Fiscal year 2017-18 comes to a close after the tumultuous implementation of the Goods and Services Tax, many provisions of which are still being implemented. But several systems, critical to how consumer packaged goods firms operate in India, are yet to be firmed up. Here’s a look at three major areas still awaiting clarity from the government.
As taxes on several consumer goods fell under GST, the government made legal provisions to punish companies that keep the tax difference as profit for themselves. Large firms including Hindustan Unilever (India’s largest FMCG firm), and McDonald’s are being scanned under the anti-profiteering clause.
However, indirect tax experts point out that there is no clear legal definition of anti-profiteering in the GST Act. The Act has not even defined how long after the new taxes were introduced could a change in prices be seen as an attempt to profit from lower taxes.
Besides, procedures for how fines collected from offending companies are to be used are unclear. The biggest instance – the government has only provisionally accepted HUL’s voluntarily disclosed “inadvertent profits” worth Rs-119 crore while it figures out where the money should go in an instance of voluntary disclosure.
E-way bills were touted as one of the biggest means to plug tax leaks for goods transported across the country. However, the introduction of the e-way bill portal in February this year was a disaster as taxpayers struggled to work the portal that crashed on its very first day.
Now, e-way bills are being reintroduced for all inter-state goods from April 1 all over India. However, FMCG and logistics firms are wary, unsure if the portal will be able to handle the large volume of e-way bills they will have to generate, according to Anita Rastogi, Partner-Indirect Tax, at tax advisory PricewaterhouseCoopers.
FMCG and other industry firms are still filing claims for inputs used in the weeks right before GST was introduced. However, companies are now under the government scanner for making inflated transitional credit claims.
On 14 March, Vanaja Sarna, chairman of Central Board of Excise and Customs, said that the board will verify all claims of transitional credit that exceed Rs-25 lakh, or where the central VAT claims between October 2016 and June 2017 has grown by more than 25%.
This has led several companies to challenge the provision, including a case in the Gujarat High Court which ruled on 22 March that the government cannot deny transitional credit because it is a vested right for companies, meaning it cannot be taken away without the consent of the companies involved. How the government will treat transitional credit claims is still unclear, blocking companies’ claims and GST revenue collections.