23 October 2019

Interaction- Samir Surlaker, President, CCMA

Discrepancies, Ambiguities, Anomalies, in Classifications

 

Last month the CCMA had an EGM to discuss the GST puzzle. After much confabulations the EGM decided to appoint two internal Committees – one Technical and one Commercial – to prepare a representation to the GST Council. The entire construction sector is waiting with bated breath to see the outcome, which will have a cascading effect across the sector. We asked the CCMA for their assessment of the issues. In an exclusive interview, SAMIR SURLAKER, PRESIDENT, CCMA, spoke to SATISH P. CHAVAN of CONSTRUCTION OPPORTUNITIES.

 

 

As the industry and the CCMA, what is your assessment of the new GST regime? Do you think it will benefit the construction sector, and in particular companies who are having a GST problem due to ambiguity in interpretation of construction chemicals?

As far as I feel the intention of government is always positive when they bring in a new set of rules. However, during the transition period there are some discrepancies, some ambiguities, and some anomalies in the classifications, which we are not agreeing upon together as an industry. The main reason for that is the HSN Classification can be a function of two aspects. One is the constituent of the materials, which you put to formulate your own products, and the second is application based. In many or most of the cases, these two classifications are contradictory. As far as benefit to the industry or the individual company is concerned, until now we have not been able to see any tangible benefits. One instance is that our customers are pretty large companies and are asking us for additional discounts, saying that since GST is applicable your prices should reduce - pass on the benefits. The actual situation is that price reductions are not much applicable to companies like us who are already registered in the old tax regime. The benefit will come to people who are not within this registration regime or are further trading / applying the material (e.g. Distributors). They will get the input credit benefits so they will be able to pass it on to the end consumer. The CC industry serves the retail market as well as the projects markets. Construction chemical industry today, almost 70 per cent of the revenue comes from the end consumers. For distributors, GST may bring in tremendous tax advantage so that they can pass on the benefit to the end customer. As far as the project business is concerned I still think GST doesn’t make much of a difference as input and output rates for the CC industry is the same.

 

 

How will CCMA present its case to the GST Council?

I think we should understand two aspects of classification. The fundamental one is the chemical composition, second is the application of the materials, that is how the system classifies the materials and we can’t change it. Let’s see what is the best way we can take it further from here. In the past some individual members also had questions on correct classification but there was no consensus and no answer. This may lead to some discord in the way different companies classify their products.

An outcome of this would be that the GST authorities may find discrepancies in ones’ classification system and they may try to dig out more skeletons in the cupboard, which hampers business. But I am quite convinced that today if the GST Council accepts our presentation it will not retract it within the time limit. So I think at least for the next few years, businesses can continue smoothly without tax hassles. Based on the industry size, I don’t think they would have a special interest in us.

The industry as a whole is willing to take a unified path of classification based on formulations, to which everyone has agreed. The products would be classified accordingly and then the matter would be put forward to the GST Council. As an association CCMA has already written to the GST Council, the PMO and the secretary to give the industry a hearing in this matter. Whatever happens, we are not saying that the old classification was wrong to any extent, but now we have gone to a better product structure as an industry and we are now ready to reclassify our products.

 

 

What are the chances of the GST Council accepting CCMA demands?

We are looking to this exercise to achieve uniformity Once the GST Council accepts in whatever form, the existing or disputed classifications, the industry would have clarity and stay unified on the classifications. This would automatically take care of the classification problem both in the organized and unorganized sectors of the industry.

But if the GST Council makes a decision to classify certain product lines at 28 per cent, then they would never retract the tax rate.So a clear unified stand would be a good thing. Finally any decision ratified by the GST council, the industry will have to follow, but it will avoid future complications, confusions and misinterpretations.




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