News shortcuts: From the Courts | Top Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | Professional Updates | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
« GST - Goods and Services Tax »
 GST Council to discuss waiver of late fee for August 2017 to January 2020 in next meeting
 GST on educational services from current session at GNDU
 GST TRAN-1: Delhi High Court Judgment is Nullified by Finance Act, 2020
 GST council may extend compensation cess levy beyond 5 years
 Government considering to bring natural gas under GST
 Need more stimulus with focus on GST cut, wage support, higher MNREGA spend'
 Tamil Nadu extends dates for GST compliances
 Incomplete claim memos stall GST refunds
 GST on director’s remuneration: Cannons of taxation sacrificed at the altar of revenue collection
 Centre considers market borrowing for GST compensation to states
 Govt may not heed calls to lower GST
 GST & Other Indirect Tax Appeals to be Heard through Whatsapp: Dept issues Guidelines
 Religious Trust shall pay GST on providing Temporary Stay for Pilgrims: AAAR

Govt may not heed calls to lower GST
May, 20th 2020

The exemption would block input-tax credit that would have an adverse impact on businesses and may not result in any significant gain to consumers, two finance ministry officials said on Tuesday.

The government may not accept industry demands to substantially reduce the Goods and Services Tax (GST) for six months to boost demand in the aftermath of the coronavirus disease (Covid-19) pandemic. The exemption would block input-tax credit that would have an adverse impact on businesses and may not result in any significant gain to consumers, two finance ministry officials said on Tuesday.

Input tax credit reduces the tax paid on inputs from taxes to be paid on output of finished goods.The proposed GST exemption will make output tax zero, blocking the input-tax credit, which will add to the cost of the finished goods, the officials with direct knowledge of the matter said, requesting anonymity.

“This will not only be injurious to the industry but also to the consumer at large and this is certainly not going to revive demand,” one of the officials said.

GST is an integrated levy of indirect taxes and the main source of revenue for both the Centre and state governments. It makes up about one-third of total tax receipts. Over 70% of the GST revenue accrues to the states as their own share of the receipts and funds devolved on them by the Centre.

Niranjan Hiranandani, president of the Associated Chambers of Commerce and Industry of India (Assocham), has proposed a cut in GST rates on almost all products by 50% for six months to boost demand.

Responding to the finance ministry officials’ comments, Hiranandani said on Tuesday: “In theory, yes – lost input tax credit (ITC) on exemption from GST is an issue of concern...”

The logic is that demand generation needs GST cuts. he said.“The aspect of ITC can be dealt with so long as the suggestion is taken in the proper perspective.”

Experts counselled the government to adopt a cautious approach. “There does not appear to be any empirical evidence that any country has exempted GST/VAT [value-added tax] across the board in order to drive up the pandemic-impacted economies. There could be specific sectors/areas where there may be a need to rationalise the GST rates for a temporary period to assist the sector. This needs be done very cautiously ensuring that revenue losses are minimised, leakages are avoided and the reductions do not lead to emergence of inverted duty structure situations,” said MS Mani, partner at Deloitte India.

Abhishek Jain, tax partner at consulting firm EY, said a GST exemption would entail breaking of the credit chain, higher input tax costs for businesses and complexities in compliances with credit transitions during taxable and exempt-tax periods.

“A specified percentage GST rate reduction could be explored vis-à-vis a NIL rate/exemption by the government specifically for the severely impacted sectors. In a scenario, where the said rate reduction entails accumulation of credits, the government should ensure full refund of the credits so accumulated with faster processing of such refunds,” he said.

“In addition, the government should consider providing working capital cushion to industry by deferring the payment of GST collected by few months to industry at large, without payment of any interest,” Jain said.


Home | About Us | Terms and Conditions | Contact Us
Copyright 2020 CAinINDIA All Right Reserved.
Designed and Developed by Ritz Consulting