guide to revised model gst law, 2017
TRANSCRIPT
GST
GUIDE TO REVISED MODEL GST LAW(With Draft Rules on Registration, Payment, Invoice, Returns and Refund)
BIMAL JAINISHA BANSAL
Highlights of the Book
Published by
B-4, Basement, Vandhana Building, 11 Tolstoy Marg, New Delhi-110 001Phone : +91-11-41824268, 23324142E-mail : [email protected] : www.bookskhoj.com
Young Global Publications
ABOUT THE BOOK
KEY FEATURES OF THE BOOK
This Handbook on Revised Model GST Law discusses the various provisions of the Revised
Model GST Law and Draft Rules released by Government of India along with comparison with
First Model GST Law in a precise and lucid manner for providing a complete insight to the
readers for the preparation and assistance in smooth transition to GST.
This Book is user-friendly, containing the gist of the provisions of the Revised Model GST Law
and can be used by professionals, tax payers, tax officers, corporates, regulators, etc. for easy
reference.
• Highlights of changes in Revised Model GST Law for easy understanding
• Constitutional Amendments and likely date of GST Implementation
• GST – Need & Necessity, Overview and Model for India
• Discussion/analysis on Revised Model GST Law along with its comparison with First Model
GST Law
• Analysis of meaning of the terms ‘Supply’,‘Goods’ and ‘Services’ in GST.
• Gist of documents, information, procedure, etc., required for migration of existing
registrants in GST
• Discussion on various domains - intra-state supply and inter-state supply of goods and/or
services, principles of place of supply & time of supply, valuation of goods and/or services,
GST ITC, taxable person, appeals and revision, offences and penalties, demand and
recovery, GST rate, e-commerce operator, etc., along with transitional provisions.
• Discussion on contentious issues under Revised Model GST Law which requires
reconsideration
• Discussion on flow of input tax credit in GST with illustrations and negative list for GST ITC
• Discussion on Draft Rules and procedural aspect of GST- Registration, Payment, Invoice,
Returns and Refund
• Impact of GST on business and specifically on manufacturers, traders and service sectors
and preparation required for smooth migration
• Transitional issues under GST along with effective tools for planning.
• Likely challenges ahead for GST implementation
• Way forward and Procedural changes in GST
• Contains complete Revised Model GST Law, ModeI IGST Law and Draft GST Compensation
Law along with Draft Rules and Formats on Registration, Payment, Invoice, Returns and
Refund as released by the Government
Price ` 650
GUIDE TO REVISED MODEL GST LAW
(With Draft Rules on Registration, Paym
ent, Invoice, Returns and Refund) • Summarized highlights of Revised Model GST Law and Draft Rules on Registration,
Payment, Invoice, Returns and Refund for easy digest.
• Contains action plan for smooth transition to GST regime along with suggestions for effective planning.
• Discussion on various domains viz. supply of goods and/or services - intra-state and inter-state, principles of place of supply & time of supply, Valuation, GST ITC, taxable person, appeals and revision, demand and recovery, GST rates, e-commerce operator, etc., along with transitional provisions.
• Contains complete Revised Model GST Law, Model IGST Law and Draft GST Compensation Law along with Draft Rules and Formats on Registration, Payment, Invoice, Returns and Refund as released by the Government.
BIM
AL
JA
INIS
HA
BA
NS
AL
DECEMBER, 2016
GUIDE to Revised
Model GST Law
YOUNG GLOBAL PUBLICATIONS
B-4, Basement, Vandhana Building, 11, Tolstoy Marg, New Delhi - 110 001 Phone: +91-11-41824268, 23324142
E-mail: [email protected] Website: www.bookskhoj.com
®
Bimal JainFCA, FCS, LLB, B.Com (Hons.)
Isha BansalACS, LLB, B.Com (Hons.)
An Insight into Goods & Service Tax
YOUNG GLOBAL PUBLICATIONS
CA. Chitresh GuptaB. Com (H), FCA,
IFRS (Certified), IDT (Certified)
®
GUIDE to Revised
Model GST Law
© All rights reserved
Price: `650
December, 2016 Edition
Bookstore:B 4, Basement, Vandhana Building, 11 Tolstoy Marg New Delhi - 110001 011-41824268, 23324142, 23324153
Office:D-22, Ganesh Nagar, Pandav Nagar Complex, Delhi - 110 092 Phone: +91-11-22486290 Website: www.youngglobals.com E-mail: [email protected]
Published by:Young Global Publications
Composition & Designed by:Addon Digital Services
Every effort has been made to avoid errors or omissions in this publication. In spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition. It is notified that neither the publisher nor the author or seller will be responsible for any damage or loss of action to any one, of any kind, in any manner, therefrom. It is suggested that to avoid any doubt the reader should cross-check all the facts, law and contents of the publication with original Government publication or notification.
No part of this book may be reproduced or copied in any form or by any means (graphic, electronic or mechanical, including photocopying, recording, taping or information retrieval systems) or reproduced on any disc, tape, perforated media or other information storage device, etc., without the written permission of the publishers. Breach of this condition is liable for legal action.
For binding mistake, misprints or for missing pages etc. the publisher’s liability is limited to replacement within one month of purchase by similar edition. All expenses in this connection are to be borne by the purchaser.
All disputes are subject to Delhi Jurisdiction only.
This book is dedicated to
Acharya 108 Sri Vidya Sagar Ji Maharaj
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vii
BIMAL JAIN
FCA, FCS, LLB with 21 years of experience in Indirect Taxation – GST, Service tax, Excise, Customs, VAT/CST, Foreign Trade Policy, DGFT matters, etc. Bimal Jain, qualified as a Chartered Accountant in May 1994, and Company Secretary in December 2006 and LLB in December, 2009. He has worked in renowned companies viz. LG Electronics India Pvt. Ltd, Honda Motorcycle & Scooters India Pvt. Ltd, Hindustan Development Corporation Ltd, Khaitan & Company. Currently, he is the Chief Executive Director of A2Z Taxcorp LLP.
Bimal is a Chairman of the Indirect Tax Committee of PHD Chamber of Commerce, Chairman of the Corporate Advisory Committee of IPEM Group of Institutions, Member of Indirect Tax Committee of FICCI & Assocham, Special Invitee of Indirect Tax Committee of ICAI, and Member of eminent faculties in Indirect tax committee of ICAI/ ICSI/ ICMA.
He is awarded as Best Participant Award in MSOP – 117th Batch by ICSI, Business Leader Award by Amity School Noida, Best Speaker Award by NIRC – ICAI/ ICMA and Young Achievers Award at Igniting Minds, 2015.
He regularly writes articles on multiple indirect tax issues and has authored books, namely, Service Tax Voluntary Compliance Encouragement Scheme, 2013,
About the Authors
viii Guide to Revised Model GST Law
GST books titling ‘Goods and Services Tax – Introduction and Way Forward’ and ‘GST Law and Analysis – With Conceptual Procedures’.
He has also represented PHD Chamber of Commerce, Assocham, ICAI, ICSI before various Government Authorities/Committees viz. the Central Board of Excise and Customs, Ease of doing Business Committee, Empowered Committee of State Finance Ministers, etc.
Bimal’s core competency and area of expertise are indirect taxation, international and corporate taxation. He specializes in all aspects of GST, Excise, Service tax, Customs, Sales tax/VAT laws, Free trade/economic cooperation agreements, anti-dumping duty, foreign trade policy, etc.
He carries a blend of industrial and professional acumen, knowledge and experience in carrying out diagnostic review of business operations, opinion & advisory services, process review, structuring of various business models, litigation services at all appropriate forums including Commissioner(Appeals), CESTAT, High Court and representation made before the TRU/ CBEC/ DGFT, etc., for various matters concerning trade, industry and commerce.
ISHA BANSAL
ACS, LLB, B.Com (Hons.) with more than 5 Yrs. of experience in indirect taxation matters Isha, qualified as a Company Secretary and LLB, after obtaining a Bachelor’s degree in Commerce (Hons.) from University of Delhi in 2008. She worked as an intern with DLF group looking after company secretarial and legal matters before moving to indirect taxation for which she had interest and flair.
