GST Rates Revised for 27 Goods and 12 Services

GST Rate Revisions as on 6 October 2017

Good/Service Present GST Rate Revised GST Rate
Duty credit scrips 5%  Nil
Mangoes sliced dried  12%  5%
Khakra and plain chapati / roti
Namkeens other than those put up in unit container and, –
(a)bearing a registered brand name; or
(b) bearing a brand name on which an actionable claim or enforceable right in a court of law is available [other than those where any actionable claim or enforceable right in respect of such brand name has been foregone voluntarily
Ayurvedic, Unani, Siddha, Homeopathy medicines, other than those bearing a brand name
Paper waste or scrap
Real Zari
Food preparations put up in unit containers and intended for free distribution to  economically  weaker sections of the society under a  programme duly approved by the Central Government or any State Government, subject to specified conditions  18%  5%
Plastic waste, parings or scrap
Rubber  waste, parings or scrap
Cullet or other waste or Scrap of Glass
Biomass briquettes
Hard Rubber waste or scrap 28% 5%
Sewing thread of manmade filaments, whether or not put up for retail sale  18%  12%
All synthetic filament yarn, such as nylon, polyester, acrylic, etc.
All artificial filament yarn, such as viscose rayon, cuprammonium
Sewing thread of manmade staple fibres
Yarn of manmade staple fibres
Poster Colour  28%  18%
Modelling paste for children amusement
All goods falling under heading 6802 [other than those of marble and granite or those which attract 12% GST]
Fittings for loose-leaf binders or files, letter clips, letter corners, paper clips, indexing tags and similar office articles, of base metal; staples in strips (for example, for offices, upholstery, packaging), of base metal
Plain Shaft Bearing
Parts suitable for use solely or principally with fixed Speed Diesel Engines of power not exceeding 15HP
Parts suitable for use solely or principally with power driven pumps primarily designed for handling water, namely, centrifugal pumps (horizontal and vertical), deep tube-well turbine pumps, submersible pumps, axial flow and mixed flow vertical pumps
E-Waste 28%/18% 5%
Imposing GST only on the net quantity of superior kerosene oil [SKO] retained for the manufacture of Linear Alkyl Benzene [LAB] 18% 18% (Clarification to be issued)

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6 Tips to Increase Your Working Capital

Suresh Tanwar owns a flourishing logistics, packaging, and transport business. He handles nearly all aspects of his company, from sales, marketing, operations, and customer service, to finances. Sooner or later, finance, especially the lack of working capital, tends to become a challenge. Suresh needs to invest in his growing business, like any other Small and Medium Enterprise (SME).

This scenario, common among India’s SMEs, calls for smart management of available monetary resources, ensuring that company has the required business capital to keep operations running . After all, the survival of a business is directly dependent on its ability to seize the next growth opportunity. Businesses also inevitably face situations of sudden, unforeseen expenses. If these working capital needs are not duly addressed, business operations can be affected and profit margins can drop.

Here are 7 tips for business owners like Suresh Tanwar to increase their working capital.

1. Try working capital financing

Procurement of a working capital loan through conventional banks is largely prohibitive, for several reasons. Often, small business owners have no collateral to offer against the loan being sought. This is a major reason why traditional financiers tend to reject loan applications from SMEs. Inflexible lending policies, laborious paperwork, and extremely slow disbursement times by banks also act as deterrents.

Faced with the recurring business costs, and the inability to acquire business capital via traditional bank loans and overdrafts, SMEs are quite likely to find themselves in a tight corner.

Working capital financing offers a constructive way out. An increasing number of SMEs are now opting to meet their working capital needs through lenders other than banks and traditional lending institutions. Capital Float is a digital finance company that funds small businesses. We have assisted manufacturers, B2B service providers, buyers, distributors, travel agents, and many other businesses with easy access to timely credit.

A range of custom financial products offered by Capital Float can help solve the problem of increasing working capital. Flexible, fast, friendly, and affordable, these loan offerings ensure borrowers have access to the requisite amount of business capital, right when they need it.

