Daily Dose of GST update on FAQ in seminar with Industries

GST Update on Industry wants to know-Part III

INDUSTRY WANTS TO KNOW: PART 3

Question: What will be the taxation policy on agricultural goods which are primarily used in industries?
Answer: As the GST council meetings are progressing, indications are coming that agricultural goods will be taxed at 0% or they will be termed as zero rated goods. But this will be applicable only for those goods which are basically of public utility. Industry specific agricultural goods may be taxed on merit rate. It is to be noted that goods will be covered under the reverse charge mechanism and thus there is a high probability that RCM is made applicable to the agricultural goods. It will be clear only when the list is declared of goods and services.

Question: What will be the status of procedures like removal of goods at concessional rate of duty for export goods under the new regime?
Answer: The model GST law does not prescribe any such procedure for procurement of inputs. In current regime, such procedure is available for procurement under Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001. Notification43/2001-C.E. (N.T.) issued under Rule 19 of Central Excise Rules prescribes such procedure for bringing inputs under bond for manufacture of export goods. But since no such procedure is prescribed and hence the inputs for export goods are to be procured after payment of duty. The exporter can take credit of the same and apply for rebate of duty payment on final product or refund of unutilised credit. This will adversely affect the working capital requirement of export unit. They have to pay GST on their inputs and use it for manufacture of export goods. Then export them and file the refund claim with the Central Excise and state department. The time taken from payment to supplier to the time of refund, their fund will block and consequently the demand of working capital will increase.

Question: Will the Cenvat credit of SGST will be allowed if drawback is taken without cenvat credit as being allowed under current regime?
Answer: Currently the drawback rates comprise component of excise, custom and service tax only. There are two ways of claiming drawback. One is to claim the rate with cenvat credit and the other is to claim the rate without cenvat credit. After GST, VAT will also be merged and hopefully the Government will reconsider the rates of drawback and incorporate the component of SGST also. If the rates are not revised then logically the credit of SGST should be allowed as it is not considered with granting drawback rates. It will be interesting to see if the cenvat of SGST which is the new form of VAT will be allowed or not.

Question: Will the cenvat of excise of goods in stock be allowed to traders after implementation of GST?
Answer: It is a big question embroiling the minds of the assessees especially the traders. The transitional provisions facilitate the availment of cenvat of goods in stock where the earlier exempted goods become taxable under the new regime. They also facilitate the carry forward of cenvat lying in balance of the previous return. Following the same, the credit of VAT balance with traders will be allowed to carry forward as SGST credit. But there is no provision for traders to avail the cenvat credit of excise on the goods lying in the stock. Currently the VAT rates vary between 2-14% and most likely the new rates under GST will be 18% (subject to contradictory provisions). In such a scenario, traders will be forced to pay the duty in cash for the initial period till the old stock lasts. Clarification is a must on this special case.

Question: What will be the status of DFIA scheme under the new regime?
Answer: Currently DFIA scheme is operational on exports where the benefit of scheme is availed with a condition of cenvat not being availed. In the new regime, if an assessee wants to avail the cenvat in case where scheme becomes non operational, the question raises whether he will be entitled to the cenvat on the stock lying. Also if he is a manufacturer of exempted goods which post GST becomes taxable, whether he will be eligible to the cenvat of the stock lying with him. All these questions are unanswered as of now and we will have to wait till these are answered.

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GST Update on Industry wants to know-Part III

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