Thereafter, she joined A2Z Taxcorp LLP and is presently working as Senior Associate, providing legal and advisory services to various multinational companies in the areas of GST, Excise, Customs, VAT, Service tax, anti-dumping duty, foreign trade policy, etc. Her in-depth knowledge, drive and strategic insights have contributed immensely to the organizations she has worked with.
Isha has done extensive study on GST in India and has been following all the developments in the rollout of GST by the Indian Government. GST is therefore one of her core competency areas along with other indirect tax laws.
ix
Preface
“Great Step by Team India, Great Step towards Transformation, Great Steps towards Transparency, this is GST”
Shri. Narendra Modi, Hon’ble Prime Minister
Goods and Services Tax (“GST”), envisaged as the Single biggest tax reform since Independence, is aimed to remove tax barriers between states to create a single market. GST is going to replace plethora of indirect taxes currently imposed at various stages of manufacturing, trading, etc. The implementation of GST will help to create a common national market and reduce the cascading effect of taxes on the costing and pricing of goods and services. It will have a far-reaching impact on almost all the realms of business operations in our country. It will impact tax structure, tax incidence, tax computation, supply chain optimization, credit availment & utilization, compliance etc., leading to a complete overhaul of the current indirect tax system in India.
GST is a tax on goods and services with comprehensive and continuous chain of set-off benefits from the producer’s point and service provider’s point upto the retailer’s level. It is essentially a tax only on value addition at each stage, and a supplier at each stage is permitted to set-off, through a tax credit mechanism, the GST paid on the purchase of goods and services as available for set-off on the GST to be paid on the supply of goods and services. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.
On June 14, 2016, the central government put the Model GST Law on public domain after getting an in-principle nod from the Empowered Committee of State Finance Ministers for seeking suggestion from the public at large. Further,
x Guide to Revised Model GST Law
122nd Constitutional Amendment Bill, 2014 (“GST Bill”) received the assent of the Hon’ble President on September 8, 2016 and enacted as the Constitution (101st Amendment) Act, 2016 [“the 101st Constitutional Amendment Act”].
In series of event for GST implementation, on September 12, 2016, the Union Cabinet has approved formation of GST Council (Section 12 of the 101st Constitutional Amendment Act) followed by the government notifying September 16, 2016 as the appointed date for remaining Sections of the 101st Constitutional Amendment Act (i.e. Section 1 to 20, except Section 12). Since notification of the GST Council on 12 September 2016, six meetings of the GST Council have been held in New Delhi. These meetings were held on 22-23 September, 2016, 30 September, 2016, 18-19 October, 2016, 3-4 November, 2016, 2-3 December, 2016 and 11 December, 2016 (as mentioned in the report card issued by the government on November 14, 2016). Further, the two day seventh GST Council meeting took place recently on 22-23 December, 2016.
Earlier, the Central Board of Excise and Customs on September 26, 2016 has unveiled Draft Rules and formats under GST relating to registration, invoice and payment, followed by the Draft Rules and formats on GST returns and refunds on September 27, 2016, which got approval from the GST Council in its meeting dated September 30, 2016. Further, the government also unveiled the Revised Model GST Law and Draft Goods and Services Tax Compensation Bill by placing it in public domain on November 26, 2016 after incorporating suggestions from trade and industry, in a way, signalling that the GST might mark its advent soon.
Though, the Government is committed to roll out GST as envisaged from April 1, 2017 but there may be some delay on account of the recent demonetisation of high-value currency by the government which has led to lot of tussles in the Parliament and moreover, the issue of dual control between the centre and state is not yet settled. The 101st Constitutional Amendment Act, to replace existing indirect taxes with the new GST law was notified on September 16, 2016, and the new ambitious tax reform has to be implemented within 12 months of that date i.e. before September 16, 2017.
The Revised Model CGST/SGST Act, 2016 consists of 197 sections divided into 27 chapters along with 5 schedules as compared to 162 sections divided into 25 Chapters along with 4 schedules and Rules as to Valuation under First Model GST Law. Further, the Model IGST Act, 2016 consists of 24 sections divided into 11 chapters in comparison to 33 sections divided into 11 chapters under First Model GST Law. Furthermore, the Compensation bill consists of 11 clauses.
This book attempts to give an insight to readers about the basic principle and theories of GST and relevancy of the same at the national & international level, in an accessible manner along with comparison of First Model GST Law with the Revised Model GST Law. I would like to highlight the title of the Book “Guide to Revised Model GST Law (with Draft Rules on Registration, Payment, Invoice, Returns and Refund)”, as the Book begins with a discussion on the present
Preface xi
indirect tax structure of the country - its shortcomings coupled with the need of GST in India, Models of GST and Dual Model for India, various domains of GST - intra-state/inter-state supply of goods and/or services, taxable person, levy and exemption, principles of time of supply and place of supply, GST rate etc., along with procedural aspects viz. registration, payment, invoice, returns, refunds, etc. in a summarized and lucid manner for easy digest and furthermore moves on to suggest the impact of GST along with preparations required for GST and recommendations to the Revised Model GST Law.
The key areas under Revised Model GST Law viz. meaning & scope of supply, taxable person, threshold limits, principles of place of supply of goods and/or services, time of supply, valuation, GST credit, Adjudication, Appeal, Advance Ruling, Offences, Penalties, Imprisonment and Transitional provisions etc., have been summarized along with comparison of provisions of the Revised Model GST Law vis-à-vis First Model GST Law. The Book has also thrown light on the major concerns that may arise in GST along with suitable recommendations on the Revised Model GST Law.
This Book has left no stone unturned in explaining and providing a complete understanding of the concept of GST and the provisions of the Revised Model GST Law in a simplified manner, followed by its impact, on manufacturing, service & trading sector, and the preparation required for smooth transition to GST. It encourages the readers to easily grasp and understand why GST is proposed, its benefits, Dual model of GST for India and the problems/challenges inherent in the GST.
I believe this book is user-friendly and can be used by students, professionals, industries, revenue officers – Central or State etc., for reference.
I am thankful to my parents, family, friends, professional colleagues and office colleagues – Anjali, Nikita, Aanchal, Sumit, Ashish, for their excellent engagement & efforts to support & ensure enriched contents of the book. Moreover, I am also thankful to Young Global Publications, for their continued support and publication of this book and ensuring its nationwide reach. Further, with a view to improve future editions of this book, I solicit the valuable suggestions, views and healthy criticisms, if any, of my esteemed readers through any means of communication convenient to them.