2.Explore e-procurement

The B2B e-commerce segment is seeing exponential growth in India. A report suggests that the growing presence of B2B e-commerce platforms has offered SMEs access to competitive pricing and has also reduced inventory costs by 40%. This serves to ease the business’ working capital needs considerably.

SMEs have also benefitted greatly from being connected digitally with buyers and sellers through e-procurement. Elimination of middlemen and their related costs means that they earn more revenue. Besides, a digital platform offers SMEs an added advantage of being able to negotiate with a wider base of suppliers. Finally, the process of e-procurement curtails spending.

3.Proactively manage inventory

SMEs need to replenish their inventory constantly. Earlier, there was a need to hold vast amounts of stock, putting pressure on working capital. Miscommunication within departments would also lead to stockpiling and increased costs.

However, rigorous stock checks coupled with e-procurement can bring down such needless expenditure. This greatly eases the burden on working capital. Active management of inventory eliminates the need for advance buying and helps you move towards just-in-time delivery of goods. Efficient inventory management thus holds the key to increasing business capital.

4.Keep track of collections

Businesses often face issues of delayed payments from customers. A smart business manager needs to get past excuses for delayed payments. Creating accurate and timely invoices goes a long way in avoiding deferred returns. Such receivables billing also helps avoid bad debts and cash crunches. Rigorous follow-ups on billing and collections will have a positive effect on the working capital as well.

5.Keeping suppliers happy

Timely payment to suppliers helps develop better working relationships, and works wonders for the business. Besides, it enables SMEs to negotiate better deals. Not being able to pay vendors on time results in a strained working relationship, which could cause delays in deliveries and poor quality of services. Naturally, this can wreak havoc on a business as delays and operational inefficiencies eat into working capital.

Keeping suppliers happy is likely to have added benefits for SMEs in the form of discounts that largely serve to ease the need for working capital. Courtesy early payment, bulk supply and/or regular orders become easier, ensuring that business capital isn’t affected, adding that much more to the liquidity of funds.

6.Keep expenses transparent

It is no mean task to run a business smoothly, especially when it comes to managing finances and having to put aside working capital to seize the next big opportunity. Even smaller hidden expenses can have a cumulative negative impact on an enterprise’s cash flow. Making expenses more visible therefore is an intelligent way of managing finances. This includes setting clear rules in areas such as travel and accommodation, deploying necessary tools to monitor expense claims, and so on.

Running into financial troubles is a given for any enterprise, big or small. How well a cash crunch is handled depends on how much cash a business has in its kitty for unexpected expenses. A financing firm like Capital Float enables enterprises across industries with quick and easy access to funds, to tide over times like these.

A trustworthy partner will walk that extra mile with people like Suresh Tanwar, and help them fulfill their entrepreneurial dreams. Capital Float has been serving SMEs for over 3 years, providing affordable loans, anytime, anywhere, in a manner that is customized to an SME’s business needs.

Oct 24, 2018

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Implications of GST on Manufacturing

GST — the unified tax system that is set to revolutionize indirect taxation in India— is finally here. Some of its key proposed advantages are streamlining of tax payments, reduction in tax frauds, and ease of doing business. Here is a look at how these will play out in the manufacturing domain.

Make In India & Manufacturing

The manufacturing sector in India contributes a mere 16% to the overall GDP. However, the potential to make this a high-growth and high-GDP sector is huge. The “Make in India” campaign by Prime Minister Narendra Modi makes this possibility real, by giving impetus to the sector. Furthermore, PwC estimates that India will become the fifth largest manufacturing country in the world by the end of 2020. It would be interesting to know how the Goods and Services Tax or GST impacts this roadmap.

Impact of GST on Manufacturing

GST is one of the key policy changes that will have a direct impact on manufacturing establishments. So far, the existing complex tax structure has been a dampener, resulting in the slow growth of the sector. GST is expected to liberate the sector by unifying tax regimes across states.

