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Meeting with Revenue Secretary on SIAM Pre-Budget
SIAM team led by Dr. Pawan Goenka met Revenue Secretary for
Pre-Budget consultation.
1
Annex 2
SIAM’s Recommendation on GST
Rates
• Standard GST Rate of 28% should be applicable to two-wheelers,
three wheelers, commercial vehicles (bus & truck) and small cars
and utility vehicles.
• For all other cars an uniform cess of 8% is suggested.
• Electric Vehicles are currently attracting 6% excise plus under 6%
VAT in many states. Therefore the GST rate should be maintained
at 12% or lower.
• For Hybrid vehicles, ~ 10% rebate should be given from applicable GST rate plus Cess
2
Concern
Section 140(2) at page No. 131 of the Draft GST Law provides the list ofActs which will be repealed as per the taxes being subsumed underGST. This list does not include NCCD, R&D Cess, etc.
Suggestion
The list should also mention the relevant part of the Act that leviesNCCD, Automobile Cess, R&D Cess on Import of Technology and InfraCess.
The mention of the above Acts shall ensure that all these cess existingtoday are subsumed under GST.
There should be no new tax / Cess introduced after GST is madeapplicable.
Repealing of Statutes relating to Old
Taxes/Cess3
Suggestion
The current draft law is silent on protecting the benefits currently
available to these units. Necessary clarification/provision should
be included to safeguard the quantum of benefits these units areeligible for under the current regime.
Concern
At present units established in Hilly States and North Eastern States are given Excise exemption
4Protecting quantum of benefit currently
available to units eligible for Area
based excise concession
A guiding principle should be made as part of the model State
GST Law to ensure that the benefits which had been promised
are protected by the respective State Governments – both interms of quantum and time.
Concern
The model GST law is silent regarding VAT & CST based incentive to
various manufacturers by the respective states.
Suggestion
5Protecting quantum of benefit
currently available under the various
State incentives schemes
Concern
Matured auto industry needs robust organised market for used vehicles
No specific provisions have been provided in the Draft GST Law for the leviability
of GST on the used vehicles.
Suggestion
The law should provide for specific provisions for the used vehicles business.
Registered Dealers would not be able to take input credit of purchase madefrom individual customers who would not be able to issue a taxable invoice.
In the absence of specific provisions, the organised pre-owned vehicles business
will become unviable because of full tax charged on the transaction value at the
time of sale by the Registered Dealers.
GST should be levied only on net value addition by registered used vehicle
dealers (on sales price – purchase price).
Specific Provisions for Organised
used-vehicles Business.6
1) Persons acting as ‘Traders’ and having stock as on the date of transition.
Such stock lying with the trader can be of two types:
a) Goods where the invoice showing the excise duty component
paid to the supplier is available.
b) Goods where the invoice does not show the excise duty
component but are excise paid goods.
2) Credit involved in the Goods in transit on the appointed date.
There will be goods in transit as on the appointed date for which the
invoice would have been issued by the supplier but the credit is not
availed by the buyer as the goods have still not been received by the
buyer.
Transitory Provisions
There are certain conditions where clarity is needed as regards
to the transitory provisions.
7
It is suggested that the time of supply should not be linked with
the payment.
Also the running account is used as a common pool for the
supply of goods and services which makes it all the more difficult
to allocate the funds to a particular supply of goods.
Time of Supply: Linkage with “receipt”
of consideration
Section 12 (2) (c) mentioned at page No. 30 of the draft GST Law
provides that the date on which the supplier receives the paymentwith respect to the supply shall be considered as one of the event for
deciding the time of supply. As per Section 12(2) the time of supply
of goods shall be the earliest of the various events mentioned
therein.
8
SIAM Submission - Accepted and
Changes Made in GST Law
SIAM requested incentives/subsidies received from Government
under various Industrial Policy should not be included in assessablevalue. Based on this submission, valuation related provision in GST
Law has been modified to exclude incentive/subsidy in assessable
value.
