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<ul><li>Corporate entities will not be able to reduce their tax burden by claiming input tax credit on corporate social responsibility activities.</li><li>This could also lead to confusion amongst corporate entities since AARs of different states have given contrary rulings in this regard.</li><li>Earlier, Uttar Pradesh AAR had allowed <keyword id="12201693" type="General" weightage="20" keywordseo="ITC-on-CSR" source="Orion">ITC on CSR</keyword> activities, while Kerala AAR took the contrary position.</li></ul>Input tax credit allows registered entities under <keyword id="6354679" type="General" weightage="20" keywordseo="GST" source="Orion">GST</keyword> to claim credit on the goods and services tax (GST) that they have paid while purchasing goods or services, which can be offset from the GST that they have to pay after making sales. However, input tax credit (ITC) can’t be claimed on expenses made towards corporate social responsibility (<keyword id="6354502" type="General" weightage="20" keywordseo="CSR" source="Orion">CSR</keyword>) activities, according to a new order from the Authority for Advance Rulings (AAR) ruling in Gujarat. There are two other rulings from the same authority and one of those allows the input tax credit on CSR. According to the provisions of Companies Act, 2013, companies with a net worth of ₹500 crore or more, or turnover of ₹1,000 crore or more, or net profit of ₹5 crore or more, will have to mandatorily spend on CSR activities. The spend should be a minimum of 2% of the average net profit of the past three years. <cmsannotation type="cmsannotation" annotationid="The root of the problem" comment="subhead" text="The root of the problem">The root of the problem</cmsannotation> The primary issue here is whether CSR activities can be construed as “in course or furtherance of business”, that is, whether they are fundamental for a company to continue its business activities. However, the GST provisions do not define what exactly that would entail. For this purpose, the applicant in this case, Adama India Pvt. Ltd., relied on the provisions of Companies Act, 2013, to state that CSR activities are mandatory as per law, and not undertaking them would cause harm to the business. This, the applicant says, entitles it to take ITC on CSR activities. However, the Gujarat AAR referred to the Companies (CSR Policy) Rules, 2014, to state that CSR activities are not covered in activities “in the course or furtherance of business”. It also cited the provisions of Companies (CSR Policy) Amendment Rules, 2021, which provide a definition of CSR that excludes it from normal business activities. Essentially, the GAAR ruled that since CSR is specifically excluded from the scope of normal business activities, the applicant cannot take ITC on CSR activities. According to Ayush Mehrotra, one of the partners at Khaitan &amp; Co., this is likely to further increase litigation in GST. “The GST framework is wide enough to inter alia include activities without pecuniary benefits and those which are incidental or ancillary to main business. As such, the present ruling will only cause further litigation on GST which was otherwise expected to be a simpler and straightforward framework,” he told Business Insider. <cmsannotation type="cmsannotation" annotationid="Contrary AAR rulings put corporates in a bind" comment="subhead" text="Contrary AAR rulings put corporates in a bind">Contrary AAR rulings put corporates in a bind</cmsannotation> Gujarat AAR’s ruling is in contrast to that of the Uttar Pradesh AAR, which allowed the applicant to take the credit of Goods and Services Tax (GST) paid by the company while purchasing goods to be used for CSR activities. However, it is in line with the Kerala AAR, which passed a similar ruling in the matter of Polycab Wires donating flood relief items. “It is also noteworthy to highlight that since this ruling is in contradiction to prior rulings issued by competent authorities in other states, the urgent need for a national authority is once again being felt to ensure certainty of legal position,” Khaitan added further. The exclusion of ITC on CSR activities will mean that corporate entities will not be able to reduce their tax burden by claiming <keyword id="12201691" type="General" weightage="20" keywordseo="GST-input" source="Orion">GST input</keyword> credit. SEE ALSO: <a href="https://www.businessinsider.in/business/startups/news/swiggy-tightens-focus-on-grocery-delivery-as-zomato-steps-out/articleshow/86582683.cms">Swiggy tightens focus on grocery delivery, as Zomato steps out</a> <a href="https://www.businessinsider.in/policy/legal/news/sc-landmark-ruling-in-the-samsung-heavy-industries-case-could-have-a-positive-effect-on-ease-of-doing-business-in-india/articleshow/77148341.cms">Supreme Court’s landmark ruling in the Samsung Heavy Industries case could have a positive effect on ease of doing business in India</a> <a href="https://www.businessinsider.in/policy/legal/news/these-are-the-common-laws-that-you-may-be-inadvertently-breaking-in-india/slidelist/76638782.cms">These are the common laws that you may be inadvertently breaking in India</a>

