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  • Anticipated GST Reduction: A Boost for the Ice Cream Industry

    Ice cream companies are optimistic about a potential reduction in the Goods and Services Tax (GST) rate, believing it will make ice cream more affordable and boost demand. This anticipated change is especially pertinent following recent elections, as industry leaders hope for favorable economic policies from the new government.

    Lobbying for Lower GST Rates

    To achieve a lower GST rate, ice cream manufacturers have actively lobbied key government officials. The Indian Ice-Cream Manufacturers’ Association has submitted a formal request to the President, who has passed it on to the Finance Ministry. The request urges the GST Council to consider reducing the GST on ice cream from the current 18% to 5%.

    Current Tax Discrepancies

    Presently, ice cream sold in shops or parlours attracts an 18% GST. However, when bundled with food services in hotels or restaurants, it is taxed at 5%. This inconsistency is seen as unfair by the ice cream industry. A uniform 5% GST rate, they argue, would significantly lower prices and increase consumption.

    Comparison with Global Consumption

    The association highlights the low per capita consumption of ice cream in India. An average Indian consumes just 400 millilitres of ice cream annually, compared to 28.4 litres in New Zealand, 20.8 litres in the USA, and 18 litres in Australia. Lowering the GST rate would make ice cream more accessible, potentially increasing these figures.

    Ice Cream as a Dairy Product

    Ice cream is a dairy product, yet it is taxed at a higher rate compared to other dairy items. Milk attracts no GST, while products like paneer, curd, lassi, yoghurt, and buttermilk are taxed at 5%. Since most raw materials for ice cream are either animal or agriculture-based, and taxed at lower rates, the industry argues that ice cream should also benefit from a reduced GST rate.

    Benefits to the Unorganized Sector

    A significant portion of the ice cream industry operates in the unorganized sector. Lowering the GST to 5% could encourage these smaller businesses to comply with tax regulations, increasing overall tax revenue. It would also help these enterprises grow, boosting employment and economic stability.

    Economic Impact and Market Growth

    According to the IMARC Group’s Report, the Indian ice cream market is projected to grow from ₹16,500 crore in 2021 to over ₹43,600 crore by 2027, with a CAGR of 17.69%. This growth will benefit rural farmers and improve living standards by providing a stable market for agricultural products used in ice cream production.

    Employment and Livelihood

    The ice cream industry currently employs over 2 million people across production, marketing, and sales. Additionally, more than 125,000 vendors rely on selling ice cream for their livelihood. The industry is also a significant consumer of sugar, which supports millions of workers in sugarcane farming. A reduction in GST would not only benefit these workers but also enhance the overall economic ecosystem related to the ice cream industry.

    Conclusion

    A reduction in the GST rate on ice cream is expected to have far-reaching benefits. It will make ice cream more affordable, increase consumption, support small businesses, and boost the economy. The Indian Ice-Cream Manufacturers’ Association continues to advocate for this change, emphasizing its potential to enhance the industry’s growth and contribute to economic prosperity.

  • Noida Police Arrest Three More in ₹10,000 Crore GST Fraud Case

    The Noida police have apprehended three additional members of a gang allegedly involved in a massive ₹10,000 crore Goods and Services Tax (GST) fraud, increasing the total number of arrests to 44. This arrest marks another significant step in the ongoing investigation that began in June 2023.

    On June 1, 2023, the Noida police announced they had uncovered a sophisticated operation orchestrating a ₹10,000 crore GST fraud. The gang was involved in registering thousands of companies under stolen or fake identities. These fraudulent entities were used to generate fake invoices and claim illegitimate input tax credit (ITC), allowing the culprits to evade substantial amounts of tax.

    Details of the Fraudulent Operation

    Over the past two years, the suspects created at least 100 fake firms. These bogus companies were then sold to unscrupulous businessmen looking to evade taxes by claiming GST input tax credits. By using stolen identities and fake documents, the gang managed to fly under the radar for an extended period, significantly impacting the exchequer.

    Recent Arrests

    The latest arrests include Shubham Jindal (30), Tarunn Jindal (32), and Kaushik Jain (35). The Sector 20 police team detained these individuals from their residences on Saturday. Deputy Commissioner of Police (Crime) Shakti Avasthy reported that these names emerged during the investigation, and the suspects had been on the run since then. In January, a reward of ₹25,000 was announced for information leading to their capture.

