Knowledge Update

Tuesday 21 November 2017

GST rate cut: FMCG firms slash product prices

Unknown November 21, 2017 GST , 1 Comments

Products whose GST rate was rationalised to 18% included chewing gum, chocolates, preparation for facial make-up, shaving and after-shave items, shampoos, etc

Consumer goods companies have begun reducing product prices following a directive by the government on Monday to pass on the benefits of lower goods and services tax (GST) to consumers quickly or face action.

Ghaziabad-based Dabur India on Tuesday slashed prices by 9 per cent on existing stocks of shampoos, skincare and home-care products.

“The company is passing on the benefits by providing primary discount of 9 per cent on existing stocks to its trade partners,” Lalit Malik, Dabur India’s chief financial officer, said in a statement.

Mumbai-headquartered Procter & Gamble, meanwhile, announced price-offs on leading brands Tide, Ariel, Pantene, Head & Shoulders, Olay, Oral-B and Gillette, as the government and the Central Board of Excise and Customs (CBEC) nudged companies to move quickly on price cuts.

“We have made provisions for companies to claim the difference from the government as input tax credit. I am not willing to accept their argument to postpone passing on the benefits to consumers till they have disposed of their old stocks,” Revenue Secretary Hasmukh Adhia said in an interview on Monday.

Adhia’s comments had come following complaints that the latest GST rate cut wasn’t passed appropriately to consumers. On November 10, the government had slashed GST on 177 mass-use items, from 28 per cent to 18 per cent, leaving only 50 items in the highest tax bracket.

Products whose GST rate was rationalised to 18 per cent included chewing gum, chocolates, preparation for facial make-up, shaving and after-shave items, shampoos, deodorants, air freshners, washing powder and detergents, among others.

These products joined daily-use items such as soaps, toothpastes and hair oils, whose rate was 18 per cent from the start of the tax regime in July.

The CBEC had written to 100 major companies on Tuesday, including Colgate, Nestlé and Hindustan Unilever, to lower prices, implying these companies could act fast in the coming days. HUL has already been running ads in dailies announcing a steep cut of nearly 24 per cent on liquid detergents under Surf Excel Matic.

The country’s largest consumer goods company was the first to pass on the benefit of lower GST in categories such as soaps and toothpastes on July 1, announcing it with ads across dailies.

In a conversation with Business Standard last week, Godrej Group Chairman Adi Godrej said his firm Godrej Consumer, the maker of brands such as Good Knight and Cinthol, would pass on the benefits in categories such as hair colour, air freshners and liquid detergents to users shortly. The company had slashed soap prices by up to 6-8 per cent in July.

The Business Standard, New Delhi, 22nd November, 2017

Sunday 19 November 2017

Auto exporters under pressure as over Rs 1,000-cr GST refund gets stuck

Unknown November 19, 2017 GST , 0 Comments

In the July-October period, passenger vehicle exports declined by 14.45 per cent to 2,35,933 units as compared with 2,75,789 units in the same period of last year

Passenger vehicle exports from India have run into a goods and services tax (GST) speed breaker as manufacturers have been unable to file claims since July and the pending sum has crossed over Rs 1,000 crore.

Industry players said as the current GST system of making payments upfront and claiming input tax credit refund is not functioning properly, the working capital requirement for companies have increased and they could rethink on exports till the issues stay unresolved.

Moreover, Ford India CFO David Schock told PTI that the quantum of cash needed to meet compensation cess of 1-22 per cent under GST from 1-4 per cent as existed earlier has been a "steep increase".

Elaborating on issues faced by automobile exporters, Society of Indian Automobile Manufacturers (SIAM) Deputy Director General Sugato Sen said, "Companies which are exported-oriented are suffering because the current GST system of making payments upfront and claiming the refund is not working properly."

It is leading to accumulation of GST credit, which is hurting the exporters, he added.

"There are companies whose refund has gone up to hundreds of crores of rupees. It has led to an increase in the working capital requirements of the companies, which has made them cautious in exports," Sen said.

In the July-October period, passenger vehicle exports declined by 14.45 per cent to 2,35,933 units as compared with 2,75,789 units in the same period of last year.

In the same period, total vehicle exports, including two-wheelers and commercial vehicles, rose by 8.07 per cent to 13,17,936 units as compared with 12,19,460 units in July- October period of 2016.

While some of the major export markets have slowed down, industry players said the GST refund issue has also played a part in the decline of vehicle exports.

According to an industry source, the pending refund amount of the top-four passenger vehicle exporters alone have crossed Rs 1,000 crore so far.

Although Schock did not comment on the amount, he said while the government provided the functionality of refunds, "it is yet to be operationalised (and) because of lack of clarity and processes, companies have not been able to file refund claim from July 2017 until October 2017".

"In case of refund of input tax credit, the absence of a clear procedure and roadmap is another area of concern," he added.

He further said, "Exporters now need to allocate significantly more funds due to the revised norms/tax structure and blocking working capital for an extended duration, especially at a time when interest rates are high, doesn't augur well."

Expressing similar views, Volkswagen India Pvt Ltd President & Managing Director Andreas Lauermann said, "We are facing challenges since there is no clarity on how refund of GST will be paid on export cars. This has led us to having a lot of credit blocked with the authorities." Seeking exemption from payment of compensation cess on exports, he said with the increase of cess on cars, the situation has worsened.

