For decades, Sugal & Damani Group focused on lotteries before it entered the online bill payment business with Payworld.
Now, it has become a GST service provider (GSP), an entity that will help businesses register, upload electronic invoices and file on the technology platform, and plans to leverage its network.
Pune-based Vayana Network has been working with small and medium enterprises (SMEs) to arrange funds and has no experience of taxation, but it too has become a GSP and is eyeing business from companies, their vendors as well as standalone SMEs.
Besides GSPs, GST has given birth to another set of entities called ‘application service providers’ or ASPs that will use sales and purchase data from taxpayers and convert it into GST returns for filing online.GST is spawning a $2 billion-3 billion (Rs 13,000 crore-20,000 crore) industry comprising software service providers, ASPs and GSPs, chartered accountants and consulting firms as the entire industry is undergoing business process re-engineering.
SAP and Oracle, the big daddies of the ERP business, may mop up revenues of at least $1 billion (Rs 6,500 crore) over the next two years, industry players say.
Homegrown Tally Solutions, which has close to 11 lakh users of its accounting software, has already got around six lakh subscriptions from businesses, which entitles them to free upgrades and access to all information.
While the cost of software varies between Rs 18,000 and Rs 54,000, each annual subscription fetches the company Rs 3,600 (for a single user) to Rs 10,800 (multiple users).
With 10,000 melas planned in the next one month, the company is out to garner as much business as possible while helping businesses tackle GST, said Tally Systems executive director Tejas Goenka.
Even a smaller player like the newly set up Ginesys is eyeing a turnover of around Rs 100 crore in three years, said co-founder Ashish Mittal. Then, there are the likes of ClearTax, which was set up to file income tax returns. Sensing a huge business opportunity it has expanded into the GST arena with its software and tie-ups with around 10,000 chartered accountants, said ClearTax founder CEO Archit Gupta.
Not surprisingly, companies have hired big time to meet the required demand. SAP and its partners have around 500-600 people working on implementing ERP solutions, business filing, supply chain and the app for filing returns, said Neeraj Athalye, who leads the firm’s GST adoption drive. Cleartax has hired around 400 in the last one year or so.The big four accounting firms too have ramped up. Deloitte’s indirect tax team has around 250 new recruits, while PwC has expanded its pool of CAs and systems executives by 200-250. While the billing for large companies runs into crores, including consulting services, the smaller companies are banking on volumes with some charging a fee of as low as Rs 100-200 a month for filing returns.
Opened for first time for new assessees, tax practitioners
With barely five days left for the roll-out of the goods and services tax (GST), the GST Network (GSTN), a company that provides information technology systems for the GST, reopened registration for assessees on Sunday.
That was for new assessees not enrolled in the existing tax system — central excise duty, service tax and state-level value added tax — and for tax practitioners such as chartered accountants. Existing assessees which did not apply earlier can also enrol. The system also opened for those to be registered as tax deducted at source (TDS) or tax collected at source (TCS).
So far as smoothness of registration is concerned, Archit Gupta, chief executive officer (CEO) of Cleartax, that helps assessees register on GSTN, said, “We have an online service for fresh registrations and have received applications form small & medium businesses. So far, we haven’t faced any issues in the registration process for our customers.”
As many as 6.56 million registrations have already been made on the GSTN, which is 81 per cent of the existing 8.01 million registrations.
The new assessees, as well as existing ones, will be given a month’s time to register on the GSTN from Sunday.
Earlier, GSTN was opened in phases since November 16 for existing tax assessees. The GSTN had stopped registrations in between, as it was to transfer data to its own data centre from an earlier hired data centre. The GST portal has already opened two windows for enrolments — first between November 8 and April 30 and then from June 1 to June 15. This is the third window to allow all taxpayers enough time to migrate to the new regime.
Navin Kumar, chairman of GSTN, said, “We started the migration of existing taxpayers in November and wanted to close the process by March. The government however asked us not to close it, as many were still to register. At that time, the number of people coming to the portal fell to a few thousands compared to 200,000 a day (now). But we halted the process briefly, hoping it would trigger more people to come and register when we reopen the window.” Interestingly, there was no law that required them to register as GSTs then; the Bills were passed later.