    Mechanism of the Fraud

    The gang’s modus operandi involved registering numerous companies using stolen or fake identities. These companies were used to generate e-way bills and claim ITC fraudulently. E-way bills are required for the transport of goods worth over ₹50,000. The ITC mechanism allows businesses to reduce their tax liability by claiming credits for taxes paid on purchases.

    Conclusion

    This case highlights a significant crackdown on GST fraud by the Noida police. The arrest of these individuals underscores the ongoing efforts to dismantle complex tax evasion networks. With 44 members now in custody, the authorities continue to unravel the extensive web of deceit that facilitated this ₹10,000 crore fraud. The investigation remains active, with further developments anticipated as the police delve deeper into this elaborate scheme.

  • Supreme Court Upholds Integrity of Resolution Plans

    In the realm of insolvency and bankruptcy law, the approval of a resolution plan by the National Company Law Tribunal (NCLT) or the National Company Law Appellate Tribunal (NCLAT) imposes stringent obligations on the Successful Resolution Applicant (SRA). The SRA must adhere strictly to the conditions of the approved plan, with no room for deviations or adjustments. This principle is enshrined in Sections 30 and 31 of the Insolvency and Bankruptcy Code (IBC), 2016.

    Section 30 details the submission process for resolution plans. A resolution applicant submits a plan along with an affidavit affirming eligibility under Section 29A, based on the information memorandum. The resolution professional must examine each plan to ensure it meets several criteria. These include prioritizing the payment of insolvency resolution process costs, satisfying debts owed to operational creditors, and ensuring financial creditors are paid at least as much as they would receive in a liquidation scenario under Section 53.

    The plan must also outline the management and oversight of the corporate debtor’s affairs post-approval. Upon confirmation of these conditions, the resolution professional presents the plan to the committee of creditors, which can approve it with a 66% majority vote, considering its feasibility and proposed distribution method. The resolution applicant can attend these meetings but lacks voting rights unless they are also a financial creditor.

    Once the committee of creditors approves a resolution plan, it is submitted to the Adjudicating Authority. Section 31 mandates that the Authority must approve the plan if it meets the requirements of Section 30. This approval binds the corporate debtor, its employees, creditors, and relevant government authorities to the plan’s terms. If the plan fails to meet these standards, the Authority may reject it.

    In a notable case, State Bank of India and others versus JC Flowers Asset Reconstruction Pvt. Ltd. and Punjab National Bank versus The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch, the Supreme Court addressed the issue of adherence to the conditions precedent in a resolution plan. The SRA, having been approved by the committee of creditors and the NCLT, was required to infuse funds in tranches and meet specific conditions to recommence operations as an aviation company. However, the SRA sought to adjust the final tranche of payment against a Performance Bank Guarantee (PBG), which the NCLAT permitted.

    The Supreme Court, however, held that such an adjustment was impermissible. The SRA was obligated to deposit the final tranche of Rs 150 crores as initially agreed, emphasizing that compliance with the resolution plan’s terms is non-negotiable. The Court directed the SRA to deposit the amount by a specified deadline and maintained the PBG until the NCLAT’s final decision.

    The Court underscored that the conditions precedent must be fulfilled as stipulated, without adjustments. The lenders’ argument that the SRA failed to meet these conditions was acknowledged, and the Court provided clear directions to ensure compliance.

    The decision reaffirms the sanctity of the resolution plan process, emphasizing that any deviation undermines the integrity of the insolvency resolution framework. The SRA’s conduct and adherence to the stipulated terms are crucial in maintaining creditor confidence and ensuring the effective resolution of corporate insolvency.

    This landmark ruling underscores the binding nature of approved resolution plans and the stringent compliance required from SRAs. It serves as a critical reminder of the procedural rigor and accountability embedded within the IBC framework, ensuring that the resolution process remains transparent, fair, and effective.

  • Finance Minister Nirmala Sitharaman Highlights GST’s Role in Cooperative Federalism and State Empowerment

    GST Collections Reach Pre-GST Levels as a Percentage of GDP

    Union Finance Minister Nirmala Sitharaman recently highlighted the significant progress and impact of the Goods and Services Tax (GST) regime in India. Addressing the media on Monday, Sitharaman noted that GST collections as a percentage of the Gross Domestic Product (GDP) have returned to pre-GST levels. She emphasized that GST has been instrumental in bolstering state revenues and exemplifies cooperative federalism.

