Gst Archives

Swiggy and Zomato to pay GST to Centre says FM Nirmala Sitharaman

September 18, 2021 Pooja Sharma No Comments

The GST Council today voted to levy a tax on online food-delivery services like Zomato and Swiggy, while also extending the concessional tax rates on some coronavirus medications for another three months, till December 31.

According to FM Nirmala Sitharaman, Food delivery platforms will now pay GST on restaurant services provided through them; and the tax will be levied at the moment of delivery. Swiggy and Zomato will bear a 5% GST at the point of delivery, according to the Union Finance Minister.

Previously, restaurants were responsible for paying the tax. However, the GST Council has decided that henceforth aggregators like Zomato and Swiggy will bear the tax. She claimed that this step will help in revenue protection. These apps are currently registered as TCS (Tax Collected at Source) in GST records.

Is there any new taxes announcement?

Following the GST meeting, Revenue Secretary Tarun Bajaj stated that no new taxes will be imposed. Furthermore, only the GST collection location would merely be relocated. “Let’s say you order meals from the aggregator, and currently the restaurant is paying taxes. However, we discovered that several restaurants were not paying. We are now stating that if you place an order, the aggregator will collect from the customer and pay the authorities rather than the restaurant “According to the Revenue Secretary.

Bajaj went on to say, “There is no new tax…”.

Among the major issues, the panel discussed the topic at the 45th meeting of the GST Council in Lucknow on Friday. The meeting was helmed by FM Sitharaman and attended by state finance ministers. Finance Minister Nirmala Sitharaman and her state colleagues agreed to extend concessionary pricing on some new coronavirus medications till December 31. It also voted to exempt fuels, such as gasoline and diesel, from the GST. “The GST Council did not believe it was the right moment to include petroleum items in GST,” Sitharaman explained.

The panel decides to levy an 18% GST on all types of pens. The GST rate on biodiesel for use in diesel blends clipped from 12 percent to 5%. From January 1, 2022, the Council also recommend new textile and footwear tariffs. For more such updates, keep watching this space!

Daily News

India Inc won’t receive calls for more advance tax: Revenue secy

August 12, 2021 Pooja Sharma No Comments

According to revenue secretary Tarun Bajaj, India Inc will not receive any calls from the tax department requesting more advance tax payments. He also assures the company of a “stable and predictable” tax environment.

He urged businesses to rekindle their “animal spirits” and boost private investment; to aid the economy in the long run.

“The Goods and Services Tax Council would look into ways to reduce rates, remove specific items from the tax-exempt category, and straighten the inverted duty structure. We would not ring you up in March to ask you to pay higher taxes,” Bajaj said at the CII annual session on Wednesday.

He stated that there may be requests to learn more about the advanced taxes that the industry planned to pay. However, this would only be for the sake of better knowing and preparing the government’s revenue position.

His response when asked about the tax collection of the current fiscal year:

Bajaj added that, based on better-than-expected corporate sector performance. The government is expecting “very, very robust” tax income in the current fiscal year.

“It’s not that we’ve raised taxes or that we’ve gotten more intrusive in our approach to collect more taxes. The good news is that the corporate sector may be performing better than we expected. As a result, it is extremely beneficial to the economy “Bajaj explained.

The current fiscal’s net direct tax collection was over Rs 2.46 lakh crore in the April-June quarter. In contrast to over Rs 1.17 lakh crore in the same quarter the previous year (2020-21).

In response to a question about the impact of higher taxes on the automobile industry under the goods and services tax (GST). Bajaj acknowledged that high rates were having an impact on the industry. He said the GST Council would look into ways to lower rates, remove certain items from the tax-exempt category, and correct the inverted duty structure. For more such updates, keep watching this space!

Daily News

FY21 compensation: ‘GST transfers to states for FY21 fell short by ₹81,179 crore’

July 20, 2021 Pooja Sharma No Comments

In the Parliamentary discussion on Monday, the Centre acknowledges that an amount of ₹81,179 crore was yet to be released to the state governments. This amount was to fully compensate the state governments for their goods and services tax (GST). This revenue shortfall is observed for the financial year 2020-21.

The statement raises the question as to how the amount would be mobilized. And, increases the chances of widening the RBI-facilitated special borrowing window. Under this scheme, the Centre raises low-cost loans to bridge a yawning shortfall arising in the designated cess kitty.

