The Institute of Indian Foundrymen (IIF)
Goods and Services Tax
Representation before the Ministry of Finance
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Background
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Background
About IIF
•
The Institute of Indian Foundrymen was set up in 1950 to promote education, research,
training and for the development of Indian foundrymen
•
It is a professional organization affiliated to the World Foundry Organization, UK and
Confederation of Indian Industries, India
•
IIF has a global presence and serves as a reference point between the customers and
suppliers of the Indian foundry industry at a global level
•
It also serves as the point of reference to the Government of India for the foundry industry
•
In India, IIF operates through its twenty-six Chapters under four regional offices located at
Kolkata, Delhi, Mumbai and Chennai. The activities of IIF has been instrumental to the
success of the foundry industry at large
•
The members of IIF majorly include companies involved in the production of metal castings
and other similar products which are primarily supplied to companies in the Oil, Gas, Power,
Transportation, Earth- moving, Engineering Sectors etc. both in India and abroad
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues under the Model GST law and
Recommendations thereon
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Taxation of Electricity under GST
Status under present law
No excise duty/ service tax/ sales tax is levied on electricity
Proposed under GST
No explicit provisions in this regard exists in the model GST law
Recommendations
• Electricity is sought to be treated as zero-rated supply
•
Inputs required to produce electricity should be subject to lower rate of GST
•
Alternately, Electricity duty may be subsumed within GST
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Transfer from one process / plant to another process / plant
respectively for captive consumption
Status under present law
Notification No. 67/95 - C.E. dated 16 Mar 1995 provides for excise duty exemption on
intermediate products consumed captively, if the final product is taxable
Proposed under GST
As per the recently released FAQ by CBEC, Intra-State transfer from one process/ plant to
another process/ plant is not liable to GST, since there is a common registration number
Recommendations
• Specific procedures and documentation requirement is sought to be prescribed under
the GST law
•
The loophole of non-levy of GST on both intermediate and final product in case the
final product is exempted/ non-taxable under GST should be addressed
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
GST liability on receipt of advance consideration for supply of goods
Status under present law
No duty/ tax is levied on receipt of advance consideration for goods. Further, the date of
recording of receipt of goods in the books of account of the recipient is of no relevance for
determining the time when the liability to pay duty/ tax arises
Proposed under GST
The time of supply of goods is to be determined on the basis of, inter alia, earlier of date
of receipt of advance payment for goods or date on which the recipient shows the receipt
of goods in his books of account
Recommendations
• The liability to pay tax on receipt of advances for goods should be summarily deleted
•
The date of recording of receipt of goods in the books of account of the recipient
should be restricted to goods sold on approval basis
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Time limit for availing CENVAT credit
Status under present law
Proviso to Rule 4(1) and Rule 4(7) of the CENVAT Credit Rules, 2004 provides for a time
limit of one year from the date of issue of invoice for availing CENVAT credit on inputs and
input services respectively. No time limit has been prescribed for availing CENVAT credit
on capital goods
Proposed under GST
Section 16(3A) - Time limit of 1 year from the date of issue of invoice
Section 16(15) - Earlier of the date of filing return under Section 27 for the month of
September following the end of the financial year to which such invoice pertains or filing of
the relevant annual return
Recommendations
The provisions shall be suitably redrafted to ensure harmonious construction of law and
benefit of CENVAT credit availment should be extended to one year
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Reversal of input tax credit
Status under present law
As per Rule 6 of the CENVAT Credit Rules, 2004, no reversal of credit is required for
capital goods
Proposed under GST
The FAQ on GST issued by CBEC provides that proportionate credit formula will also
extend to capital goods
Recommendations
No reversal of credit should be made on capital goods
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Non-availability/ Reversal of Input Tax Credit (ITC) against supplies
made to Defence and other priority sectors
Status under present law
• As per Rule 6 of the CENVAT Credit Rules, 2004, no CENVAT on inputs is allowed/
reversal of credit is required for supplies to excise exempted industries such as
defence and other priority sectors
•
Further, Customs duty benefit in the form of duty free/ concessional imports, of
castings is available to these priority sector industries. However, supplies to these
industries by local foundries are not eligible for any such benefits
Proposed under GST
No explicit provisions in this regard exists in the model GST law
Recommendations
• Reversal of ITC should be not made applicable for supplies to defense or other priority
sectors. Alternately GST charged can be refunded to foundries for exempt supplies to
