But niggles persist, such as tax on parts being higher than that on end-products
GST implementation was indeed a long-awaited, welcome decision by the government which has helped construction equipment industry to align tax rates at a single point.
It has helped the industry by relieving them from various procedural restrictions which existed while goods were under transit, like waybills, transit passes and its connected returns and assessments.
Removal of checkposts has resulted in significant reduction of transit time.
Withdrawal of various forms existing under VAT regime like Form C, H, F etc., has helped the industry to concentrate on their core business, resulted in reduction in manpower and/or channelising such resources to other core areas and also mitigated the risk associated with non-receipt of these forms.
Unlimited availability of input credit, by change in the definition of input credit, for all transactions, is one more significant advantage.
This enabled flow of credit directly into the system with verification facility, resulting in more input compared to VAT and service tax.
Interstate stock transfer
Payment of GST for interstate stock transfer which is treated as a sale, resulting in IGST liability, was made available as full credit in the destination location. This has resulted in tax savings to the manufacturer. Additionally, all tax on interstate purchase was not available as input credit under VAT regime whereas now it is available.
Elimination of virtual branches established only for the purpose of documentation and taking credit has been eliminated completely.
Time limit allowed for passing credit notes for longer period compared to VAT is one more welcome step. Such a large migration can never happen without the entailing blues during implementation. There persist some variances which, if addressed, will benefit the industry in a big way.
There are some parts that go into the manufacture of the end-use equipment, which carry a higher rate of GST than the end use equipment itself. It is advisable to stabilise the rates of end-use equipment, which are predominantly machinery, under 18% category, including the components that go into the manufacture.
Until recently, GST rate for special purpose vehicles (SPV), was 28%. In the GST Council meeting held in July 2018, the rates were reduced to 18%.
However, these SPVs still continue to be under HSN code starting with 87. In line with motor graders, truck-mounted cranes, wheel loaders etc., which are also similar to SPVs, but classified under HSN code beginning with 84, the subjects of latest amendment of rates should also classified under the codes starting with 84, to avoid inconsistencies in future.
With the current challenges in web-based reconciliation, assessees are finding it difficult to file GSTR-1 by the 10th of the subsequent calendar month. Many customers’ GST numbers are changed which need to be corrected after following up with the customers, which takes time. GSTR-1 and GSTR-3B should be allowed to be filed together.
The classification of goods with reference to HSN Codes should be made uniform across all dealers without restricting to 2, 4 and 8 digits for various categories based on scale of operation.
Allowing ITC based on the original invoice of the supplier without depending on GSTR-2A will be a welcome step. Cross reconciliation of ITC should be deferred to the annual return.
For capital equipment manufacturers, warranty issues are invariably a commitment given to customers across all industries. Warranty supplies are usually committed under very limited deadlines since the equipment would have stopped working causing huge loss to the customer. Hence, issuing of material free-of-cost during the warranty period should be allowed from the nearest spares stock point which may not be the State from where the original supply was made.
The data of IGST paid while importing an item is available with ICEGATE. The GST website should be automated for taking this data from ICEGATE. This will immensely simplify reconciliation.
If these aspects are addressed appropriately, it will help the construction equipment industry in a big way and heighten the ease of doing business in India.