Maharashtra government launches gross SGST refund to lure investors

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In a bid to protect existing investors and attract new investment, the Maharashtra government has put in place gross state goods and services tax (SGST) reimbursement based industrial subsidy across the state compared to other states which provide Net SGST reimbursement. The state government argues that the NET SGST reimbursement industrial subsidy offered by Gujarat, Haryana, Punjab and Andhra Pradesh will result in lower tax reimbursement to investors.  Sometime states may run into inverted tax issues, leaving investors with low return, who then invest in other states. However, Gross SGST is higher and it will help investors reap benefits.

The state will have to shell out Rs 4,000 crore annually to pay Gross SGST reimbursements under its Package Scheme of Incentive. The Gross SGST reimbursement for most of the sectors is a replacement for VAT reimbursement. A state industries department officer told DNA, ”The Gross SGST reimbursement always remains positive for lowest tax slab of 5% products and its amount for the industry is always higher compared to Net SGST amount. On the other hand, the Net SGST amount for small states entailing very less consumption within the state is meagre with respect to the investment made. It makes investors reluctant to invest in a state where the Net SGST reimbursement model exists.”

The officer said Net SGST reimbursement model would not fit for the industries where the inverted tax structure applies where in GST rate on the input which includes raw material or intermediary product are higher than the final product. ”Textile and bicycle sectors are an example of such sectors,” the officer said. The basic difference between the Net SGST and Gross SGST is of input tax credit component. The government, which is taking a slew of measures to improve ease of doing business to retain its favoured investment destination status, believes that the state’s GST policy is investor friendly. The policy will help the state to clock the highest sales in most of the sectors.

Read more at: https://www.dnaindia.com/mumbai/report-dna-exclusive-maharashtra-government-launches-gross-sgst-refund-to-lure-investors-2719837

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