TIOL-DDT 1262 · the untouched capture
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1262</font><br> 21.12.2009 <br> Monday </strong></font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Implement GST by April 1, 2011 - Maharashtra Sales Tax Commissioner </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SANJAY</strong> Bhatia, a 1985 IAS Officer, Commissioner of Sales Tax, feels that we should put the system in place and have the GST by 1.4.2011. He says, “you can't do it in October, you can't do it in September. This is a huge reform. Central taxes getting combined with state taxes as a single tax, It has to be in the beginning of the year. Then also with clear prior notice, we should resolve most of the problems by April 2010 and then set up the system upto April 2011 so that we can start.” </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Bhatia was a Member of almost all the Committees on GST including the constitutional amendment committee. He notes that <em>although empowered committee consists of state finance ministers but government of India representatives are also present in that. There is an advisor of finance minister, the additional secretary is present, the joint secretary is present and they have been present in all the deliberations but when paper came out; the paper came out as the first discussion paper of empowered committee of state finance ministers and not a joint paper. So that indicates that there are some issues today between GOI and the states also. </em></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">His comments on some key issues: </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><em>GST and rates </em></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Once the cascading goes the rates have to come down. Second reason for the rates to come down finally would be the widening of the tax base because service tax has a separate base, goods have today a separate base when they combine together the base becomes widened. Similarly simplify tax structure then possible reduction in prices– 1.4% of gross domestic product (GDP) growth. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><em>What does 1.4% amount to? </em></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It amounts to more than Rs 50 Lakh Crore of growth in the economy with this coming in. Central taxes which are getting subsumed, excise mainly central excise and its related taxes; service tax, additional customs duty, the CVD is part of this and all its surcharges and cesses these are the central taxes which are coming in. What are the State taxes which are getting into this – VAT, entertainment tax, luxury tax, taxes on lottery, betting and gambling - State cesses and surcharges as long as they relate to goods and services; </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><em>Will Central Sales Tax (CST) be abolished? </em></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CST will be abolished on the goods and services which are part of GST. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Implementation through multiple statutes</strong>, although there are multiple statutes but that multiple statute is going to be commonly decided. Basic features of the law need to be uniform. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><em>GST rate structure: </em></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Maharashtra has been propagating a single rate because a single rate would have come to about SGST 8 and roughly CGST 8 or 9 so we could have about 16% roughly. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><em>Threshold: </em></strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">States uniformly decided that the threshold will go up from 5 lakhs which we have today turnover to 10 lakhs and because 5-10 is not very-very material and except for the North-Eastern states they were saying but we do not have people who are above 10 lakhs so we won't have any revenues so for them some special arrangement will be made. But for CGST what will be the threshold? What the states have proposed is 1.5 crore. Government of India has not agreed and this also creates another problem. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Original Problems:</font> </strong>you will have to identify what is the service and you will have to identify what is goods. So what does that mean – all your original problems of works contract, what part of that is service and what part of that is goods continue, all those problems continue. What we are saying is that whatever is the rate for goods and services it should be the same rate; it should not be a different rate so that we do not have to identify what is a good and what is a service. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Exporters would be zero rated</font> </strong> and similar benefits may be given to SEZ and such benefits will only be allowed in the processing zones of the SEZ and no benefit of sales from SEZ to domestic tariff will be allowed and that is a crux of the zero rating of exports. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">Constitutional amendments</font> </strong> are a major issue and we have not been able to resolve this issue. Goods after the manufacturing stage are in the state list, services are in the central list, manufacturing goods are in the central list. Question is whether it should come in the concurrent list, if it comes in the concurrent list, if there is a dispute centre has the sway; states are not agreeable to that; so what is the solution. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">This deadline of April 1, 2010</font> </strong> is not possible at all - you have to build up the IGST model, you have to resolve all this issues and at least for Maharashtra we do not want a half break solution. