GST rules on transitional stock welcome, but experts wait for details on exports, anti-profiteering

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Updated: June 05, 2017 12:18 PM

Most experts welcome the finalisation of rules related to transition towards GST and to the processes to be followed post implementation, specially increase in the excise refund on transitional stocks, but have asked for speedy clarity on some other rules.

In a major leap forward on the road to implement GST by July 1, the GST Council has finalised almost all the rules that will govern the transition to the new tax regime and the processes to be followed.

In a major leap forward on the road to implement GST by July 1, the GST Council has finalised almost all the rules that will govern the transition to the new tax regime and the processes to be followed under the new regime. Along with this, the administration reiterated in clear terms that the new tax structure will be rolled out on July 1 indeed and that there will be no extension on the deadline, and thus called for a speedy action on the part of the businessmen to prepare for it.

Notably, the council raised the limit on input tax credit from the earlier proposed 40% to 60% of the GST liability against excise duty payments, bringing some respite on sale of inventories stocked up before the July 1 implementation deadline. In addition, the rules also include clarification on returns.

Here’s what experts have to say on the final steps taken on the road to GST:

Deadline — Businesses need to buckle up now. It’s happening

  • MS Mani, Senior Director, Deloitte Haskins & Sells LLP: The GST Council has done an admirable job by finalizing all rates and rules, it is hoped that the next meeting scheduled on 11th June is the final meeting before the roll out date of 1st July as it is necessary for businesses to have a final view of the changes to be made instead of continuing to make incremental changes. Businesses should immediately move to the fifth gear and get prepared for GST – this would entail major supply chain changes together with inventory and pricing decisions. Since GST works on the presumption of a connected system across the supply chain, any lack of preparation by any business would deprive them of the benefits. The finalization of the rates in respect of the few items that were not finalized together with the reiteration that July 1 is the GST rollout date is a clear message for all businesses who are not prepared that they run the risk of not being part of the GST ecosystem if they do not immediately shift to a higher gear.
  • Pratik Jain, Partner and Leader Indirect Tax, PwC: The final countdown to the most radical reforms of India now begins. “Stage now seems set for July 1 rollout as Government doesn’t seem to be blinking amidst demand of deferment by couple of months.
  • Rajeev Dimri, Leader, Indirect Tax, BMR & Associates LLP: With assurance from state finance ministers and the GSTN on the readiness of implementing GST ready from July 1, onus now lies on the industry to prepare. Adequate information is now available in the public domain vis-à-vis return formats and rules, thus it is critical for the industry to gear up their IT systems for meeting reporting requirements for filing returns on the GSTN portal.

Transitional stocks — Major relief on excise refunds

  • Sachin Menon, Partner and Head, Indirect Tax at KPMG in India: It is indeed a welcome step, that the GST council increased the availability of input credit limit without excise duty paying documents for stock held on the date of introduction from 40% to 60%, in case of goods attracting 18% or more GST. With this move, dealers need not return their pre GST stock as their concern over loss of credit mostly stands addressed.
  • Abhishek Jain, Tax Partner, EY: The relief on transitional stocks is welcome. Though it may not completely address the concerns of the industry on account of loss that they would suffer on the transitional stocks, the quantum of loss would be reduced.
  • MS Mani, Senior Director, Deloitte Haskins & Sells LLP: The increase in the proportion of deemed credits ( without excise documents) from 40% to 60% in respect of goods having a rate of 18% or more is a welcome development although this was widely expected for all rates categories.
  • Pratik Jain, Partner and Leader Indirect Tax, PwC: Increase in deemed credit to 60% for products in GST slab of 18% and more comes as a major relief to the industry and neutralises the loss on transition stock to a large extent.  Also, allowing 100% credit in case of high value items (above Rs 25,000) based on tracking of the product, even without actual excise duty paying document could be a major relief to sectors such as consumer electronics, durables and automobile.  The disruption  in the trade, therefore, would be minimised.

Returns forms — Step forward

  • Sachin Menon, Partner and Head, Indirect Tax at KPMG in India: Finalisation of the GST return forms will provide certainty for making requisite changes in the IT system. However, the government cannot keep changing the APIs frequently, as the industry needs sufficient time to factor such changes in their IT system.
  • Divyesh Lapsiwala, Tax Partner, EY: The formats of return have been changed significantly.  Taxpayers will have to review all the revised requirements in detail to make sure that no new data elements are required (as compared to the older formats).  This will mean that taxpayers will need a longer lead time to get ready for compliances.  With the go live date continuing to be 1 July, taxpayers will have to work overtime to deliver this revised expectation.
  • Pratik Jain, Partner and Leader Indirect Tax, PwC: Attempt has been made to simplify the GST returns by not having a requirement of invoice wise HSN code reporting and advances in cases where invoice is raised in the same month.  This would, however, mean that industry as well as GSTN would need to do some rework in terms of configuring and testing their  respective IT systems.

Anti profiteering — Anxious industry awaits details

  • Abhishek Jain, Tax Partner, EY: The Finance Ministry made a limited statement that the GST Council will set up a committee to look into complaints regarding anti-profiteering clause. Thus clarity on how anti-profiteering provisions would be implemented at the ground level still remains elusive in the absence of detailed rules on the subject.
  • Pratik Jain, Partner and Leader Indirect Tax, PwC: Industry still awaits the guidelines on anti profiteering clause, though it seems that the committee set up for this purpose would act on specific complaint of price increases and would be more of a watch dog.

Export rules — Clarity needed now

  • Abhishek Jain, Tax Partner, EY: Clarity still awaited on the treatment of deemed exports and the refund procedure for supplies from excise free zones. The industry is keenly awaiting guidance and rules around the same. The Revenue Secretary has stated that accounts and record rules and e-way bill rules to be taken up in the next GST Council meet on June 11. With the go live date still being July 1, the industry will have very limited time to gear up and be ready with these requirements.
  • SS Gupta, Senior Consultant, The approval of all pending rules are step forward in implementation of GST. But yet many rules like for Exports, format of bonds and format of various forms are yet to be finalized. These pending matter is cause of anxiety for achieving target date.”

Retail — welcome move on CSD refunds

  • Suresh Nair, Tax Partner, EY: Welcome move by the GST Council to clarify on the tax treatment for sales to Canteen Stores Department. There is now confirmation on the quantum of GST refund available for such transactions. Important for Industry to now analyse the exact impact thereof.

(Originally published on Sunday, June 4, 2017 on

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