No GST on goods bought at duty free shops: Bombay HC
In major relief to duty free shops, the Bombay High Court has ruled that goods and services tax (GST) cannot be levied on products sold at the duty free shops in Mumbai airport.
 
The two judge bench observed that the if duty free shops are subjected to local taxes, the tax burden will increase and price of the goods, which are supposed to be free of taxes and duties, would go up.
 
Citing Article 286 of the Indian Constitution, the judgement said: "The supply made in the course of import into India or in the course of export out of India, can not be subjected to any tax."
 
The judgment would have wider implications as it could set precedent for abolition of local duty on products sold through duty free shops across the country.
 
"We also find merit in the contention of the Petitioner that both before and after the introduction of GST, the sales to arriving passengers continue to be sales in and/or from the custom area, as at the point of sale in DFS (duty free shop), the goods have neither crossed the customs frontier nor have they been cleared for home consumption by DFS. Accordingly, neither customs duty, nor Integrated Tax, is payable by DFS," it said.
 
The judges further said that they find merit in the contention of the petitioner that arriving passenger's baggage is exempt from the integrated tax.
 
"In view of the above exemption read with the duty free allowance available under the Baggage Rules applicable to arriving passengers, neither customs duty (upto the permitted baggage allowance) nor IGST is levied on such goods," it said.
 
Such import of goods by arriving passengers across custom frontier as passenger baggage is therefore an exempt supply under the GST, hence no IGST is payable by either the duty free shop on its imports, or on supply to arriving passengers, it said.
 
"The arriving passengers are also not required to pay any IGST on crossing the custom frontiers, in view of the above exemption read with the duty free allowance under the Baggage Rules."
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    Without This Two-Step Plan, Corporate Tax Cuts Will Have a Limited Impact
    Exactly two weeks after the dramatic tax cuts of 20 September 2019, the mood has turned sombre once again. On that day, finance minister Nirmala Sitharaman announced sharp cuts in corporate taxes, which will benefit only a handful of big tax-payers. 
     
    After the announcement and excited stock market had pushed the Sensex up by 5.3% on Friday (20th September) and 2.8% the following Monday. The real impact has been psychological. The deep belief of businessmen and investors in the regime was restored. But bad news continues to come and the market has given up a lot of the outsize two-day gains.
     
    Since 2014, businessmen and investors have fervently believed that the Bharatiya Janata Party (BJP) government, led by Mr Modi knew exactly what to do and were working according to a plan to accelerate growth. It is quite another matter that the government has just never explained what its economic philosophy is, and so, what kind of reforms we can expect.
     
    What we got as “reforms” was the destruction of demonetisation and enormous pain inflicted by the shoddy implementation of the goods and services tax (GST).
     
    But businessmen and investors, who are a naturally optimistic bunch, took all this pain in their stride because they believed in the PM Modi’s desire and ability to deliver. This is why just before the union Budget in July, the market hit an all-time high, as investors looked for a ground-breaking budget. 
     
    After all, PM Modi had created history by winning a massive popular mandate for the second successive time and nothing stopped him from unleashing “big bang reforms”.
     
    However, over the last few months, every economic indicator has been flashing red – a result of no economic philosophy and so, no effective reforms. No wonder that rising unemployment, poor export growth, punitive taxes, tax terrorism, imploding public sector, collapse in the gross domestic product (GDP) growth rate to 5% (effectively 3.5% under the old calculations) in the first quarter, auto sales at a 20-year low, no manufacturing growth, crisis in financial services and banking were staring at our face. 
     
    Dr Rathin Roy, till recently a member of the Prime Minister’s Economic Advisory Council (EAC), commented that we are facing a silent crisis.  After this frank talk and raising questions about government’s budget figures, which seem to be at variance with the figures of Comptroller and Auditor General (CAG), he was removed from the EAC.
     
    But just when were seemed to slide down inexorably down a slippery slope, the government announced huge tax cuts and the belief in PM Modi was restored again. Businessmen and investors are now expectantly waiting for the next round of big bang reforms. What could these be?
     
    Sustained economic success stories from around the world clearly tell us what works. We need higher productivity of land, labour and capital. This in turn can be delivered by two important engines: 
     
    1. A true market economy, with both incentives and competition to businesses. 
     
    2. A regulatory, governance and justice system that encourages good guys and penalizes the bad buys. 
     
    There is no other proven method of durable economic progress. 
     
