  

Marginally negative : Zee, Sun, HT Media and Jagran Prakashan  


The effective tax rate for the sector currently ranges between 6-7 per cent  


> Under the GST regime, there is no clarity whether a lower rate will continue for the readymade garments.  

> Companies may be negatively impacted in case the output tax rate is high.  

> Going forward, several export companies may also avail duty drawback benefits. Though we await more clarity on the impact of these benefits.  

Key players to be impacted: Arvind, Raymond, Page Industries  


Currently, the sector enjoys various location-based tax incentives. The effective tax rate (excise duty) for most companies is much below the statutory tax rate (6 per cent).  


> The concessional tax bracket for the sector is expected to continue.  

> The existing tax exemptions will continue until expiry of the tax exemption period. Going forward it will be difficult to bring forth the new exemptions.  

> GST is also expected to address inverted duty structure and lower logistic costs for the sector.  


The impact of GST is expected remain neutral for the pharmaceutical sector.  

IT & ITeS 

Currently, the IT industry is subject to an effective tax rate of 14 per cent.  


> The tax rate under GST is expected to increase to 18-20 per cent.  

> The industry earns a large part of its revenue from exports, which will continue to be exempt under GST.  

> Litigation around taxability of canned software will probably end under GST regime as there will be no distinction between goods and services.  


Impact on the IT industry is expected to range from being neutral to slightly negative.  


Currently, telecommunication services are subject to service tax of 14 per cent.  


> The tax rate is expected to increase to 18 per cent under GST.  

> It is expected that the telecom companies may pass the increased tax burden on postpaid subscribers.  

> Availability of input tax credit will lower the sector's capex cost.  

Impact: Increase in effective tax rate may be marginally negative for the sector. The telecommunication companies may not be able to pass on all the increase in taxes to all the end consumers, especially the ones in the lower Arpu prepaid segment.  


Currently, the effective tax rate for base metal products is 19-21 per cent:  

> VAT ranges from 4-5% depending on the state  

> Excise 12.5%, CST 2% and entry taxes in respective states.  

Impact: Under GST, it is not known whether metal products will attract a special rate that is lower than the standard GST rate.  

Banking and financial services 

Currently the effective tax rate is 14 per cent, which is levied only on fee component (and not interest) of the transaction.  


> Under GST, effective tax rate on fee-based transactions is expected to increase to 18-20%.  

> As the taxs on the input services will increase, operating expenses (comprising of rent, legal & professional fee, advertisement, insurance, telecommunication and other expenses) will also increase marginally.  

Impact: With the implementation of GST a moderate increase in the cost of financial services such as loan processing fees, debit/credit card charges, insurance premiums, etc. is expected.  

Anand Laddha is a Research Analyst and Sahil Kapoor is the Chief Market Strategist of Edelweiss Securities. Views expressed in this article are their own.

The article has been published on ET at the link given below. Copyrights are owned by them/writers. We don't claim or represent any ownership on the article.

#GST Explained

The Goods and Services Tax (GST), the biggest reform in India’s indirect tax structure since the economy began to be opened up 25 years ago, at last looks set to become reality. The Constitution (122nd) Amendment Bill comes up in Rajya Sabha today, on the back of a broad political consensus and boosted by the ‘good wishes’ of the Congress, which holds the crucial cards on its passage. Here’s how GST differs from the current regimes, how it will work, and what will happen if Parliament clears the Bill.


Stage 1

Imagine a manufacturer of, say, shirts. He buys raw material or inputs — cloth, thread, buttons, tailoring equipment — worth Rs 100, a sum that includes a tax of Rs 10. With these raw materials, he manufactures a shirt.
In the process of creating the shirt, the manufacturer adds value to the materials he started out with. Let us take this value added by him to be Rs 30. The gross value of his good would, then, be Rs 100 + 30, or Rs 130.
At a tax rate of 10%, the tax on output (this shirt) will then be Rs 13. But under GST, he can set off this tax (Rs 13) against the tax he has already paid on raw material/inputs (Rs 10). Therefore, the effective GST incidence on the manufacturer is only Rs 3 (13 – 10).

