India Regulatory Brief: GST Schedule for Goods and Services, RBI Removes Restrictions for Bank Branches

Final GST schedule released for goods and services

The GST Council, which is the federal agency regulating the new indirect tax structure in India – the Goods and Services Tax (GST) – published a detailed list of tax rates late last week.

The final GST schedule aligns 1,211 goods in six separate categories; barring the exemption list, there are five slabs of taxation. These fall under 5 percent, 12 percent, 18 percent, 28 percent, and 28 percent plus cess. For services, the tax structure is similar. Further, all e-commerce vendors will be liable to pay one percent tax collected at source under the GST regime.

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Goods that do not attract GST are primary food items such as eggs, dairy produce, fresh meat and fish, and food grains, while healthcare and education services will be exempt from GST.

The GST Council also finalized GST rules that cover: composition; claiming of input tax credit; invoice, debit, and credit notes; payment; refund; and registration.

Businesses have until July 1 to transition to the new GST system.

RBI redefines bank branches in India

The Reserve Bank of India, the country’s central bank, relaxed its branch authorization policy on May 18. In reworking the parameters for bank branches, the RBI will now recognize all branches and fixed business correspondent outlets as banking outlets and will remove restrictions on opening branches in tier 1 cities.

Under the RBI’s revised policy, ‘a banking outlet’ is defined as a scheduled commercial bank, a payments bank or a small finance bank that is “a fixed point service delivery unit, manned by either the bank’s staff or its business correspondent, where services of acceptance of deposits, encashment of checks, cash withdrawal or lending of money are provided for a minimum of 4 hours per day for at least five days a week”. The RBI classifies those outlets that do not meet this criteria as “part-time banking outlets.”

The new policy also allows banking outlets to be opened in tier 1 to tier 6 cities without seeking the RBI’s permission; however, banks are mandated to open 25 percent of these outlets in unbanked rural centers (URC).

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Finance ministry drafts Fugitive Economic Offenders Bill, 2017

The finance ministry has drafted the Fugitive Economic Offenders Bill, 2017, which aims to provide an effective, expeditious, and constitutionally permissible deterrent to tackle the menace of high-value economic offenders absconding from India.

The Bill includes provisions for a Special Court under Prevention of Money Laundering Act and defines who will be considered a ‘fugitive economic offender’.

The proposed law will applicable in cases where the value of offenses exceeds US$15.5 million (Rs 100 crore). It will also enable the government to confiscate the property owned by any such person in India.

Giving context to the bill is the recent case of liquor baron Vijay Mallya, whose company Kingfisher Airlines owes over US$1.39 billion (Rs 9,000 crore) to banks.

The government has sought public and expert feedback on the Bill by June 3, following which it will be presented in parliament.

India accedes to the TIR Convention

Earlier this year, the Union Cabinet approved India’s accession to the Customs Convention on International Transport of Goods under cover of the TIR Carnets, 1975 (TIR Convention). This ensures the ratification of necessary procedures for the Convention to come into force in India.

By joining the Convention, Indian traders will have access to fast, easy, reliable, and hassle free customs clearance for movement of goods by road or multi-modal means across the territories of other contracting parties. Signatories to the Convention mutually recognize each other’s internal customs controls, removing the need for inspection of goods at intermediate borders as well as physical escorts en route.

Supply chain efficiencies as well as enhanced security is ensured by the TIR Carnets of 1975, which establishes an international system of approved transporters and vehicles, and also governs the centralized collection of custom duties and taxes.

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