Place: New Delhi BIMAL JAIN Date: December 21, 2016 FCA, FCS, LLB, B.Com (Hons.) Email: [email protected]
xiii
Content at a Glance
ABOUT THE AUTHORS viiPREFACE ixREVISED MODEL GST LAW – ONE MORE STEP TOWARDS BIGGEST INDIRECT TAX REFORM xxvii
PART A: MODEL GST LAWChapter 1 Overview of Present Indirect Taxation in India 1Chapter 2 Overview and Need of GST 4Chapter 3 How GST will work – Intra-State supply of
Goods and/or Services 8Chapter 4 Inter-State supply of Goods and/or Services under GST 10Chapter 5 Taxable Event - Meaning and Scope of Supply 13Chapter 6 Meaning of ‘Goods’ and ‘Services’ under GST 20Chapter 7 Taxable person under GST and Reverse
Charge Mechanism 22Chapter 8 Composition scheme under GST 26Chapter 9 Input tax credit under GST – Availment and Utilization 29Chapter 10 Valuation of Goods and/or Services 43Chapter 11 Exports and Imports of Goods and/or Services 47Chapter 12 Place of Supply of Goods and/or Services 52Chapter 13 Time of Supply (Point of Taxation) of
Goods and/or Services 62
xiv Guide to Revised Model GST Law
Chapter 14 E-commerce under GST 67Chapter 15 Job Work Transactions under GST 71Chapter 16 Assessment and Audit 74Chapter 17 Demands and Recovery under GST 79Chapter 18 Inspection, Search, Seizure and Arrest 86Chapter 19 Offences and Penalties 91Chapter 20 Prosecution and Compounding of Offences 96Chapter 21 Appeals and Revision 101Chapter 22 Advance Ruling and Settlement of Cases 106Chapter 23 Transitional Provisions in GST 109Chapter 24 Anti-Profiteering Measure 121Chapter 25 Other Important Provisions 122
PART B: PROCEDURES AS PER DRAFT RULES IN GSTChapter 26 Registration in GST 126Chapter 27 Ongoing migration of existing registrants in GST 130Chapter 28 Tax Invoice, Credit and Debit Notes 133Chapter 29 Payment of GST 138Chapter 30 Returns under GST 144Chapter 31 Refunds under GST 153
PART C: IMPACT, PREPARATION AND RECOMMENDATIONSChapter 32 Impact of GST 159Chapter 33 Preparation and Challenges ahead 167Chapter 34 Recommendations on the Revised Model GST Law 178
ANNEXURESI. DRAFT MODEL CGST/SGST ACT, 2016 (AS RELEASED ON
NOVEMBER 26, 2016) 186II. DRAFT MODEL IGST ACT, 2016 (AS RELEASED ON
NOVEMBER 26, 2016) 361III. DRAFT GST (COMPENSATION TO THE STATES FOR LOSS
OF REVENUE) BILL, 2016 386IV. DRAFT GOODS AND SERVICES TAX - REGISTRATION RULES 394V. DRAFT GOODS AND SERVICES TAX RULES - REGISTRATION
FORMATS 405VI. DRAFT GOODS AND SERVICES TAX - INVOICE RULES 477VII. DRAFT GOODS AND SERVICES TAX RULES - INVOICE FORMATS 483VIII. DRAFT GOODS AND SERVICES TAX - PAYMENT RULES 485
Content at a Glance xv
IX. DRAFT GOODS AND SERVICES TAX RULES - PAYMENT FORMATS 489X. DRAFT GOODS AND SERVICES TAX - RETURN RULES 500XI. DRAFT GOODS AND SERVICES TAX RULES - RETURN FORMATS 513XII. DRAFT GOODS AND SERVICES TAX - REFUND RULES 613XIII. DRAFT GOODS AND SERVICES TAX RULES - REFUND FORMATS 620
xvii
Detailed Content
ABOUT THE AUTHORS viiPREFACE ixREVISED MODEL GST LAW – ONE MORE STEP TOWARDS BIGGEST INDIRECT TAX REFORM xxvii
PART A: MODEL GST LAW
Chapter 1 Overview of Present Indirect Taxation in India 11.1 SHORTCOMINGS IN THE PRESENT INDIRECT TAXATION SYSTEM 2
Chapter 2 Overview and Need of GST 42.1 VARIOUS MODELS OF GST 42.2 GST MODEL FOR INDIA – CONCURRENT DUAL GST 52.3 TAXES LIKELY TO BE SUBSUMED IN GST 52.4 TAXES NOT LIKELY TO BE SUBSUMED IN GST 62.5 HOW GST CAN HELP IN OVERCOMING THE SHORTFALLS
IN OUR PRESENT INDIRECT TAXATION STRUCTURE 6
Chapter 3 How GST will work – Intra-State supply of Goods and/or Services 83.1 DETERMINATION OF SUPPLIES OF GOODS AND/OR SERVICES
IN THE COURSE OF INTRA-STATE TRADE OR COMMERCE 83.2 HOW INTRA-STATE TRANSACTION OF GOODS AND SERVICES
WOULD BE TAXED UNDER GST 9
xviii Guide to Revised Model GST Law
Chapter 4 Inter-State supply of Goods and/or Services under GST 104.1 DETERMINATION OF SUPPLIES OF GOODS AND/OR SERVICES
IN THE COURSE OF INTER-STATE TRADE OR COMMERCE 104.2 HOW INTER-STATE SUPPLY OF GOODS AND/OR SERVICES
WOULD BE TAXED UNDER GST 11
Chapter 5 Taxable Event - Meaning and Scope of Supply 135.1 MEANING OF TERM ‘SUPPLY’ – AN INCLUSIVE AND
SUBJECTIVE DEFINITION 135.2 IMPORT OF SERVICES 145.3 MATTERS TO BE TREATED AS SUPPLY EVEN IF MADE
WITHOUT CONSIDERATION 145.4 SUPPLY OF GOODS VS. SUPPLY OF SERVICES 155.5 ACTIVITIES OR TRANSACTIONS WHICH SHALL BE TREATED
NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES 175.6 ACTIVITIES OR TRANSACTIONS UNDERTAKEN BY THE
CENTRAL GOVERNMENT, A STATE GOVERNMENT OR ANY LOCAL AUTHORITY WHICH SHALL BE TREATED NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES 18
5.7 POWERS OF THE CENTRAL OR A STATE GOVERNMENT TO NOTIFY TRANSACTIONS EITHER AS SUPPLY OF GOODS OR SUPPLY OF SERVICES OR NEITHER OF THEM 18
5.8 TAXABILITY OF COMPOSITE AND MIXED SUPPLIES: A NEW PROVISION INSERTED TO DETERMINE TAXABILITY OF BUNDLED SUPPLIES – NATURALLY BUNDLED OR NOT NATURALLY BUNDLED 18
Chapter 6 Meaning of ‘Goods’ and ‘Services’ under GST 206.1 MEANING OF ‘GOODS’ 206.2 MEANING OF ‘SERVICES’ 20
Chapter 7 Taxable person under GST and Reverse Charge Mechanism 227.1 MEANING OF TERM ‘TAXABLE PERSON’ 227.2 PERSON REQUIRED TO BE REGISTERED UNDER GST:
SCHEDULE V 227.3 MEANING OF ‘AGGREGATE TURNOVER’ 247.4 DEEMED DISTINCT PERSONS UNDER GST 247.5 REVERSE CHARGE MECHANISM UNDER GST 25
Chapter 8 Composition scheme under GST 268.1 TURNOVER LIMIT FOR COMPOSITION SCHEME 26
Detailed Content xix
8.2 COMPOSITION SCHEME NOT AVAILABLE IN SPECIFIED CASES 278.3 NO COMPOSITION SCHEME IN CASE OF REVERSE
CHARGE LIABILITY 278.4 COMPOSITION SCHEME TO BE ADOPTED UNIFORMLY
BY ALL THE REGISTERED TAXABLE PERSONS, HAVING THE SAME PAN 27
8.5 WITHDRAWAL OF COMPOUNDING SCHEME ON CROSSING THRESHOLD LIMIT 27
8.6 COMPOUNDING DEALERS CANNOT ENTER INTO THE CREDIT CHAIN 27
8.7 PENALTY IN CASE OF IRREGULAR AVAILMENT OF COMPOSITION SCHEME 28
Chapter 9 Input tax credit under GST – Availment and Utilization 299.1 KEY DEFINITIONS 299.2 ELIGIBILITY AND CONDITIONS FOR TAKING ITC 319.3 APPORTIONMENT OF CREDIT AND BLOCKED CREDITS 329.4 AVAILABILITY OF CREDIT IN SPECIAL CIRCUMSTANCES 359.5. UTILISATION OF ITC 379.6. CONCEPT OF INPUT SERVICE DISTRIBUTOR (ISD) AND
MANNER OF DISTRIBUTION OF ITC 379.6.1 Conditions for distributing ITC by ISD 399.6.2 Manner of recovery of credit distributed in excess 40
9.7 ILLUSTRATIONS 40
Chapter 10 Valuation of Goods and/or Services 4310.1 BASIS OF VALUATION UNDER THE GST REGIME –
TRANSACTION VALUE 4310.2 INCLUSIONS IN THE TRANSACTION VALUE 4410.3 EXCLUSION OF DISCOUNT IN THE TRANSACTION VALUE 45
Chapter 11 Exports and Imports of Goods and/or Services 4711.1 IMPORT OF GOODS – DEEMED AS INTER-STATE SUPPLY
UNDER GST 4711.2 IMPORT OF SERVICES – DEEMED AS INTER-STATE
SUPPLY UNDER GST 4811.3 EXPORT OF GOODS AND/OR SERVICES – DEEMED AS
INTER-STATE SUPPLY 4911.4 ZERO RATED SUPPLY 50
Chapter 12 Place of Supply of Goods and/or Services 5212.1 NEED FOR THE PRINCIPLES OF PLACE OF SUPPLY IN GST 5312.2 MEANING OF IMPORTANT TERMS 53