    Operationalization of GST Appellate Tribunal

    On the same day, Sitharaman administered the oath to Justice (Retd) Sanjaya Kumar Mishra as the President of the GST Appellate Tribunal (GSTAT). This marks a significant milestone in the GST journey, ensuring a dedicated body to address GST-related disputes. The establishment of GSTAT comes nearly seven years after the GST’s rollout in July 2017, providing a structured mechanism for resolving tax disputes.

    Milestone Achievements in GST Collections

    The Finance Minister also highlighted the robust growth in monthly GST collections, which recently surpassed the Rs 2 lakh crore mark. According to the Finance Ministry’s data for April, released on May 1, this achievement underscores the effectiveness of the GST system.

    Economic Impact and Cooperative Federalism

    Sitharaman took to social media platform X, formerly known as Twitter, to elaborate on GST’s economic impact. Despite challenges such as a lower than prescribed Revenue Neutral Rate and the economic disruptions caused by COVID-19, GST collections have reached their previous levels. This achievement, she stated, is a testament to the improved tax administration by both the Centre and the states, resulting in higher revenues without increasing the tax burden on citizens.

    She further clarified a common misconception, stating, “It is a myth that all GST collections are pocketed by the Centre. GST significantly contributes to state revenues. States receive 100% of the State GST (SGST) collected, approximately 50% of the Integrated GST (IGST), and 42% of the Central GST (CGST) as per the Finance Commission’s recommendations.

    Improved Tax Buoyancy and Pro-Poor Approach

    Sitharaman emphasized that GST has enhanced tax buoyancy for states, rising from 0.72 pre-GST to 1.22 between 2018 and 2023. Even after the end of the compensation period, state revenues have remained buoyant at 1.15. She highlighted that without GST, states’ revenue from subsumed taxes from FY19 to FY24 would have been Rs 37.5 lakh crore. With GST, the actual revenue amounted to Rs 46.56 lakh crore, reflecting a significant increase.

    Highlighting the pro-poor approach of GST, Sitharaman noted that the effective weighted average GST rate has consistently declined from the initially suggested 15.3% to 11.6% in 2019. Essential items and services, such as unbranded food items, certain life-saving drugs, healthcare, and education, have been exempted from GST or subjected to reduced rates.

    Former Chief Economic Adviser’s Perspective

    Former Chief Economic Adviser Arvind Subramanian recently commented on GST revenues, pointing out that despite recovery from the pandemic, GST revenue for FY24 at 6.1% of GDP has not yet surpassed pre-GST levels. He stressed the importance of focusing on net revenues rather than headline collections.

    GST Council’s Role and Future Prospects

    As the Chairperson of the GST Council, Sitharaman assured that all states’ voices are heard equally, maintaining a balanced and cooperative decision-making process. The GST Council operates with a 75% majority vote requirement, with one-third voting power assigned to the Centre and two-thirds to the states. Out of 52 meetings, only one decision required a vote, indicating strong consensus-building.

    In conclusion, Sitharaman reiterated that GST has led to lower taxes on many essential items compared to pre-GST rates. The National Anti-profiteering Authority has ensured that the benefits of tax rate reductions are passed on to consumers. With continuous efforts to rationalize tax rates and improve administration, GST stands as a pillar of cooperative federalism, empowering states and benefiting the nation’s economy.

  • Tipping Point—Analyzing GST Revenues and Reform Imperatives

    In a historic milestone, India’s Goods and Services Tax (GST) revenues surpassed ₹2 lakh crore for the first time in April. Typically, April sees the highest GST collections, driven by the fiscal year-end activities in March, when taxpayers finalize their books, hasten to meet tax deadlines, and rectify discrepancies as required by the revenue authorities. April’s GST collection reached slightly over ₹2.1 lakh crore, marking a 12.4% increase from April 2023’s ₹1.87 lakh crore, which was previously the highest monthly collection. While this impressive figure might not yet represent the new monthly norm, given the absence of year-end pressures, it suggests a robust trajectory for GST revenues. If the economic momentum continues and GST revenue growth sustains in the 11%-12% range seen last year, April 2023’s high of ₹1.87 lakh crore could emerge as this year’s average monthly benchmark. For context, last year’s average monthly revenues were ₹1.68 lakh crore, with the previous peak being April 2022’s ₹1.67 lakh crore.