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Something's come and then we are in a fix, we are neither near nor there so we would like everything to be done properly, proper computerisation, do it and then by April 1, 2011 bring it. In fact the mistake which we have encountered earlier, in VAT you would be aware that Maharashtra is the only state which shifted from geographical jurisdiction to functional jurisdiction. Other states are still continuing with that what is geographical jurisdiction. There is a sales tax officer he has a particular jurisdiction, he has a ward so he looks after that area. We shifted from that to functional jurisdiction; nobody has one to one relationship. Without computerisation that became a huge issue for us. For first year we were facing a lot of problems now when the computerisation is taking place and it is come to a particular stage functional is much better- all other states are coming forward and doing it. We do not want to commit the same mistake again. Let us have some level of computerisation. Let us have those returns processing areas, processing methods and then by April 1, 2011 let us do it. </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>With FBT abolished, perks to be now taxed in hands of employees </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>WITH</strong> the complicated and cumbersome Fringe Benefit Tax abolished in the last budget, the employee is now liable to pay tax on all those perks be it a residential accommodation, car, sweeper, gardener, watchman, personal attendant, gas electricity, water, free or concessional educational facilities for any member of his household, free transport, interest-free or concessional loan for any purpose, travelling, touring, accommodation and any other expenses paid for or borne or reimbursed by the employer for any holiday availed of by the employee or any member of his household, free food and non-alcoholic beverages, any gift, or voucher, or token in lieu of which such gift may be received by the employee or by member of his household on ceremonial occasions, membership fees and annual fees incurred by the employee or any member of his household, which is charged to a credit care (including any add-on-card) provided by the employer, any expenditure incurred (including the amount of annual or periodical fee) in a club, transfer of any movable asset, ESOPs. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Rule 3 of the Income tax Rules have been amended with effect from 1.4.2009. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/pdfdocs/wnew/it09not094.pdf" target="_blank">CBDT Notification No. 94/2009 (F.NO. 142/25/2009-SO (TPL): Dated December 18 2009 </a></strong></font></p> <p align="center"><font face="Verdana, Arial, Helvetica, sans-serif"><strong><font face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600" size="2">Jurispruden</font><font color="#FF6633" size="2">tiol</font><font color="#006600" size="2"> – Tuesday's cases</font></strong></font></strong></font></p> <p><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_hammer.jpg" alt="Legal Corner Icon" width="100" height="84" hspace="5" border="0" align="left">Central Excise </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Chief Commissioner can exercise power of Commissioner and file appeal under Section 35(B)(2), as per provisions of Rule 3 of Central Excise Rules, 2002: CESTAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AGGRIEVED</strong> by the order of the Commissioner (Appeals), revenue preferred an appeal before the Tribunal under Section 35B(2) of the Central Excise Act, 1944. During the material period, the said power was vested with the jurisdictional Commissioner (At present, it is the Committee of the Commissioners). But, the appeal was filed by the Chief Commissioner. The respondent assessee raised a preliminary objection to this, by contending that the appeal under Sec 35B(2) should be filed by the Commissioner only. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Revenue argued that as per Rule 3 of the Central Excise Rules, 2002, the Chief Commissioner is also a Central Excise Officer and he is entitled to exercise the powers of his subordinate also. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>India-Denmark DTAA - assessee enters into contract for supply of platform vessel to ONGC - also provides crew - sources crew from Group Co based in Denmark - salary to crew paid by sister concern - taxability of salary income - Revenue treats assessee as agent - A non-resident cannot be held to be agent of a non-resident company: ITAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>MAERSK </strong>Co. Ltd.(MCL), a foreign company resident of the UK, entered into a contract for supply of Platform Vessel (PSV) to ONGC. Hire charges were received by MCL with regard to this supply of PSV. Under the contract, MCL was also to provide crew members. MCL obtained such crew from one Rederiet A. P. Motor (RAPM), a group company, resident of Denmark which does not have a PE in India. The salary of the crew members is thus paid by the sister concern. </font></p> <p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Service Tax </strong></font></p> <p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Exports – refund of service tax – Notification No. 41/2007 – refund cannot be denied by reviewing the correctness of service tax payment at end of service providers - CESTAT </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>TRIBUNAL</strong> in a series of judgments has held that CENVAT credit cannot be denied to a receiver of duty paid inputs, by the Central Excise authorities having jurisdiction over the input receiver, by revising the assessment of duty at the supplier's end. The same principle will be applicable to this group of cases and unless and until, the service tax payment by the service providers is revised by the jurisdictional service tax officers, the service tax refund available to the exporters, who had received those taxable services in connection with export of goods, cannot be revised. </font></p> <p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our columns Tomorrow for the judgements </font></strong></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more<strong> DDT </strong></font></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice day. </font></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com </a></font></p> </body> </html>