Can you claim input tax credit on CSR expense ⁠— three authorities have two different rulings

The new year 2022 is going to bring a significant change in the manner of availing <keyword id="6456395" type="General" weightage="20" keywordseo="input-tax-credit" source="Orion">Input Tax Credit</keyword> (ITC) by the taxpayers under the Goods and Services Tax Act. The additional condition to avail ITC by the recipient of goods/services introduced by the <keyword id="6374292" type="General" weightage="20" keywordseo="finance-act" source="Orion">Finance Act</keyword>, 2021 has been made effective from January 1, 2022. With the upcoming change, ITC on an invoice/debit note can be availed by a recipient only when details of such invoice/debit note have been furnished by the supplier in his outward supplies (GSTR-1) and such details have been communicated to the recipient of such invoice in Form GSTR-2B. Basically, a buyer will not get credit for the tax paid if the supplier does not upload the invoice and file returns on the <keyword id="6354679" type="General" weightage="20" keywordseo="gst" source="Orion">GST</keyword> portal in a timely manner. Henceforth, the taxpayer will not get the benefit of availing 5% provisional ITC as allowed under aforesaid rule. <cmsannotation type="cmsannotation" annotationid="Implications of the change on businesses" comment="subhead" text="Implications of the change on businesses">Implications of the change on businesses</cmsannotation> One of the major rigours of the above amendment is that it will increase the dependency of recipients on their suppliers for availing any ITC on their supplies. Unless the suppliers report their supplies over the GST portal aptly and the same is visible in their auto drafted GSTR-2B, the ITC on such supplies will not be available to the recipient even if other conditions for availing ITC have been duly satisfied. This brings in dual responsibility on the taxpayers, one to ensure correctness of their own compliances and second to also ensure correct compliances by their suppliers. And if they don’t do the same, they will be the one who will lose their legitimate ITC due to the fault of their suppliers. <cmsannotation type="cmsannotation" annotationid="How can businesses protect their ITC now? Vendor agreements." comment="subhead" text="How can businesses protect their ITC now? Vendor agreements.">How can businesses protect their ITC now? Vendor agreements.</cmsannotation> With such draconian provisions being brought in GST, it is imperative for the businesses to safeguard themselves by introducing such stringent and unwavering clauses in their vendor agreements which will protect them from any loss incurred by them due to failure on part of the supplier to upload invoices or incorrect uploading of invoices of supplies made to recipient under GSTR-1 or due to any other technical flaw and entitle them to offset or recover the same from such defaulting suppliers. <cmsannotation type="cmsannotation" annotationid="Civil suits in case of disagreements" comment="subhead" text="Civil suits in case of disagreements">Civil suits in case of disagreements</cmsannotation> Unless stringent clauses are incorporated in the vendor agreements, it will be difficult for the recipients to claim any remedy under GST law in case any such loss is incurred by them due to non-compliance of the supplies. Therefore, the last legal recourse that may be available to them will be to file civil suits for recovery which itself is a long-drawn process. <cmsannotation type="cmsannotation" annotationid="Improving in-house processes will be the key to ensure ITC is not lost" comment="subhead" text="Improving in-house processes will be the key to ensure ITC is not lost">Improving in-house processes will be the key to ensure ITC is not lost</cmsannotation> In order to avoid any such complexities, businesses should proactively build in-house processes for the relevant stakeholders such as accounts payable team, tax team, finance team etc. to ensure legitimate ITC is not lost. For instance, accounts payable team should ensure that payment for any invoice is not made unless the same is available on the GST portal. Likewise, the tax