“In fact, I am surprised why they came. We asked the tax department to persuade them to come and migrate, so the entire credit goes to CBEC. About six million came in the first instance and then 600,000 more came in the 15 days after that,” he said.
There were 8.01 million registrations in the existing system. Kumar said he wondered why the 1.4 million didn’t come. He believed one factor could be the exemption threshold under VAT for most states is Rs 5 lakh, and is Rs 20 lakh under the GST. Those with a turnover below the threshold have to register if they want to claim input tax credit.
It is expected not all assessees would migrate to the GSTN portal as, businesses with turnover of up to Rs 5 lakh are currently exempt from VAT. But, if they are supplying to other businesses or if want to pass on credit, then they need to register their business.
The existing assessees were given provisional IDs if they registered with their email ID and mobile numbers. But, for the second stage and final registration, the businesses have to give details of its business, such as the shareholding pattern of business, main place of business, additional place of business, directors and bank account details etc.
Revenue Secretary Hasmukh Adhia had cautioned those with provisional IDs not to rush for registration on GSTN, as they had got one month more for registration.
The GST Council has given relaxation for filing of returns. The assessees can file detailed, invoice-based returns by September 5 for the month of July. Had this relaxation not been given, they would have to file these returns by August 10.
Similarly for August, these returns could be filed by September 20, a relaxation of 10 days.
Meanwhile, the GSTN released three sets of videos to reach out to assessees and help them register.
“To help the people register themselves to the new GST portal smoothly, we have released three videos just after the opening of the portal today (Sunday). The videos are an official guide for registration which will ensure a smooth roll out of the regime. The videos have been crafted to help all taxpayers including those who are not well versed with technology to complete their enrolments,” Kumar said.
This will bring down the incidence of taxation on business, which can be shared with consumers through lower prices.
Buying cleaning liquids for ‘Swachh Bharat’ as part of corporate social responsibility or taking a business associate out for lunch, companies will be able to set off all taxes paid on their consumption of goods and services when they clear their own GST liability.
The upcoming indirect tax reform seeks to revamp the entire credit process, allowing credit for any tax paid towards the furtherance of business barring a few items.
“Uninterrupted and seamless chain of input tax credit is one of the key features of GST, which will prevent cascading of taxes” .
This will bring down the incidence of taxation on business, which can be shared with consumers through lower prices.
Goods and services tax (GST), India’s most ambitious indirect tax reform, is set to roll out from July 1.
Tax charged by central and state governments would also be part of the same tax regime with credit available for tax paid at every stage for set off against GST liability.
“Any registered person can avail credit of tax paid on the inward supply of goods or services or both which is used or intended to be used in the course or furtherance of business,” the provision reads.
Under the current tax regime, if a retailer purchases a refrigerator to store perishable goods, he is not able to claim credit for tax paid on it. But under GST, he will be able to claim credit for tax paid on new refrigerator when he files his own taxes.
Similarly, credit could be claimed on tax paid on taking business associates out for lunch, or on goods or service used for corporate social responsibility. There are some exceptions, such as contribution towards employee provident fund and car lease, which are not covered under input tax credit.
“Under GST, input credit is available on all business expense except few that are specifically denied, such as employee benefits and construction,” said Pratik Jain, leader, indirect tax, at PwC.
“This is much more liberal than the current laws and would significantly increase the credit pool for the businesses,” he said.
“One would hope that authorities will interpret the law also liberally as this would need in change in mindset both for the industry as well as the government,” Jain said.
There is a pass through available for tax paid on a good or service consumed to ensure that tax is not levied on tax.
The GST Council on Sunday made the dreaded anti-profiteering clause more palatable specifying a sunset clause of two years even as it relaxed the deadline for filing returns under the goods and services tax (GST) till September
The GST Council on Sunday made the dreaded anti-profiteering clause more palatable specifying a sunset clause of two years even as it relaxed the deadline for filing returns under the goods and services tax (GST) till September. The Council also approved five sets of rules but deferred a decision on the E-Way Bill rule. The GST — a uniform levy across the country — will be rolled out at midnight on June 30, ahead of which the council will meet again. Jammu and Kashmir and Kerala are yet to approve the State GST law.