Overall, GST is expected to have a positive impact and boost manufacturing.  Here is why:

  • Removal of multiple valuations will create simplification: The old tax regime subjects manufactured goods to excise duty, which is calculated differently in different states. While some states calculate excise duty based on transaction value, others calculate it based on quantity. Most manufactured goods’ excise duty is currently considered on MRP valuation. This creates great confusion in valuation methods. GST will usher in an era of transaction-based valuation, making calculation of tax much simpler for the manufacturer.
  • Entry tax subsummation will reduce cost of production: The subsuming of the entry tax for inter-state transfers is a key reason for reducing cost of goods and services. For example, a supplier of cement from Maharashtra to Karnataka was earlier required to pay entry tax when the supply crossed the interstate border. For Karnataka, the entry tax rate was 5% of the value of the goods. The supplier would pass on this additional cost to the customer, resulting in increase in selling price. With entry tax being subsumed, the supplier need not pay the entry tax rate amount and consequently, not charge the customer this amount either.
  • Improved cash flows: Under the new tax laws, manufacturers can claim input tax credit on input goods, which seems to be a positive sign for cash flow. SMEs are keenly observing the time difference between input tax credit and the credit being available.
  • Single registration process will provide ease of registration: The old regime required manufacturers to register each manufacturing facility separately, even those in the same state. GST will simplify the plant registration process by allowing single registration for all manufacturing entities within the same state. Previously, if a brick manufacturer had factories in Bangalore, Hubli and Dharwad, each unit had to be registered separately. Under GST, all of these factories would be jointly registered under the state of Karnataka. Of course, different state-entities will require separate registrations under GST too.
  • Removal of cascading will lead to lower cost-to-consumer: The old tax regime does not allow manufacturers to claim tax credit on inter-state transaction taxes such as octroi, central sales tax, entry tax etc. This results in cascading of taxes—an extra cost to the manufacturing company. Manufacturers end up passing on these extra costs to the consumer. The unified GST regime will eliminate multiple taxes and thus lower cost of production; this, in turn, will mean lower pricing for the consumer. For example, prior to 1 July 2017, SMEs in manufacturing used to pay Excise Duty, Central State Tax and sometimes VAT too at 12.5%, 2% and 5.5% respectively. With GST in effect, they are required to pay 18% in taxes.
  • Restructuring of supply chain: To align with the GST law, businesses will be required to realign their supply chains. However, this is a blessing in disguise. Till date, most supply chain structuring has been designed around how to manage tax regimes. With a single tax regime, this will change, and supply chain structures will focus on driving business efficiencies. An example is that of warehousing. The old regime demands that warehouse management be based on arbitrage between varying VAT rates across states. This is expected to change to bring in economic efficiencies and more customer-centricity going ahead.

Manufacturers, however, are concerned about the following aspects:

  • Increase in immediate working capital requirements: Branch transfers and depo transfers will be treated as taxable under GST; IGST will be applicable on these transfers. This increases the requirement for immediate working capital. Another reason for increased working capital requirements is that the receipt of advance is taxable as per GST rules. Also, stock transfers are treated as “supply” and hence are taxable under the GST regime.
  • More stringent and elaborate transaction management: GST aims to achieve better tax compliance. To make this possible, manufacturers must work towards streamlining existing transactions; this means additional resources and costs. For example, under GST, credit in respect to an invoice can be taken only up to one year of the invoice date. Also, the provision of reverse charge means that the liability to pay tax falls on the recipient of goods/services instead of the supplier. The payment of reverse charge is dependent on the time of supply (30 days from the date of issue of invoice by the supplier in case of goods and 60 days for services).These changes will require manufacturers to carefully assess and track their supply processes, especially the timelines. This may mean hiring a better skilled compliance workforce, and better systems and software. More legal considerations will also mean more costs.
  • Lack of clarity on local exemptions: Despite GST being proposed as a unifying platform for indirect tax, all the components for manufacturing are not yet clear. One such area is localized area-based exemptions. The old structure provides certain exemptions for certain goods in specific states (for example the North East or hilly states). Under GST, most of these exemptions are likely to be removed, resulting in a negative cost-impact on these manufacturers. Such companies must reassess their financial position in view of such likely changes.

Overall, one can say that the impact of GST on the manufacturing sector is positive. It provides a unique opportunity to streamline business operations to become more compliance and profitability-oriented, rather than tax-oriented. It puts power in the hands of business leaders to bring about positive change and steer their enterprises on a growth path, powered by GST-compliance.