team should ensure that no ITC is taken on any invoice unless the same is appearing on the GST portal as this may result in denial of ITC later. <cmsannotation type="cmsannotation" annotationid="Other practical solutions to make sure businesses don’t lose ITC" comment="subhead" text="Other practical solutions to make sure businesses don’t lose ITC">Other practical solutions to make sure businesses don’t lose ITC</cmsannotation> Time to time reconciliations from the data available on portal before taking ITC, rigorous follow up with vendors for timely reporting of their invoices, email communications with the suppliers in case of non-reporting or misreporting, holding payments of non-compliant vendors, etc. are some of the practical solutions which can be implemented by the businesses at their end to ensure legitimate ITC without affecting cash flow of the company. <cmsannotation type="cmsannotation" annotationid="Concluding remarks" comment="subhead" text="Concluding remarks">Concluding remarks</cmsannotation> As a closing remark, it won’t be improper to state that having such restrictive provisions runs absolutely contrary to the intention behind introduction of the GST regime which was to eliminate the cascading impact of taxes that existed under the erstwhile regime and to allow free movement of credit. There is no denial that the government must combat bogus invoicing but while doing so it should not harass bonafide taxpayers by increasing compliance burden on them. Note: This is an opinion piece by CA Tushar Aggarwal, Founder Partner Tattvam Advisors &amp; CA Geetika Shrivastava, Executive Partner Tattvam Advisors. SEE ALSO: <a href="https://www.businessinsider.in/finance/news/heres-how-to-avail-gst-credit-if-your-supplier-has-not-uploaded-invoices/articleshow/81145678.cms">Here’s how to avail GST credit if your supplier has not uploaded invoices</a> <a href="https://www.businessinsider.in/policy/legal/news/can-you-claim-input-tax-credit-on-csr-expense-three-authorities-have-two-different-rulings/articleshow/86609122.cms">Can you claim input tax credit on CSR expense ⁠— three authorities have two different rulings</a> <a href="https://www.businessinsider.in/policy/legal/news/cloud-kitchens-are-restaurants-ice-cream-is-not-food-and-other-important-clarifications-that-will-affect-gst-rates/articleshow/86841614.cms">Cloud kitchens are restaurants, ice cream is not food and other important clarifications that will affect GST rates</a>

OPINION: GST Input Tax Credit changes from January 1 – Things to ask your vendor, how to protect your ITC and more

<ul><li>The 45th meeting of the <keyword id="6355040" type="General" weightage="20" keywordseo="gst-council" source="Orion">GST council</keyword> has clarified matters pertaining to the rate of <keyword id="6354679" type="General" weightage="100" keywordseo="gst" source="Orion">GST</keyword> applicable on several services.</li><li>This includes cloud kitchens, alcoholic liquor, ice cream parlours among others.</li><li>Check out the latest news and updates on <a href="https://www.businessinsider.in/">Business Insider</a>.</li></ul>The <keyword id="6359833" type="General" weightage="20" keywordseo="goods-and-services-tax" source="Orion">Goods and Services Tax</keyword> (GST) regime was introduced in 2017 in India to simplify the consumption-based tax system, but several dozens of issues and complexities remain in the system more than four years after its introduction. One of the reasons behind this is the ever-evolving business landscape – for instance, while cloud kitchens have been around in informal setups for a long time now, the formal sector has only caught up recently largely due to the Covid-19 pandemic. With many of these cloud kitchen companies coming under the ambit of GST due to an explosion in popularity, it’s important to understand how the government looks at them, so they can collect GST at the applicable rate. To clear the confusion and clarify what rate of GST is applicable on many of these services, the government has issued a circular that goes into each category’s detail. Here is a summary: <cmsannotation type="cmsannotation" annotationid="Cloud kitchens are restaurants" comment="subhead" text="Cloud kitchens are restaurants">Cloud kitchens are restaurants</cmsannotation> The GST council has clarified in its circular that cloud kitchens provide the same services that a restaurant does, and as such, they would be covered under the definition of a restaurant under the act. This includes regular restaurants, cafes, takeaway services, room services and food delivery services. This means that cloud kitchen firms will have to charge GST at the rate of 5%, without taking any input tax