    The much-hailed liberalisation of early 1990s failed to fire either of the two engines, which is why we had corruption, bad loans and inflation from which the economy took a decade to recover. On top of this, we got crony capitalism under the successive governments.
     
    India may have gone up in the World Bank ranking of “Doing Business” but the reality on the ground is that we dozens of permissions are required to start a business; running it involves bribes and extortion; and shutting them down is tough. 
     
    The second aspect – speedy and fair governance, regulatory and justice system – is not in place either. The central bank has repeatedly failed to supervise banks and finance companies, sectoral regulators are bumbling and dealing with courts and revenue authorities is a nightmare. The government remains the largest litigant. 
     
    Poor climate of doing business and governance system is the reason various markers of the economy today are worse than in late 2013, when a despondent India, tired of corruption, crony capitalism and policy paralysis, pinned their hopes and faith in Mr Modi. 
     
    Any policy change, to be really effective, must be part of the two steps outlined above. Otherwise they will not have only a temporary and limited effect. Tax cuts did not flow from an overall plan to bring about these two basic changes. Welcome as they are, they were a knee-jerk action to a gloomy economic scenario that is getting a lot of attention suddenly. 
     
    You may want to watch this video...

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    COMMENTS

    Ramesh Poapt

    2 weeks ago

    many are worried aboutGDP. it will well improve in Q4

    Suketu Shah

    2 weeks ago

    Anurag Thakur seems to be right hand man of FM.What does he know about finance,economics,etc,All unsuitable people in major posts leading to disaster.

    Aditya G

    2 weeks ago

    Completely agree. I'm all for free market capitalism, but with some safeguards for the poor. It's going to very difficult to balance the two. My view is that the bureaucratic system has to be overhauled, streamlined by shedding all the fat and inefficiencies within. It's a major hurdle to reforms.

    Ranbir Lamba

    2 weeks ago

    Already posted that
    It will go to running corporate
    Reduce GST & IT slabs + corporate to slash prices by 49that% of this corporate tax. All were recommended on day of corporate tax rate cut. Need to generate demand . Pay DA also we'd jul to employees for consumption

    No MAT credit for companies opting for lower corporate tax: CBDT
    Clarifying on shift from current to the new corporate tax regime, the tax department on Wednesday said that companies opting to pay for lower tax rate of 22 per cent would not be allowed to avail Minimum Alternate Tax (MAT) credit.
     
    These companies would also not be able to carry forward the accumulated additional depreciation of past years in case of shifting to the lower tax regime.
     
    Tax experts said that companies would have to see which regimes suits them depending on their MAT credits, additional accumulated depreciation of past years and future profitability.
     
    "The companies would need to do their maths and see what suits them," said Rahul Garg, Senior Partner (Tax & Regulatory), PwC India.
     
    In a clarification on Wednesday, the Central Board of Direct Taxes (CBDT) said that the tax credit of MAT paid by the domestic company, exercising the option under section 115BAA of the Act shall not be available consequent to exercising of such option.
     
    "Further, as there is no time line within which option under section 115BAA can be exercised, it may be noted that a domestic company having credit of MAT may, if it so desires, exercise the option after utilising the said credit against the regular tax payable under the taxation regime existing prior to promulgation of the Ordinance," the apex decision-making body on direct taxes said.
     
    The government had last month promulgated an ordinance to slash corporate tax to 22 per cent from 30 per cent with the rider that companies will be able to opt for lower tax regime only, if they do not avail any exemptions and incentives.
     
    The CBDT circular has also clarified that a domestic company which exercises option for availing benefit of lower tax rate under section 115BBA shall not be allowed to claim set off of any brought forward loss on account of additional depreciation for an assessment year for which the option has been exercised and for any subsequent assessment year.
     
    "The circular from the Ministry (CBDT) reflects the much desired responsiveness to provide tax certainty and mitigate tax litigation. The denial of set off of loss from unabsorbed accelerated depreciation affirms the clear intent of the policy makers on the working ofthe new tax schemes," said Gokul Chaudhri, Partner, Deloitte India.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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