Read more of our content on GST by clicking here.

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Oct 24, 2018

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We want to be in 100 cities in the next 12 to 18 months: Gaurav Hinduja & Sashank Rishyasringa – Business Standard

Written by Alnoor Peermohamed

Bengaluru-based startup Capital Float, which lends to small and medium enterprises (SMEs), plans to grow its presence from 40 cities to a 100 cities in the next 12 to 18 months. While sellers on e-commerce platforms make up a large chunk of whom the company lends to, it says it will focus more on tier 2 and tier 3 businesses, which might be solely offline but have the potential to grow massively. Gaurav Hinduja and Sashank Rishyasringa, founders of Capital Floatalk to Alnoor Peermohamed in the company’s plans. Edited excerpts:

The e-commerce segment is fairly new and there’s bound to be volatility. How do you think that might impact your business?

Hinduja: E-commerce merchants are the core to what we do and it’s an important vertical, but we’ve also diversified outside.

We do loans to a lot traditional SMEs — brick and mortar, manufacturing and service type of organisations because that segment is 30-40 million, whereas e-commerce is 100-200 thousand. I think almost all sellers sell on all marketplaces. And when we underwrite the business, we look at a combination of things. Sales across marketplaces, and how does that look across his offline sales as well, because a lot of sell offline. We look at a holistic view of the business before we actually decide to give the person a loan.

Data on sellers is harder to come by in the offline world. How are you tackling that?

Rishyasringa: You’ll be surprised as to how much data is available on any business in India and that’s very much a big part of the IP we’ve built since the early days. I think what we’ve been able to do is build a lot of pipes for data sources such as Aadhaar, NSDL, and a whole host of other government and legal databases.

The borrower is also able to give us access to a lot of data that we can then use in deciding what terms and what kind of loan to give them. For example, social media is a very interesting input that we consider in our underwriting model.

On the online piece, yes there is some additional data which helps with the speed of lending. So today we give real time approvals to e-commerce sellers in 10 to 15 minutes.

What is your primary source of raising capital?

Hinduja: Like most financial institutions we obviously raise equity right, and we have raised a little over Rs 100 crore from some of the best VCs, but also we have raised debt.

What are your sort of default rates? How are you working to keep them low?

Hinduja: Ironically, a lot of the bank’s defaulters are not coming from the SME sector. They’re actually coming from large borrowers. A lot of what we do is the underwriting, through different data, and we do that to keep our credit costs, which are defaults, et cetera, really low.

Today they are very low, I’d say 80-90 per cent better than any NBFC that lends to SMEs out there. That said, it is still early days. This is a lending business at the end of the day, there are going to be defaults.

What do you think will happen when guys like Alibaba increase their focus in India? Where do you fit in?

Rishyasringa: B2B e-commerce has the potential to be far larger than B2C e-commerce in India. And we think what Alibaba has been able to achieve in China and in India with its SME base for exporters and importers is tremendous.

We are partners with Alibaba. You can infer from that, that we’re already active in the space and its part of our strategy.

How is this partnership going to work?

Hinduja: They’re going to look at us to help get more SMEs to become active Alibaba users. But at the same time a lot of their SME merchant base will require financing, whether it’s for domestic transactions, or cross border transactions. They will look at a financer that really has the speed and the agility to meet the SMEs requirements in that sense.

What are your growth plans?

Hinduja: We want to be in 100 cities in the next 12 to 18 months and obviously a lot of that growth is going to come from tier 2 and tier 3 towns. Because banks really don’t have a presence there.

While people and SMEs in the top 8-10 cities can still access a bank branch, bank branch penetration in those tier 2 tier 3 towns is almost negligible. I think that’s where we’ll see a lot of growth and through the make in India and e-commerce stuff you’ll see a lot of business growth in those cities as well.

What sort of regulatory hurdles do you see yourselves having to cross?

Rishyasringa: Actually in the financial services space I think we’ve got a very proactive regulator and what you’re seeing in these payment banks, small finance banks, e-KYC, I think these are all steps in the right direction and we obviously hope that we continue to see these steps.

News piece sourced from Business Standard. Read the full piece here.

Oct 24, 2018