16 August 2017 Indirect Tax Alert India s GST Council reduces rates for certain supplies and approves rules on e-way bill EY Global Tax Alert Library Access both online and pdf versions of all EY Global Tax Alerts. Copy into your web browser: www.ey.com/taxalerts Executive summary On 5 August 2017, the Goods and Services Tax (GST) Council met to discuss revision of the GST rates for certain goods and services, and matters relating to the e-way bill and anti-profiteering. The key Council decisions included: Revision in GST rates: Job work services across the textile chain will be taxed at 5%. For goods transport agencies and rent-a-cab services, an option has been provided to pay GST at 12% and claim a full input tax credit (ITC). Aggregators offering small house-keeping services (e.g., plumbing) will be liable to pay GST on the services provided through them. Works contract service provided to the Government will be taxed at 12%. Approval of e-way bill rules: Rules on the e-way bill were approved and are likely to be implemented from 1 October 2017. The rules specify pre-registration of all goods valued at more than INR50,000 before they are moved for supply beyond 10km. Increase in cess on motor vehicles: The Council has recommended to increase the maximum ceiling of cess leviable on motor vehicles from 15% to 25%.
2 Indirect Tax Alert Anti-profiteering measures: The Council approved the setting up of Central and state level anti-profiteering committees in the next 15 days. The next GST Council meeting is scheduled for 9 September 2017 to address the revision of rates for other items. Detailed discussion Key decisions The key GST Council decisions are summarized below. Revision in GST rates GST rates on certain goods and services were revised as follows: Job work services across the textile chain will be taxed at 5%. Presently, the 5% rate was applicable only for job work services in relation to textile yarns and textile fabrics. Now, all types of job work services across the textile chain like stitching, embroidery, knitting, dyeing, and ironing will be taxed at 5% instead of 18%. Works contract services provided to the Government will be taxed at 12% instead of 18%. The tax rate on services in relation to post-harvest storage infrastructure for agricultural produce and mechanized food grain handling system has been reduced from 18% to 12%. For goods transport agencies and rent-a-cab services, an option has been provided to pay GST at 12% and claim the full ITC. This is in addition to the rate of 5% provided earlier, with the condition of no ITC. Aggregators offering small house-keeping services (e.g., plumbing) will be liable to pay GST on the services provided through them instead of service providers. Services by way of printing newspapers, books (including Braille books), journals and periodicals where only the content is supplied by the publisher and the physical inputs including paper used for printing belongs to the printer, will be taxed at 12% instead of 18%. If the physical inputs for printing are also provided by any other person, the service will be taxed at 5%. Goods required by FIFA (Fédération Internationale de Football Association) and Services provided by and to FIFA and its subsidiaries in connection with FIFA U-17 World Cup to be hosted in India, in 2017, shall be exempt from GST. Approval of e-way bill rules The GST council has approved rules on the e-way bill. Implementation of the e-way bill is likely to be effective from 1 October 2017. The rules propose exemption from the e-way bill for transportation of goods up to 10km. The rules specify preregistration of all goods valued at more than INR50,000 before they are moved for supply beyond 10km. The e-way bill would not be applicable for exempt goods. GSTN (Goods and Service Tax Network) would generate e-way bills that will be valid for 1 to 20 days, depending on distance to be travelled. Distance to be travelled Validity of e-way Bill 10-100 km 1 day 100-300 km 3 days 300-500 km 5 days 500-1000 km 10 days More than 1000 km 20 days Anti-profiteering measures The Council has approved the setting up of anti-profiteering committees at the Central and state level in the next 15 days. According to media reports, the GST Council will soon start publishing rates of various products with detailed explanation of: Previous taxes and prices. Prices after GST. Price differential between the two tax regimes. This campaign will start with 150 products and more products will be added in the future. Other key changes post GST implementation Some other key changes undertaken by the Government post-gst implementation are as follows: The Government has clarified certain issues for export under bond or letter of undertaking (LUT). The category of exporters eligible to export under LUT has been specified along with conditions and safeguards. The Government has clarified that IGST shall be levied only once on high sea sales transactions.
Indirect Tax Alert 3 Through a press release, the Government has clarified GST treatment on perquisites and gifts to employees, sale of old jewelry, boarding fees charged by hostels and certain other transactions. The exchange rate notified by CBEC (Central Board of Excise and Customs) which is applicable for Customs, shall also be applicable for determining the taxable value of imported/exported goods. However, in the case of import/ export of services, the rate of exchange shall be the rate determined according to Generally Accepted Accounting Principles (GAAP). Recent Developments In addition to the developments at the 5 August meeting, other recent developments regarding GST include: The GST Council held a meeting on 17 July 2017 to take stock of the situation post the rollout and to get a nationwide report. This was the first GST meeting of the Council after GST implementation. The Government has issued various clarifications through press releases and circulars on GST treatment of certain transactions. Amendments have also been made to GST rules. The time limit for cancellation of GST registration and filing intimation for composition scheme is extended to 30 September 2017. CBEC has announced an extension in the time limit for furnishing GST returns. Implications Notification to give effect to the revised GST rates is awaited. It remains to be seen whether the new rates will be made effective retroactively as of 1 July 2017. The reduction in the tax rate on job work services across the textile supply chain is a positive development and will provide much awaited relief to the textile industry. It will also help correct the anomaly of an inverted tax structure faced by the industry. Exemption from the e-way bill for transportation of goods could have been extended to transportation within the city or town, instead of restricting it to 10km. Finalized rules on the e-way bill should be placed in the public domain soon, to help industry prepare for the compliance. Based on international experience, the Government should provide for a clear mechanism to compute benefits under GST in order to be compliant with the anti-profiteering provisions. This will avoid unwarranted litigation. Industry should also analyze the impact of GST on their goods and services considering the changes in cost structure and profitability. Return for the month July 2017 August 2017 Period for filing GSTR-1 1-5 September 2017 16-20 September 2017 Period for filing GSTR-2 6-10 September 2017 21-25 September 2017 Period for filing GSTR-3 11-15 September 2017 26-30 September 2017 Due date for filing GSTR-3B 20 August 2017 20 September 2017
4 Indirect Tax Alert For additional information with respect to this Alert, please contact the following: Ernst & Young LLP (India), India VAT Team, Gurgaon Harishanker Subramaniam +91 124 671 4103 harishanker1.subramaniam@in.ey.com Ernst & Young LLP (India), India VAT Team, Mumbai Uday Pimprikar +91 226 192 0190 uday.pimprikar@in.ey.com Ernst & Young LLP, Indian Tax Desk, New York Riad Joseph +1 212 773 4496 riad.joseph1@ey.com
EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. Indirect Tax 2017 EYGM Limited. All Rights Reserved. EYG no. 04636-171Gbl 1508-1600216 NY ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com