defense or priority sector
•
Similar exemptions/ concessions should be provided for local foundries, so as to enjoy
a level playing field
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Non-availability of input tax credit (‘ITC’) w.r.t. certain supplies
Status under present law
Restriction on availment of CENVAT credit prevails under the current law
Proposed under GST
Similar to existing provisions
Recommendations
Restrictions on availment of CENVAT credit should be removed to allow seamless flow of
credit. ITC for all business expenditure should be allowed
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Eligibility to avail input tax credit subject to payment of tax and
filing of return
Status under present law
No requirement of payment of tax by the supplier and filing of return by the recipient exists
under the current law
Proposed under GST
ITC will be available subject to payment of tax by the supplier and filing of return under
Section 27
Recommendations
• The condition of deposit of tax by the supplier should be summarily deleted
•
Entitlement to ITC should be based on outward supplies made by the supplier
•
Condition of filing returns for availing credit should be removed
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Reversal of credit for inputs used for personal use
Status under present law
No credit is available in respect of inputs used for personal use
Proposed under GST
Use of business assets/services for personal use is deemed as supply and is leviable to
GST but ITC is not available w.r.t the same
Recommendations
Provision of treating the goods/or services used for private or non-business use as supply
should be struck off
© 2016 Grant Thornton India LLP. All rights reserved.
Issues and Recommendations
ITC on inputs or capital goods sent for job work
Status under present law
As per Rule 4(5)(a) of the CENVAT Credit Rules, 2004, reversal of CENVAT credit is
required to be made on inputs or capital goods sent for job work, not received back by the
principal manufacturer within the stipulated time. However, no levy of interest is made on
such reversal
Proposed under GST
An amount equivalent to the ITC availed on the said inputs/capital goods along with
interest has to be paid if the inputs or capital goods sent for job work are not received back
by the principal within stipulated time
Recommendations
• Levy of interest in terms of Section 16A of model GST law should be removed
•
Alternatively, levy of interest should only be restricted to cases where the GST credit
has been actually utilized by the principal
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Recovery of excess ITC distributed by Input Service Distributor (ISD)
Status under present law
Recovery of excess credit distributed shall be made from the ISD
Proposed under GST
Recovery of excess credit distributed shall be made from both the ISD and the supplier
receiving excess credit
Recommendations
Suitable amendments is sought to be made to Section 18 of the model GST law to avoid
double recovery of the excess amount distributed
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Duplication of refund procedures
Status under present law
Application for refund of tax is required to be filed with a single authority
Proposed under GST
Refund application is to be filed separately for CGST/ IGST/ SGST to the respective
officers in terms of Section 38
Recommendations
• Single Authority for granting of refund must be introduced to avoid duplication of refund
procedures
•
Instead of State-wise refund mechanism, centralized refund claim should be
introduced on the basis of PAN of the taxpayers
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Withholding or deduction of refund claim
Status under present law
No such provision exists
Proposed under GST
Withholding of refund claim or adjustment of refund against the amount of tax, interest or
penalty due in separate proceedings unless the liability to pay has been stayed by any
Court, Tribunal or Appellate authority
Recommendations
• The said provision should be summarily deleted
•
Alternatively, more clarity is required on adjustment of refund with demand confirmed
under previous tax regime
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Job-work procedures under Section 43A of the Model GST law
Proposed under GST
The threshold limit of inter-state supply of goods and services by a job-worker is NIL
Recommendations
Inter-state job-worker falling below the threshold limit should not be compelled to obtain
registration
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
No provision for issuance of show cause notice
Status under present law
The time limit for issue of show cause notice under service tax and excise laws is within
2.5/ 5 years and 2/ 5 years respectively, as the case may be
Proposed under GST
• Time limit of 3/ 5 years, as the case may be, has been prescribed for issuance of order
on the adjudication proceedings
•
Further, in terms of Section 51C(10), the time period of pendency of order, when a
similar matter is appealed against by the revenue before the appellate forum or higher
authorities shall be excluded from the aforesaid time limit
Recommendations
• Time limit of one year for issuance of SCN should be prescribed in the GST law
•
The provision contained in Section 51C(10) should be suitably amended to prevent
time lag in settlement of dispute
•
5 years capping should be prescribed for cases where tax has been collected but not
deposited with the Government
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Tax wrongfully collected and deposited with the Central Government or
State Government
Status under present law
N.A.
