Changes in the GST Taxation System – with effect from 15 November 2017

Composition Scheme Changes

  • GST rate at 1% for manufacturers and traders
  • Composition scheme limit to be extended to ₹1.5 crore
  • Composition tax of 1% on turnover of taxable goods
  • Interstate sales are not permissible for composition dealers. Input tax benefit not allowed.

GST Filing Extensions

GSTR form Previous Due Date Revised Due Date
GSTR-5 (for Non-Residents) Before 20th August 2017 or & days from date of registration 15th December 2017
GSTR-4 (for Composition Dealers) 18th October 2017 24th December 2017
GSTR-6 (for Input Service Distributors) 13th August 2017 31st December 2017
ITC-04 (for the quarter of July-September) 25th October 2017 31st December 2017
TRAN-1 30th September 2017 31st December 2017

Taxpayer Relief Measures

  • Reduced Late Fee: For delay in the filing of NIL returns, late fee will be reduced from ₹200 per day to ₹20 per day.
  • Credit of Late Fee: For filing of GSTR-3B for the months of July, August and September, late fee has been waived. Any late fee paid will be credited back in Electronic Cash Ledger under ‘Tax’ and can be utilized for GST payments.
  • Manual filing for ‘Advance Ruling’ to be introduced
  • Export of services to Nepal and Bhutan are now exempt from GST. Input tax credit, if paid, can be claimed for refund.
  • Taxpayers with turnover less than ₹1 crore should file invoices every month, while those with turnover greater than ₹1 crore should file invoices every quarter.

Revised GST Rates for 178 Goods and Services

Goods/Services Present GST Rates Revised GST Rates
Guar meal, Khandsari sugar, Dried or frozen vegetables, Uranium ore concentrate, Hop cones, Unworked coconut shells 5% Nil
Desiccated coconut, Idli Dosa Batter, Coir products, Fly ash bricks, Worn clothes or rags, Fishing hooks, Leather or chamois after tanning or crusting, Nets of textile material, Restaurants (non-Ac) 12% 5%
Potato flour, Chutney powder, Sulphur recovered as by-product in refining of crude oil, Specified parts of aircraft, Scientific and technical apparatus, Computer software and accessories, Restaurants (AC) 18% 5%
Condensed milk, Diabetic foods, Refined sugar, Medicinal grade oxygen, Printing, writing and drawing inks, Pasta, Curry paste, Mayonnaise and salad dressings, Mixed seasoning, Parts of agricultural & sewing machinery, Bamboo and cane furniture, Frames and mountings for spectacles, Hand bags and shopping bags of cotton and jute 18% 12%
Wet grinders, Tanks and other armoured fighting vehicles 28% 12%
Chewing gum, Chocolates, Preparation of facial make-up, Preparations for oral hygiene, Toothpaste, Shaving and after-shave items, Shampoo, Deodorants, Detergents, Granite and marble, Handmade furniture, Electric switches, Watches, Sanitary ware, Cases, Cutlery, Refrigerators, Flavoured drinks, Water heaters, Fire extinguishers, Printers, Automatic goods vending machine, Transmission shafts and cranks, Fork-lift trucks, Self-propelled bulldozers, Batteries, Static converters, Vacuum cleaners, Cameras and projectors, Microscopes, Musical instruments 28% 18%

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Oct 24, 2018

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Impact of GST on Your Day to Day Business

The Goods and Services Tax or GST goes live on July 1, 2017, but the process of consolidation and enrolment has already begun. Aiming to standardise indirect taxation in the country as far as goods and services are concerned, the GST will have a multi-fold and direct impact on the workings of businesses, whether large corporate houses or SMEs.

A quick overview of GST will help businesses understand its implications play to its advantage.

