source Business standard
CS A Rengarajan
|
Fiscal year change might happen as early as 2018 |
|
New Delhi, 5 June The government is planning to shift to a January December financial year, and it could happen as early as January 1 next year. If this happens, the government would have to amend number of laws, including the Income Tax (IT) Act and the Companies Act, and cut the current financial year (201718) short to three quarters. It would also have to rework the Centre´s balance sheet, start anew assessment year for taxes, and present the Union Budget by December this year. All this needs to happen in the remaining six months of this calendar year. “The government is studying all options about the possible change in the financial year, including beginning the next one by January 1, 2018. Nothing has been ruled out,” said senior official involved in the deliberations. At present, the financial year begins in April of one year and ends in March the next year. This year, the government advanced the date of presenting the Budget for FY18 from February 28 to February 1. Another option officials in the Prime Minister´s Office and the finance ministry are considering isagradual change. For instance, the Budget for the next financial year (FY19) could be presented by January 1, as Business Standard had earlier reported. The final decision will be made by the Union Cabinet, the official quoted above said. “If it is to be January 1, 2018, then the decision will have to be taken soon,” he added. The official also said the finance ministry would be able to shorten the changeover process. Experts were of the opinion that such change would not be surprise. Former Chief Statistician of India and former Planning Commission member Pronab Sen said, “It would make sense keeping in mind that the next national elections are in April 2019. The Centre will be able to presentaBudget in December 2018 with an eye on the elections, without the constraints of the code of conduct.” Sen also said if the government tried to change the financial year in 2019, the Election Commission might question it. Hence, January 2018 seemedafeasible date. “As far as the preparation is concerned, it should not be problem. Revised Estimates start coming in from September, soaDecember Budget is possible,” he said. The central government had constituted committee under former chief economic advisor Shankar Acharya to examine the “desirability and feasibility” of having anew financial year. The report hasn´t been made public, but it is learnt that the panel has recommended sticking to the April March financial year. However,aNITI Aayog concept paper, written by member Bibek Debroy, favoured the change. Sources have confirmed the change would be applicable to the Centre, the states as well as India Inc. Last month, Madhya Pradesh became the first state to switch to the January December financial year. The state´s Budget session will be in December this year or January next year. Madhya Pradesh´s decision comes on the heels of Prime Minister Narendra Modi making pitch for changing the financial year at the NITI Aayog´s governing council meeting in New Delhi on April 23. India has been following the AprilMarch financial year since 1867. Before that, the British government had used the MayApril period as the financial year. December date likely for Budget; amendment must to IT, corporate laws MAKING THE SWITCH OPTIONS BEFORE THE GOVERNMENT |Immediate shift to JanDec financial year from 2018 |Gradual shift with only the Budget being advanced byamonth in 2018 |No change as said to have been suggested by the Shankar Acharya panel WHAT NEEDS TO BE DONE |Amendanumber of laws, including ITAct and Companies Act |End the preceding year, from the intended change date, at 9 months |Rework central balance sheet, allocations, and tax assessment years accordingly |Present Budget latest by December IT WOULD MAKE SENSE KEEPING IN MIND THAT THE NEXT NATIONAL ELECTIONS ARE IN APRIL 2019. THE CENTRE WILL BE ABLE TO PRESENTABUDGET IN DECEMBER 2018 WITH AN EYE ON THE ELECTIONS, WITHOUT THE CONSTRAINTS OF THE CODE OF CONDUCT” PRONAB SEN, Former chief statistician of India |
Practising Company Secretary
Chennai
Mobile 93810 11200
CS A Rengarajan
|
Surat textile trade caught in aGST knot |
|
