India Regulatory Brief: Multi-tier GST Structure Finalized and Gujarat Only State to Operationalize the Real Estate Act

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Multi-Tier Goods and Services Tax (GST) Structure Finalised for Goods Categories

India is one step closer to implementing its most ambitious tax reform, the Goods and Services Tax (GST), which seeks to replace the existing multi-layered indirect tax structure, and in turn establish a single national market for goods and services in the country. On November 3, the GST Council reached a broad consensus over a four tier GST structure with the following slabs of 5 percent (mass consumption items like spices, tea, mustard oil), standard rates of 12 (processed foods) and 18 percent (soaps, oil, toothpaste, smartphones, refrigerators), and the higher slab of 28 percent (for white goods and cars). The segment of luxury cars and demerit goods such as tobacco and aerated drinks will be subject to the 28 percent tax slab in addition to a cess.

Essential items in the consumer price basket like food grains (rice, wheat) will be subject to zero GST. The government has also postponed a decision on the GST rate for gold till the tax slabs for all segments are finalized. It is also important to note that items that are presently subject to a tax range of 27 to 31 percent will come under the 28 percent slab under the GST regime. Moreover, middle class consumers will benefit from the lowering of tax incidence on items like soaps, toothpastes, refrigerators, which are presently subject to more than 27 percent in taxes.

Supporting legislation will now have to be passed in the coming weeks to ensure the GST gets implemented from the new financial year starting April 1, 2017. The winter session of India’s parliament starts on November 16 and the next GST Council meeting will be held on November 20. Remaining bottleneck issues include the division of powers in the administration of the new tax regime, finalising the tax rate for all goods, and working out a similar rate structure for services.

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Gujarat State Notifies Rules to the Real Estate Act, Other States Yet to Follow

As per the rules of the Real Estate (Regulation and Development) Act of 2016, October 31 served as the last date for states to officially notify the rules under the Act in order to make it operational. However, Gujarat is the only state to have met this deadline. The Real Estate Act is important for the regulation of India’s booming housing sector and primarily seeks to protect the interests of homebuyers.

Following the law’s enactment, the Ministry of Housing and Urban Poverty Alleviation (HUPA) formulated the Model Rules and Model Regulations for Regulatory Authorities based on public feedback to ensure uniform implementation of the Real Estate Act throughout the country. HUPA’s Model Rules stipulate that real estate developers will have to update the status of their projects for the benefit of buyers and will need to deposit 70 percent of the unused funds in a separate bank account to ensure completion. In case of delay in ongoing projects, developers will be required to inform the public of the final building plan along with changes made, the amount collected from the allottees, account of expenditure, original timeline, and expected date of completion.

Incorporating feedback from various stakeholders, HUPA halved the initial registration fees for real estate developers and reduced the renewal registration fee. Finally, developers will not need to divulge their income tax returns as was proposed in the earlier draft of the rules. This final framework of the Model Rules and Model Regulations is what needs to get ratified by the respective state legislatures for the Act to get operational.

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E-Pharmacy Startups to Soon Get Regulated in India

The government is working on a policy to govern the online sale of medicines in order to level the playing field between online and traditional offline retailers. At present, India has about 50 e-pharmacy startups including 1mg.com, Bookmeds, mChemist, Medidart, Medlife, Medstar, Netmeds, Pharmeasy, and Zigy.com. They have raised US$ 92.6 million in funding so far and could be a game-changer in improving the scope and timely delivery of medicines to all areas. Consequently, the government’s position is to draw up a policy that facilitates the growth of e-pharmas while stipulating the regulatory parameters of quality, cost, and access.

Triggering the government’s sudden move towards greater scrutiny and regulation of online pharmacies is the call for a nationwide strike on November 23 by the All India Organization of Chemists & Druggists. They argue that medicine e-tailers will threaten the livelihoods of the 800,000 chemists and 8 million workers in this segment and impact the health of the general public. Nevertheless, the government is of the opinion that far from threatening the sector’s traditional brick-and-mortar stores, the rise of e-pharmacies will promote healthy competition, widen the reach of critical medicines to remote areas, introduce more cost-effective models, improve upon the timely availability of medicines, and boost entrepreneurship in India’s e-commerce market.

Certain rules are already in place for online sellers such as the requirement of uploading scanned prescriptions. The new policy will therefore aim to balance the need for enabling the viability of the online model and regulation to ensure health security and space for both traditional and online sellers.


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Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email india@dezshira.com or visit www.dezshira.com.

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