    Finance Minister Nirmala Sitharaman hailed April’s GST revenue milestone as a “landmark,” crediting it to a resilient economy and enhanced collection efficiency. This achievement alleviates earlier concerns about the GST regime’s underperformance since its inception 82 months ago. Enhanced enforcement against fraud, such as fake invoicing, and stringent compliance measures have undoubtedly bolstered revenues. With central GST revenues surpassing last year’s targets, achieving the interim Budget goals for 2024-25 now demands less than 10% growth. The incoming government will face the relatively straightforward task of adjusting revenue targets in the full Budget. However, the pressing challenge lies in broadening the GST base and streamlining its complex rate structure to simplify the tax for consumers and investors, particularly now that revenue anxieties have diminished. Notably, the BJP’s election manifesto highlights the simplification of the GST portal for small businesses, while the Congress pledges a unified, moderate tax rate with minimal exceptions, no levies on agricultural inputs, and equitable revenue sharing with local bodies. Intelligent GST reforms, shaped by comprehensive stakeholder consultations, must be a priority for the new administration to rectify consumption barriers and pave the way for the next cycle of investment and growth.

  • Aurobindo Pharma Faces ₹13 Crore Tax Demand

    Updated – May 03, 2024 at 05:35 PM

    Hyderabad: Aurobindo Pharma Ltd. has been hit with a significant tax demand from the GST authority, amounting to over ₹13 crore. This demand includes interest and penalties related to an ineligible input tax credit (ITC) claim.

    Tax Order Details
    The Deputy Commissioner (ST) STU-1 of GST, Punjagutta Division, Hyderabad, under the Commercial Taxes Department of Telangana, issued the order under the Central Goods and Services Tax Act, 2017, and the TGST Act, 2017 for the financial year 2018-19.

    The breakdown of the tax demand is as follows:

    • Reversal of ITC and Payment of GST: ₹6,54,50,645
    • Interest: ₹5,92,20,900
    • Penalty: ₹65,51,354

    Aurobindo Pharma’s Response
    In a regulatory filing, Aurobindo Pharma stated that it plans to appeal the order. The company emphasized that this tax demand will not materially impact its financial position or operational performance.

    Looking Ahead
    The pharmaceutical giant is preparing to present its case before the appellate authority. While this situation underscores the complexities of tax regulations, Aurobindo Pharma remains confident in navigating this challenge without significant disruption to its business.

    Stay updated on developments regarding Aurobindo Pharma’s tax appeal and its implications on the company’s financial health.

  • Sanjaya Kumar Mishra Appointed as President of GST Appellate Tribunal

    The Central Government has taken a significant step in improving tax dispute resolution by establishing the Goods & Services Tax Appellate Tribunal (GSTAT). Retired Justice Sanjaya Kumar Mishra has been appointed as the President of GSTAT, which will feature 31 benches in major cities across India. This move aims to provide businesses with a timely and efficient mechanism to resolve GST-related disputes.

    The Appointment Committee of the Cabinet, following the recommendation of the Search-cum-Selection Committee (SCSC), approved the appointment of Justice (Retd.) Sanjaya Kumar Mishra, who previously served as the Chief Justice of the High Court of Jharkhand. He will serve as President of GSTAT for a term of four years, or until he reaches the age of 70, with a monthly salary of ₹2.50 lakh.

    To further strengthen the tribunal’s framework, the Finance Ministry has announced vacancies for 63 judicial members and 33 technical members, representing both the Centre and the States. The GSTAT will include a Principal Bench in Delhi and additional benches across various states. Notably, Uttar Pradesh will host three benches, the most of any state, while Gujarat, Karnataka, Rajasthan, Tamil Nadu, and Maharashtra will each have two benches. The Principal Bench will handle inter-state disputes, while state benches will address other issues, including GST rates. Appeals can be made from these benches to the High Courts and the Supreme Court.

