GST AND DELHI ECONOMY – LIKELY IMPACT ON DIFFERENT SECTORS

GST AND DELHI ECONOMY- DELHI PROFESSIONALS AND TRADE HAVE TO START UNDERSTANDING, APPRECIATING AND IMPLEMENTING GST LAW INTO THEIR BUSINESSES RIGHT FROM THE WORD GO.  THE LIKELY SECTORS WHERE IMPACT WILL BE HIGH, MY TAKE FEELS, ARE AS FOLLOWS

1.              Infrastructure:

Works contract is now a service.  Hence, no confusion.  Full tax on full bill value.  Contracts to be made accordingly especially having long term implication.  Transitional provisions to be studied minutely to minimize the tax loss.  There is no interstate works contract; no L&T judgment etc.  Simply each transaction suffers GST on value addition.  Longer the chain, higher shall be the tax incidence.

2          Auto Sector:

GST rate now may be 18 percent or 26 percent for small or luxury cars on transaction value which has to be a fair market value i.e. Company price list minus trade discounts that are given to the trade in general and on the invoice.  Those dealers making sales to tax operators; be care full, GST liability cannot be postponed and tax has to be paid on point of supply as per point of supply rules.

Second Hand Dealers selling cars and scooters.  No input tax credit for second hand goods in GST Law for the time being.  Hence entire closing stock you hold on 31.3.2017 will have to be sold at FAIR MARKET VALUE and full GST will have to be charged as if they were selling the new cars.  Transaction value, if under valued, will be subject to fair market value which may be on the basis of insurance valuation certificates.  Be careful.

Works shops: 
No chaos between goods and services.  No confusion of FMS during warranty periods.  All are taxable now.  Negotiate with the companies for FMS and GST payment as in my view these are covered by transactions not for consideration but subject to GST.  Transaction value to be on fair market value.  Company approved rates can be adopted to value the work shop business and accordingly GST can be charged.

Importers of cars and commercial vehicles: 
In addition to customs duty as per law, you also have to pay IGST to clear your goods.  Then while selling these goods you have to charge full GST as per law and claim ITC for the IGST paid.

Transportation :
tempo operators; truck operators to study point of supply and time of supply rules carefully as the GST levy will hit them hard.  Once again fair market valuation issues will crop up.

Insurance will be subject to GST.

All discounts to be given on invoices only.

Import of accessories; car music systems; paints; tyres and tubes – all to be subjected to import duty ,IGST and then subject to SGST and CGST for Intra state sale and IGST as per transactions completed in the country.

Embassy sales or other organization sales – exempt only if notified by the State in the Act or in the Rules; other wise no other agreement valid for tax exemption.

IGST to be paid for procuring cars etc from the manufacturers situated outside Delhi.  Separate accounting to be done.

Returns to be filed in all the States wherever you are registered.

Converting local sales into interstate sales or stock transfers not beneficial now.  As all such transactions shall attract GST

No forms involved now.

3.   Services

Delhi has huge service economy.  Banking, education, medical tourism; AMCs, foreign exchange stock exchange transactions; financial transactions; professionals including thousands of architects, lawyers and chartered accountants who will not stand excluded from GST purview.  These are areas where there is hardly any ITC to be given; virtually more than 90 percent gross receipts may be subjected to GST and Delhi will retain the same.

4.   Importers

Mobile phones, dry fruits; IT products including laptops; parts and accessories; televisions and high end music systems are all imported either by the companies from the parent companies or by the dealers dealing in these.

With IGST on imports, importers will not get away and will have to declare imports.  There must be a separate assessment cell dealing with imports of all kinds and each officer handling a particular class of imports.  Once that is done, the after clearance of imported goods by payment of IGST; SGST and CGST can be collected. Will increase working capital need.

5.   Textile

Two rates may be applied 6 percent and 12 percent.

Readymade Garments , hosiery goods, woollen garments and textile above specific rate at present are subject to normally 5 percent.  This goes up to 12 percent.  Sarees may be classified as Readymade garments .At present we collect no tax on sarees.

We will have to wait and see for made ups.  My take expect at least 6 percent GST will be invoked.

And above all Delhi is a huge consumer of such products. As the consumers shop; whether they consume in Delhi or take out of Delhi, through point of supply rules and IGST rules, the consumed shall be deemed to be in  Delhi and supply shall stand concluded in Delhi and hence tax collected will not be transferred outside Delhi.

6.   Transporters and car rental companies

Now since these will be services and perhaps taxed at standard rate of 12 percent; the scope is huge.  They all require registrations.  The point of supply and time of supply rules need to be understood carefully.  They cannot get out of tax net now as simply registration with the transport department, which they cannot avoid, will ensure them in the tax net.  Huge scope for professionals.

7.   Contractors;

Tent Contractors, Interior Decorators, Food Caterers; Wedding planners, event management companies.  All deemed to be service providers.