GST Council to rank firms on tax payment track record Jindal Stainless said to have raised ₹800 crore in priority funding
NEWDELHI: Businesses will soon be able to know which company they should not deal with if tax hassles are to be avoided.
Federal indirect tax body the Goods and Service Tax (GST) Council is planning to implement from January a ranking of businesses based on their track record of tax payments.
This ranking will enable businesses to judge how likely a material or service supplier will default on its tax payment obligations which could result in blockage of tax rebates if these items are sourced from them, an official who attends Council meetings said on condition of anonymity.
The ranking system is being worked out as a solution to complaints from firms that the tax rebates due to them are getting blocked for no fault of theirs since their suppliers who charged taxinclusive prices have not remitted taxes to the government.
Although tax authorities rec- ognise that it is unfair to deny rebate to a company which has already paid the indirect tax to its vendor, they are unable to grant the benefit as it will hurt the exchequer. Firstly, the tax that ought to have come in from one of the parties to a transaction hasn’t been received and secondly, the other party may claim refund from the government of what has been paid to its vendor.
The Council believes the best way is to encourage businesses to avoid dealing with crooks.
Experts said the ranking system may have a flip side or two. While it will facilitate a company to know the compliance level of its vendors, it is possible that businesses that have not paid certain taxes due to genuine alternative interpretation of law may get a poor score. MUMBAI: Jindal Stainless Ltd (JSL), India’s largest stainless steel producer, has secured ₹800 crore in so-called priority funding from L&T Finance Ltd, two people aware of the development said. Priority funding allows a new lender to come in on the promise that it will be accorded higher priority during the payout phase, once a turnround is effected or the firm is liquidated.
In such transactions, existing lenders may cede charge on the assets in favour of a new lender, which has the first right on the company’s cash flows.
The funds will be used towards working capital needs and for capacity expansion, the people cited above said on condition of anonymity.
JSL, which has been in financial distress for the past few years returned to profitability in the third quarter of FY17, posting a net profit of ₹40.43 crore from a ₹134 crore loss a year earlier. In the quarter ended June 30, JSL posted a net profit of ₹41.50 crore on an income of ₹2,203.86 crore. It reported an income of ₹2,157.08 crore during the year-ago period.
JSL underwent corporate debt restructuring (CDR) in 2009 and since then, has been trying to cut debt and reduce interest costs. In 2014, it approached lenders with an asset monetisation plan, aiming to unlock the value of its operations and improve net worth.
Emails sent to JSL, L&T Finance remained unanswered till press time.