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GST, TAXATION
One nation, one tax! That is the concept of the new indirect tax passed by the Rajya Sabha. The Goods and Services Tax is one indirect tax for the whole nation, which will make India a unified and common market. GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. It will be levied at every stage of the product distribution chain by giving the benefit of Input Tax Credit (ITC) of the tax remitted in the previous stages. Therefore, the final consumer will bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all previous stages. GST will replace all Central level taxes such as excise, service tax, customs duty as well as state level taxes like VAT, CST, entertainment tax among others. The impact on the food Processing Businesses:
  • With the latest information suggesting that the minimum GST rates will be 18% on all products.
  • Alcoholic beverages have been excluded from GST and they will be taxed separately.
  • Implementation of the GST is said to increase the prices of agricultural goods. However, the products will be able to reach the consumer faster due to state-level taxes such as Octroi and entry taxes which will significantly reduce the time and hassle of transporting goods across state borders.
  • GST will also favor the National Agricultural Market on merging all the different taxation on agricultural goods will improve the marketing and virtual market growth.
  • Because GST is a consumption tax, it will be levied only when food products are sold by the manufacturer and not when they are manufactured.
  • The Confederation of Indian Industries (CII) has also in its representation called for a zero rate tax on products which have a rate of up to Rs. 10/- and Rs. 20/-. It also demanded that all packaged material used as inputs by the food processing industry should have a zero-percent rate.

Impact on Restaurants and Food Joints:


Service tax liability with the credit of input VAT on goods consumed will get submerged into GST and irrespective of goods and services, the credit of input will be available for adjustment against the output liability. This will further optimize the working capital of these restaurants and consumers can expect the superior quality of goods and services.

You know how we Wazzeerians are particular about satisfying your business needs, be it Fortune 100 or upcoming Fortuner one thing that forms the pattern is your value for quality and transparency. We would love to hear from you, anytime. Let’s connect!
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GST, TAXATION
Infrastructure and Construction Sectors are no doubt the most important pillars of Developing Economy. In absence of it, no resources can be extracted, no goods and services can be transferred from one place to other as no business is made in open grounds.

What’s been happening so far?

When it comes to taxation, Infrastructure and Construction Sector, generally, face a lot of complexities. Tax is levied at every stage separately, by the Centre and the State, at varying rates i.e. 10.5% / 6% / 4.5% for service tax and different rates by different States, on the value of construction services.

What are the implications of GST on this sector?
  1. Overview
  • Under the GST system, the tax will be charged only on the value added at each stage by the sub-contractors, main contractors and developers or builders.
  • It is a single tax collected at multiple value additions with a full set-off for taxes paid earlier in the value chain by subcontractors and main contractors.
  • The inter-credit of different taxes paid in the current regime be a service tax, VAT, CST, etc. to Centre or States are not allowed and thus becomes a part of the cost on the suppliers. Thus, under GST the final buyer/client will bear only the GST charged by the last person i.e. developer or builder.
  • GST clearly defines WORKS CONTRACTS as service. Thus, there is:
    1. Simplified treatment of works contracts, since there would be no multiplicity of taxes.
    2. Ease in contract structuring as there will be no requirement to divide contracts into material and service portion, as the entire contract would be treated as service. This would be relevant for onshore services contracts entered with project owners undertaking supply of both goods and services.
  1. Effect on Raw Materials
Most of the Construction projects are carried out using following materials:
MaterialCurrent RegimeNew GST regime Probable Tax %
Excise %VAT %
Cement12.512.512-18
Coal6512
Steel12.5518
Bricks12.5518
Wires(all types)12.5518
tiles12.512.528
  Also, the input credit available to manufacturers of these products would increase, and if passed on to the end customers, is likely to result in lower prices. The benefit to other projects will be affected on the basis of ability to offset the input credit of these items with the output tax.
  1. Effect on basis of Construction Project:
Many real estate projects are developed in a way where the land owner gets a fixed amount of flats in lieu of the transfer of land development rights to the developer. It is known as Joint Development Agreement. barter exchanges are covered in the definition of supply, the law is still vague about the transfer of land rights. The other one is Work Contractor EPC Contracts.  

