India is witnessing a revolutionary shift in effecting its day-to-day transactions. For instance, there are many fold increase in footfalls on the digital platforms, followed by the government’s farsighted decision of demonetisation as one of the bold and decisive steps to curb black money, corruption, tax avoidance and adopting digitalisation as the medium in creating a transparent cashless economy.
‘One Nation, One Market, One Tax’ seems to be transforming to reality as the techtonic policy shift wherein passing of the constitution amendment bill, revenue sharing between the Centre and the States, administration of the assessees, contours of GST (Goods and Services Tax) rate have been achieved in transitioning to the biggest indirect tax reform ‘GST’. As announced by Finance Minister Arun Jaitley after the 9th GST council meeting in January, GST is likely to be implemented from 1 July.
The Budget 2017 proposal with the motto on transform, energise and clean (TEC) India seems to transition to GST as the path breaking reform to meet the targeted GDP rate of 7.2 per cent for FY 2017 and 7.8 per cent for the FY 2018. The indirect tax and the direct tax growth rate is targeted at 8.8 per cent and 15.3 per cent, respectively with revenue expected to be collected with increase in monitoring of compliances.
Jaitley also emphasised that all steps necessary for preparedness to move to GST are as per target including the IT system, and that the CBEC (Central Board of Excise and Customs) is working extensively to reach out to trade and industry from 1 April providing positive trigger towards readiness to GST.
While it was anticipated that the service tax rate may be increased, there have been no changes proposed to the tax rates. Rather, in line with the GST transition, the research and development cess is proposed to be repealed. Also, to provide clarity and reduce litigation, under the service tax law, the valuation rule is amended to clarify that the value of land or undivided share in the land would not form part of the value of goods incorporated in works contract, thereby not liable to service tax.
Similarly, in relation to one time down payment/salami for long term lease of industrial plots (30 years and above) entered with State Development Industrial Corporation, it is confirmed that the same would not be liable to service tax for the period 1 June 2007 to 22 September 2016.
As a boost to digitalisation, exemption from basic customs duty, additional duty or counterveiling duty, special additional duty for importers and excise duty (up to 30 June) is provided to manufacturers on certain POS devices and parts and components required for manufacturing the said devices.
With the objective to bring administrative convenience, expedite clearances, it is proposed that the bill of entry (BOE) on imports should be filed on the next day of the arrival of the conveyance and customs duty would be required to be paid at the time of filing the BOE. Moreover, the advance ruling authority under the central indirect tax law have been aligned with the income tax law. It is a welcome move.
The approach of the government indicates an intention to transition to the GST at the earliest. However, in the absence of the timelines for the the final GST law, the product-/service-specific GST rates and access to GSTN (Goods and Services Tax Network) portals, it would be imperative for the industry to watch how the government unfolds the road map at the GST council meeting scheduled on 18 February, awareness scheduled from 1 April and gear up appropriately.
Guest Author
Sachin Menon is partner and head of indirect tax at KPMG in India
