Sl No
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Issue
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Section/Rule
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Suggestion/Justification
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1
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Input service distributor cannot pay reverse charge GST.
Pre-GST, companies had a centralised service tax registration Number through which all reverse charge payment were effected and credit was distributed.
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Instruction No 4 in the GSTR 6
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This has created lot of additional work as the tax has to be first paid in a different GSTIN and thereafter distributed to the ISD GSTIN. Hence, ISD should be allowed to make reverse charge supplies.
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2
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No refund mechanism provided for refund of IGST paid by an SEZ to a domestic supplier who is unwilling to claim exemption/Zero rating.
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Section 54 read of the CGST Act read with Rule 89 and Section 16 of the IGST Act
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There are many suppliers who have not executed bond/LUT or do not want to claim refund of IGST paid on supply to SEZ. In such situations, there should be an option for the SEZ to avail the input tax credit and claim refund of the IGST paid by the Supplier.
In the above context, it also needs to be clarified that SEZ developer/Unit is eligible for input tax credit and refund can be claimed on exports.
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3
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• Post GST, Companies are not able to procure Diesel for generation of electricity against Form Cat concessional rate of tax of 2%. Oil PSUs are charging full rate of tax on Diesel and this has increased cost of generation of electricity and the consequently the cost of finished products likely to go up. In some states this is being allowed but most states have taken a stand that C form cannot be issued for purchase of diesel
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CST Act 1956 read with the CST rules read with the GST laws
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i) Electricity is Nil rated under GST but is an intermediate product and used in manufacture of final product on which GST is payable. Hence, purchase of Diesel should be permitted against Form C as Diesel, if still covered under CST Act and companies incur huge expenditure on generation costs which may ultimately increase the price of the finishedproduct.
States should also be persuaded not to with draw any benefits to companies on products like Natural Gas, HSD used in the course of business.
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5
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EOU units are required to calculate the amount of customs duty which have gone into finished product sold to Domestic tariff area.
Prior to GST, EOU units were paying Basic customs of 7.5% (concessional duty of 3.75% based on certain conditions). The amended notification requires that the EOU compute the Basic customs duty exemption on inputs which are used in the finished goods sold in Domestic Tariff area and pay the same to Government.
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Notification 52/2003-Cus dated. 31.3.2003
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The methodology of calculations have created issues and delay in shipments. Hence, the notification should be amended suitably to allow payment of a fixed percentage of duty.
It should also be clarified that for supplies to SEZ units/Developers/Deemed exports and merchant exporters, no duty exemption needs to be surrendered.
Also a facility of payment of such duty on a monthly basis should be provided in the notification.
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6
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Samples Manufactured in R&D units of Pharma companies are located in different locations. Samples manufactured or synthesised are transferred to Factories for further analysis/development. Under excise law, samples manufactured were exempted vide notification No 167/71-CE
Under GST such samples are now made taxable if they are sent to the company's own unit located in a different state.
R&D units also receives a lot of Goods or services on which input tax credits. Outward supplies are mostly for own manufacturing units and therefore, there would be a lot of accumulated input tax credit which needs to be refunded as the tax payable on the outward supply will be of lesser value.
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Earlier excise Notification 167/71-CE.
Entry No 2 of Schedule I to the CGST Act
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Samples are sent on daily basis and mostly by courier. They are very minor quantities and raising Tax invoices every time when such samples are being sent to own manufacturing units located in a different state has led to increase in the costs and time spent on such tax procedures. R&D units are also not equipped with commercial staff.
Hence, it is suggested that R&D units should be allowed to raise one Tax invoice at the end of the month for all samples dispatched by courier at the end of the month.
Alternatively, the samples manufactured in R&D should be exempted from GST with a scheme for refund of the accumulated credits and this will give a fillip to the R&D units in the country.
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7
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Clarity on Classification of the items like Rectified spirit/Industrial alcohol/Anhydrous alcohol/Pharma grade alcohol which are used in manufacture of Chemicals/Pharma products whether denatured or otherwise.
Post GST, except for Alcoholic liquor for human consumption, all other items are covered under GST.