credit (ITC), under the GST composition scheme. Alternatively, they can charge GST at the rate of 18% if they want to claim input tax credit. <cmsannotation type="cmsannotation" annotationid="Ice cream parlours are not restaurants" comment="subhead" text="Ice cream parlours are not restaurants">Ice cream parlours are not restaurants</cmsannotation> Another important aspect that affects consumers directly is whether ice cream parlours are to be considered as restaurants or not. The council observed that ice cream parlours do not engage in any form of cooking at any stage, and as such, are not covered under the scope of restaurants. It noted that these parlours sell already-manufactured ice cream. As such, this would attract GST at 18% and not 5%. <cmsannotation type="cmsannotation" annotationid="Amusement parks with rides" comment="subhead" text="Amusement parks with rides">Amusement parks with rides</cmsannotation> The council clarified that amusement parks, which have casinos or race clubs, will have to charge GST at the rate of 28% on the services provided by them. However, if these parks do not have casinos or race clubs, or if they do not provide access to them, the applicable GST rate will be 18%. <cmsannotation type="cmsannotation" annotationid="Coaching services to students with disabilities" comment="subhead" text="Coaching services to students with disabilities">Coaching services to students with disabilities</cmsannotation> The council clarified that coaching institutes and non-governmental organisations (NGOs) which provide coaching services under the central government’s “Scholarships for students with disabilities” scheme are exempt from GST, and as such, there will be no GST on the coaching services offered by them. <cmsannotation type="cmsannotation" annotationid="Alcoholic liquor is not food" comment="subhead" text="Alcoholic liquor is not food">Alcoholic liquor is not food</cmsannotation> Firms which manufacture alcoholic liquor for human consumption for brand owners will have to charge GST at the rate of 18%. A clarification was sought whether alcoholic liquor is covered under the definition of food and food products, and the GST council underlined that alcoholic liquor is excluded from the purview. As such, this would attract GST at 18% and not 5%, which is otherwise applicable on food and food products. SEE ALSO: <a href="https://www.businessinsider.in/policy/legal/news/can-you-claim-input-tax-credit-on-csr-expense-three-authorities-have-two-different-rulings/articleshow/86609122.cms">Can you claim input tax credit on CSR expense ⁠— three authorities have two different rulings</a> <a href="https://www.businessinsider.in/policy/legal/news/sc-landmark-ruling-in-the-samsung-heavy-industries-case-could-have-a-positive-effect-on-ease-of-doing-business-in-india/articleshow/77148341.cms">Supreme Court’s landmark ruling in the Samsung Heavy Industries case could have a positive effect on ease of doing business in India</a> <a href="https://www.businessinsider.in/policy/legal/news/these-are-the-common-laws-that-you-may-be-inadvertently-breaking-in-india/slidelist/76638782.cms">These are the common laws that you may be inadvertently breaking in India</a>

Cloud kitchens are restaurants, ice cream is not food and other important clarifications that will affect GST rates

<ul><li>Companies and firms with branches in different states now have a new headache to deal with – charging <keyword id="6354679" type="General" weightage="100" keywordseo="gst" source="Orion">GST</keyword> on salaries of their head office staff. </li><li>Experts suggest that this will effectively make salaries taxable under the purview of GST, which is in contradiction with the law. </li><li>This could also lead to a flurry of notices from the GST authorities, and litigation that can be avoided. </li></ul>The GST (Goods and Services Tax) regime requires firms to take separate registration for each state, and common expenses incurred by the head office, like marketing, advertising, legal services and travel expenses, for instance, are to be distributed to branch offices, usually based on their respective turnovers. Now, a <a href="https://economictimes.indiatimes.com/news/company/corporate-trends/aaar-ruling-on-salary-to-impact-head-office-branch-gst-dynamics/articleshow/88938019.cms">new tax ruling</a> says the same shall apply to salaries paid to head office employees for the services provided to branch offices. Essentially, if you are in the Delhi head office of a company and your <keyword id="10876" type="General" weightage="20" keywordseo="salary" source="Orion">salary</keyword> is ₹10,000 a month, your company has to say how much of the money paid to you is