xx Guide to Revised Model GST Law
12.3 PLACE OF SUPPLY OF GOODS OTHER THAN SUPPLY OF GOODS IMPORTED INTO, OR EXPORTED FROM INDIA 54
12.4 PLACE OF SUPPLY OF GOODS IMPORTED INTO, OR EXPORTED FROM INDIA 55
12.5 PLACE OF SUPPLY OF SERVICES WHERE THE LOCATION OF SUPPLIER OF SERVICE AND THE LOCATION OF RECIPIENT OF SERVICE IS IN INDIA 55
12.6 PLACE OF SUPPLY OF SERVICES WHERE THE LOCATION OF SUPPLIER OR THE LOCATION OF RECIPIENT IS OUTSIDE INDIA 59
Chapter 13 Time of Supply (Point of Taxation) of Goods and/or Services 6213.1 TIME OF SUPPLY FOR GOODS AND/OR SERVICES 62
• General provision 62• Supply of goods and/or services under reverse charge
mechanism (“RCM”) 63• Specific scenario – Supply of vouchers 64• Residuary provision 64
13.2 CHANGE IN THE RATE OF TAX IN RESPECT OF SUPPLY OF GOODS OR SERVICES 64• Where goods or services have been supplied BEFORE the
change in rate of tax 64• Where goods or services have been supplied AFTER the
change in rate of tax 65
Chapter 14 E-commerce under GST 6714.1 MEANING OF THE RELEVANT TERMS 6714.2 COLLECTION OF TAX AT SOURCE (TCS) 6714.3 MEANING OF TERM ‘NET VALUE OF TAXABLE SUPPLIES’ 6814.4 OTHER PROVISIONS 69
Chapter 15 Job Work Transactions under GST 7115.1 MEANING OF THE RELEVANT TERMS 7115.2 SPECIAL PROCEDURE FOR REMOVAL OF GOODS FOR
CERTAIN PURPOSES 7115.3 INPUT TAX CREDIT IN RESPECT OF INPUTS/CAPITAL
GOODS SENT FOR JOB WORK 72
Chapter 16 Assessment and Audit 7416.1 MEANING AND TYPES OF ASSESSMENT 74
16.1.1 Self- Assessment 7416.1.2 Provisional Assessment 7516.1.3 Best Judgement Assessment 75
Detailed Content xxi
16.1.4 Summary Assessment 7616.1.5 Re-Assessment 76
16.2 MEANING AND TYPES OF AUDIT 7616.2.1 Audit by tax authorities 7716.2.2 Special audit 7716.2.3 Power of CAG to call for information for audit 78
Chapter 17 Demands and Recovery under GST 7917.1 DETERMINATION OF TAX NOT PAID OR SHORT PAID OR
ERRONEOUSLY REFUNDED OR INPUT TAX CREDIT WRONGLY AVAILED OR UTILIZED 79
17.2 GENERAL PROVISIONS RELATING TO DETERMINATION OF TAX 8117.3 OTHER PROVISIONS 8217.4 LIABILITY TO PAY IN CERTAIN CASES 84
Chapter 18 Inspection, Search, Seizure and Arrest 8618.1 INSPECTION, SEARCH AND SEIZURE 8618.2 INSPECTION OF GOODS IN MOVEMENT 8818.3 ARREST PROVISION 8818.4 OTHER PROVISIONS 89
Chapter 19 Offences and Penalties 9119.1 PENALTY PROVISIONS IN RESPECT OF OFFENCES COMMITTED 9119.2 GENERAL DISCIPLINES RELATED TO PENALTY 9219.3 POWER TO IMPOSE PENALTY IN CERTAIN CASES 9319.4 DETENTION, SEIZURE AND RELEASE OF GOODS AND
CONVEYANCES IN TRANSIT 9319.5 CONFISCATION OF GOODS AND/OR CONVEYANCES AND
LEVY OF PENALTY 94
Chapter 20 Prosecution and Compounding of Offences 9620.1 PROSECUTION 9620.2 COGNIZABLE AND NON-COGNIZABLE OFFENCES 9720.3 PRESUMPTION OF CULPABLE MENTAL STATE 9820.4 COMPOUNDING OF OFFENCES 98
Chapter 21 Appeals and Revision 10121.1 HIERARCHY OF APPELLATE AUTHORITY UNDER GST 10121.2 PROVISIONS RELATING TO APPEALS AND REVISION 102
Chapter 22 Advance Ruling and Settlement of Cases 10622.1 MEANING OF ADVANCE RULING 10622.2 PROVISIONS OF ADVANCE RULING 107
xxii Guide to Revised Model GST Law
Chapter 23 Transitional Provisions in GST 109PROVISIONS UNDER MODEL CGST/SGST LAW• General Provision 109• Migration of existing taxpayers having valid PAN to GST 109• Amount of credit carried forward in last return to be allowed as
input tax credit (“ITC”) 110• Unavailed Cenvat credit on capital goods, not carried forward in a return 110• Credit of eligible duties and taxes in respect of inputs held in stock to
be allowed in certain situations 110• Credit of eligible duties and taxes in respect of inputs held in stock for
manufacturer/service provider engaged in non-exempted and exempted goods/services 111
• Credit of eligible duties and taxes in respect of inputs or input services during transit 111
• Credit of eligible duties and taxes allowed to a taxable person switching over from composition scheme 112
• Exempted goods returned to the place of business on or after the appointed day 112
• Duty/(tax in SGST Act) paid goods returned to the place of business on or after the appointed day 112
• Inputs removed for job work and returned on or after the appointed day 113• Semi-finished goods removed for job work and returned on or after the
appointed day 113• Finished goods removed for carrying out certain processes and
returned on or after the appointed day 113• Issue of supplementary invoices, debit or credit notes where price
is revised in pursuance of a contract entered prior to the appointed date 114• Pending refund claims to be disposed of under earlier law 114• Refund claims filed after the appointed day for goods cleared or services
provided before the appointed day and exported before or after the appointed day to be disposed of under earlier law 115
• Refund claims filed after the appointed day for payments received and tax deposited before the appointed day in respect of services not provided 115
• Claim of Cenvat credit to be disposed of under the earlier law 115• Finalization of proceedings relating to output duty or tax liability 115• Treatment of the amount recovered or refunded in pursuance of
assessment or adjudication proceedings 116• Treatment of the amount recovered or refunded pursuant to revision
of returns 116• Treatment of long term construction/works contracts 116• Progressive or periodic supply of goods or services 116• Taxability of supply of services in certain cases 117
Detailed Content xxiii
• Taxability of supply of goods in certain cases 117• Credit distribution of service tax by Input Service Distributor (ISD) 117• Provision for transfer of unutilized Cenvat credit by taxable person
having centralized registration under the earlier law 117• Tax paid on goods lying with agents to be allowed as credit 118• Tax paid on capital goods lying with agents to be allowed as credit 118• Treatment of branch transfers 118• Goods sent on approval basis returned on or after the appointed day 118• Deduction of tax source (“TDS”) 119• Transitional provisions for availing Cenvat credit in certain cases 119PROVISIONS UNDER MODEL IGST LAW• Import of services or inter-state supply of goods and/or services
made on or after the appointed day 119
Chapter 24 Anti-Profiteering Measure 121
Chapter 25 Other Important Provisions 12225.1 GST RATE 12225.2 SPECIAL PROCEDURE FOR CERTAIN PROCESSES 12425.3 GST COMPLIANCE RATING 12425.4 TAKING ASSISTANCE FROM AN IT PROFESSIONAL 12425.5 DRAWAL OF SAMPLES 12425.6 BURDEN OF PROOF FOR ELIGIBILITY OF GST ITC 12425.7 ROUNDING OFF OF TAX, INTEREST, ETC. 125
PART B: PROCEDURES AS PER DRAFT RULES IN GST
Chapter 26 Registration in GST 12626.1 LIABILITY TO BE REGISTERED 12626.2 STRUCTURE OF GOODS AND SERVICES TAXPAYER
IDENTIFICATION NUMBER (GSTIN) 12726.3 OTHER PROVISIONS 127
Chapter 27 Ongoing migration of existing registrants in GST 13027.1 PROVISIONS FOR MIGRATION OF EXISTING
REGISTRANTS IN GST 13027.2 MIGRATION OF 8 MILLION ASSESSEES STARTED