However, there is misconception among industry that rectified spirit/industrial alcohol or undenatured alcohol which are used in Pharma/Chemical industry are not under GST
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HSN entry No 22072000
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A clear clarification may be issued to the extent that all these products are covered under GST and full input tax credits are eligible on such products.
It should be also be clarified that such products even if not denatured but are meant for non-potable purposes should be under GST only.
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8
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Animal nutrition products like poultry feed are exempted from payment of GST and has resulted in cost increase of the finished products in view of the non-availability of Input tax credits.
This also breaks the Input tax credit chain and smaller/unregistered vendors have an edge over the organised sector.
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Entry 102 of Notification 2/2017-Central tax (Rate)
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A nominal GST should be levied and the differential tax should be refunded to the manufacturers subject to passing on the benefit of reduced prices to the customers.
This will ensure that there is a level playing field.
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9
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Denatured Anhydrous alcohol/Ethanol (even though not potable) is being subject to all types of state excise duties, license fee, permit fees, export fees, import fee etc even though the product is covered under GST. This product is used by the oil companies for blending with petrol.
There is lot of ambiguity on the state's power to control this product. Oil companies depend hugely on indigenous distilleries for procurement of ethanol.
The cost of the Ethanol is going up in view of these levies which are not as per the law.
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State Excise Acts of UP, Delhi & Haryana
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Industry seeks that:
(i) No State excise control should be exercised on Denatured anhydrous alcohol/Power alcohol/Denatured ethanol.
(ii) No state levies like license fee, export fee, import fee, regulatory fee etc., on sale/supply of Ethanol for blending with petrol.
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10
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State of Uttar Pradesh levies Administrative charges of Rs.11 per quintal on sale of molasses under UP Shira Niyantran Adhinayam 1964. No clarity on applicability of such charges, post the implementation of GST. No input tax credit will be allowed on this resulting in cascading.
Since Molasses is covered under GST, such charges have to be subsumed in GST as credits are not permitted on such charges and this leads to increase in costs and cascading.
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Entry No 54 of List II to Schedule 7 of the Constitution
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Administrative charges are in the nature of tax as held by Supreme court of India.
Consequent to amendment of the Entry No 54 of State List, State has no power to levy administrative charges on Molasses.
State of UP should be persuaded through the GST council to drop this levy on Molasses as GST is already being levied at the rate of 28%. The administration fee is increasing the cost the chemicals and will lead increase in end products as well.
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11
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Input tax credit is allowed on inputs/Input services used in the course or furtherance of business. But credit is not being allowed on works contract services in the nature of construction of immoveable property. The word construction includes repairs, alteration, renovation etc.,
The above would lead to increase in costs as credit in respect of tax charged on goods/services used in normal repair to an office building/Factory building will be disallowed.
Similarly credit is not being allowed on canteen services in factories. (outdoor catering).
Similarly, credit is being denied on goods disposed of as free samples.
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Section 16 read with Section 17 of the CGST Act
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Industry is of the view that credit should be allowed on all items used in the office/factory. All goods and services used in office and factory are in the course or furtherance of business.
Similarly, in pharma and chemical industries small quantities of the products are being issued as samples to prospective customers (unrelated parties) for business purposes. While no tax is payable on free samples as there is no consideration, Input tax credit should not be denied on these samples.
These are potential areas of dispute
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12
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Reverse charge tax payments are suspended up to 31 3 2018.
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Section 9(4) of the CGST Act
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There are still many suppliers whose turnover is less than Rs.10 lakhs and make supplies to industry.
Hence, this provision should be permanently deleted from the Act.
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13
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In Pre GST regime, 100% CENVAT on Capital Goods was available unless such capital asset is completely used in the manufacture of exempted products. However in GST, credit reversal is also required on common capital goods used for supplying both taxable and non-taxable goods or goods used for business and non business purposes.
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Rule 43 of the In CGST Rules
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The process for reversal of credit is complicated and the rules for payment of interest as well.
It is requested this rule be amended and full credit may please be allowed on capital goods.