Stage 2

The next stage is that of the good passing from the manufacturer to the wholesaler. The wholesaler purchases it for Rs 130, and adds on value (which is basically his ‘margin’) of, say, Rs 20. The gross value of the good he sells would then be Rs 130 + 20 — or a total of Rs 150. A 10% tax on this amount will be Rs 15. But again, under GST, he can set off the tax on his output (Rs 15) against the tax on his purchased good from the manufacturer (Rs 13). Thus, the effective GST incidence on the wholesaler is only Rs 2 (15 – 13).

Stage 3

In the final stage, a retailer buys the shirt from the wholesaler. To his purchase price of Rs 150, he adds value, or margin, of, say, Rs 10. The gross value of what he sells, therefore, goes up to Rs 150 + 10, or Rs 160. The tax on this, at 10%, will be Rs 16. But by setting off this tax (Rs 16) against the tax on his purchase from the wholesaler (Rs 15), the retailer brings down the effective GST incidence on himself to Re 1 (16 –15). Thus, the total GST on the entire value chain from the raw material/input suppliers (who can claim no tax credit since they haven’t purchased anything themselves) through the manufacturer, wholesaler and retailer is, Rs 10 + 3 +2 + 1, or Rs 16.

How it would be in a non-GST regime?

In a full non-GST system, there is a cascading burden of “tax on tax”, as there are no set-offs for taxes paid on inputs or on previous purchases.

Thus, if we consider the same example as above, the manufacturer buys raw materials/inputs at Rs 100 after paying tax of Rs 10. The gross value of the shirt (good) he manufacturers would be Rs 130, on which he pays a tax of Rs 13. But since there is no set-off against the Rs 10 he has already paid as tax on raw materials/inputs, the good is sold to the wholesaler at Rs 143 (130 + 13).

With the wholesaler adding value of Rs 20, the gross value of the good sold by him is, then, Rs 163. On this, the tax of Rs 16.30 (at 10%) takes the sale value of the good to Rs 179.30. The wholesaler, again, cannot set off the tax on the sale of his good against the tax paid on his purchase from the manufacturer.

The retailer, thus, buys the good at Rs 179.30, and sells it at a gross value of Rs 208.23, which includes his value addition of Rs 10 and a tax of Rs 18.93 (at 10% of Rs 179.30). Again, there is no mechanism for setting off the tax on the retailer’s sale against the tax paid on his previous purchase.

The total tax on the chain from the raw material/input suppliers to the final retailer in this full no-GST regime will, thus, work out to Rs 10 + 13 + 16.30 + 18.93 = Rs 58.23. For the final consumer, the price of the good would then be Rs 150 + 58.23 = Rs 208.23.

Compare this Rs 208.23 — with a tax of Rs 58.23 — to the final price of Rs 166, which includes a total tax of Rs 16, under GST.

What’s it like in today’s mixed scenario?

Currently, we have Value-Added Tax (VAT) systems both at the central and state levels. But the central VAT or CENVAT mechanism extends tax set-offs only against central excise duty and service tax paid up to the level of production. CENVAT does not extend to value addition by the distributive trade below the stage of manufacturing; even manufacturers cannot claim set-off against other central taxes such as additional excise duty and surcharge.

Likewise, state VATs cover only sales. Sellers can claim credit only against VAT paid on previous purchases. The VAT also does not subsume a host of other taxes imposed within the states such as luxury and entertainment tax, octroi, etc.

Once GST comes into effect, all central- and state-level taxes and levies on all goods and services will be subsumed within an integrated tax having two components: a central GST and a state GST.

This will ensure a complete, comprehensive and continuous mechanism of tax credits. Under it, there will be tax only on value addition at each stage, with the producer/seller at every stage able to set off his taxes against the central/state GST paid on his purchases. The end-consumer will bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

What will the Bill in Parliament today do?

It basically seeks to amends the Constitution to empower both the Centre and the states to levy GST. This they cannot do now, because the Centre cannot impose any tax on goods beyond manufacturing (Excise) or primary import (Customs) stage, while states do not have the power to tax services. The proposed GST would subsume various central (Excise Duty, Additional Excise Duty, service tax, Countervailing or Additional Customs Duty, Special Additional Duty of Customs, etc.), as well as state-level indirect taxes (VAT/sales tax, purchase tax, entertainment tax, luxury tax, octroi, entry tax, etc). Once the Bill is passed, there will only be a national-level central GST and a state-level GST spanning the entire value chain for all goods and services, with some exemptions.