While several states have been vocal about these dues, the Centre hasn’t categorically endorsed the claims so far. The written reply in the Lok Sabha by the finance minister of state, Pankaj Chaudhary did not address the questions on settlement. The statement remains silent on how and when the amount will achieve a settlement.

Against the states’ estimated total GST compensation requirement of a huge ₹2.82 lakh crore for 2020-21. Only, a little over ₹2 lakh crore were transferred to states in the respective year. The amount also includes over ₹85,000 crores collected via the designated cesses on demerit goods. Including another ₹1.1 lakh crore under the special back-to-back loan facility. The loan mechanism doesn’t entail any direct financial cost to the states. However, the delayed release of the compensation amounts, under the relevant laws on a bi-monthly basis; has increased the states’ borrowing requirements.

Reasons for the GST shortfall

2020-21 was the first year when the cess proceeds fell short of the states’ compensation requirement. This was largely due to the pandemic but also because of the series of rate cuts in GST. The series of rate cuts brought down the weighted average GST rate to around 11%, against a revenue-neutral rate of around 15% before the launch of the destination-based consumption tax.

The GST revenue shortfall (S-GST shortfall) seems to be a massive ₹2.6 lakh crore for the current financial year as well. Or, as per the estimate of some analysts the shortfall will be even higher.

While the estimated GST compensation for April-May 2021 was ₹55,345 crore. The Union government released a total of ₹75,000 crore, on July 15 to the states. The release aims to bridge the GST revenue shortfall of states. This was an addition to normal GST compensation. The Centre releases normal GST compensation, every two months out of actual cess collections.

The funds for the release of ₹75,000 crore on July 15 came from the borrowings of the Union government in 5-year securities. Totalling ₹68,500 crore and 2-year securities for `6,500 crores in the current financial year at weighted average yields of 5.60% and 4.25% per annum, respectively.

However, the government said that thanks to the reduction in Covid-19 case numbers and easing of the lockdowns. The e-way bills generation by businesses rose to 5.5 crores in June, from 3.99 crores in May. This upward trend is indicating a smart recovery of trade and business. For more such updates, keep watching this space!

Daily News

GST bonanza for old gold jewellery buyers; now pay tax only on the difference between purchasing, selling price

July 17, 2021 Pooja Sharma No Comments

Indian consumers are now likely to get a GST bonanza for old gold jewellery purchases. Now, the buyers will pay tax, only on the difference between purchasing and selling price.

In our day-to-day life, buying and selling old products is a common phenomenon. For every purchase, the product incurs GST in its total price amount. However, when a business entity refurbishes an old product and resells it. A tax is again charged on the value, resulting in double taxation.

To address this issue, GST Law has a provision known as the “Margin Scheme” that intends to resolve this anomaly. The margin scheme model applies to the person participating in the purchase and sale of second-hand commodities. GST is determined from the difference between purchase value and re-sale price of used goods in this scheme.

But the question is whether this Margin Scheme is applicable in the case of used/second-hand jewellery. Hence, whether GST will only limit to the difference between the selling price and purchase price, or would it be charged on the gross value?

This Aadhya Gold (P) Ltd. had raised this question before the Karnataka Authority of Advance Ruling (“AAR”). In this case, the applicant was buying used/second-hand gold jewellery from unregistered persons (“common man”). The applicant is a seller of used/second-hand gold jewellery, which the applicant used to purchase from the people. The applicant used to sell such ornaments in their original form after cleaning and polishing but without altering the nature of the ornament.

How will Margin Scheme impact?

Karnataka AAR observed that the applicant was not melting the jewellery to transform it into bullion and then recreating it into new jewellery. The applicant was only cleaning and polishing the old jewellery without changing the nature or form of the jewellery purchased. Thus AAR concludes that in this case, GST is payable only on the margin between the sale price and the purchase price.

This ruling will massively reduce the GST payable on an item that has the reputation of investment in India. In the present scenario, the industry is charging GST on the gross sale value received from the buyer irrespective of the underlying facts.

However, if the jeweller melts the old jewellery and uses the molten metal to create new jewellery. Then the resale of new ornament does not qualify for Marginal Scheme, as there is a change in the original form of the jewellery. Thus, in this case, the tax will practically be charged on the gross value.

But, after this ruling, mischievous dealers in the industry will melt their jewellery and use it to make new jewellery. While keeping the department in the dark, and continue paying tax under the Marginal Scheme. This will result in a significant loss for the department in the long run. For more such updates, keep watching this space!