Transitory Provisions – The revised model GST Law has taken in
consideration most of the issues SIAM had raised on transitory
provision.
9
SIAM Submission – Accepted by
Revenue Secretary, changes awaited
SIAM requested that specific provision should be made for used
vehicle business otherwise organized pre-owned vehicle business
will become unviable as no provisions were mentioned in the draft
GST Law.
Revenue Secretary understood the criticality of the issue and asked for
suggestion on the GST rate. SIAM suggested that a 5% GST on value addition
(sales value – purchase value) should be levied. Rev Secretary informed thatGST Rules will have provision for used vehicle business.
SIAM requested that the excise duty benefits currently available to
units in Hilly States and North Eastern States should be safeguarded.
Revenue Secretary informed that DIPP would make budgetary provision for
reimbursement to these companies. This reimbursement has been already
decided and would be to the tune of 58% of the GST incidence.
10
SIAM Submission may not be Considered
Time of supply of goods has been linked with receipt of payment by the
recipient of goods/ services. – SIAM requested that since OEMs have a
running account with dealers, hence time of supply of goods should not belinked to payment receipt. GST Council is considering SIAM’s submission
SIAM requested inclusion of Acts that levies NCCD, Automobile Cess, R&D
Cess on Import of Technology and Infra Cess in the section (list) that
mention taxes/cesses which will be repealed under GST law. These are not
mentioned in the Model GST Law at present.
It seems NCCD may not get repealed
Also, DHI is in discussion for continuation of Auto Cess
Infra Cess likely to be subsumed
11
Retain Custom Duty Structure on
Automobile CBUs
S.No Description Basic Customs Duty on All Vehicles (%)
Existing SIAM Suggestion
New Second
Hand
New Second
Hand
1 CBU of Commercial Vehicles
falling under Tariff Heading -
87.02 & 87.04
20 20 40 40
Retain existing customs duty rates for all automobile CBUs except commercial vehicles. Commercial vehicle rates should be increased from applied rate of 20% to basic duty rate of 40%.
13
Custom Duty benefit of Hybrid/EVs
Custom Duty Concessions on Identified parts of Hybrid/ EVs parts should be extended to certain additional parts (list given in Memorandum).
14
Tax Collection at Source on sale of
motor vehicle In Union Budget 2016-17, TCS was levied on vehicles with sales value
exceeding Rs 10 lakhs. The intention was to levy tax on luxury vehicles,
however in the Income tax amendment the words used were “motor
vehicles”, thereby including commercial vehicles in its as well.
A CBDT Circular was issued 22/2016 on 8th June 2016 to issue clarification
to exclude government departments and dealers from TCS levy
Suggestion:
TCS should be abolished since there are already various mechanisms for
keeping track of sale of high value motor vehicles, quoting of PAN, VAHAN
system, RTO Registration, etc.
If TCS cannot be abolished, commercial vehicles should be excluded
Make suitable amendment in IT Act itself to reflect CBDT Circular 22/2016
15
Depreciation rate for Motor Cars, MUVs
and 2 wheelers
Depreciation rate under IT Act is 15% WDV whereas under companies
Act it is 25%.
Suggestion:
Depreciation rate for Motor Cars, MUVs and 2 wheelers, other than those
used in the business of hire, should be 25% under both Companies Act
and IT Act.
16
Curtailment in Scope of R&D Expenses
for weighted Income tax DeductionIn May 2014 relating to the applicability and procedures providing for the
Weighted Tax Deduction of 200% incurred on scientific research by
companies in In-house R&D, which revises the last guidelines issued in May
2010
‘Capital expenditure on R&D, eligible for weighted deduction will include
only plant and equipment or any other tangible item. Capitalized
expenditure of intangible nature will not be eligible for weighted
deduction.’
‘The personnel with Degree / Diploma in Science or engineering discipline
and above qualification will only be regarded as R&D manpower eligible
for weighted tax deduction. Manpower under the category of retainership
/ consultants and manpower on contract will not be admissible forweighted tax deduction’
Suggestion:
Above should be allowed for weighted deduction
17
Extension of weighted deduction in
respect of scientific expenditureConcern
The last Finance Budget had proposed to reduce the weighted
deduction from 200% to 150% with effect from 1st April 2017 to 31st
March, 2020.