Mumbai, 15 June Dhiraj Shah, managing director of Shalon Industries, is worried he will have to payahigher goods and services tax (GST) rate on synthetic yarn while the fabric he makes will attractalower rate. With an annual turnover of ~500 crore, Shah´s unit makes synthetic fabric in Surat, Gujarat, and hasa 1 per cent share of the city´s ~50,000crore textiles business. Shah has two problems. He will collect 5 per cent GST from his buyer and pay 18 per cent duty on raw yarn. Also, his finished goods will face competition from cheap, imported fabric, which will attract an import duty of 15 per cent. At present, there is no excise duty on fabrics. Surat produces 40 million metres of fabric every day, 20 per cent in composite mills that do all the value addition inhouse. For these units, the accumulated duty credit and the additional working capital cost will be around 3 per cent. The other 80 per cent of Surat´s fabric is made in powerlooms and shuttleless looms, which face an even bigger disadvantage postGST. “After GST, we will have to pay 18 per cent duty on yarn and another 18 per cent for job work of twisting and weaving. This will result in our costs going up by about 10 per cent,” said Ashish Gujarati of the Aditya group, which has 150 powerlooms in Surat. “PostGST, imports of fabrics from China will cause severe damage to Indian fabric makers. The Indian weaving industry, especially the manmade fibre knitting and weaving units in Surat, Bhiwandi and Ludhiana, are already reeling under pressure and cheap imports from China will only add to their woes,” said Sri Narain Aggarwal, chairman of the Synthetic and Rayon Textiles Export Promotion Council. He explained the current taxes on imports of fabrics were 26.5 per cent: 10 per cent import duty, 12.5 countervailing duty and 4 per cent special additional duty. After the GST, imports will attractatax of 15 per cent and asaresult, imported fabric will become 11 per cent cheaper. Cotton textile makers will not be affected because the GST rate on both yarn and fabric is 5 per cent. Turn to Page 16 >File photo ofaworker at one of the textile manufacturing units in Surat. Surat produces 40 million metres of fabric every day PHOTO: BLOOMBERG TEXTILE HUB At ~50,000 crore, Surat accounts for 12.5% of India´s textile industry revenue 25% of 2.7 millionpowerlooms are in the city Surat has 150 wholesale textile markets, 50,000 wholesale traders, 20,000 manufacturers KEYCONCERNS Fabric to attract 5% GST from nil at present Partial input creditfor synthetic fabric makers to hurt cost structure Imports to become cheaper by 11% Cheap imports put powerlooms atabigger disadvantage GST UNVEILED 16 >>FABRIC TRADERS STAGE STRIKE >LESS FORMALISED INDUSTRIES ARE THE WEAK LINK: SAP INDIA PRESIDENT &MD >GOVT ASKS BUILDERS TO PASS ON GST BENEFIT TO BUYERS |
|
Fabric traders stage strike |
|
Mumbai, 15June Cotton fabric traders stagedanationwide token strike on Thursday, protesting the decision to bring the item under the goods and services tax (GST) net.Afive per cent rate has been levied —aroundamillion small and medium size units were paying no duty so far. Even if these units wish to evade the tax, garment makers would beacheck —to claim input credit from the government, garment manufacturers would need GST compliance papers from fabric makers and traders. “We hadafirm belief that items which at present are not taxed (either excise or valueadded tax) will continue to enjoy exemption. Textiles have been classified under essential commodity/goods of special importance. The industry and trade employs 100 million people directly or indirectly. Most of them are in the unorganised sector or selfemployed. If GST is imposed on textile fabrics, the backbone of the trade will be broken,” goesarepresentation by the Textile Traders´ Association (TTA),abody of fabric manufacturers. There are 2.7 million powerlooms in the country, in the medium or small scale sector. Aunit here has between four and 16 looms and the sector is the second largest employer, after agriculture. “The entire textile business will be ruined if the GST is not withdrawn. Today, only yarn attracts central excise duty in the entire textile value chain. Since the government has already enhanced the current excise duty from 12 per cent GST to 18 per cent on manmade yarn, there will be no revenue loss if GST is withdrawn on fabric,” pleaded Raichand Binayaka, convenor, TTA. The next meeting of the GST Council is scheduled this Sunday. Traders warned of an indefinite strike if the government does not withdraw the five per cent GST on cotton fabric. Traders atadaylong strike against the goods and services tax in Ahmedabad on Thursday PHOTO REUTERS |
Practising Company Secretary
Chennai
Mobile 93810 11200