"Going forward, we could be forced to rethink our exports if these challenges do not get resolved," Lauermann said.

An executive of another major passenger vehicle manufacturer said on the condition of anonymity that the increased working capital to meet exports requirements is putting extra pressure on business.

"When a company is made to block Rs 100 crore a month for exports due to the current issues regarding refund and not exactly knowing when will it be refunded, it raises many questions," the executive said.

Companies with big domestic sales can still manage it but the pressure is mounting more on the export-oriented manufacturers, Sen added.

Ford India, Volkswagen, General Motors, and Nissan are the top export-oriented manufacturers in India, while Maruti Suzuki and Hyundai are also major exporters but with significant domestic presence.

The Business Standard, New Delhi, 20^th November, 2017

Monday 13 November 2017

Vacancy for the Post of Company Secretary at Duff & Phelps

Unknown November 13, 2017 JOBS , VACANCY 0 Comments

Dear Readers, there is Vacancy for the Post of law Graduate with Company Secretary at Duff & Phelps. Please go through below for further details and requirements.

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Friday 10 November 2017

Big GST reset: Only 50 items stay in 28% slab, eating out to get cheaper

Unknown November 10, 2017 GST , 0 Comments

Composition scheme threshold at Rs 1.5 crore

Consumers will be paying less for a wide range of items from shampoo to furniture from November 15 as the GST (goods and services tax) Council on Friday decided to cut the indirect tax from 28 per cent to 18 per cent on these and further down to 12 per cent on another two (wet grinders, and tanks and armoured vehicles), leaving only 50 items in the peak rate category.

In all, 178 items have been taken out of the top tax bracket.

Detergents, mattresses, marbles, ceramics, flooring, and toiletries will also cost less because all will come in the 18 per cent net.

Besides, eating at restaurants will cost less as the Council lowered the rate on them to 5 per cent, irrespective of turnover or whether they have air-conditioners or not.

However, restaurants will be denied input tax credit because they were supposedly not passing on the benefit to customers.

Only restaurants in starred hotels charging at least Rs 7,500 would pay 18 per cent, said Union Finance Minister Arun Jaitley, who chaired the Council meeting.

Also, the GST on 13 items, including pasta, curry, diabetic food, and condensed milk, was lowered from 18 per cent to 12 per cent; from 18 per cent to 5 per cent on six items such as puffed rice, chikki, chutney powder, and fly ash; from 12 per cent to 5 per cent on eight items such as desiccated coconut, idli, dosa, sambar, and worn clothing; and from 5 per cent to nil on six items like guar meal and frozen fish.

The GST rates on aircraft engines were reduced from 18-28 per cent to 5 per cent, aircraft tyres from 28 per cent to 5 per cent, and aircraft seats from 28 per cent to 5 per cent. The GST rate on bangles of lac was lowered to nil from 3 per cent.

Prime Minister Narendra Modi said, "The recommendations made by the GST Council will further benefit our citizens and add strength to the GST. These recommendations are in the spirit of continuous feedback we are getting from various stakeholders on the GST."

Under the composition scheme, which gives easier compliance to small and medium players and a flat rate without the benefit of input tax credit, the rate has been cut to 1 per cent in the case of manufacturers. Traders will continue to pay 1 per cent. For restaurants it will continue to remain 5 per cent, the same as for those (except the ones in starred hotels) that are not under this scheme.

Besides, the scheme was made open for service providers up to a threshold of Rs 5 lakh.

The threshold for availing of the scheme was raised to an annual turnover of Rs 1.5 crore from Rs 1 crore.

Besides, the law will be changed to enable a further increase to Rs 2 crore.

While Bihar Finance Minister Sushil Kumar Modi said the decision would cost the exchequer Rs 20,000 crore, Jaitley refused to quantify the revenue impact, saying compliance might also increase due to the rate reductions.

West Bengal Finance Minister Amit Mitra said the Centre and the states had incurred losses of Rs 90,000 crore in the first three months of the GST.

Only a few categories will remain in the 28 per cent tax slab, which would include luxury and sin goods such as big cars and cigarettes, which attract a cess over the peak rate, auto parts, yachts, construction materials such as cement and paints, etc.

The move drew flak from Cement Manufacturers’ Association.

The Council decided to go beyond the recommendation of the fitment committee to thin the 28 per cent slab to 62 items and decided to additionally lower rates for 12 more items.

Shaving-cream, beauty products, chocolates, chewing gum, marble, and granite are among the additional 12 items whose rate has come down to 18 per cent, going beyond the fitment committee recommendation.

"We identified 12 more items for which the rates will be reduced to 18 per cent," said a government official.

Explaining the rationale behind the move, Jaitley said the principle of equivalence was applied while fitting items in various slabs of the GST. This means that items were fitted in the slabs — 5 per cent, 12 per cent, 18 per cent, and 28 per cent — on the basis of the closest rates to the ones drawn by them in the pre-GST regime.

He evaded a reply to the query as to whether the decisions were a precursor to merging the standard rates of 12 per cent and 18 per cent, saying the question pertained to the agenda of meetings in the future.

Vishal Raheja of Taxmann said: "We expect that government will further slash tax rates by moving from four tax slabs to fewer rates or even a single one.”

Abhishek A Rastogi, Partner, Khaitan & Co, said it appeared that after this mass rate reductions various anti-profiteering problems might come up for businesses which would not pass on the benefits to consumers.