Phasing out of deduction / incentives alongwith reduction in tax rates
to implement a simplified tax regime is a welcome step.
However, curtailment of benefit would lead to hardship for thosecompanies who have recently established R&D facility with significant
investment
Suggestion
It is suggested that reduction in general corporate tax rate should be
implemented as first step. Phasing out of weighted deduction should
be implemented thereafter with a gap of 2-3 year so as to take care
of the gestation period.
18
Expenditure on Scientific Research
There is ambiguity about capital expenditure done before R&D centre
becomes operational. Establishment of R&D Centre takes 2-3 years. Major
CAPEX is done at the initial period and hence disallowance of the CAPEX
dilutes the actual benefit significantly.
Suggestion:
It should be clarified that there should not be any cut-off (start) date for
claiming/ allowing the weighted deduction of R&D expenditure once
the approval has been granted and co-operation agreement has
been entered by the DSIR.
In other words total CAPEX should be allowed.
19
NEMMP 2020: The FAME Scheme
A scheme for Faster Adoption & Manufacturing of (Hybrid &) Electric
vehicles in India by 2020, for a sustainable road transportation system to
achieve:a) National fuel securityb) Globally competitive xEV (hybrid & electric vehicle) eco-system and,c) Affordable environment friendly transportation
The Government has set up a robust mechanism for disbursement of
incentives, for ensuring quality of products and for value addition in the
country.
Need adequate budgetary support for running the scheme successfully
20
Incentivise Vehicle Fleet Modernisation
Programme World over vehicle scrappage and fleet modernisation is regulated through an end
of life policy, which is implemented through a robust Inspection and Certification
system.
Notwithstanding a robust I & C system in countries like Europe, etc. even these
countries, at times, had to resort to schemes like Cash for Clunkers for weeding out
old and polluting vehicles and replacing them with new environment friendly ones.
Suggestion
SIAM would suggest that in order to mitigate immediate air quality problems and
decreasing the menace of road accidents, a limited-time incentive scheme for
retirement of old vehicles is required.
This would require support from both the State Government and the Central
Government. The Governments at both levels would need to come together to
make this programme successful by providing fiscal incentives/ subsidies for fleet
modernisation.
Need adequate budget allocation for the same.
21
Domestic Transfer Pricing
Domestic Transfer Pricing provisions were introduced in Finance Act 2012.
This amendment has cast an additional obligation on the assessee even in
a situation where both the parties are paying tax at the highest rate and
there is no loss to the Income Tax Department.
Suggestions:
Provisions of Domestic Transfer Pricing should have been made
applicable only in case of loss making companies or the companies
whose income is exempt / availing tax holidays.
Further, in case where any adjustment made on account of Domestic
Transfer Pricing, the corresponding adjustment should be allowed to the
other Company.
22
Mini Bus Type Vehicles under Tariff
Heading 8702 Anomaly exists under the Central Excise Tariff Act, 1985 (CETA). Vehicles are
mainly classified under tariff items 8702, 8703, 8704, and 8711. The tariff items are
described as below:
8702 –Motor vehicles for transport of ten or more persons, including the driver (buses)
8703 – Motor vehicles for the transport of persons (other than those covered in heading 8702) (passenger vehicles)
8704 – Motor Vehicles for transport of goods (trucks)
8711 – Motorcycles (including mopeds) (all two-wheelers)
Tariff item 8702 attracts two rates 12.5% and 27%. The rate 12.5% is for all vehicles
above 13 seaters, while the vehicles with 10-13 seaters attract 27%, which is a
clear anomaly as 10-13 seater vehicles are essential for public / rural transport.
SIAM would request that such anomalies in the taxation system should be removed
and all vehicles falling under tariff item 8702 including vehicles for transport of not
more than thirteen persons, including the driver, should attract a GST rate of 28%
only.
23