In the previous post, we covered the Make in India initiative and how it could affect SME’s along with other expectations from the Union Budget 2015. Moving forward, let’s talk about the much-awaited Goods and Service tax.
Goods and Service tax roll out date
Though no GST implementation date has been announced, however commitment to introduce GST has been affirmed. FM hopes to resolve pending matters so as to be able to approve the legislative scheme paving way for early introduction of GST.
More specifically, factors like the introduction of the Goods and Service Tax (GST), Foreign Direct Investment (FDI) in retail along with the need for transparency in action, accountability of programs and funds and dependable governance have been pending topics over the past Budgets.
Lack of commitment from the previous government over the past Budgets continues to reduce confidence of SMEs to explore and invest aggressively to expand and grow revenue. In addition, the new government must also action a program to promote and support entrepreneurship – this will add to the domestic economy on multiple levels, including adding muscle to the country’s Intellectual Property (IP).
Impact of GST on SMEs In order for SMEs to compete with large scale enterprises and other global counterparts, it is important that they are provided easy and affordable opportunities to obtain credit.
With limited working capital, key for SMEs is low cost finance that is available from public sector banks. In order to retain growth for SMEs, the government must work towards establishing an environment that simplifies access to finance and creates transparency in how banks and credit agencies decide terms.
Last but not the least, offering clarity on introduction of Goods and Services Tax (GST) will ensure all active in the ecosystem can plan the migration smoothly.
Clarity on MAT The industry chamber demanded that investment allowance should be extended to the infrastructure sector to further spur investment activity in the economy. Further infrastructure companies should be exempted from paying the Minimum Alternate Tax (MAT).
“MAT on SEZs should be abolished. Similarly, the government should do away with the dividend distribution tax at SPV (Special Purpose Vehicle) level to make REITs attractive,” said one of the members in the CII delegation.
Income tax reliefs for Individuals Even as income-tax rates for individuals remain unchanged, the exemption limit was increased by INR 50,000 from INR 200,000 to INR 250,000. Impact of GST on CAs and SMBs The Institute of Chartered Accountants of India (ICAI) is serious on its role as India prepares to usher in the goods and services tax (GST).
Apart from seeking inputs from various users such as traders, commerce organizations and associations, ICAI has also asked its chartered accountant members to conduct independent studies on the net financial gains or losses that each state across the country would end up once GST becomes a reality.
Sharing its view with TOI here, ICAI president G Ramaswamy said while some states are willing to implement GST, other states have reservations about it. State finance ministers need to be told whether they are gaining or losing (revenue) post GST, Ramaswamy said, adding this is where a study becomes important.
Apart from requesting members to help with the study, ICAI is organizing workshops to educate all concerned on GST, he said. According to another CA firm, a ‘flawless’ GST in the context of the federal structure, which would optimize efficiency, equity and effectiveness. The ‘flawless’ GST is designed as a consumption type destination VAT based on the invoice-credit method.
Impact of MAT on CAs
If the amendment goes through, certain categories of companies would fall within the ambit of MAT. In case entities not incorporated under Companies Act but treated as a company for the purposes of income tax may still continue to remain outside the ambit of MAT. This position may also hold good even for foreign companies. Hence, CAs would need to educate themselves regarding the same.
The budget’s here, so are the opportunities to learn and relearn. Time for SMEs and their partnering CAs to pull up their socks and learn a few tricks to make it better in India. Sources: Times of India/ E&Y report/ Firstpost / Blogs
About the Author: CA Kashmira Nirmal – A Chartered Accountant and a member of ICAI with more than 10 years of experience in Auditing, advisory, cloud computing, US GAAP and Taxation services.