About GST

GST is a standardisation of the indirect taxation regime across the nation, leading to subsuming of many earlier state and central tax regime laws. Now, goods and services will be taxed under four basic slabs—5%, 12%, 18% or 28%—creating a new norm in indirect taxation. Traditionally, indirect taxes have had a very significant impact on businesses, particularly on their working capital. A number of taxes such as VAT, Service Tax, Excise Tax and others have resulted in huge contributions to the government and in effect, a huge expense for businesses. The hidden nature of indirect taxes, often spreading across multiple stages of the product cycle, has been a significant drain on working capital. Typically, the proportion of indirect taxes is significantly more in tax collections in developing countries, as compared to developed countries, where the share of direct taxation is significantly higher.

With the implementation of the GST, tax buckets are set to change, as also the way of doing business, as the cash outflow and timelines are about to be significantly affected. Working capital is the lifeline of a business, one that keeps it up and running. Especially for SMEs, it helps carry on day-to-day operations, which are critical to business continuity and success.

Here are some key GST changes that will directly affect your business and working capital flows.

  1. Input tax credit changes: As per the existing taxation system, any tax paid on a business expense that is not directly related to taxable sales is not available as credit. For example, any tax paid on advertising expenses will not be available as credit. GST has a new concept called the “Furtherance of Business” under which it allows credit of any kind of input for business to be “used or intended to be used in the course of or for the furtherance of business”. Now, a businessman can claim credit for tax paid on advertising services as well, giving the businessman significant leeway. The positive outcome is that cost of operations will greatly reduce, and net margins will increase, thereby bettering the working capital flow of the business, and perhaps the line of credit in the future.
  2. Claims due to inverted duty structure: An inverted duty structure is one where inputs are taxed higher than outputs i.e., raw material excise duty is higher (12.5%) than finished goods (6%), leading to a situation where the excess i.e., 6.5% is unused and gets accumulated. Under the current regime, this excess is not refundable. With the introduction of GST, businesses can now claim the unutilized input tax credit accumulated due to inverted duty structure. This, coupled with a speedy claims process, is a boon to boost the working capital of businesses.
  3. Timeliness of input tax credit: Currently, the input credit that a businessman avails is not captured in real-time, or in other words, in line with the current tax liability of the supplier. With GST, the input tax credit amount will depend on the compliance level of the supplier, making it compulsory for the supplier to declare the outward supplies along with the tax payment.  In a way, you might be responsible for your supplier’s failure to furnish valid returns. This may mean a dip in your cash flows since the input credit tax that you have claimed will be reversed and you will be expected to pay interest too, apart from losing out on the credit. GST will thus mandate businesses to manage their vendors very effectively. Review your current vendors and continuously monitor compliance levels to avoid this concern.
  4. Advance tax payments: Under the GST regime, tax needs to be paid on advance receipt dates. This is a major change, since so far this was applicable to only service tax under the current system. Now, if an advance is received against supply at a later date, the tax is liable to be paid on the date of advance receipt. The matter becomes worrisome since even though the business pays tax in advance, it cannot be claimed under the bucket of input tax credit immediately. It can be availed only once the goods or services are received.
  5. Taxation of stock transfers: The current VAT rules do not treat stock transfers as “goods” or “services”. However, with the GST, this changes—stock transfers are included under the category of goods/services and are taxable. This change will directly impact companies’ cash flows because the tax is to be paid on the date of stock transfer, whereas input tax credit can be availed of on the date of stock liquidation. How the working capital holds up in the interim period can be a crucial element to maintaining the working capital levels of the company
  6. The impact of location in offsetting credit: The prevailing Service Tax regime allows for centralised, pan-India registration of business. As a result, there are no restrictions on availing input tax credit across locations. However, under GST, different state entities need to be registered separately. These will be under varying jurisdictions depending on whether they come under the Central GST Bill, Integrated GST Bill or the Union Territory GST Bill. There are certain restrictions to offset a Central GST tax with an Integrated GST tax and so on. This may create difficulties in offsetting tax input credits across locations. For example, you may not be able to offset tax liabilities of one state branch with another state branch. Your liquidity may not be useful, even though it is available, creating an undesirable working capital situation.
  7. It is clear that businesses will need to exert more caution as they transition to GST. A detailed scrutiny of current tax commitments and the impact of the four bills depending on operational locations must be done at the outset to ensure healthy levels of working capital. It is also recommended to explore opportunities for availing working capital finance, or options for a line of credit by looking for the latest financing products such as those offered by Capital Float. Our customised, innovative loan offerings include term finance and online seller finance among others to ease working capital woes that SMEs routinely face. Click here for more.

