Entities engaged in businesses of ice cream, pan masala and tobacco
will not be eligible for the proposed higher threshold limit for
mandatory registration and new composition scheme for services under the
Goods and Services Tax (GST). The new proposals will come into effect
from April 1.
Under the new mechanism, threshold for goods suppliers in 20 States and the one Union Territory
(with Assembly), i.e. Delhi, for mandatory registration will be ₹40 lakh, against the present ₹20 lakh.
Similarly for the seven North-Eastern States (barring Assam) and the hilly State of Uttarakhand, threshold for mandatory registration will be ₹20 lakh as against ₹10 lakh as of now. Telangana and the Union Territory of Puducherry will continue to have threshold of ₹20 lakh.
The first category is ice cream and other ice, whether or not containing cocoa, while the second category is of pan masala and the third category comprises tobacco and manufactured tobacco substitutes. While ice cream attracts GST at the rate of 18 per cent, tobacco and pan masala attract GST at the rate of 28 per cent. There is also a cess on tobacco.
Though no reasons have been given for the exclusion of these products and related supplies, there have been precedent of keeping more vigil on these products.
Also, the tobacco product sector is considered to be evasion prone. During the pre-GST regime, there was physical control for the Central Excise. Entities with annual turnover of ₹1.5 crore or more were asked to pay levy on the basis of capacity of filling and sealing machine.
Similarly, tax authorities used to keep an eye on two companies, supplying packaging materials to pan masala companies. There was special material capable of bearing effects of chemicals. So, on the basis of supply, tax authorities were in a situation to get an idea of total production and hence tax liability.
“Many of the pan masala companies are family-owned with a number of small units (with one or two machines) and each one of such unit is registered separately to avoid registration formalities,” a tax expert explained while adding that all these could be the reason for their exclusion from higher threshold.
Experts said ice cream, chocolate and crumble are considered to be in the ‘high risk’ category from the health point of view. Also, barring a few, most of the ice cream businesses are small ones. The Government prefers to keep such business in the lower threshold category.
Under the new mechanism, threshold for goods suppliers in 20 States and the one Union Territory
(with Assembly), i.e. Delhi, for mandatory registration will be ₹40 lakh, against the present ₹20 lakh.
Similarly for the seven North-Eastern States (barring Assam) and the hilly State of Uttarakhand, threshold for mandatory registration will be ₹20 lakh as against ₹10 lakh as of now. Telangana and the Union Territory of Puducherry will continue to have threshold of ₹20 lakh.
Composition Scheme
It has also been decided to introduce a new Composition Scheme for services. Businesses (both services alone and mix, that is goods and services supplier) with annual turnover up to ₹50 lakh will be eligible for the new scheme. According to the draft notifications, businesses of three categories of goods and their supply have been excluded.The first category is ice cream and other ice, whether or not containing cocoa, while the second category is of pan masala and the third category comprises tobacco and manufactured tobacco substitutes. While ice cream attracts GST at the rate of 18 per cent, tobacco and pan masala attract GST at the rate of 28 per cent. There is also a cess on tobacco.
More product inclusion
“The product-specific exclusions in the higher threshold proposed for GST and products initially could act as precedents for inclusion of more products in future based on the compliance experience and identification of avoidance prone sectors/ products,” MS Mani, Partner at Deloitte India, said.Though no reasons have been given for the exclusion of these products and related supplies, there have been precedent of keeping more vigil on these products.
Also, the tobacco product sector is considered to be evasion prone. During the pre-GST regime, there was physical control for the Central Excise. Entities with annual turnover of ₹1.5 crore or more were asked to pay levy on the basis of capacity of filling and sealing machine.
Similarly, tax authorities used to keep an eye on two companies, supplying packaging materials to pan masala companies. There was special material capable of bearing effects of chemicals. So, on the basis of supply, tax authorities were in a situation to get an idea of total production and hence tax liability.
“Many of the pan masala companies are family-owned with a number of small units (with one or two machines) and each one of such unit is registered separately to avoid registration formalities,” a tax expert explained while adding that all these could be the reason for their exclusion from higher threshold.
Experts said ice cream, chocolate and crumble are considered to be in the ‘high risk’ category from the health point of view. Also, barring a few, most of the ice cream businesses are small ones. The Government prefers to keep such business in the lower threshold category.
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