attributable to services rendered to, say, the Kolkata branch office. And, pay GST on that part of the salary. While the employees don’t have to worry about this, the finance team will have a new headache. Experts say this will create confusion and unnecessary litigation. “Salary is not under the purview of the GST law. This AAAR ruling essentially makes salaries taxable under GST, which is contradictory to the provisions of the law,” <keyword id="3183501" type="General" weightage="20" keywordseo="jatin-arora" source="Orion">Jatin Arora</keyword>, partner, <keyword id="3460452" type="General" weightage="20" keywordseo="phoenix-legal" source="Orion">Phoenix Legal</keyword>, told Business Insider. There was a <a href="https://taxguru.in/goods-and-service-tax/gst-implications-inter-unit-service-cost-cross-charges.html">similar ruling</a> from Karnataka Authority of Advance Ruling 2019. The union government had said that it would provide a clarification in this matter but nothing has come through so far. “As per Schedule I, only supply of goods and services between related parties would be subject to tax, whether with or without consideration. However, cost allocation is different from supply of service, and this would not fall under the purview of supply,” <keyword id="3063029" type="General" weightage="20" keywordseo="Abhishek-Rastogi" source="Orion">Abhishek Rastogi</keyword>, partner, <keyword id="908387" type="General" weightage="20" keywordseo="khaitan-co-" source="Orion">Khaitan &amp; Co.</keyword>, told Business Insider. He also further explained that this means that any cost allocation – in this case, salaries of head office staff – would not be taxable under GST. Maharashtra AAAR’s ruling is a result of a request filed by Cummins India, seeking clarity on whether it should charge GST on allocation of salaries of its head office staff to branches. “Due to this, there will be unnecessary confusion, leading to notices from the department and litigation,” Arora added, stating that the government should issue a clarification at the earliest to avoid a flurry of notices from the tax department to firms across the country. SEE ALSO: <a href="https://www.businessinsider.in/business/auto/news/tesla-india-prospects-get-a-boost-as-states-compete-with-each-other-to-invite-elon-musk-to-their-backyard/articleshow/88890951.cms">Tesla India prospects get a boost as states compete with each other to invite Elon Musk to their backyard</a> <a href="https://www.businessinsider.in/stock-market/news/hcl-technologies-shares-down-7-as-employees-are-leaving-the-firm-at-a-faster-rate-than-ever-before/articleshow/88944681.cms">The street is dumping HCL Tech shares because its employees are leaving at a faster rate than ever before</a> <a href="https://www.businessinsider.in/policy/legal/news/can-you-claim-input-tax-credit-on-csr-expense-three-authorities-have-two-different-rulings/articleshow/86609122.cms">Can you claim input tax credit on CSR expense ⁠— three authorities have two different rulings</a>

GST on salaries? A new ruling can cause a lot of confusion and litigation

<ul><li>The <keyword id="183099" type="ORGANIZATION" weightage="20" keywordseo="BSE-Auto-Index">BSE Auto index</keyword> surged nearly a percent on December 16, with Ashok Leyland and Tata Motors leading the way. The index has gained 16% since September 30. </li><li>A Parliamentary Standing Committee seeks more stimulus aside from other measures to boost demand, and revive the <keyword id="34478" type="PERSON" weightage="20" keywordseo="auto-industry">auto industry</keyword> in India. </li><li>The recommendations include regulatory relief, financial incentives for the scrappage policy, discount on research and development and more loans for dealers, but with less collateral. </li><li>The Committee also recommended reducing the GST rate to 18% from 28% to bring down a sizable amount in vehicle price. </li><li><a href="https://www.businessinsider.in/">Check out the latest news and updates on Business Insider.