Central taxes That The GST will replace

# Central Excise Duty
# Duties of Excise (medicinal and toilet preparations)
# Additional Duties of Excise (goodsof special importance)
# Additional Duties of Excise (textiles and textile products)
# Additional Duties of Customs (commonly known as CVD)
# Special Additional Duty of Customs (SAD)
# Service Tax
# Cesses and surcharges in so far as they relate to supply of goods or services

State taxes That The GST will Subsume

# State VAT
# Central Sales Tax
# Purchase Tax
# Luxury Tax
# Entry Tax (all forms)
# Entertainment Tax (not levied by local bodies)
# Taxes on advertisements
# Taxes on lotteries, betting and gambling
# State cesses and surcharges

The GST Council

WILL CONSIST of the union Finance Minister (chairman) and MoS in charge of Revenue; Minister in charge of Finance or Taxation, or any other Minister, nominated by each state
DECISIONS WILL be made by three-fourths majority of votes cast; Centre shall have a third of votes cast, states shall together have two-thirds
MECHANISM for resolving disputes arising out of its recommendations may be decided by the Council itself

The levy of GST

BOTH Parliament, state Houses will have the power to make laws on the taxation of goods and services
PARLIAMENT’S LAW will not override a state law on GST
EXCLUSIVE POWER to Centre to levy, collect GST in the course of interstate trade or commerce, or imports. This will be known as Integrated GST (IGST)
CENTRAL LAW will prescribe manner of sharing of IGST between Centre and states, based on GST Council’s views

What’s Out of GST…

Alcoholic liquor for human consumption Petroleum crude, high speed diesel, motor spirit (petrol), natural gas and aviation turbine fuel — GST Council will decide until when

… AND What’s In

Tobacco, tobacco products. Centre may impose excise duty on tobacco

The journey so far…

Budget 2006-07: GST by April 1, 2010, announced. Subsequently, Empowered Committee (EC) of state Finance Ministers tasked with drawing up roadmap and design

April 2008: EC, headed by the then West Bengal Finance Minister Asim Dasgupta, submits report to the central government, which offers its views and comments in October and December of that year. Joint working groups are then set up to examine options on exemptions and thresholds, taxation of services and inter-state supplies, etc

November 2009: EC releases its First Discussion Paper

March 22, 2011: The Constitution (115th Amendment) Bill is introduced in Lok Sabha; is referred to Parliamentary Standing Committee on Finance, which submitted its report on August 7, 2013. Bill lapsed as term of the Lok Sabha ended in 2014

December 19, 2014: Constitution (122nd Amendment) Bill introduced in Lok Sabha

May 6, 2015: Constitution Amendment Bill passed by Lok Sabha

May 12, 2015: Bill referred to a 21-member Select Committee of Rajya Sabha headed by Bhupender Yadav

July 22, 2015: Select Committee submits its report

Monsoon and Winter Sessions 2015, Budget Session 2016: Bill not tabled in the face of opposition led by the Congress and persistence of sticking points

…And Ahead

The President shall constitute the GST Council

The GST Council shall make recommendations on:

# Taxes to be subsumed
# Exemptions
# Model GST laws, Principles of Levy, etc.
# Threshold for exemption
# Rates, including floor and bands
# Special rate/rates for specified period
# Date from which GST to be levied on crude, high speed diesel, natural gas, aviation turbine fuel and petrol
# Special provisions for the Northeast, J&K, etc.

Parliament will have to pass legislation on central GST (CGST) and Integrated GST (IGST)

All 29 states and 9 UTs will have to pass their state GST (SGST) Acts

Dates of implementation of CGST, SGST and IGST have to be negotiated and synchronised


BIGGEST BENEFIT is that it will disincentivise tax evasion. If you don’t pay tax on what you sell, you don’t get credit for taxes on your inputs. Also, you will buy only from those who have already paid taxes on what they are supplying. Result: a lot of currently underground transactions will come overground.

LOWER TAX RATES will follow from GST covering all goods and services, with tax only on value addition and set-offs against taxes on inputs/previous purchases. Right now, we have more tax on fewer items; with GST, there will be less tax on more items. Ideally, no good or service should be tax-exempt, as this will break the input tax chain.

Source: Indian Express