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14
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HSN code to be specified in the Tax invoice is at 4 digit level. However, for export purposes, the exporter has to still maintain 8 digit HSN. There is a need for parity on the same
Many schemes like MEIS are notified based on 8 digit classification. Hence, Export invoice/Shipping bill has to contain 8 digit classification.
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Section 31 read with Rule 46 of the CGST Act & Rules, Notification 12/2017-Central tax dt 28th June 2017
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4 Digit HSN should be allowed for both domestic and export purposes as well.
Similarly for services it should be clarified whether the HSN needs to be maintained at 4 or 6 digit level.
MEIS and other schemes should be allowed on the basis of 4 digits of HSN
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15
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Refund of taxes in respect of Inverted structure of Taxes in Pharma Industries. API is taxed at 18% whereas Dosage forms is taxed at 12%. The refund granted under Section 54(3)(ii) read with Rule 89(5) of the CGST Rules is only for a situation where goods are domestically sold.
Also Huge opening balance of Cenvat credit is lying in the books of pharma companies which has to refunded to the Pharma companies through a onetime scheme.
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Section 54 (3) (ii) of CGST Act read with Rule 89 (5) of the CGST Rules
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The Pharma industries should be allowed to claim refund of the accumulated credit at the end of the month after claiming the refund of IGST paid on exports.
Also Pharma companies have huge Cenvat credit balances on account of inverted duty structure in Pre-GST regime. Even though this amount was allowed to be transferred to GST regime to CGST credits, since the inverted tax structure continues in GST regime as well, there should a onetime scheme for refund of all accumulated carried forward credit.
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16
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IGST is being demanded on sales made in Bonded warehouses/tanks in Ports
Since IGST is being paid by importer at the time of filing the home consumption bill of entry, there is a double tax in case of bonded sales. Also the IGST paid is not allowed to be used to pay the IGST which is a part of customs duties
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Circular No 46/2017-Cus Dt 24th November 2017
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Government should withdraw the circular No 46/2017-Cus and grant exemption similar to High sea sales.
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17
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Excise department (CGST officials) areis passing orders sanctioning rebate claims for the pre GST period and is allowing re-credit in cases where rebate is eligible but cash refund cannot be given. This is not in line with Section 142 (3) of the CGST Act which clearly states that refund of any cenvat credit/duty etc., has to be sanctioned only in cash. Since such re-credit cannot be taken in the CGST electronic credit ledger and we have already filed our TRAN 1 forms, the amount sanctioned as re-credit becomes a cost.
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Section 142 (3) of the CGST Act
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Suitable instructions needs to be given to field formation to sanction the rebate claims fully in cash only and Also in respect of the amount already sanctioned in the form of re-credit, orders should be modified suo motto and refund sanctioned in cash.
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18
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Companies are required to issue a payment voucher in respect of payments made to unregistered suppliers. There is no logic behind this provision and this needs to be deleted from the law. These are additional compliances under the GST law. Companies have their own internal accounting payment vouchers which can be produced at the time of audits
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Section 31)3)(g) of the CGST Act
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Any additional compliance requirements is hurting the industry at this point of time. Also payment voucher is not required to be disclosed in the GSTR returns. Hence this provision should be deleted from the Act.
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19
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Place of supply in respect of services provided by the Hotels/Warehouses etc., is the location where the immoveable property is located. Hence, if a particular recipient is not having a registration in the said state where the immoveable property is located, the GST charged by the said services providers is not available as credit.
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Section 13(4) of the IGST Act
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Many companies hire warehouses in the ports and they do not have registration in the said states where ports are located. Hence Provision to be amended and if registration of the recipient is not there in the particular state where immoveable property is located, then the supplier of the services should be allowed to charge IGST in the invoices.
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20
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In respect of services where GST is payable on reverse charge basis, self-invoice is required to be raised for availment of GST credit. Under the earlier service tax law, credit was allowed based on Challans. Work has increased several manifold because of this provision and created lot of confusion
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Section 31 (3) (f) of the CGST Act
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This provision should be done away with and credit should be allowed on the basis of the invoices raised by the service providers (who are unregistered) which can be captured in the GSTR 2 returns by the service recipient.
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