</a> </li></ul>Indian benchmark indices remained in the grip of bulls, recording fresh highs during the trade today and one of the big drivers of today’s rally were the auto stocks. The BSE Auto index surged nearly a percent on December 16, with Ashok Leyland and Tata Motors leading the way. Car and truck makers in India are not in good shape. The car makers were already broken with months of falling sales before the pandemic struck but now, there is hope in the horizon⁠— a parliamentary panel can see their pain. Their proposals include a recommendation to cut Goods and Services Tax (GST) rate by 10%. A Parliamentary Standing Committee, which pegged the loss to the industry at about ₹2,300 crore ($312 million), wants the government to release more stimulus to revive the sector. <table style="border-width: initial; border-style: none;"></colgroup><tbody><tr><td style="border-left:solid #000000 0.9907650000000001pt;border-right:solid #000000 0.9907650000000001pt;border-bottom:solid #000000 0.9907650000000001pt;border-top:solid #000000 0.9907650000000001pt;vertical-align:bottom;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Stocks </td><td style="border-left:solid #000000 0.9907650000000001pt;border-right:solid #000000 0.9907650000000001pt;border-bottom:solid #000000 0.9907650000000001pt;border-top:solid #000000 0.9907650000000001pt;vertical-align:bottom;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Today's gain </td></tr><tr><td style="border-left:solid #000000 0.9907650000000001pt;border-right:solid #000000 0.9907650000000001pt;border-bottom:solid #000000 0.9907650000000001pt;border-top:solid #000000 0.9907650000000001pt;vertical-align:bottom;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Ashok Leyland </td><td style="border-left:solid #000000 0.9907650000000001pt;border-right:solid #000000 0.9907650000000001pt;border-bottom:solid #000000 0.9907650000000001pt;border-top:solid #000000 0.9907650000000001pt;vertical-align:bottom;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">5.48% </td></tr><tr><td style="border-left:solid #000000 0.9907650000000001pt;border-right:solid #000000 0.9907650000000001pt;border-bottom:solid #000000 0.9907650000000001pt;border-top:solid #000000 0.9907650000000001pt;vertical-align:bottom;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Tata Motors </td><td style="border-left:solid #000000 0.9907650000000001pt;border-right:solid #000000 0.9907650000000001pt;border-bottom:solid #000000 0.9907650000000001pt;border-top:solid #000000 0.9907650000000001pt;vertical-align:bottom;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">2.07% </td></tr><tr><td style="border-left:solid #000000 0.9907650000000001pt;border-right:solid #000000 0.9907650000000001pt;border-bottom:solid #000000 0.9907650000000001pt;border-top:solid #000000 0.9907650000000001pt;vertical-align:bottom;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">M&amp;M </td><td style="border-left:solid #000000 0.9907650000000001pt;border-right:solid #000000 0.9907650000000001pt;border-bottom:solid #000000 0.9907650000000001pt;border-top:solid #000000 0.9907650000000001pt;vertical-align:bottom;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">1.89 </td></tr><tr><td style="border-left:solid #000000 0.9907650000000001pt;border-right:solid #000000 0.9907650000000001pt;border-bottom:solid #000000 0.9907650000000001pt;border-top:solid #000000 0.9907650000000001pt;vertical-align:bottom;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">TVS Motors </td><td style="border-left:solid #000000 0.9907650000000001pt;border-right:solid #000000 0.9907650000000001pt;border-bottom:solid #000000 0.9907650000000001pt;border-top:solid #000000 0.9907650000000001pt;vertical-align:bottom;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">1.88% </td></tr><tr><td style="border-left:solid #000000 0.9907650000000001pt;border-right:solid #000000 0.9907650000000001pt;border-bottom:solid #000000 0.9907650000000001pt;border-top:solid #000000 0.9907650000000001pt;vertical-align:bottom;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">MRF </td><td style="border-left:solid #000000 0.9907650000000001pt;border-right:solid #000000 0.9907650000000001pt;border-bottom:solid #000000 0.9907650000000001pt;border-top:solid #000000 0.9907650000000001pt;vertical-align:bottom;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">1.62% </td></tr></tbody></table>Source: BSE Auto Index There has been some recovery in auto sales in recent months. But, there is a peculiar situation in India, where the car makers and the dealers can’t agree whether the sales in the month of November were good or not! While the Society of Indian Automobiles, the lobby of car manufacturers, said <a href="https://www.businessinsider.in/business/auto/news/festive-boost-passenger-vehicle-sales-jump-13-in-november-two-wheelers-rose-14/articleshow/79676027.cms">it has been a great month</a>, the dealers association <a href="https://www.businessinsider.in/business/auto/news/passenger-vehicle-retail-sales-rise-4-two-wheeler-decline-21-despite-festive-boost-fada/articleshow/79622188.cms">wasn’t as excited</a>. The recommendation from the Parliamentary panel has come at a time when car makers like Maruti and Mahindra &amp; Mahindra have already announced discounts⁠— a usual fair at the end of every year⁠— after a losing an entire year to the pandemic and its extended impact. The