FROM 08-11-2016 13127.3 INFORMATION AND DOCUMENTS REQUIRED FOR
ENROLMENT WITH GST 132
Chapter 28 Tax Invoice, Credit and Debit Notes 13328.1 TAX INVOICE 133
xxiv Guide to Revised Model GST Law
28.2 BILL OF SUPPLY 13628.3 CREDIT AND DEBIT NOTES (DEBIT NOTE INCLUDES
A SUPPLEMENTARY INVOICE) 136
Chapter 29 Payment of GST 13829.1 PAYMENT OF TAX, INTEREST, PENALTY AND OTHER AMOUNTS 13829.2 ORDER OF DISCHARGING TAX AND OTHER DUES 13929.3 INTEREST ON DELAYED PAYMENT OF TAX 14029.4 PAYMENT OF TAX DEDUCTION AT SOURCE (TDS) 14029.5 SPECIAL PROVISION FOR PAYMENT OF TAX IN CASE OF
ONLINE INFORMATION AND DATABASE ACCESS OR RETRIEVAL (OIDAR) SERVICES 141
Chapter 30 Returns under GST 14430.1 MEANING OF RETURN 14430.2 WHO ARE REQUIRED TO FILE RETURN? 14430.3 SUMMARIZATION OF DIFFERENT RETURNS –
REQUIREMENT AND PERIODICITY 14530.4 STEPS FOR RETURN FILING (FORM GSTR-1, FORM GSTR-2
AND FORM GSTR-3) – AS PER THE DRAFT RULES ON RETURN 14730.5 MATCHING, REVERSAL AND RECLAIM 148
30.5.1 Input tax credit 14830.5.2 Output tax liability 150
30.6 OTHER PROVISIONS 151
Chapter 31 Refunds under GST 15331.1 REFUND PROVISION 15331.2 TIME LIMIT FOR FILING OF REFUND CLAIM 15431.3 RELEVANT DATE FOR FILING REFUND APPLICATION 15431.4 SANCTIONING OF REFUND 15631.5 TIME LIMIT FOR PASSING ORDER 15631.6 INTEREST ON DELAYED REFUNDS 15731.7 ADJUSTMENT/WITHHOLDING OF REFUND 15731.8 OTHER PROVISIONS 157
PART C: IMPACT, PREPARATION AND RECOMMENDATIONS
Chapter 32 Impact of GST 15932.1 IMPACT OF GST ON MANUFACTURING SECTOR 16032.2 IMPACT OF GST ON SERVICE SECTOR 16332.3 IMPACT OF GST ON TRADERS 165
Chapter 33 Preparation and Challenges ahead 167
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33.1 PREPARATION AND CHALLENGES FOR THE TAXPAYERS 16833.1.1 Migration of existing registered person 16833.1.2 Last return under the existing regime to play
important role 16833.1.3 Computation of duties and taxes in respect of goods
held in stock 16933.1.4 Credit of stock in transit 16933.1.5 Inputs/semi-finished goods removed to job worker and
finished goods removed for carrying out certain processes 16933.1.6 Exempted goods returned to the place of business on or
after the appointed day 17033.1.7 Area based Exemptions 17133.1.8 Stock transfer is taxable in GST 17133.1.9 Matching concept under GST 17133.1.10 Benefit of abatement may not be available under GST 17233.1.11 Services provided to employees 17233.1.12 Reporting and analysis 17233.1.13 Requirement of amendment in purchase order 17233.1.14 Review of pricing policy 17233.1.15 Review of long term contracts 17333.1.16 Principles of Place of supply – a new concept for
identifying intra-state and inter-state services 17333.2 HOW TO GO ABOUT FOR GST – ACTION PLAN 173
33.2.1 Strengthening management of process change 17333.2.2 Efficient strategic planning 17433.2.3 Redefining operations and robust IT infrastructure 17433.2.4 Education and training 174
33.3 PREPARATION AND CHALLENGES FOR THE GOVERNMENT 17533.3.1 Dual control under GST 17533.3.2 GST Council power only recommendatory in nature 17533.3.3 Classification of goods and/or services in GST slab rate 17633.3.4 Tax on services by the states 17633.3.5 Whether existing cesses are going to be subsumed
under GST? 17633.3.6 Tax cascading 17633.3.7 Implementation of anti-profiteering measures 17633.3.8 IT infrastructure 176
Chapter 34 Recommendations on the Revised Model GST Law 17834.1 SUPPLY 17834.2 REGISTRATION 18034.3 VALUATION 18034.4 INPUT TAX CREDIT (ITC) 181
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34.5 TDS PROVISION 18434.6 TRANSITIONAL PROVISIONS 18434.7 DEMANDS AND RECOVERY 185
ANNEXURESI. DRAFT MODEL CGST/SGST ACT, 2016 (AS RELEASED ON
NOVEMBER 26, 2016) 186II. DRAFT MODEL IGST ACT, 2016 (AS RELEASED ON
NOVEMBER 26, 2016) 361III. DRAFT GST (COMPENSATION TO THE STATES FOR LOSS
OF REVENUE) BILL, 2016 386IV. DRAFT GOODS AND SERVICES TAX - REGISTRATION RULES 394V. DRAFT GOODS AND SERVICES TAX RULES - REGISTRATION
FORMATS 405VI. DRAFT GOODS AND SERVICES TAX - INVOICE RULES 477VII. DRAFT GOODS AND SERVICES TAX RULES - INVOICE FORMATS 483VIII. DRAFT GOODS AND SERVICES TAX - PAYMENT RULES 485IX. DRAFT GOODS AND SERVICES TAX RULES - PAYMENT FORMATS 489X. DRAFT GOODS AND SERVICES TAX - RETURN RULES 500XI. DRAFT GOODS AND SERVICES TAX RULES - RETURN FORMATS 513XII. DRAFT GOODS AND SERVICES TAX - REFUND RULES 613XIII. DRAFT GOODS AND SERVICES TAX RULES - REFUND FORMATS 620
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The Goods and Services Tax (GST) is envisioned as a biggest indirect tax reform of the independent India. It is a single tax on the supply of goods and services, right from the manufacturer to the consumer and credits of input taxes paid at each stage will be available in the next stage of value addition, which makes GST essentially a tax only on value addition at each stage.
The implementation of GST will help to create a common national market and reduce the cascading effects of taxes on the costing and pricing of goods and services. It appears that the design of GST itself will lead to substantial benefits accruing to end consumers. The final consumer will thus have to bear only the GST charged by the last dealer in the supply chain, with set-off benefits available. GST will have a far-reaching impact on almost all the aspects of the business operations in the country, for instance, pricing of products and services, supply chain optimization, IT, accounting, and tax compliance systems. It will also help to build a transparent and corruption-free tax administration.
GST is going to be a game changing indirect tax reform which was introduced as 122nd Constitutional Amendment Bill, 2014 (“the GST Bill”), replacing the 115th Constitutional Amendment Bill, 2011 and was passed by the Lok Sabha on May 6, 2015. However, it kept pending in the Rajya Sabha for long and was finally passed on August 3, 2016 with certain key amendments. Meanwhile, on June 14, 2016, the central government put the Model GST Law on public domain after getting an in-principle nod from the Empowered Committee of State Finance Ministers for seeking suggestion from the public at large. Further, in the series of events for implementation of GST, the said GST Bill received the assent of the Hon’ble President on September 8, 2016 and the same was enacted
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biggest Indirect tax reform
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as the Constitution (101st Amendment) Act, 2016 [“the 101st Constitutional Amendment Act”].
On September 12, 2016, the Union Cabinet approved the formation of the GST Council (section 12 of the 101st Constitutional Amendment Act) followed by the government notifying September 16, 2016 as the appointed date for remaining sections of the 101st Constitutional Amendment Act ( i.e. section 1 to 20 except section 12).
