Medicine supplied to in-patients via hospital pharmacies will not attract GST separately:AAR

Kerala’s Authority for Advance Rulings (AAR) has made it clear that supply of medicine through pharmacy to in-patients will not be levied Goods and Services Tax (GST) separately.

The matter is related to Ernakulam Medical Centre Pvt Ltd (based in Kochi) which approached the AAR seeking a ruling on whether the supply of medicines and allied items through the pharmacy of the hospital run by the applicant attracts liability under GST. The petitioner’s argument was that medicines supplied through the pharmacy to both in-patients and out-patients under the prescription of the doctors are incidental to the healthcare services rendered in the hospital and beyond the ambit of taxation.

It sought for an advance ruling on the liability of hospital under GST Act on the supply of medicines and allied items through the pharmacy.

The Bench observed that healthcare services provided by a clinical establishment, an authorised medical practitioner or para medics, are exempted from the tax. The word ‘clinical establishment’ means a hospital, nursing home, clinic, sanatorium or any other institution that offers services or facilities requiring diagnostics or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India or a place established as an independent entity or a part of an establishment to carry out diagnostic or investigative services of diseases.

The Bench said that it was clarified that food supplied to in-patients as advised by the doctor/nutritionist is a part of composite supply of healthcare and not separately taxable. Other supplies of food by a hospital to patients not admitted are taxable. The same principle is applicable in the case of dispensing of medicines.

Part of treatment

It pointed out that as far as in-patients are concerned, the hospital is expected to provide lodging, care, medicine and food as part of treatment under supervision till their discharge. In-patients receive medical facility as per the scheduled procedure and have strict restriction to ensure quality/quantity of items for consumption. Hence, the medicines or allied goods supplied to inpatients are indispensable items and are a composite supply to facilitate healthcare services and are not taxable, it said. However, the supply of medicines and allied items provided by the hospital through the pharmacy to the out-patients is taxable.

The AAR helps the taxpayer by giving an advance decision in relation to the supply of goods and/or services proposed to be undertaken or being undertaken by the assessees. The decision is binding on the applicant and the jurisdictional tax authority. Though such a decision does not have precedent value like that of a High Court or Supreme Court judgment, it can be used as persuasive tool in future cases. Therefore, the decision mentioned here can be used for persuasion in matters related to supply of medicines in hospitals across the country.

Commenting on the ruling, Abhishek Jain, Tax Partner at EY, said it is quite a welcome ruling for the hospitals as well as for the common man. For the hospitals in terms of the age long ambiguity on the applicability of VAT supply of medicines to in-patients and the legacy continuing under the GST regime. “For the common man, the upholding of exemption on such medicine supplies to in-patients would reduce tax costs on the medicine related expenses,” he said.

Source : Business line

Impositions of Kerala calamity tax with Gst is not advisable: CAIT

Traders' body CAIT Tuesday said levy of any cess or tax with the Goods and Services Tax (GST) is not advisable as it will contradict the principle of one tax, one nation.
The Confederation of All India Traders (CAIT) in a statement said that any move to impose calamity tax with the GST will set a wrong precedent in the country.
The GST Council last week set up a seven-member ministerial panel under Bihar Deputy Chief Minister Sushil Modi to examine the legality of imposing a new tax on certain goods and services to raise resources for natural calamity-hit states like Kerala.
The CAIT said that at a time when the country is moving towards rationalisation of tax structure, any move to impose cess/tax in any form will jeopardise the basic fundamental and spirit of the GST.
"The levy of any cess or tax terming as calamity tax with GST is not advisable as it will run contrary to the principle of One Tax-One Nation," it said.
The move would increase problems of both the government and traders as they would have to make necessary changes in their software system.
It has urged the finance minister, GST Council to consider some other mechanisms to aid Kerala.
Source : Economic Times

Infosys to design new forms for filing gst returns

The Goods and Services Tax Network (GSTN) has directed its software vendor Infosys to design new forms for filing returns by traders, said its Group of Ministers Chairman Sushil Kumar Modi on Saturday.
"We have directed Infosys to design the new forms as suggested by the GST Council to simplify filing returns by traders on the network," Modi told reporters here after the 10th meeting of the GoM, held here to review the working of the network.
"We plan to roll out the new simplified GST returns form in the next 4-6 months for the benefit of dealers or traders paying the indirect tax through the network," said Modi, who is also Bihar Deputy Chief Minister.
The GoM has identified 18 companies across the country to develop a uniform accounting software for the smaller tax payers.
"The new software will be given to all small traders to ensure uniformity in filing GST returns," said Modi.
As decided by the GST Council, e-commerce firms will pay Tax Deduction at Source (TDS) and Tax Collected at Source (TCS) with effect from October 1.
The Union government on September 13 notified October 1 for implementing the TDS and TCS provisions under section 52 of the Central GST (CGST) Act.
The e-commerce companies have to deduct TDS up to 1 per cent state GST and 1 per cent central GST on intra-state supplies of over Rs 2.5 lakh.
In the case of inter-state supplies of over Rs 2.5 lakh, the TDS will be 2 per cent of the integrated (state and central) GST.
The Council had earlier deferred implementing the TDS and TCS after e-commerce players like Amazon, Flipkart and Myntra expressed concerned on compliance burden.
Claiming that GST revenue was improving after the procedures and rules were reformed, Modi said revenue deficit of states had declined to 13 per cent from 17 per cent earlier.
"We are hoping the combined revenue will soon touch Rs 1.3 lakh crore per month with greater compliance by all the stakeholders," reiterated Modi.
The data and business intelligence by the network is helping the Council to track tax evasions and warn dealers filing fake invoices.
Source : Economic Times