Joint Development Agreement ModelWork Contracts or EPC Contracts
Cost goes Up if land barter comes in the ambit of Supply.No credit can be taken on goods and services in the execution of Work Contract. Similar to the current tax regime.
Capital Lockup (long interval between transfer and ability to set off.Increases the cost since work contracts specifically defined as Supply
Input Credit on Material consumed, Lower cost of Materials (As mentioned in above table)Lower Input material Cost reduces the Overall price. Though Not a significant difference.
 
  1. Road, Rail and Airport Projects
  • Exemption from paying service tax yet liable to pay input tax and service tax to transporter as well as states.
  • No improvement in tax credit liability due to Section 17 (4) (c)
  • However, for power projects and operational power units that enjoy certain exemptions, will have a negative effect since electricity is outside the ambit of GST and input tax is a cost.
  1. Compliance Ease
Finally, the benefit of GST will be the ease of compliance that it would offer. Elimination of multiple taxes and tax laws is a certainty. However, “Engineering, Procurement, and Construction” (EPC) contracts spread across multiple states would require contractors to register in multiple states including their site offices due to ?place of supply? concept. Further, all the site offices will require technological upgradations since input credit would be available only after an online reconciliation of tax invoices is done.

You know how we Wazzeerians are particular about satisfying your business needs, be it Fortune 100 or upcoming Fortuner one thing that forms the pattern is your value for quality and transparency. We would love to hear from you, anytime. Let’s connect!
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GST, TAXATION
With GST replacing most of the indirect tax especially VAT and Service Tax, it becomes necessary for existing suppliers (registered at respective tax authority) to migrate to GST at earliest. GST Registration is necessary to claim Input tax credit or to collect the tax from customers

LIABILITY TO GET REGISTERED UNDER GST

Any supplier having an aggregate turnover of Rs. 20 Lakhs or more needs to be registered at State from where it makes a taxable supply of Goods and Services. This limit is Rs.10 Lakhs if the business is carried out in the North Eastern States including Sikkim.

MIGRATION TO GST

Section 166 of Model GST law provides for Migration of existing taxpayers. Here existing taxpayer means assesses registered under any acts as specified, i.e.
  • Central Excise
  • Service Tax
  • State Sales Tax/VAT
  • Entry Tax
  • Luxury Tax and
  • Entertainment Tax (except levied by the local bodies).
Existing Taxpayers are legally required to register themselves at GST Platform.

PROCEDURE

The whole procedure of Migration can be divided into two parts:
  1. Issuance of Provisional ID &Password – In order to get your GST Number, you need to get a provisional Id and password. The government has digitized the whole procedure. For your provisional ID, you need to log in to the website of Automation of Central Excise and Service Tax using existing aces user id.
The ID is issued only to those persons who have PAN associated with their registration. Only one provisional ID is issued in case state and PAN associated with the business is same. Every person registered under Central Excise/ Service Tax is provided with GST Identification Number. This is a Provisional Registration.
  1. GST Registration: GST REG20 is required to be filled after receiving the provisional ID. A unique username and password are to be created using above provisional id and password at GST Registration Portal (www.gst.gov.in).
After username is created you need to upload supporting documents. After providing requisite details, and uploading necessary documents, it is required to be verified by the Authorized Signatory required to do so as per nature of the business. Once above steps are completed, Application Reference Number (ARN) is issued to the taxpayer in 15 minutes. Once an assessed has ARN he migrates to GST with A provisional Certificate issued to him in GST REG- 21. The Provisional Registration converts into GST registration if he is required to be registered under GST Act otherwise GST REG 24 is issued.

Documents Required for Migration:
  • Proof of Constitution of Business depending upon nature of the business.
  • Passport Photos and Details of Promoter/ Partner/ Director/ Karta
  • Proof of Appointment of Authorized Signatory and Photo
  • Address Proof of Principal Place of business and additional places if any
  • Details of Bank Accounts with statements or at least first page of statement
  • Details of Goods and Services Supplied
 All documents must not be more than 1mb and in Pdf format. Pictures shall be in JPEG with a max size of 100 KB. We will be glad to help you with the GST migration, let’s connect.
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