To begin with, I divide this article into 3 parts. In the first part, I will address the political comedy show enacted by the dirty tricks department of Congress Party on the historic launch of GST by the PM Mr Narendra Modi. In the second part, I will clarify the Mc Donald and Murugan Idly Shop’s GST Bills. In the 3 rd part, I will discuss some of the clarifications that were provided on GST by Revenue Secretary’s Sri Hasmukh Adhiya.
Congress is defeated in their own Game
The Congress party’s dirty tricks Department woke up much early and started spreading a lie that ‘Modi said GST will be a failure’ through a suitably edited video of Modi ‘s speech of 2011 when he was the CM of Gujarat. It is unfortunate that the Congress party has exhibited their distress and insecure penchant on Modi ‘s triumphant implementation of GST.
A Party headed by an eminent Economist of International repute, a Finance Minister with a Harvard Business School Degree in Business Administration with over 35 yrs of experience in politics and Parliamentary Affairs could not muster power to engage in healthy dialogue with the Government on GST, but resorted to dirty tricks of trolling on Social Media, skipping protocol and boycotting the special session of Parliament convened on the eve of the mid-night launch of GST by the PM , FM , President and their Cabinet colleagues, shows only their immaturity and defeat mentality.
The Congress leaders were no doubt in dilemma but finally decided to skip the event which decision itself speaks volumes of Congress party’s bankruptcy.
Mrs Sonia Gandhi probably would have thought that the scenario would be terribly embarrassing to their personal status, sitting on the other side, when the whole Nation cheering Modi and his BJP team when the GST button is pressed.
Lets now see how the dirty tricks Department of Congress Party started circulating an edited video of Mr Modi ‘s speech in 2011. The official Congress Party handle’s tweet.
— Congress (@INCIndia) June 30, 2017
This video is partly edited short version. If you look into an another video of 2011, where Modi had clearly spelt the importance of forming a GST Task Force and a GST Net Work for the successful implementation of GST. So it is clear from this video, that Modi never opposed GST per se, but expressed apprehension over the lack of preparedness of the UPA Government.
Full Video here:
Despite, Modi having spelt this very clearly, our usual cynics, have conveniently deleted that material portion and beamed the rest to present a different scene which gives an impression as if Modi had opposed the GST outright. In fact, after Modi’s caution over the absence of a GST Network, UPA Government has set up a GSTN (Goods and Services Tax Network) in 2013. This alone is proof enough how the then UPA Government was ill prepared for the launch of GST then.
True to the idiom, Ever since Modi took charge of the Nation in May 2014, the PM has been working hard for the implementation of the GST. What steps has Modi initiated in the run-up to GST?
Reforming Income Tax returns filing, linking Aadhar with PAN and Income Tax individual accounts, Operation Clean Money, Tax Amnesty Scheme, Pradhan Mantri Garib Kalyan Yojana etc.
In September 2016, the Cabinet Committee on Economic Affairs chaired by the Prime Minister Narendra Modi had approved Rs 2,256 crore for Project SAKSHAM, a New Indirect Tax Network (Systems Integration) of the Central Board of Excise and Customs (CBEC) in the seven years. The SAKSHAM will help in the implementation of Goods and Services Tax (GST), an extension of the Indian Customs Single Window Interface for Facilitating Trade (SWIFT) and other taxpayer-friendly initiatives under Digital India and Ease of Doing Business of Central Board of Excise and Customs.
It was expected then that the number of taxpayers, importers, exporters and dealers under various indirect tax laws administered by CBEC is likely to go up from 36 lakh to over 65 lakhs after the introduction of GST and in a couple of years after GST roll out, to touch 100 lakhs.
Further the present existing EDI system in Customs functioning at 140 locations, is likely to increase further to cover large areas of Customs stations.
CBEC’s IT systems need to integrate with the Goods & Services Tax Network (GSTN) for processing of registration, payment and returns data sent by GSTN systems to CBEC, as well as act as a front-end for other modules like Audit, Appeal, Investigation. There is no overlap in the GST-related systems of CBEC and GSTN.
CBEC’s e-Services in Customs, Central Excise & Service Tax, implementation of tax¬payer services such as scanned document upload facility, the extension of Indian Customs Single Window Interface for Facilitating Trade (SWIFT) initiative and integration with Government initiatives such as E-Nivesh, E-Taal, e-Sign.
Nothing was in place in 2011 for the then UPA Government’s dream of GST implementation. This preparedness is all that Modi hinted in his speech.
Now, the PM has successfully followed it up all that he said in 2011, during the last 3 years for the run up to GST in July 2017.
On States concern over the new GST Bill under Modi Government Apart from the preparedness for GST aspect, states had also some major demands, which were to be addressed on priority basis in 2013, as the old Bill of GST neglected these concerns
1. Keeping Petroleum out of GST ambit
2. Keeping Alcohol out of GST ambit
3. Keeping Entry Tax out of GST ambit
4. Some sort of guarantee from Centre for potential revenue loss.
However, the present Government under the PM Modi and FM Jaitley have worked hard towards consensus and finally addressed the state’s concerns.