The GST Council tweaked rates for luxury hotels giving relief to states relying on tourism. State-run lottery tickets will attract a levy of 12% while those run by private players will attract a higher GST of 28%. Rates for hybrid vehicles were not discussed at the meeting, the 17th Council meeting.
The anti-profiteering clause seeks to penalise businesses that do not pass on the benefit of a reduced incidence to customers. Any firm found to be profiteering, will pay a penalty equivalent to the amount of benefits gained under GST but not passed on to customers.
At a press conference, finance minister Arun Jaitley said he hoped the anti-profiteering rule would not be used.
Explaining how the anti-profiteering clause would work, revenue secretary Hasmukh Adhia said the GST implementation committee, a body comprising officers from states and central government, would pass on any complaints that it receives to the Director General of Safegaurd. “The DG of Safeguard will then take about three months to investigate the complaint and send its findings to the anti-profiteering authority,” Adhia explained.
“We may be able to refund the penalty to consumers in the case of commodities that can be tracked. However, for other commodities, the penalty amount will be deposited in the consumer welfare fund as provided under the GST Act,” Adhia added.
The simplified rules for filing returns require a taxpayer to file only a simple, self-certified return —by August 20 for July and September 20 for August. This would summarise inward and outward supplies rather than specify invoice-wise detailed returns as per GST rules. However, assesses must file the return with invoice details in September for both months. These will be matched with the simpler returns filed earlier, and any discrepancy would be liable to a fine, Adhia said.
The FM observed the IT platform—GSTN– was ready. “So far, 65.6 lakh of the 80.91 lakh existing assessees have migrated to the GSTN. This is a reasonably good number given many current taxpayers would be out of GST ambit due to the annual turnover ceiling of Rs 20 lakh,” Jaitley said. The FM added that there was a window of more than 30 days for new businesses to register.
The GST council approved five sets of rules including those relating to advance ruling, appeal and revision, assessment, anti-profiteering and fund settlement.
The anti-profiteering authority will be a five-member body; the chairman will be a secretary- level officer with four joint secretary level officers as members.
With the GST Council divided on the E-way rule—the manner in which consignments moving across states will be tracked–Jaitley said the transient rule would prevail pending a final decision.
Meanwhile, the Council raised the ceiling for hotel rooms attracting the highest tax rate of 28%– rooms costing more than Rs 7,500 per night will now be taxed at 28% compared to Rs 5,000 and above earlier. Similarly, services provided by restaurants in five-star hotels will now also charge 18%, down from 28% earlier. This has brought these restaurants at par with other air-conditioned restaurants.
The Council lowered the annual turnover limit for the composition scheme to Rs 50 lakh for the north-eastern and some other hilly states, at their request. Earlier, the composition limit for all states was increased from Rs 50 lakh to Rs 75 lakh. The composition scheme is applicable only to traders, manufacturers and restaurants.
The move, which will require a change in the income tax law, would also end the relevance of various geographic divisions in the form of wards and circles.
The one-nation, one-tax principle that underlines the goods and services tax (GST), set to be rolled out on July 1, could be adopted in a much more broader sense by the income tax department through a path-breaking initiative on jurisdiction-free assessment.
This would mean that a taxpayer in Mumbai could be assessed by an income tax officer located in Patna, a significant leap toward eradicating corruption by reducing the need for face-to-face contact between citizens and tax officials to the absolute minimum besides speeding up processing.
The move, which will require a change in the income tax law, would also end the relevance of various geographic divisions in the form of wards and circles with the whole country becoming one jurisdiction. This, it is hoped, will put an end to a system in which bribery is said to be used as a tool to ease processes through human intervention.
A high-level internal report of the Central Board of Direct Taxes (CBDT) recommended the move, which is under active consideration, a senior official told Economic Times.