The GST Council’s first meeting was held on September 22-23, 2016, wherein consensus was developed on contentious issues of threshold exemption amount, dual control of the centre and states over assesses and base year of compensation to states for 5 years in the event of revenue loss due to switch-over to GST. However, the consensus initially arrived at on the aspect of dual control was broken later with states demanding complete control over assesses with turnover up to Rs. 1.5 crores.
Then, the Central Board of Excise and Customs on September 26, 2016 has unveiled Draft Rules and formats under GST relating to registration, invoice and payment, followed by the Draft Rules and formats on GST returns and refunds on September 27, 2016, which got approval from the GST Council in its meeting dated September 30, 2016.
Further, the government also unveiled the Revised Model GST Law and Draft Goods and Services Tax Compensation Bill by placing it in public domain on November 26, 2016 after incorporating suggestions from trade and industry, in a way, signalling that the GST might mark its advent soon.
Since notification of the GST Council on September 12, 2016, six meetings of the GST Council have been held, wherein some of the important decisions taken (as mentioned in the report card issued by the government on December 14, 2016) are as under:
(i) The threshold limit for exemption from levy of GST would be Rs. 20 lakhs for normal states (Rs. 10 lakhs for the special category states enumerated in Article 279A of the Constitution).
(ii) The threshold for availing the composition scheme would be Rs. 50 lakhs. Service providers would be kept out of the composition scheme.
(iii) To compensate states for 5 years for loss of revenue due to implementation of GST, the base year for the revenue of the state would be 2015-16 and a fixed growth rate of 14% will be applied to it.
(iv) Approval of the Draft GST Rules on registration, payment, return, refund and invoice, debit & credit notes with the understanding that minor changes may be permitted with the approval of the chairperson, if required, due to suggestions from the stakeholders or from the law department.
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(v) All entities exempted from payment of indirect tax under any existing tax incentive scheme would pay tax in the GST regime and the decision to continue with any incentive scheme shall be with the concerned state or central government. In case any state government or central government decides to continue any existing exemption/incentive scheme, it will be administered by way of a reimbursement mechanism.
(vi) Bands of rates of goods under GST shall be 5%, 12%, 18% and 28% and in addition there would be a category of exempt goods. Further, a cess would be levied on certain goods such as luxury cars, aerated drinks, pan masala and tobacco products, over and above the rate of 28% for payment of compensation to the states.
Further, the two day seventh GST Council meeting took place recently on 22-23 December, 2016. On the first day, the members debated over the provisions of the Model central/state legislation. Finally, the Council reached a broad consensus on the draft of central and state GST Legislations. On the subsequent day, a consensus was also built on the method of compensation of revenue loss to the states. It was also agreed that the states will get 100 percent compensation for revenue losses and would be compensated every two months. “The CGST and SGST laws, a total of 197 provisions and five schedules, have been approved. The legally vetted copy of the drafts will be circulated to the states. Only issues of dual control and cross empowerment are left.”, said Shri. Arun Jaitley during a press conference following the completion of the seventh GST Council meeting on December 23, 2016.
The Council, however, failed to arrive at consensus on Integrated GST Law and dual control regarding division of jurisdiction and administrative powers over tax assesses with an annual turnover of INR 1.5 crores, between the centre and the states. The GST Council is scheduled to meet next on 3-4 January, 2017 to take up the issue of cross empowerment and IGST Law.
It is pertinent to note that the government is all set and committed to roll out GST as envisaged from April 1, 2017, but may be delayed on account of the recent demonetisation of high-value currency by the government which has led to a lot of tussles in the Parliament. The migration of traders and merchants registered under various state and central tax regimes to the GST and the enrolment process has been sluggish as they are apprehensive about the legal implications of the GST. Moreover, the issue of dual control between the centre and state is a major roadblock for the implementation of GST for assessees whose turnover is less than Rs. 1.5 crores per year. Not only this, too many sections of the mammoth law are also yet to be finalised.
Since the deadline of April 1, 2017, for rolling out GST appears little far from reality with pace of time, the government may stretch for July 1 as the next target date. The 101st Constitutional Amendment Act, to replace existing indirect taxes with the new GST law was notified on September 16, 2016, and the new
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ambitious tax reform has to be implemented within 12 months of that date i.e. before September 16, 2017.
KEY HIGHLIGHTS OF THE REVISED MODEL GST LAWThe key highlights of major changes in the Model GST Law released in June, 2016 vis- a-vis November 2016 are as follows-
• Capping of GST rate:The GST Council in its meeting held on 03-11-2016 has decided four-tier GST tax structure of 5%, 12%, 18% and 28%, with zero rate for essential items and the highest for luxury and de-merits goods that would also attract an additional cess on specified items.
The lowest rate of 5% would be for common use items, while there would be two standard rates of 12% and 18% and luxury goods & demerit goods would be covered under 28% tax rate slab with additional cess on specified items. In this regard, in the Revised Model GST Law, provisions have been inserted, thereby capping the central and state GST rates at 14% each and 28% for IGST.
• Though changes have been made in definition of term “Supply”, it still continues to be inclusive and subjective one:
The Model GST Law has chosen to define ‘supply’ in inclusive manner, without even defining what ‘supply’ means and its scope has been kept wide enough to include any form of supply like, sale, transfer, lease, rental etc., and even extended to cover barter and exchange.
However, in the Revised Model GST Law, scope of supply has been curtailed to some extent by excluding importation of services without consideration out of taxable net, except when imported from a related person or from other establishment outside India.
Further, revamp changes have been made in Schedule I dealing with “Matters to be treated as supply even if made without consideration” and nightmare situations as given in the First Model GST Law like business assets/ services put to private or non-business use, assets retained after deregistration, FOC supplies, etc., has now been done away.
• Incorporation of new concept of ‘Mixed supply’ and ‘Composite supply’:In the Revised Model GST Law, new provisions have been inserted to determine taxability of mixed supply and composite supply which were not there in the First Model GST Law.
Composite supply i.e. the supplies that are naturally bundled It shall be treated as supply of principal supply.
Mixed supply - The supplies that are not naturally bundled i.e. two or more individual supplies or combination thereof, not constituting composite supply It shall be treated as a supply which attracts the highest rate of tax.
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• No GST on securities:Unlike the First Model GST Law, the Revised Model GST Law has excluded securities from the ambit of the term ‘goods’. Meaning thereby, that the concerns of the stock market participants, brokers etc., has been addressed and there would no GST on securities.
• Specified transaction in money to be services:Transaction in money is included in the definition of services but is limited only in cases when an activity relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged.
• Increase in threshold limit for registration:Threshold limit for registration has now been increased from Rs. 9 lakhs to Rs. 20 lakhs for states excluding states specified in Article 279A(4)(g) of the Constitution and special category states, wherein Rs. 10 lakhs is prescribed (In the First Model GST Law, Rs. 4 lakhs was specified).
• Aggregate turnover to exclude non-taxable supplies:The definition of aggregate turnover has been amended in the Revised Model GST Law to exclude non-taxable supplies but, exempt supplies, exports of goods and/or services still continues to be included in the aggregate turnover.
• Insertion of concept of distinct person:Person/establishment of person who has obtained registration or required to obtain more than one registration whether in one state or more than one state/ in a state in addition to any other establishment in another state, to be treated as distinct person/establishment of distinct person.
• Mandatory registration for overseas supplier supplying OIDAR services to a person in India other than a registered taxable person:
In the Revised Model GST Law, provisions have been inserted regarding mandatory registration for overseas supplier supplying online information and database access or retrieval (“OIDAR”) services to a person in India other than a registered taxable person, which was not there in the First Model GST Law. Further, in the Revised Model GST Law, the definition of the same, principle for determining place of provision of OIDAR services etc. have been inserted.
• Casual taxable person or non-resident taxable person to apply for registration at least 5 days prior to commencement of business:
In the Revised GST Law, it has been specifically provided that a casual taxable person or non-resident taxable person shall apply for registration at least 5 days prior to the commencement of business. However, a casual taxable person or a non-taxable person shall make taxable supplies only after the issuance of the certificate of registration.
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• Registration can also be amended by person having unique identity number:
In the Revised Model GST Law, it has been provided that the person to whom a unique identity number has been assigned can get his registration amended. However, in the First Model GST Law, the provision for amendment of registration has been provided specifically to a registered taxable person only.
