No GST on Advance Taken by FMCG Cos

No GST on Advance Taken by FMCG Cos

Cos say amount taken from dealers was not against a specified product and so tax rate was not clear

In a big relief to all FMCG companies and others that take advance from dealers before they supply goods, no goods and services tax (GST) would be levied on such advance.The department of revenue has issued a notification allowing the relaxation after the same was approved in the GST Council meeting last week in Guwahati. The notification exempts all taxpayers from payment of tax on advances received in case of supply of goods.

The companies were having trouble levying GST on such advance as it was not against a specific product and so it was not clear what rate had to be applied.Besides, some funds were blocked because of this payment of tax on advances. “Under VAT regime, there was no tax on advances for goods but was introduced under GST. Since the input credit was only available after receipt of goods, this led to working capital blockage for industry and additional compliance burden.

Further, there was ambiguity around the state where tax has to be paid in few cases,” said Pratik Jain, indirect tax partner, PwC For services, GST continues to be payable on advance in line with the provisions under erstwhile service tax laws.“In furtherance to the government’s earlier move of exempting businesses with up to ?1.5 crore from paying GST on receipt of advances for future supply of goods, similar exemption has also been extended to all except those who have opted for composition scheme,” said Abhishek Jain, tax partner at EY India.

“This comes as a huge sigh of relief for businesses both in terms of compliances as well as working capital loss.”The relief is available only to those who have not opted for composition scheme.On Tuesday night, the Central Board of Excise and Customs (CBEc) issued 12 notifications implementing the decisions taken by the GST Council, including those relating to the reduction in rate of tax on over 200 goods and restaurants.

Suppliers of services through an ecommerce platform have been exempt from obtaining compulsory registration. The relief is available to those with a nation-wide turnover of less than ?20 lakh. The other notifications provide the extension in filing approved by the GST Council and quarterly filing for those with turnover of less than ?1.5 crore.

Now, Exporters Can File for GST Refunds Manually

The government has allowed exporters to file manual application for refund of GST. Exports are zero rated under the GST and thus all taxes paid on inputs have to be refunded. ACBDT circular has prescribed conditions and procedures for manual filing and processing of refund claims.

The Economic Times, New Delhi, 16th November 2016