Skip to main content

CBEC Sets Up Panel to Smooth Road to GST

By
Starting Line Govt readies detailed framework to review excise duty exemptions being enjoyed by pharma, FMCG and auto cos in states
India Inc may not face a bumpy ride under the proposed goods and services tax (GST) regime that would witness elimination of tax holidays as the government is readying a detailed framework to ensure a smooth transition.
 
The Central Board of Excise & Customs (CBEC) has set up a panel to formulate the framework that could have wide ramifications for pharmaceuticals, FMCG and automobiles sectors that have thrived in the states enjoying area-based excise duty exemptions.
 
“All these issues need to be worked out for smooth implementation,“ said an official. A detailed set of guidelines would be put in place ensure that entities enjoying tax holidays during the grandfathering period do not suffer.
 
The finance ministry is also beginning stakeholder consultations with individual sectors -starting with ecommerce on Wednesday -to understand concerns on the proposed tax.
 
A number of tax holidays given by states and exemptions by the centre will be terminated under the GST, a move that will help in keeping the tax rate lower. Those that enjoy tax holidays in the grandfathering period will have to move to a system wherein tax payment will have to be made upfront and reimbursed later through a refund mechanism. A similar mechanism has been proposed for exporters.
 
In many states such as Uttarakhand, a large number of units in the pharmaceutical and automobiles sectors are still enjoying excise duty and local tax holidays.
 
The refund mechanism will allow these units to claim credit on tax paid on inputs and pay balance tax to the government to be reimbursed later.
 
The idea behind this is to keep the overall GST framework free of exemptions that would complicate it and rob it of some of the benefits. The refund mechanism would allow companies to continue to get the benefits that were promised to them in the grandfathering period.
 
The move, however, could create cash flow issues for companies that do not have to pay any tax or lower tax because of these exemptions. Tax experts say industry needs some reassurance and smooth refund system. “Industry needs a reassurance that the incentives committed to them in the present regime would be available to them in the GST regime as well,“ said Bipin Sapra, partner, EY. The mode of giving this incentive should also be efficient to ensure that industry does not face unnecessary hiccups.
 
The GST, which is expected to be rolled out from April 1, 2017, will replace multiple taxes on goods and services levied by both the centre and states.
 
ET VIEW
 
Review Makes Sense
 
A panel to review these exemptions is a good idea. Such exemptions go against the principle of moving to the goods and servi ces tax system where manufacturers can get credit for all the input taxes paid by them. Exemptions spell patronage, break the input tax credit chain and erode the tax base.
 
One option is to grandfather past investments for business reasons. But the Task Force on GST set up by the 13th Finance Commission had recommended providing direct investment linked cash-subsidy to industry to promote balanced regional development. That's a good idea.
 
The Economic Times, New Delhi, 17 August 2016

Comments

Post a Comment

Popular posts from this blog

Household debt up, but India still lags emerging-market economies: RBI

By
  Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...
Post a Comment
Read more

External spillovers likely to hit India's financial system: RBI report

By
  While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...
Post a Comment
Read more

Retail inflation cools to a six-year low of 2.82% in May on moderating food prices

By
  New Delhi: Retail inflation in India cooled to its lowest level in over six years in May, helped by a sharp moderation in food prices, according to provisional government data released Thursday.Consumer Price Index (CPI)-based inflation eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May last year, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed. This marks the fourth consecutive month of sub-4% inflation, the longest such streak in at least five years.The data comes just days after the Reserve Bank of India’s (RBI) Monetary Policy Committee cut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move signals a possible pivot from inflation control to supporting growth.Food inflation came in at just 0.99% in May, down from 1.78% in April and a sharp decline from 8.69% a year ago.A Mint poll of 15 economists had projected CPI ...
Post a Comment
Read more