“We are looking at it,” the CBDT official said.
The government may consider implementing the process in the next financial year.
The Catalyst
The key catalyst for such a significant reform is the massive shift toward e-filing of returns, which is already jurisdiction-free with returns going to the Central Processing Centre in Bengaluru.
In the last financial year, over 42.1 million tax returns had been filed online by February. The number of e-returns processed by then was 43 million, which included some backlog from previous years.
Multiple Benefits
In line with this move towards e-processing, the income tax department may even opt for e-scrutiny for all limited scrutiny cases where assesses can explain the transactions in question over email, the official said.
A complete jurisdiction-free environment would make geography redundant and the income tax department completely faceless for taxpayers. Any review or scrutiny of return could happen anywhere in India through an electronic interface, ensuring that the payee is not forced to interact with officials. “A taxpayer would not need to have any physical interface with his assessing officer,” said the official cited above.
CBDT had earlier constituted a seven-member committee to formulate a Standard Assessment Procedure for e-scrutiny to promote greater certainty, transparency and accountability. The board has in recent times taken a number of initiatives to reduce the face-to-face contact between tax officials and assessees and make the system non-adversarial.
These include directing field offices to raise only specific queries in income tax assessment cases picked up for scrutiny. It also directed the expeditious completion of those scrutiny cases where income concealed is up to Rs 5 lakh. “Jurisdiction-free assessment will help the tax department plan and allocate assessment work across the country,” said Jiger Saiya, partner, direct tax, BDO India.
The resolution of the vexed issue of massive non-performing assets (NPAs) in the banking system is a work in progress and some “visible action” will be initiated over the next few days under the NPA ordinance promulgated recently, finance and defence minister Arun Jaitley said.
The resolution of the vexed issue of massive non-performing assets (NPAs) in the banking system is a work in progress and some “visible action” will be initiated over the next few days under the NPA ordinance promulgated recently, finance and defence minister Arun Jaitley said on Thursday.
“The RBI was taking measures under the existing mechanism. We have now taken other steps and there would be visible action taken under the new mechanism in the next few days,” Jaitley said, addressing media on achievements of the ministries under him over the past three years. The Centre won’t provide any special package to any state to waive farm loans but the states are free to spend from their own budgets should they take any such decision, the minister said.
Here are few excerpts from FM’s media briefing:
On NPAs and other things constraining private investments
Massive toxic assets impact the ability of banks to support growth, although record levels of foreign direct investments (gross FDI inflows touched $60 billion in 2016-17) and higher government spending have offset inadequate private investments to a certain extent. Linked to it (NPAs) is the challenge of wanting to increase private sector investment, even though our FDI and public investments have significantly increased. And of course there is a significant (adverse) impact of the global situation also (on private investments).
“Note ban not sole reason for Q4 GDP slowdown”
Demonetisation could be one of the several factors, and not the sole reason, that contributed to the slowdown of GDP growth to an 8 quarter-low of 6.1% in Q42016-17. What you think is very clear (that note ban dragged down Q4 growth) isn’t very clear. There are several factors which can contribute to GDP in a particular quarter. There was some slowdown visible, given the global and domestic situations, even prior to demonetisation in the last year. Financial services, which used to have 9-10% growth, has come down (to 2.2% in Q42016-17). Under the current global situation, 7-8% growth, which is at the moment the Indian normal, is fairly reasonable by our own standard and very good by global standards.
And I am sure as the impact of all these policies (taken by the government) holds out, growth will gather momentum. There won’t be any adverse impact of GST on GDP growth. The GST by itself should normally add to growth.
(Chief economic adviser Arvind Subramanian pointed out that under the GST, the incidence of tax is going to come down. While there could be some teething problem in implementation, at the most, initially, the tax cut would be positive to both reduce inflation and stimulate consumption).
On Pradhan Mantri Garib Kalyan Yojana
PMGKY wasn’t an isolated scheme in last financial year. First we introduced the Income Disclosure Scheme; after the IDS, there was a (post-demonetisation) phase of people depositing cash in the banking system. And the PMGKY was over and above these. To assess the total amount of (black money) disclosures made, you have to look at all the three collectively.