Proposed under GST
Section 53 provides for the payment of IGST and refund of the CGST / SGST paid
wrongfully on the inter-state supply of goods considering the transaction to be an intraState supply
Recommendations
• Provision for adjustment of CGST/ SGST paid against the IGST liability should be
devised to avoid blockage of working capital
•
Alternatively, refund process should be time bound
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Test purchase of goods and/or services and drawal of samples
Status under present law
No such provision exists
Proposed under GST
• Section 121 provides for test purchase of goods and/or services from the business
premises of taxable person to check issue of tax invoices or bills of supply
•
Further, Section 122 provides that the officers are also empowered to take samples of
goods from the taxable persons and issue a receipt for the same
Recommendations
The said provisions are needless, causes unnecessary harassment and goes against the
assessee. Hence, the same should be summarily deleted
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Transitional provision in respect of unutilized CENVAT credit
Status under present law
N.A.
Proposed under GST
Section 143 provides for availability of CENVAT credit carried forward in a return of earlier
law as ITC provided the said amount is eligible for credit both under the earlier law and
GST law
Recommendations
Seamless flow of eligible credit should be provided for credit lying in the books of accounts
before the appointed day. Once credit is rightfully earned and entitled under the previous
laws, then the same should not be evaluated/ questioned under the GST law.
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Transitional provision for taxability on return of goods from job worker
Status under present law
N.A.
Proposed under GST
Section 150 and 151 of the draft law provides for levy of tax on both the job worker and the
manufacturer if the inputs / semi-finished goods removed from the place of business of the
manufacturer to the job worker, in accordance with the provisions of earlier law, are
returned after a period of 6 months or the extended period from the appointed day
Recommendations
The double recovery of tax from both the job worker and the manufacturer, for the same
activity should be suitably amended
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Refund Claims under earlier law
Status under present law
N.A.
Proposed under GST
Section 154 provides for disposal of refund claim filed before the appointed day. However,
in the event of rejection of refund claims either partially or fully, the amount so rejected
shall lapse
Recommendations
• Clarity on how the refund claims will be available, pertaining to the periods when
earlier laws were applicable, after the appointed day is sought.
•
Provision regarding lapse of credit in case of rejected claim should be deleted and
availment of such rejected claims as CGST/ SGST credit should be introduced
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Taxability of supply without consideration
Status under present law
No tax/ duty is leviable on use of business assets / services to personal use
Proposed under GST
Temporary application of business assets/services to a private/ non-business use is
treated as supply without consideration and liable to GST
Recommendations
Definition of 'assets' and a proper valuation mechanism for valuing the transactions
covered under Schedule - I is sought to be provided
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Valuation issues in case of supply of goods
Status under present law
Post-supply discounts and subsidies are not allowed to be deducted from the transaction
value of goods under excise laws. Further, the CST law and most of the state VAT laws
allows discount only when the same is reflected in the invoices
Proposed under GST
• The deduction for post-supply discounts from the transaction value shall be allowed
only if it is as per the agreement, is known at or before the time of supply and is
specifically linked to relevant invoices
•
Subsidies provided in any form or manner, linked to the supply shall from part of the
transaction value
Recommendations
• Declaration of the taxpayer on the discount amount should be accepted and such
discounts which are normally known to the business after raising of invoices should
also be allowed to be deducted from the transaction value
•
The term 'subsidy' should be explicitly defined in the law and the term 'linked to the
supply' should be modified to provide "directly linked to the value of the supply"
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Valuation mechanism in case of stock transfer of goods
Status under present law
CST not levied subject to production of Form - F and other relevant documents; VAT is
unconditionally exempt for intra-state branch transfers. Excise duty is levied on 110% of
cost of goods
Proposed under GST
No specific valuation method prescribed for stock transfer of goods.