    GSTAT is designed to be a specialized body focused on GST disputes, ensuring that tax matters are resolved swiftly and impartially. Despite facing several legal and administrative hurdles, the establishment of GSTAT is a crucial development. These tribunals will provide an expert forum for resolving tax disputes, thereby promoting fairness and the rule of law in tax administration. The introduction of 31 benches nationwide is expected to alleviate the burden on High Courts and expedite the resolution of tax disputes.

    Businesses have long felt the absence of dedicated GST tribunals, often resulting in prolonged and costly litigation processes in High Courts. The new GSTAT is anticipated to streamline dispute resolution, enhancing business sentiment and improving the ease of doing business in India. The number of appeals against orders from first Appellate Authorities has surged, doubling from 5,499 in 2020-21 to 11,899 in 2022-23, highlighting the urgent need for an efficient dispute resolution mechanism.

    Chandrajeet Banerjee, Director General of the Confederation of Indian Industry (CII), remarked that the establishment of GSTAT will significantly benefit businesses. “By ensuring speedier and economical resolution of cases through specialized GSTATs, this initiative will bolster business confidence and contribute to a more favorable business environment in the country,” Banerjee said.

    The creation of the GST Appellate Tribunal, with Justice Sanjaya Kumar Mishra at its helm, marks a pivotal advancement in India’s tax administration system, promising a more efficient and just resolution of GST disputes.

  • Zomato Faces Significant GST Demand and Penalty

    April 20, 2024

    Zomato Receives Notice
    Food delivery giant Zomato has been hit with a substantial Goods and Services Tax (GST) demand and penalty order amounting to Rs 11.8 crore. This announcement came from the company on April 19, detailing the financial period from July 2017 to March 2021.

    Breakdown of the GST Order
    The order includes a GST demand of Rs 5.9 crore alongside an equivalent penalty of Rs 5.9 crore. Specifically, Zomato disclosed that the Additional Commissioner of Central Goods and Services Tax in Gurugram issued the demand for GST totaling INR 5,90,94,889/- plus applicable interest (yet to be quantified), and a matching penalty of INR 5,90,94,889/-.

    Nature of the Dispute
    Zomato received this demand following a show cause notice concerning export services provided to its subsidiaries outside India during the mentioned period. The company has indicated that these services, which spanned from July 2017 to March 2021, are the focal point of the GST evaluation and subsequent penalty.

    Next Steps for Zomato
    In response, Zomato will need to address this significant financial obligation and navigate the legal and regulatory framework to resolve the demand and penalty. This situation underscores the importance of stringent compliance with tax regulations, especially in a complex and evolving field like international service provision.

    This GST demand and penalty order is a notable event for Zomato, reflecting the rigorous scrutiny that major corporations face in their tax and regulatory dealings. The outcome of Zomato’s next steps will be closely watched by stakeholders and industry observers alike, as it may set precedents for similar cases in the future.

    For those in the business sector, particularly in international operations, this serves as a critical reminder to ensure robust compliance mechanisms to avoid such significant fiscal repercussions.

  • Breaking News—CBIC Imposes Deadline and Streamlines GST Investigation Process with New Guidelines!

    The Central Board of Indirect Taxes & Customs (CBIC) has rolled out fresh guidelines for GST investigations, marking a significant shift in approach towards tax compliance and enforcement. These guidelines, unveiled recently, carry pivotal directives aimed at enhancing efficiency, transparency, and accountability in the investigation process.

    Key Highlights:

    1. Consolidated Investigations: Under the new guidelines, GST assesses may find themselves under the scrutiny of a single office for multiple investigations, streamlining the process and avoiding duplication of efforts. This move is poised to bring greater coherence and effectiveness to the investigative process.
    2. Deadline for Conclusions: A notable feature of the guidelines is the imposition of a strict one-year deadline for concluding investigations. This time-bound approach is intended to expedite the resolution process, providing clarity and certainty to taxpayers and authorities alike.
    3. Responsibility Allocation: The guidelines delineate clear responsibilities for approving investigations against different categories of taxpayers. From matters of interpretation to cases involving major multinational corporations, the guidelines ensure that investigations proceed with due authorization and oversight.
    4. Proactive Engagement: Emphasizing proactive engagement, the guidelines advocate for dialogue and coordination among investigating offices to avoid duplication of efforts and ensure optimal resource utilization. This collaborative approach is instrumental in fostering synergy and efficiency in the investigative process.
    5. Timely Resolution: Recognizing the importance of timely resolution, the guidelines mandate that investigations must reach a conclusion within the stipulated timeframe, without unnecessary delays. This commitment to expeditious resolution underscores the board’s dedication to facilitating a conducive business environment.
    6. Digital Integration: To leverage digital resources effectively, the guidelines discourage the redundant collection of information already available through digital platforms. This measure not only minimizes administrative burden but also aligns with the broader digital transformation agenda.
    7. Adherence to Legal Provisions: Through these directives, the CBIC underscores the importance of strict adherence to legal provisions while advocating for proactive measures to prevent grievances and address tax malfeasance effectively. By promoting compliance and accountability, these guidelines contribute to a robust regulatory framework.