Revenue secretary Hasmukh Adhia said the response to PMGKY hasn’t been very good; only Rs 5,000 crore has been declared under the scheme. There are mainly two reasons for it. First, even before the scheme was announced, people had tried to deposit their cash in different accounts and tried to “adjust their money”. Secondly, many people found the (PMGKY) rate – 50% tax plus 25% as interest-free for four years – too high).
No central funds for farm loan waiver by states
The Centre won’t provide any special package to any state to waive farm loans but states are free to spend from their own budgets should they take any such decision. The Centre will continue to provide the states funds in accordance with the latest Finance Commission suggestions, and not more to waive farm loans (clarified that states are free to take decision on farm loan waivers from their own budgets but they have to stick to the 3% fiscal deficit target, as stipulated under the fiscal responsibility legislation).
On Air India
As far as AI is concerned, Niti Aayog has given its suggestion to the civil aviation ministry and the ministry will have to explore all the options for divestment or privatisation of the airline. The civil aviation minister will now devise the methodology ( for disinvestment / privatisation). As far the merger of oil PSUs are concerned, the petroleum ministry will have to take a call.
On “jobless growth”
Jobs aren’t created outside the economic structure. If the economy grows then it’s only natural that the formal sector would create jobs and in this country job creation is even faster in the informal sector. Since there is no firm statistics available on job growth in the informal sector, the term ‘jobless growth’ is being bandied about.
On the amount of demonetised currency
On the total currency given to the banks, the RBI used to give the figures frequently during the process of demonetisation, but now that the exercise is complete, as a responsible institution it can’t give an approximation. Today, every currency note is to be counted and if there are counterfeits these also need to be counted before arriving at the real count. The exercise is enormous and large but the RBI will give the accurate figure when it is complete.
According to latest depository data, FPIs invested a net Rs. 7,711 crore in equities last month, while they poured Rs. 19,155 crore in the debt markets.
Foreign investors have pumped $4.2 billion in the country’s capital market in May due to finalisation of GST rates for bulk of the items and prediction of a normal monsoon.
Interestingly, most of the funds have been invested in the debt markets by the foreign portfolio investors (FPIs).
“The differential spread between 10-year bond yields in the US and India is still around 4.5-5 per cent, this, coupled with stable outlook for the Indian currency bodes well for FPI flows into debt market,” Sharekhan Head Advisory Hemang Jani said.
According to latest depository data, FPIs invested a net Rs. 7,711 crore in equities last month, while they poured Rs. 19,155 crore in the debt markets during the period under review, translating into a net inflow of Rs. 26,866 crore ($4.2 billion).
This comes following a net inflow of close to Rs. 94,900 crore in the last three months (February-April) on several factors, including expectations that BJP’s victory in recently held assembly polls will accelerate the pace of reforms.
Prior to that, such investors had pulled out over Rs. 3,496 crore from debt markets in January.
“FPIs sold into Indian equities in the first few days of May. It was only in the second week that they started buying. The most prominent reason is expectation from the government that it would speed up development and economic reforms in their last two years in office before going for elections in 2019.
“The government finalising GST rates and expectation that it will be rolled out on time, in addition to forecast of normal monsoon also led to positive sentiments,” Himanshu Srivastava, Senior Analyst Manager Research at Morningstar India said.
Going forward, there are few challenges but not strong enough to disrupt the current trend. Markets and the rupee are surging higher, which offer a good profit booking opportunity for FPIs. They did that in April and they can again use this opportunity to book profits going forward.
“The flow is largely driven by expectation, and for the flows to sustain, the government has to meet those expectation. Monsoon will be another thing to watch out for as it tends to have big economic implications,” he added.
With the latest inflow, total investment in capital markets (equity and debt) has reached Rs. 1.21 lakh crore this year.
For decades, Sugal & Damani Group focused on lotteries before it entered the online bill payment business with Payworld.