recovery of this segment of industry is important because it employs a large number of people, many unskilled or less-skilled ones, and as per the panel’s estimate, 345,000 people have already lost their jobs. These are major items recommended by the Parliamentary Standing Committee: <ul><li>Consider wages paid to contract workers as charity: The committee recommended that the expenditure incurred by automakers for making payments to the temporary and contract labour during the lockdown period should be eligible as corporate social responsibility (CSR) expense. This move will help the automaker from tax paid on salaries. </li></ul><ul><li>Give more time to pay suppliers and vendors: It also recommended that the condition to avail ITC (Input Tax Credit) requiring payment of invoice to the supplier within 180 days of invoice to be done away with, till the situation returns to normal. Or at least should be provided with a waiver of interest which is charged from the date of invoice of the supplier, as most payments to the vendors will be deferred in the present scenario. The input credit helps the automaker to reduce the already paid raw material tax at the time of paying tax on output. </li></ul><ul><li>Reduce need for testing and regulatory approvals: A provision should be made for acceptance of self-certification by OEMs, instead of testing and approval by Government agencies for meeting regulatory requirements. Also a prioritised attention should be given to new approvals of alternate materials/parts identified for testing for compliance and validation purposes and fast track approvals by testing agencies. </li></ul><ul><li>Double the waiver on demurrage charge: Instead of 50%, 100% waiver on demurrage charges to be provided at the Airports/Seaports and rail yards until 1 month post resumption of full commercial production. </li></ul><ul><li>Reduce depreciation on value of vehicles: To make up the lost sales in March 2020 vehicles purchased till May 30 be permitted to enjoy 6 months depreciation in FY 2019-2020 — which will help in stimulating sales. </li></ul><ul><li>Discount on research and development: The government should also give a temporary exemption on import/export taxes and a 50% discount in testing prices in National Automotive Testing and R&amp;D Infrastructure Project (NATRIP) facilities.</li></ul><ul><li>More loans for dealers, but with less collateral: The Committee also recommended that the collateral norms for regular loan products for Auto Dealers should be moderate for availing required finance. It addressed that though banks have been facing various challenges because of bad loans, however, they should not look at all financial lendings with the same eye as the recovery rate is very high in the <keyword id="46265" type="PERSON" weightage="20" keywordseo="Auto-sector">auto sector</keyword>.</li></ul><ul><li>Financial incentives in the Scrappage Policy: The committee said that in addition to setting of Automotive Vehicle Scrapping Facility (AVSF) centres across the country, the government should make provisions for upfront financial incentives in the Scrappage Policy to boost demand for purchase of new vehicles. </li></ul><ul><li>GST reduction: To mitigate this cost increase, the Committee said the reduced GST rate to 18% from 28% at the moment. It said it will bring down a sizable amount in vehicle price creating more demand for newer vehicles. The increased sale due to the reduction in GST rate, will cover up the loss in GST revenue.</li></ul>Federation of Automobile Dealers Associations of India President Vinkesh Gulati welcomes the recommendations from the Parliamentary Standing Committee. “We had recommended One Nation – One Road Tax. I am happy to note that the committee found it relevant. It will also be praiseworthy if the Government accepts the committee’s recommendation of introducing effective rate of depreciation as 25% on permanent basis thus helping in improving sales,” he said in a statement to Business Insider. SEE ALSO:<a href="https://www.businessinsider.in/business/corporates/news/interview-home-recipes-that-are-set-for-a-7-million-ipo-mrs-bectors-food-is-no-cookie-cutter/articleshow/79721783.cms" data-type="tilCustomLink"> INTERVIEW: Home recipes that are set for a $73 million IPO⁠— Mrs Bector’s Food is no cookie cutter</a> <a href="https://www.businessinsider.in/thelife/personalities/news/facebook-ceo-mark-zuckerberg-and-reliance-industries-mukesh-ambani-spoke-but-had-no-chemistry/articleshow/79739547.cms" data-type="tilCustomLink">Zuckerberg spoke to Ambani but there was no chemistry — even with a multi-million dollar partnership between them</a>

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