India Regulatory Brief: Government Simplifies Import Process, Model GST Laws Released, and New Aviation Policy

Government to Simplify Process for Select Importers

In order to ease processing norms for importers, the Ministry of Finance is considering the integration of two existing regulatory schemes – the Accredited Clients Program (ACP) and the Authorized Economic Operator (AEO). The revamped AEO scheme will subsequently have an expanded scope.

RELATED: Pre-Investment Advisory from Dezan Shira & Associates

The integrated scheme will allow the option to extend single port clearance, defer payment of duty, be exempt from routine checks, and enjoy significant easing of eligibility preconditions. While most of the benefits will go to direct manufacturers in India, traders will not be excluded. The new plan also intends to divide the month into two parts. Importers who are members of the new AEO scheme and bring in shipments by the 15^th of a given month will be able to defer payments by a particular date after a fortnight. There are no value thresholds and minimum documentation required for membership in the new AEO scheme. Additionally, the government has proposed only a risk-based assessment for member-importers.

Before, this trade facilitation scheme was assured only to IKEA by the Ministry of Finance as an incentive for doing business in India. However, if the proposed changes are accepted, all importer-members can take advantage of the revamped AEO scheme. The Central Board of Excise and Customs (CBEC) is currently holding consultations with other government departments to finalize the framework.

Government Releases Draft Model GST Laws

On June 14th, the Ministry of Finance released its Draft Model Goods and Services Tax (GST) Laws, including the Goods and Services Tax Act 2016 (also called the Central/State Goods and Services Tax Act 2016 or CGST/SGST), the Integrated Goods and Services Tax Act 2016, and the GST Valuation (Determination of the Value of Supply of Goods and Services) Rules 2016. The Acts will come into force after the GST bill gets passed by parliament and state legislatures and on such date as the central or a state government may notify in the Official Gazette.

The model laws cover tax administration; levy of and exemption from the GST; time and value of supply; input tax credit; registration; tax invoices; GST returns; payment of GST; transfer of input tax credit; refunds, accounts and records; e-commerce; assessment; audit, demands and recovery; inspection, search, seizure and arrest; offences and penalties; prosecution; appeals; advance rulings; transitional provisions (e.g. migrating taxpayers to GST); and other miscellaneous provisions.

All forms of “supply” of goods and services, such as sale, transfer, barter, exchange, license, rental, lease, and import of goods and services made for a consideration will attract CGST and SGST. Since GST will be calculated on supply, former taxable heads may become irrelevant, such as manufacture, sale, and provision of services, among others. There will be no constitutional cap on the GST rate. Other key clauses include tax at source for e-commerce firms; classification of intangibles such as software, and works contract and lease transactions as services; reduced compliance burden for small traders through one percent nominal tax; strict timelines for filing tax returns and claiming refunds; and the provision for a national goods and services tax appellate tribunal with branches in every state.

RELATED: Two Years into the Modi Government – How are Things Shaping Up for India?

New Civil Aviation Policy to Increase Travel Options for Consumers

The Union cabinet recently approved a new aviation policy that could launch more airlines, improve regional connectivity, and provide customers with increased options for international air travel.

The policy, framed by the Civil Aviation Ministry, calls for the abolition of the 5/20 rule in favor of a 0/20 rule. This means that new airlines, like Vistara and Air Asia, will not be required to have functioned for a minimum term of five years, as long as 20 aircraft or 20 percent of the carrier’s total fleet (whichever is higher) are deployed in the domestic sector (at any given time). This means that an airline must have a minimum of 20 aircraft in its fleet. Further, airfare for short flights of an hour duration on hitherto routes will now be lessened through tax breaks collected by domestic airlines via small cesses, lower VAT, and jet fuel subsidies, making a seat cost a mere US$ 37.12 (Rs 2500). A specialized body will be formed to engage in viability gap funding so as to properly compensate carriers for slashing commercial flying rates.

The government is to have an open skies agreement with other SAARC and European countries within a 5000 km radius so that all the included members can be allotted additional capacity entitlements. Future tariffs at all airports will be calculated on a ‘hybrid till’ basis, based on a combination of aeronautical and non-aeronautical revenue. Airports will also be built with the help of utilizing models such as public-private-partnership (PPP). Airport security will be partly outsourced to private parties, benefiting the Central Industrial Security Force/armed police (CISF) who are already understaffed. Helicopters will not require air traffic control (ATC) clearance to fly under 5000 feet, allowing them to function better as air ambulances. MRO service providers (maintenance, repair, and overhaul) will be incentivized by cost cutting measures, such as evasion of royalty payments, which sometimes amount to as much as 20 percent of the total costs.

Managing Your Accounting and Bookkeeping in India
In this issue of India Briefing Magazine, we spotlight three issues that financial management teams for India should monitor. Firstly, we examine the new Indian Accounting Standards (Ind-AS) system, which is expected to be a boon for foreign companies in India. We then highlight common filing dates for most companies with operations in India, and lastly examine procedures and regulations for remitting profits from India.

Using India’s Free Trade & Double Tax Agreements
In this issue of India Briefing magazine, we take a look at the bilateral and multilateral trade agreements that India currently has in place and highlight the deals that are still in negotiation. We analyze the country’s double tax agreements, and conclude by discussing how foreign businesses can establish a presence in Singapore to access both the Indian and ASEAN markets.

Passage to India: Selling to India’s Consumer Market In this issue of India Briefing magazine, we outline the fundamentals of India’s import policies and procedures, as well as provide an introduction to engaging in direct and indirect export, acquiring an Indian company, selling to the government and establishing a local presence in the form of a liaison office, branch office, or wholly owned subsidiary. We conclude by taking a closer look at the strategic potential of joint ventures and the advantages they can provide companies at all stages of market entry and expansion.

• Previous Article India’s Public Sector Banking Crisis on Foreign Investment
• Next Article India’s Tax Bodies Pledge Better Service, Expanded Reforms