Daily Dose of GST update on FAQ in seminar with Industries

GST UPDATE ON INDUSTRY WANTS TO KNOW

Daily Dose of GST update on FAQ in seminar with Industries
INDUSTRY WANTS TO KNOW – PART IV

Here is the 3rd installment to the series where we try to find answers to the unanswered questions and queries coming from the trade and industry.
Question: What will be the tax rate for the Construction Service?
Answer: The exact tax rates have not been notified yet. Although as per the last meeting of GST Council where the slab system of rates was notified, we expect that it may fall under slabs of 12% or 18%. At present, the Construction Service is subject to both VAT and Service Tax. The effective tax rate comes to around 3.75% for Service Tax. Other than that, VAT is also leviable on the Construction contracts, generally paid by way of composition.
Question:- This is very high rate for the construction industry. Whether the industry suffering from recession will be able to aborb such a high rate?
Answer:-In our opinion, a representation maybe filed for considering the Construction Service in the lower tax rate slab of 5%.
Question: How will the Construction Industry be benefitted by the implementation of GST?
Answer: Construction Industry is largely to be benefitted after the advent of GST. Firstly, the assessees shall be liable to single indirect tax after GST comes into play. Secondly, there will be a smoother flow of credits thus reducing their costs. In the current regime, they are not able to avail credits of excise duty, CST, Entry Tax on various inputs which used to form a non-creditable tax cost. They are able to avail only the credit of input services only. But they will be able to take the credit of inputs also like cement, tor steel, tiles etc. In current regime, they have to pay the tax on 40 or 70% under service tax composition scheme. Similarly, industry has to pay VAT under composition scheme under works contract. If we add both the composition schemes, the industry is paying tax on more than 100% in most of the cases. But under current regime, both CGST and SGST will be charged on 100% only. Hence, the net tax payable by the industry will come down. Also, increased credit flow on inputs will also bring down the tax burden. If add all, the effective tax payable will come down from current regime.
Question: What are adverse effect of GST on reality industry?
Answer:-A higher tax rate can be a damper for the construction services. Not only that, the construction industry is known to be one amongst the most unorganized industries. With the GST in force, the entire Construction Industry will have to be organized and infact the builders and contractors will have to ensure proper payment of tax by their sub-contractors. This is big difficulty in current regime for the department. But this burden will be shifted from the department to builder or main contractors. Also, on the transitional front, GST can be a setback as credit of inputs is not availed in the current regime and will thus not be carried forward. Under the transitional provisions, the credit of input services will be carried forward as shown in their return. But the construction industry is not taking credit on inputs and there is no provision also for taking the credit of the same. This is provision for not taking credit due to exemption under current regime then the credit on stock will be available if the same is chargeable to GST under proposed regime. But there is no transitional provision of taking of credit on stock of inputs when the credit is not allowed in law itself due to abatement. The industry should demand transitional provision for the same.
Question: Will the department provide any help in filing of the said minimum 37 Returns annually?
Answer: The department shall not extend any help with regards to the filing of 37 returns. Instead it is expected that these returns will be highly software dependent particularly extracting data automatically. Although being highly software driven, it should also have features of editing required to make necessary amendment, monitoring of debit and credit notes and also human intervention about which credits to be availed or not, etc.
It is important to note that this may turn out to be a complex task for Small Scale Industries and Units both in terms of time and cost.

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