GST tweak likely to see retrospective amendment return
NEW DELHI: The government is likely to retrospectively amend laws governing the goods and services tax (GST) to deny transitional credit to taxpayers against cesses levied in the earlier indirect tax regime.
If it goes through with its plan, the Narendra Modi government will be going back on its promise of not making retrospective amendments to tax laws that have an adverse impact on taxpayers.
The proposed amendment to the GST law seeks to explicitly exclude cesses levied in a preGST regime from allowable transitional credit that can be claimed by companies. Under the transitional credit provision, companies were allowed to claim tax credit against levies such as value added tax and service tax on stock purchased before implementation of GST for a limited period.
Many companies availed the transitional credit facility seeking input tax credit also for cesses such as the Krishi Kalyan cess paid in the pre-gst regime through the TRAN-1 form.
However, the central government doesn’t want to give credit against the cesses. Mint could not ascertain the exact amount of transitional credit claimed against cesses.
It accordingly proposes to specifically amend the transitional provision in the GST law to only allow input tax credit against eligible duties and insert an explanation excluding cesses from the list of eligible duties. The amendments will be tabled in the upcoming monsoon session of Parliament beginning July 18.
“Excluding cesses from transitional credit will be the only amendment that will be retrospective as the transitional Amending the GST law to disallow transitional credit against cesses levied in earlier regime
The transitional credit is for the period before and the credit claims have already been made by companies through TRAN-1 form
In the upcoming monsoon session of Parliament, which begins on
claims have already been filed through the TRAN-1 form. None of the other amendments proposed to the GST laws are retrospective,” said a government official, who did not want to be named.companies had claimed nearly ₹65,000 crore in transitional credit by mid-september, prompting the Central Board of Indirect Taxes and Customs (CBIC) to review the claims. CBIC asked taxpayers to file revised claim forms by December 27 or face action for what they believe are exaggerated claims. It has started the process of phase-wise examination of some of the highest transitional credit claims.
CBIC also warned taxpayers not to utilise disputed transitional credit against GST liability and said that it will recover the amount with interest and penalty. “Such an amendment will have a financial impact on the business as the tax liability will increase. Industry expected that the cesses that were creditable in the pre-gst regime will be creditable in the GST regime as well. We could see advance rulings or the companies approaching courts,” said Suresh Rohira, Partner, Grant Thornton India Llp. MUMBAI: Publicly traded firms in India handed out the biggest dividends in at least 10 years during 2017-18 as investment opportunities to expand and grow dried up, a analysis showed.
Dividend payout ratio—dividends as a share of earnings—of 457 companies on the BSE 500 index hit 39.6% in 2017-18, more than double the previous year’s 16.6%, according to data compiled by Capitaline. The ratio was the highest since 23.19% in 2008-09, the earliest year for which data is available. A higher dividend payout ratio typically signals inability to find suitable investment options to expand, increase capacity or make acquisitions, prompting firms to hand out surplus cash to shareholders.
According to Vinod Karki, vice-president, strategy, at ICICI Securities Ltd, dividend payouts typically rise when cash piles up without corresponding investment opportunities. “Since capex recovery has not picked up in India, companies are piling on cash. Capacity utilisation is still low. Return on capital is still not good for companies to generate spreads over their cost of capital. Both return on capital and return on equity of India Inc. have bottomed out in the past two-three years, but it is not yet that good for companies to get attracted to invest.” A July 3 ICICI Securities report by Karki and Siddharth Gupta said 3,500 listed non-financial Indian firms saw a rise in cash and cash equivalents to ₹15.1 lakh crore in FY18 from ₹14.7 lakh crore in FY17.
Investors also see bigger dividends as indicating a firm’s strength and the management’s positive expectations for future earnings.