Oct 24, 2018

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The Great Indian Finance Festival (GIFF) 2017

The Great Indian Finance Festival or GIFF 2017 is an online initiative by Capital Float to offer working capital loans to MSMEs across different sectors in the country. GIFF aspires to reach out to over 10 million SMEs by offering lucrative offers on working capital finance, in a bid to bridge the credit gap that small businesses continue to be challenged by. Over the next three months, starting July 1, 2017, GIFF kicks off a one-of-its-kind loan festival that will provide Indian SMEs with the working capital support they need to diversify and scale up their businesses.

Working Capital Loans
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Up to Rs. 10,000 PayTM gold for every loan on offer Three Long Months
Jul 1 – Sep 30, 2017
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At GIFF 2017, you can get access to quickly disbursed, flexible, short-term loans that are typically used for the purchase of inventory, servicing new orders or optimising cash cycles. You can apply online in minutes, select desired repayment terms and receive funds in your bank account in as little as 3 days.

Products & Features:

During GIFF 2017, we will be providing three of our loan products at interest rates starting 16%:

Merchant Cash Advance Term Loan Online Seller Finance
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Flash Sales:

In addition to the three-month long festival, watch out for short ‘Flash Sales’ throughout GIFF 2017. A flash sale lasts for three days, and you can earn up to 10,000 in PayTM gold!. Each product will feature a flash sale of its own, so be sure to visit the GIFF website regularly!

Application Process:

The entire process at GIFF 2017 is online. You need to fill up an online application and submit all the relevant documentation. If you meet the eligibility criteria and your paperwork is correct, your application can be approved within a few hours. The best part is that the loan amount will be credited to the bank account within 72 hours of approval.

GIFF 2017 Application Process

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The first step is to fill up basic details about yourself and the company such as the registered name of your enterprise, years of operation, type of company (private limited/partnership/proprietorship/unlisted), company turnover and loan amount required in the online application form. Next, upload relevant documents on the website. These documents or paperwork are necessary to demonstrate your creditworthiness and ability to repay.

Capital Float leverages technology such as big data analytics and proprietary algorithms to make quick lending decisions based on the verifiable data you have provided. Over the years, the technology and intelligence we deployed have ensured better decision-making and quick disbursal of loans.

GIFF 2017 and the  festive season

A recent Nielsen’s global consumer confidence index report showed that India’s consumer confidence score rose to the highest it’s ever been in the last 10 years. This swing in consumer sentiment even made Nielsen proclaim India as ‘a nation of determined optimists’. So, as we head into a period of positive consumer sentiment and with many major festivals coming up, the timing seems perfect for SMEs to think big.

Even though we Indians have festivals all round the year, consumer spending spikes from July to December. Traditionally, Ganesh Chaturthi, Onam, Durga Puja, Dussehra, Diwali and Christmas have been occasions for large spending by the Indian consumer. In 2016, Indian consumers spent an estimated amount of Rs 12,000 crore ($1.8 billion) online during Diwali alone. The festive season is also when the marketers spend almost 40% of their annual budget in attracting customers and boosting sales by 20% – 25%.

Timing is everything:

Cashing in on an opportunity at the right time is critical for SMEs to prosper. The upcoming festive season and a high consumer confidence score is a lucrative opportunity that smart SMEs will want to leverage for growth and expansion. Over the next few months, we will be providing our impactful working capital finance products at discounted interest rates with our esteemed promise of 3-day disbursal. Tap into this opportunity and propel your enterprise towards a busy season ahead, equipped with all that you need to succeed and #BreakLimits.

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