• Taxable person to discharge due obligations in addition to tax liabilities under GST even after cancellation of registration:
It has been provided in the Revised Model GST Law that despite of cancellation of registration, the taxable person has to discharge all the tax liabilities and other dues or any obligation under the GST Act and rules made thereunder for any period prior to the date of cancellation, whether or not such liabilities are determined before or after the date of cancellation.
• No requirement for registration also extended to a person engaged in exclusive supply of exempted goods and/or services:
A person engaged exclusively in the business of supplying goods and/or services that are non-taxable or wholly exempted under GST are not required to take registration. Earlier, the person engaged exclusively in the business of supplying non-taxable goods and/or services were only kept out of the purview of the taxable person.
• Minimum tax rate of 1% for traders and 2.5% for manufacturers opting for composition scheme:
In the Revised Model GST Law, minimum rate of tax under composition scheme has been prescribed as not less than 1% for traders and 2.5% for manufacturers i.e. effectively for CGST/SGST, it would be 2%/ 5%.
• No benefit of composition scheme to supplier of services and taxable person making inter-state outward supply of goods:
In the First Model GST Law, benefit of the composition scheme was not available to person who effects any inter-state supplies of goods and/or services. However, in the Revised Model GST Law, the scope of the said scheme has been curtailed by restricting taxable person engaged in supply of services for availment of benefit of the composition scheme.
Also, now it has been specifically provided that the person making inter-state outward supply of goods is not eligible for benefit of composition scheme thereby removing the ambiguity as to the term ‘person effecting inter-state supply’.
• Rules for valuation of goods or services not yet provided in the Revised Model GST Law:
The Revised Model GST Law does not contain any GST Valuation Rules, unlike the First Model GST Law i.e. GST Valuation (Determination of the Value of
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Supply of Goods and Services) Rules, 2016. However, it is specifically stated that where the value of supply of goods or services cannot be determined in terms of section 15(1), the same shall be determined in the manner as may be prescribed. This means that the GST Valuation Rules are yet to be revised and put on public domain.
• Reimbursable expenditure or cost incurred, free of cost supplies, subsidies provided by central or state government etc., not to be included in transaction value:
The items such as reimbursable expenditure or cost incurred, free of cost supplies which were forming part of the value of supply as per the First Model GST Law has now been removed. Further, it has been provided that subsidies provided by the central or state government shall be excludible from the value and only subsidies directly linked to the price will be included in the value of supply.
• Removal of condition stipulating that discount should be allowed in the course of normal trade practice, for exclusion from value of supply
In the First Model GST Law, it was provided that the discount allowed before or at time of supply shall not be included in the transaction value provided that such discount is allowed in the course of normal trade practice and duly recorded in the invoice issued. However, now the said condition of “discount is allowed in the course of normal trade practice” is removed.
Thus, any discount that is given before or at the time of the supply will not form part of the value provided such discount has been duly recorded in the invoice issued in respect of such supply.
• Interest or late fee or penalty for delayed payment of any consideration for any supply to be included in transaction value:
Now, if interest or late fees or penalty for delayed payment of any consideration for any supply is paid, then it shall be includible in the value of supply, which is a departure from the provision under the present indirect taxation regime.
• Separate provisions for place of supply in case of mobile connection for telecommunication services, DTH etc., provided on pre-payment through the selling agent/re-seller/distributor
In the Revised Model GST Law, separate provisions have been provided for determining the place of supply of telecommunication services in cases where mobile connection for telecommunication, internet service and DTH services are provided on pre-payment through a voucher or any other means through selling agent/ re-seller/ distributor of SIM card/ re-charge voucher, which was not there in the First Model GST Law. The place of supply in the said cases shall be address of the selling agent/ re-seller/ distributor as per the record of the supplier at the time of supply.
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• Deletion of concept of recipient showing receipt of supply in its books of accounts for determining time of supply:
In the First Model GST Law, one of the parameter for determining time of supply was that of the recipient showing receipt of supply in its books of accounts, which has now been deleted from the list of events determining time of supply in GST in the Revised Model GST Law.
• Extension of provisions for determination of time of supply when there is change in rate of tax to supply of goods:
In the Revised Model GST Law, the provision for determination of time of supply when there is change in rate of tax has been extended to supply of goods which were restricted only to supply of services in the First Model GST Law.
• Credit note can also be issued in case of return of goods by recipient and services found to be deficient :
In the Revised Model GST Law, it has been specifically provided that credit note can be issued in the following cases also:
Where the goods supplied are returned by the recipient Where services supplied are found to be deficient• Limits for deducting TDS reduced from Rs. 10 lakhs to Rs. 5 lakhs:In the Revised Model GST Law, threshold limit for deducting TDS has been reduced from Rs. 10 lakhs to Rs. 5 lakhs, i.e. TDS required to be deducted where the total value of such supply under a contract, exceeds Rs. 5 lakhs.
• TDS to be deducted @2% in inter-state supplies and 1% in intra-state supplies:
It is specified in the Revised Model IGST Law that the deductor is required to deduct TDS at the rate of 2% i.e. in case of inter-state supplies, as against 1% in case of intra-state supplies.
• Changes in the provisions relating to input tax credit (ITC) in GST:The definition of the terms ‘input’ and ‘input service’ for availing ITC under GST has been elaborated to cover all goods/ services which are used or intended to be used by a supplier. The condition requiring the supplier to use input/input services for making outward supply has been removed.
Further, the definition of capital goods has also been simplified in the Revised Model GST Law and has been brought in line with the accounting practices, to include all goods which have been capitalized in the books of accounts. Also, capital goods will be entitled for 100% credit immediately except for pipelines and telecommunication tower fixed to earth by foundation or structural support including foundation or structural support, on which credit shall be available is 1/3rd on yearly basis.
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Furthermore, the negative list of goods and services on which no ITC shall be admissible has also amended to restrict ITC to other conveyances along with motor vehicles except when used for subsequent trading, transportation of passengers or goods, imparting training on driving, flying and navigating such vehicles and conveyances. Further, the government will notify services which are obligatory for an employer to provide to its employees under any law in force, on which credit shall be admissible.
ITC of works contract services received will be allowed, where it is used for further supply of work contract services. Thus, the anomaly arising in the First Model GST Law as to whether credit shall not pass even between sub-contractor and contractor is now removed.
• Works contract definition restricted to activities relating to immovable property:
In the Revised Model GST Law, the definition of works contract has been amended and now it covers only the works contract relating to immovable property.
• No GST on high sea supplies:It has been specifically provided in the Revised Model GST Law that IGST on imports of goods shall be payable only when the duties of customs are payable. However, the First Model GST Law was silent in this regard. Hence, high sea supplies will continue to enjoy exemption under GST as well.
• Supplies to SEZ are now zero rated:Provisions for zero rated supply has been inserted in the Revised Model IGST Law, which provides that supply of goods and/or services to a SEZ developer or an SEZ unit shall also treated as zero rated supplies. Thus, zero rated supplies will attract nil rate of tax.
• Changes made in the provisions of TCS required to be collected by e-commerce operator:
Rate of TCS was not prescribed in the First Model GST Law and the same has been now been fixed as 1% in case of intra-state supplies and 2% in case of inter-state supplies.
It may also be noted that in the First Model GST Law, TCS was payable out of the ‘amount payable or paid to the supplier, representing consideration towards the supply of goods and/or services made through it’, but, now it has been clarified and stated that rate shall be applied on net value of taxable supplies made through e-commerce operator.
Definition of ‘e-commerce’ and ‘e-commerce operator’ has been simplified and exclusion of persons engaged in supply of goods and/or services on their own behalf, from the definition of ‘e-commerce operator’, does not find place in the Revised Model GST Law.
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The Revised Model GST Law does not provide any definition of ‘aggregator’, and provisions have been inserted in section 8(4) which states that the government may come out with a notification specifying which type of services that would be covered therein. Aggregators includes Ola, Uber, etc., which work as platforms for providing transport and other services, wherein by means of the application and a communication device, a potential customer is connected with the persons providing service of a particular kind under the brand name or trade name of the said aggregator.