Temperory disaster cess on agenda of GST council’s next meeting

The goods and services tax (GST) Council will discuss a proposal to levy a disaster cess on a few items across India for a short duration during its next meeting on 28 September, Kerala finance minister Thomas Isaac said on Thursday. 
The move, however, is unlikely to be welcomed by the industry as cesses are considered to distort the GST architecture. Typically, no input tax credit is available on cesses, thus breaking the supply chain.
Isaac, who was speaking at a press briefing after meeting Union finance minister Arun Jaitley and senior finance ministry officials, is in New Delhi to seek the centre’s support for the reconstruction of Kerala following last month’s devastating floods.
While Kerala had suggested a 10% cess on the state GST component levied by the state, the c entre is of the view that it will be operationally difficult to implement. Instead, the Union finance minister has suggested levy of a small disaster cesses for some items across the country for a limited period.
However, this will need a change in laws and the government may need to bring in an ordinance to provide for it. Also, the attorney general is of the view that since the constitutional validity of a cess is being challenged in the Supreme Court, the council should wait for a verdict.
A disaster cess on GST that applies across the country, rather than on state GST (SGST) alone, will send the signal that the central government and other states are backing the rehabilitation and reconstruction efforts of Kerala, which witnessed its worst floods in a century last month.
Isaac added that the centre has agreed to not include the cess as part of compensation calculations. States are compensated by the centre for any revenue losses arising from a transition to GST.
The Kerala government has also sought a relaxation in the borrowing limits to allow the state to raise funds for the massive reconstruction drive that it has to undertake.
Kerala estimates that it needs at least ₹20,000 crore to rebuild its infrastructure. 
The finance minister was sympathetic to Kerala’s fund requirements and to both the proposals, said Isaac.
States have to ensure that their fiscal deficit is within 3% of gross state domestic product as per the Fiscal Responsibility and Budget Management Act.
However, the proposal to relax the borrowing limits will need further deliberation. Kerala will have to put together a plan on the relaxation it seeks in deficit targets across the next few years so as to space out the deficit, Isaac said. He added that the state has committed to tied project funding and assured that it will not breach the revenue deficit target.
Kerala chief minister Pinarayi Vijayan had told Mint in an interview published on 30 August that the damage caused by floods, including loss of homes, crops and utilities, will far exceed the state’s annual plan spending. Kerala’s annual plan for FY19, including ₹8,097 crore of centrally-sponsored schemes, is more than₹37,200 crore.
Source: Live mint