    In Conclusion:

    The issuance of these guidelines reflects a concerted effort by the CBIC to enhance the efficacy and integrity of GST investigations. By setting clear directives, deadlines, and responsibilities, the board aims to foster a business-friendly environment while safeguarding the integrity of the tax system. Moving forward, adherence to these guidelines will be crucial in promoting transparency, fairness, and efficiency in GST compliance and enforcement.

  • Massive GST Evasion Uncovered in Nationwide Crackdown

    In a determined effort to combat fraudulent practices in GST transactions, the government has unveiled a major crackdown on fake GST invoices and registrations. This operation exposed 29,000 firms involved in evading ₹44,000 crore in taxes, marking a significant step in ensuring compliance and transparency.

    Details of the Crackdown

    The Finance Ministry reported that over a period of seven and a half months, a nationwide drive identified these fraudulent entities. The effort began in mid-May last year and focused on uncovering non-existent or bogus registrations and fake invoices. These invoices were issued without any actual supply of goods or services, aiming to fraudulently claim input tax credit (ITC).

    As a result of this drive, a total of 29,273 bogus firms were detected, suspected of evading ₹44,015 crore in ITC. The crackdown led to immediate savings of ₹4,646 crore, with ₹3,802 crore saved by blocking ITC and ₹844 crore recovered directly. The operation also resulted in 121 arrests, highlighting the seriousness of the offenses.

    Methodology and Impact

    The special drive was a coordinated effort by both Central and State tax administrations, launched on May 16, 2023. Using detailed data analytics and risk parameters, the GST Network (GSTN) identified suspicious GSTINs (Goods and Services Tax Identification Numbers) for further verification by State and Central tax authorities.

    Once these suspicious GSTINs were flagged, jurisdiction-wise details were shared with relevant tax administrations to initiate verification and necessary actions. If a taxpayer was found to be non-existent or fictitious, their registration was suspended and canceled. Additionally, input tax credits in the Electronic Credit Ledger were blocked to prevent further misuse. The government also aimed to identify the recipients of these fraudulent credits and take action against the masterminds behind these schemes.

    Strengthening the GST Registration Process

    To prevent such frauds in the future, the government has implemented several measures to strengthen the GST registration process. Pilot projects for biometric-based Aadhar authentication at registration have been launched in Gujarat, Puducherry, and Andhra Pradesh. These initiatives aim to ensure that only genuine businesses obtain GST registrations.

    Further measures include sequential filing of GST returns and system-generated alerts for reconciling discrepancies in tax liabilities and input tax credits. Data analytics and risk parameters continue to play a crucial role in detecting fake ITC claims, ensuring a robust system to curtail tax evasion.

    Addressing the Issue of Fake Invoices

    Fake invoices, which involve issuing invoices without any real supply of goods or services, have become a significant problem. Fraudsters misuse the identities of legitimate businesses to obtain fake GST registrations and pass on false input tax credits. This not only defrauds the government but also disrupts the integrity of the GST system.

    The recent crackdown highlights the government’s commitment to eliminating such fraudulent activities and safeguarding revenue. By identifying and acting against these bogus firms, the government aims to create a more transparent and compliant GST ecosystem.

    Conclusion

    The exposure of 29,000 firms involved in ₹44,000 crore GST evasion underscores the need for stringent measures and continuous vigilance. The government’s proactive approach in using advanced data analytics and risk parameters is crucial in tackling GST fraud. Strengthening the registration process and ensuring thorough verification will help build a robust and trustworthy tax system, ultimately benefiting the entire economy.