Petroleum products, Alcohol for human consumption and Electricity were kept outside GST
Finally, the enactment of the ‘The Goods and Services Tax (compensation to states) Act 2017 can be considered as a milestone and full credit goes to Sri Narendra Modi and the Finance Minister Sri Arun Jaitley. This constitutional assurance finally lead to an amicable agreement on GST, that made possible the historic launch of GST on 1st July 2017.
This is how Modi Government has addressed the States concerns on GST and their fear of loss of Revenues successfully which lead to the historic launch of GST on 1st July 2017
Time for Congress Party for introspection and take precautions to avoid similar blunders in future, as many earth-shaking reforms are in store.
McDonald and Murugan Idly Shop’s GST Bills dated 1st July 2017 are explained.
On first July 2017, Shoba De, had travelled to Nanganallur Chennai all the way with the sole purpose of exposing Modi’s bankruptcy on GST idea, as the Nation had just witnessed a grand midnight launch of GST by the PM & Co in Parliament Hall, just a few hours ago. She reached the famous Murugan Idly Shop, Nanganallur Chennai so early in the morning and had a nice hot Ghee Pongal and hot coffee and paid proudly GSTax among the very few first’s.
GST ke side effects. Unaffordable idlis pic.twitter.com/1wZCaHjT4h
— Shobhaa De (@DeShobhaa) July 1, 2017
When Shoba De tweeted this with a snap of the bill referring the ‘Pongal’ as Idly, tweeple’s immediately grabbed the shot and made fun, stating she could not differentiate between Idly and Pongal. Notwithstanding her goof up, she is probably on dot, as both Idly and Pongal are made of rice and dal. Jokes apart let us analyse the two GST bills generated on 1st July 2017.
Before jumping into conclusions that GST made life miserable etc, it is fundamental first to compare the situation. That is how the same item was subjected to tax before GST and after GST.
The above is self-explanatory. However, there is one intriguing part of taxation I should explain here for the much delight of Idly lovers or Pizza lovers. The price what the owner had charged for Pongal or Coffee as on 1st July 2017, is bound to come down in coming days, for the reason that the owner did not work out his costing and revised the price taking into consideration of the ITC.
What is ITC then?
That is Input Tax Credit. ITC is supposed to be passed on to the Customers in view of an inbuilt provision made in the present GST legislation. In terms of Clause 171 it is mandatory to pass on the benefit that is accrued to the owner either on account of reduction in tax rates or benefit of credit of input taxes paid on the raw materials and input services he receives and utilises in making the Idly or Pizza.
As the GST came into force only on midnight of 1st July 2017, the supplier can accrue ITC only in coming days as and when he purchases the raw materials or receives any input services connected to his establishment and hence, it is unpracticable to expect the owner of the outlet to pass on the benefits on account of reduction in taxes or ITC on the very first day i.e 1st July itself. But in the earlier Central Excise Law or in Service Tax law, there was and is, always a provision to take credit of duties paid on raw materials and taxes paid on Input Services, that were held in closing stock.
Here Rule 40 of GST Rules 2017 provides such a facility.
In this case, the closing stock as on midnight of 30th June ( Opening stock of 1st July ) to be declared by the supplier of goods, a provider of services so that credit of duties and taxes paid on RM stock and services can be availed. (A provision is clearly in place in the present GST to avail this benefit). Once availed by the owner of the shop, the ultimate price will come down.
The CGST of 9% and SGST of 9% in the bill is the outcome of GST rate of 18% being split into half between Central Government and respective State Governments/
The CGST has replaced the earlier Service Tax for the Central Government ( hence now known as ‘Central Tax ) and SGST has replaced the VAT ( now known as State Tax ) for the respective State Governments.
The previous Service Tax rate as mentioned in the bill was 6% though the original ST rate was 14%. This has been reduced to 6% for the restaurants and hotels on the food they sell within the premises. This is because ST was liable only on the ‘service portion’ of the cost ( minus cost of the Pongal ) of Rs 50/- and VAT was liable only on the cost of Pongal (minus cost of service) that was sold. Hence VAT can not be charged on service portion, and vis a vis, ST can not be charged on the cost of the Pongal. There is a clash here.
So, an amicable ( legal ) way out was then, the ST rate was reduced to 6% presuming the service portion of the Pongal is 40%. This abatement in the rate of ST was provided with a condition that the owner should not avail Input Credit on Input Goods. However, all eligible taxes already paid on the stock held can be availed as an opening credit commencing 1st July 2017. Also as and when the supplier receives Tax paid goods and services, he keeps posting the credit details and at the end of the month, all the accrued credit will be adjusted against his total tax liability. This is done while filing the returns on monthly basis.
Hence in view of the above-explained structure, the benefit of reduction in taxes and input credits of taxes has inevitably to be passed on to the customers. Also in law, there is a provision to prevent the taxpayer from retaining any portion of any ‘excess tax’ if (over and above the actual) collected from the customers. Such excess tax amount too, to be deposited with the Government along with Interest.
So all food lovers can remain cool and content without getting panic over these GST Bills that are being circulated on SM. Time slowly heals and cajoles. Have patience.