The TCS provision will not apply to aggregators. But, it is to be noted that section 8(4) is only for specified services and not for goods. Thus, TCS provisions would be applicable on e-commerce operators for supply of goods.
Further, two provisos are contained in section 8(4), to fix the liability of GST on e-commerce operators that do not have a place of business in India – i.e. their representative will be liable to discharge liabilities under GST or if they don’t have a representative, a person has to be appointed for the purpose of paying tax.
• Requirement to take permission from the proper officer for sending inputs and/or capital goods to job work, without payment of tax has been done away
In the Revised Model GST Law, the procedure of taking permission before sending any inputs and/or capital goods, without payment of tax, to a job worker for job-work and from there subsequently sending to another job worker and likewise has been dispensed away and now only intimation is required.
• Insertion of provisions regarding no interest payable on the amount of IGST or CGST/SGST payable where tax wrongly collected and deposited:
In the Revised Model GST Law, it has been provided that a taxable person shall not be required to pay any interest on the IGST or CGST/SGST payable on transaction of inter-state/ intra-state supply which is wrongly considered as intra-state/ inter-state supply. The said provision was not there in the First Model GST Law.
• Insertion of provision of power of CAG to call for information for audit: In the Revised Model GST Law, provisions have been inserted pertaining to power of CAG to call for information, records and returns furnished under the GST Act from the proper officer, required for conducting an audit under the Comptroller and Auditors General’s (Duties, Powers and Conditions of Service) Act, which was not there in the First Model GST Law.
• Amendment in triggering amount of offences for imprisonment and in other related provisions:
The triggering amount for imprisonment of 3 years in the First Model GST Law was, amount exceeding Rs. 50 lakhs but not exceeding Rs. 2.5 crores, now the
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said amount is increased to amount exceeding Rs. 1 crore but not exceeding Rs. 2.5 crores. Similarly, triggering amount for imprisonment of 1 year was amount exceeding Rs. 25 lakhs but not exceeding Rs. 50 lakhs which is now increased to amount exceeding Rs. 50 lakhs but not exceeding Rs. 1 crore.
Further, in the First Model GST Law, there was no provision for imprisonment upto 6 months and/or with fine in the specified cases viz. obstruction or prevention of any officer in the discharge of his duties, tampering with or destroying any material evidence or documents, or failure to supply any information or supplying false information. Also, earlier the words “amount of tax evaded” was used in prosecution provisions but now the said words have been replaced with “amount of tax evaded or the amount of input tax credit wrongly availed or utilized or the amount of refund wrongly taken”. Thus, now prosecution provisions will also apply if the amount relates to ITC wrongly availed or utilized or refund wrongly taken.
• Determination of cognizable and non-cognizable offences:In the Revised Model GST Law, it has been specified that in case of 5 prescribed offences such as supply of any goods and/or services without issue of invoice or grossly mis-declaring the description of the supply on invoice, tax collected but not deposited beyond a period of 3 months from due date of payment etc., where the amount of tax evaded or ITC wrongly availed or refund wrongly taken exceeds Rs. 1 crore, then the offences shall be cognizable and non-bailable. However, in the First Model GST Law, the provision was “the offences relating to taxable goods and/or services where the amount of tax evaded exceeds two hundred and fifty lakh rupees shall be cognizable and non-bailable”. Thus, threshold amount is now reduced from Rs. 2.5 Cr to 1 Cr and the general provision has been made specific and the commissioner has been given power to take cognizance of offence.
• Increase in time period for issuance of notice for retention of goods The time period for issuance of notice in respect of retention of goods was 60 days plus extended period of 60 days at a time subject to a maximum of 6 months in the First Model GST Law, which was considered to be on higher side. However, in the Revised Model GST Law, the said time period is further increased to 6 months plus extension of 6 months.
• Time period for issuance of show cause notice in fraud and non- fraud cases prescribed:
In the First Model GST Law, no time period was prescribed for issuance of show cause notice. However, now it is prescribed under the Revised Model GST Law and accordingly show cause notice is to be issued within the below mentioned time period-
In non-fraud case: Atleast 3 months prior to the time limit for issuance of order (Time limit for issuance of order: within 3 years from the due date for
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filing of annual return related to the relevant period or within 3 years from date of erroneous refund).
In fraud case: Atleast 6 months prior to the time limit for issuance of order (Time limit for issuance of order: within 5 years from the due date for filing of annual return related to the relevant period or within 5 years from date of erroneous refund).
• Order to be issued with 3/5 years from due date for filing annual return:
The First Model GST Law prescribed that order has to be issued within 3 years (in non- fraud case) /5 years (in fraud case) from the due date or the actual date, whichever is earlier, for filing of annual return. However, the provision now states that issuance of order shall be within the specified time period which shall be calculated from the due date for filing of annual return.
• Provisions for settlement commission not yet provided:In the First Model GST Law, extensive provisions regarding settlement of cases by settlement commission were provided but in the Revised Model GST Law, the said provisions have been deleted, which would create a question in the mind of the stakeholders that whether no such mechanism shall be provided to the assessee to assess their tax liability in case of doubt instead of entering into any legal proceedings.
• Transitional provisions: Transitional provisions have been revamped in the Revised Model GST Law, to address the various concerns raised by the Industry like transitional credit on goods in transit, carry forward of credit by exempted service providers, first and second stage dealers, etc.
• Anti-profiteering measures:Probably, picking a cue from Malaysia having provisions of anti- profiteering measure, the Revised Model GST Law has incorporated the said provisions, which were not there in the First Model GST Law, thereby making an attempt to ensure that businesses do not take advantage of GST and should pass on the benefit of GST ITC available or reduction in rates to the consumer.
However, there are concerns regarding proper implementation of this anti-profiteering measure which will be used for identifying the profiteers and a fear is raised in the minds of traders that it may result into undue power delegated in the hands of the designated authority. Further, timing of implementation of these measures will also play an important role in ascertaining its success.
• Draft Compensation Bill has also been released:The government has also released Draft Compensation Bill to provide for compensation to states for loss of revenue arising on account of implementation
Revised Model GST Law – One more step towards biggest Indirect tax reform xxxix
of GST for a period of five years. Some of the important provisions of the said bill are as follows-
Base year- For the purpose of calculating the compensation amount payable in any financial year during the transition period, the financial year ending 31-3-2016 will be taken as the base year.
Projected growth rate: The projected nominal growth rate of revenue subsumed for a state during the transition period shall be 14% per annum.
Base year revenue: Base year revenue for a state shall be the sum of the revenue collected by the state and local bodies during the base year, on account of the taxes levied by the respective state or centre, net of refunds, with respect to the taxes imposed by the respective state or centre, which are subsumed into GST viz. VAT, CST, entry tax, octroi etc. Further, in respect of the state of Jammu and Kashmir, the base year revenue shall include the amount of service tax collected by the state government.
Levy and collection of GST compensation cess: A cess called GST compensation cess at such rate as may be notified to be levied and collected on the value determined under section 15 of the CGST Act, 2016 and on such supplies of goods and services, including imports of goods and services, and those supplies on which tax is payable on reverse charge basis, which may be prescribed on the recommendations of the GST Council, for the purpose of providing compensation to states for loss of revenue arising on account of implementation of the GST for a period of 5 years, w.e.f. the date from which the CGST Act is brought into force.
However, no such cess shall be leviable on supplies made by a taxable person permitted to opt for composition levy.
Returns, Payments and Refunds: Every taxable person registered under the CGST Act, 2016, making a taxable supply of goods and/or services, shall furnish such returns in such formats, as may be prescribed, along with the returns to be filed under the CGST Act, 2016, shall pay the GST compensation cess in the manner as may be prescribed and apply for refunds of cess paid and refundable in such form as may be prescribed.
GST Compensation Fund: The proceeds of the GST compensation cess shall be credited to a non-lapsable fund known as the GST Compensation Fund in the Public Account, and shall be utilized for purposes specified above.
• Insertion of other provisions:Certain new provisions regarding special procedure for certain processes i.e. registration, payment for certain classes of taxable persons and taking assistance from an IT professionals have been inserted in the Revised Model GST Law which were not existing in the First Model GST Law.