Retrospective amendments in Gst provisions have shocked business

When the new indirect tax regime came into effect on July 1 last year, the transition provisions allowed businesses to transition CENVAT credit as an input credit under GST. Many businesses took the position that the balance of total CENVAT credit carried forward in their last return was eligible for being transitioned into the GST regime. This included the remaining CENVAT credit of excise duties paid on inputs/ capital goods, service tax on input services and cesses, such as education cess as well as Krishi Kalyan cess.
However, tax authorities have disagreed with the interpretation that credit of cesses can be transitioned to the GST regime.
A recent amendment in Section 140 of the Central GST Act, with retrospective effect from July 1, 2017, exclude Krishi Kalyan cess and additional duties of excise (related to textiles) from the list of eligible duties and taxes for transition to the GST Input Tax Credit ledger.
“This retrospective amendment may expose billions worth of such credit transitioned across the country to unnecessary demands and litigation,” says Sudipta Bhattacharjee, partner, Advaita Legal.
Tax experts point out that the government probably wanted to restrict such transition of credit of cesses through this retrospective amendment. “The amendment is consequent to tax authorities’ line of thought that credit of such cesses was not utilisable for payment of excise duty or service tax in the earlier regime and therefore, it cannot be transitioned and used for payment of GST,” says V Lakshmikumaran, managing partner, Lakshmikumaran & Sridharan.
However, the way the amendments have been worded, it not only restricts the transition of credit of cesses but also puts a question mark on the entire amount of unutilised credit forming part of the last pre-GST return filed by a business. This includes credit related to service tax on input services, excise duty paid on inputs that were not held in stock as of July 1, 2017, and excise duty paid on capital goods.
Though this retrospective amendments in transition provisions are awaiting notification, many tax heads and CFOs are apprehensive of the outcome.
“I am sure once the notification is issued to give effect to the changes carried out in law, field officers will start harassing the assessees to reverse the credit and pay differential in cash. Interest will also be demanded as all those credits will be termed as wrongly availed,” says head of indirect tax in an Indian-owned multinational conglomerate.
Not surprisingly, many businesses are seeking legal help to deal with the situation. “This amendment is likely to be in various high courts through writ petitions on the ground of taking away vested rights of the assessees,” says Bhattacharjee.
Credits not allowed to be offset for output liability are costs to business. “Product or services are priced factoring input tax credits. Industry cannot retrospectively hike prices. Manufacturers which had substantial education cess balance, the service sector and the textile industry will be impacted,” says Lakshmikumaran.
Legal experts point out that it will not be easy for the government to undo any drafting error in statutory provisions. The retrospective amendment has already been passed by the legislature and received Presidential assent.
Issuing a ‘clarification’ or a ‘notification’ to rectify any drafting error will not be sufficient to deal with this problem, say experts. “It is a settled position that a circular which is contrary to the statutory provisions has really no existence in law,” says Bhattacharjee.
Legal experts say for immediate redressal, the way forward is to convene an emergency meeting of the GST Council to recommend necessary changes to this retrospective amendment. This has to be followed by Ordinances from the central government as well as state governments. The next legislative session of Parliament is still two months away.
Most experts find it disappointing that the government had to resort to retrospective amendments to bolster its interpretation of tax laws.
“The legislature no doubt has the competence and the power to enact a retrospective law, but that should be sustainable on the touchstone of constitutional principles,” says Bhattacharjee.
Laksmikumaran points out that the GST regime is founded on the principle of seamless credit. “The government could have allowed all credits validly earned under earlier laws to be transitioned to the GST regime. Retrospective amendments mean uncertainty for businesses and entering into litigation with attendant cost of interest and penalty. These are avoidable,” he says.
Many in the industry feel that the government should have been mindful of the wider ramifications of retrospective amendments done in haste and without consultation with stakeholders.
Some like Laksmikumaran are not sure if taking legal recourse to challenge these retrospective amendments would be a good idea.  
“In certain cases, courts have held credits accrued as vested rights. But, courts have held in favour of Revenue when cross-utilisation of credits was sought by the industry,” he says. Seeking judicial remedy may not be an option given the judicial precedents, he adds.
Clearly, businesses and the government would have to sit across the table to sort out the irritants.
Source: Business standards

Excess ITC inadvertently claimed can’t escape from penalty

Several taxpayers who have admitted to invalid credit entries in their GST return forms made earlier, and have subsequently corrected their claims continue to receive notices from the tax department asking for interest payments. One such notice seen by FE has been served to a firm that claimed over Rs 1 crore of excess credit in September 2017. However, it rectified the same in March this year and wrote to the tax department in August mentioning the chain of events.
The tax department in its notice has invoked the GST Act, which says that a taxable person claiming undue ITC would have to pay interest on such excess claim. Experts said in the earlier regime, if a taxpayer admitted to his mistake and reversed the claim, there was no penalty.
“Some of the GST law provisions are quite draconian at times, one of which is a mandatory clause for payment of interest even in case the taxpayer has claimed excess credit by clerical error for which neither any rectification is permitted nor any suo-motu intimation to tax authorities is of any help. This provision needs a fresh look and policymakers need to correct the provisions by clarifying that interest would be applicable only when such credit is utilised for payment of taxes,” Rajat Mohan, partner at AMRG & Associates, said.
Another business said if an extra digit is added by mistake to the ITC claim and the same is submitted in the return, there is no recourse against imposition of penalty. While this forces assessees to be meticulous in filing returns, it has also pushed many assessees to seek professional help for the same.
Source: Financial express

Furnish Gst returns and get an OD of Rs.1 Crore

Micro, small and medium enterprises will now be able to get quick overdraft of up to Rs 1 crore for working capital requirements, based on their goods and services tax (GST) returns.

ICICI Bank announced the facility known as ‘GST Business Loan’ on Monday and said it would be available to any such business, including non-customers of the bank.

“This facility brings in the improved convenience of availing of quick OD facility, as it does away with the need for a paper-intensive assessment of financial documents, including balance sheets of previous years,” the bank said in a release on Monday.

MSMEs will be sanctioned the overdraft amount within two working days and the bank will assess their GST returns to assess their eligibility for working capital limit.

“Since GST takes into account comprehensive business flows, we believe that GST returns will change the lending paradigm for MSMEs with faster and hassle-free access to working capital finance from financial institutions,” said Anup Bagchi, Executive Director, ICICI Bank.

The overdraft amount could range between Rs 10 lakh and Rs 1 crore and would be up to 20 per cent of the turnover reported in the GST return. To avail of the facility, MSMEs can give residential, commercial or industrial property as collateral security. The customer will also not have to show any financial statements.

It is renewable on an annual basis, depending on the repayment track record of the overdraft facility by the customer, ICICI Bank further said. With over one crore MSMEs registered with the GST Network, the lender is hopeful that the facility will give a boost to their business expansion plans.

Source: Businessline