Recommendations
Separate valuation rule should be prescribed for valuation of inter-state branch transfers of
goods and supplies to agents within same state under different PAN
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Valuation of amortized pattern separately charged to customers
Status under present law
The foundry units are levying excise duty twice on the same amount, i.e. once on sale of
pattern and secondly on the amortized value of pattern sold along with castings (in terms
of Explanation 1 to Rule 6 of the Central Excise Valuation (Determination of Price of
Excisable Goods) Rules, 2000
Proposed under GST
No explicit provisions in this regard exists in the model GST law
Recommendations
A clear principle should be laid down in the GST law whereby tax on the same amount
should not be collected twice under separate valuation mechanisms
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Clarity on levy of GST on inter-state branch transfer of services
Status under present law
No concept of branch transfer of services, as service tax is a central levy
Proposed under GST
Services provided by a branch in one state to branch(es) in another state is included in the
definition of supply and hence liable to GST
Recommendations
GST should not be levied on inter-state branch transfer of services and it should be
treated as zero rated supply
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Export Scheme under Foreign Trade Policy laws
Status under present law
Various FTP schemes have been devised under the current law which provides incentives
to exporters
Proposed under GST
No clarity in the model GST law as regards the fate of such FTP schemes
Recommendations
• The FTP schemes is sought to be extended to the GST regime. Further, the duty
credit scrips should be acceptable for setting off of GST liability under the GST regime
•
The State Governments should be taken on board for agreeing to sacrifice their part of
IGST
•
Under GST law, ITC should be allowed on purchase of MEIS scrips
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Deemed Exports
Status under present law
Specified transactions are treated as deemed exports
Proposed under GST
Refund of tax allowed in case of deemed exports
Recommendations
• Suitable clarifications is sought as to which kind of supply will be treated as deemed
exports.
• Further, fate of the deemed exports benefits under FTP needs detailed clarification
with respect to chargeability/non-chargeability of GST on the same.
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Exemptions on supplies made to SEZ units
Status under present law
Supplies made to SEZ units is treated as exports and hence exempted
Proposed under GST
No exemptions have been specified in the draft law for SEZ unit
Recommendations
Amendments should be made in the SEZ Act and Model GST law to treat supplies made
to SEZ units as exports/ zero-rated supply
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
State Incentive Schemes (SIS)
Status under present law
Various State Governments launch industrial promotion schemes from time to time
providing, inter alia, tax incentives to the companies making investment in the respective
States for defined period of time, to promote industrial development and employment
generation within the State
Proposed under GST
No clarity in the model GST law as regards the fate of such State incentive schemes
Recommendations
• Provisions for carry forward of State incentive schemes under the GST law is sought
•
Companies covered under SIS should be relieved from the levy of IGST levied on
inter-state sales to bring parity in their positions both under the GST regime and preGST regime
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Rate of Tax
Status under present law
Effective tax rate is around 14.5% - 17.5%
Proposed under GST
No clarity
Recommendations
Merit rate of 12% should be prescribed for supplies made by the foundries, treating the
same as industrial inputs used in the development of other industries and economic
growth of the country
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Treatment of under GST on unavoidable/ natural loss incurred during
transit of goods
Status under present law
Excise duty not applicable in case of natural/ unavoidable losses upto a prescribed limit
Proposed under GST
No specific provision
Recommendations
Appropriate clarity is required for treatment of natural/ unavoidable losses and the same
should be creditable
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
Issues and Recommendations
Uniformity in classification of inputs and capital goods
Status under present law
Owing to the definition of capital goods under CENVAT Credit Rules, 2004 consumables
such as grinding wheels, refractory wheels, other refractory ceramic goods, etc. are
treated as capital goods. However, under the local State taxes, the said consumables are
treated as inputs
Proposed under GST
No specific provision under model GST law
Recommendations
• A uniformity is sought in classification of the consumables as capital goods or inputs
across the Central GST and State GST laws so as to mitigate any dispute that may
arise due to different classifications
•
Further, uniform rate of SGST should be attracted in all States to avoid rate related
disputes
© 2016 Grant Thornton India LLP. All rights reserved.
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/
The Institute of Indian Foundrymen (IIF)
Web: http://indianfoundry.org/