India GST: It's simpler, sure, but will it make life costlier?

Dubai - New tax to bring in cost efficiencies and result in a market share shift from unorganised to organised players

India will continue to wrestle with new policy adoption of the Goods and Services Tax with a clear intent to be organised under a unified tax regime.
A research report from Edelweiss states GST will usher in a much simplified tax structure in the country, bring in cost efficiencies and result in a market share shift from unorganised to organised players.
The firm is structurally positive on sectors like building materials, plastics, electrical equipment, logistics, luggage, automobile and FMCG (including tobacco and jewellery). However, due to a lack of clarity and uncertainty over availability of input tax credit, trade channels have started liquidating inventory before the GST rollout. This will adversely impact revenue and profitability of companies in the first half of 2018 as things are only expected to normalise towards the third quarter.
The SME segment is not only struggling for preparedness, but is also staring at rising manpower and compliance costs, which could disrupt their business and impact cash flows.
Karan Patel, head of commercial at Etisalat Information Services, said: "There are companies that have presence in the UAE and India. Even in tough market conditions the additional tax burden will be passed on the consumer; the probability would be that certain products that are imported from India in the UAE can get costlier, but we need to wait and watch how the companies will balance both the segments [consumer loyalty versus price increase]."
Similarly, Freya Ahuja, founding partner at Freya Law Offices, said that companies having a business presence in the UAE and India need to pay special attention to the Integrated GST (IGST) provisions that govern inter-state supplies within India, exports and imports. While exports are zero-rated, export of services between an Indian company and its related establishments outside India - including an establishment in the UAE - would be subject to IGST at the prescribed rate (0.25 per cent, three per cent, five per cent, 12 per cent, 18 per cent, 28 per cent and cess in certain cases).
In the case of imports of goods, the existing Countervailing Duty (generally 12.5 per cent) and Special Additional Duty (generally four per cent) would be replaced by IGST and consequently, Basic Customs Duty (generally 10 per cent) along with IGST would be leviable. Futhermore, Ahuja also states that a hike in compliance costs is likely for presently-exempted small businesses and service industries that file half-yearly returns, as the GST regime envisages monthly returns for most taxpayers.
Sunil Kumar, managing director at SKN Holdings & Global Trading, expects that non-resident Indians may have to pay higher remittance fees for sending money to their home country. Otherwise, GST has no direct impact on NRIs; GST is mandatory only to existing NRI taxpayers under VAT, service tax and central excise.
Non-residents, registration by agent supplying goods, input service distributor, e-commerce operators and those selling through e-commerce operators and those providing online information and database access or retrieval services from a place outside India to a person in India have also been made mandatory, adds Kumar.
Any person doing business or providing services with a taxable turnover of over ?20 lakhs is required to mandatory register for GST in India. Besides this, the concept of casual registration and voluntary registrations have also been introduced.
Few have been exempted and shall not be required to obtain registration and will be allotted a UIN (Unique Identification Number) instead. Those notified can receive refund of taxes on notified supplies of goods/services received by them.
The central government or state government may be based on the recommendation of the GST council, notify exemption from registration to specific persons.
Under GST, a non-resident taxable person (NRTP) is one who occasionally does business transactions involving the supply of goods or services, or both, whether as principal or agent or in any other capacity, but who has no fixed place of business or residence in India. All NRTPs also need to apply for GST registration without any benefit of threshold limit, said Kumar.
- sandhya@khaleejtimes.com

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