Respected Hon’ble Finance Minister
We thank you and appreciate that your Government is open to suggestions and the suggestions on the draft GST Model Act of June 2016 has been incorporated in the revised Draft GST Model Act released in Nov 2016.
We would like to draw your attention to the following in the Revised Draft Model GST Law:
Chapter –I – Preliminary
1. Section 2 – Definitions
The taxable event for the levy of GST is the supply of goods or services. Accordingly, the definition of manufacturer, first and second stage dealers do not augur well in the GST regime and add more confusion rather than the solution.
Suggestion –clauses 2(46), 2(63), 2(82),2(91) be deleted.
Chapter V – Input Tax Credit
2. Section 16(2)
The draft law envisages that the credit of GST on the goods or services can be availed only after the tax has been paid and the returns are filed even though the goods have been received under a valid invoice and utilised.
The credit of the ITC is deferred instead of immediate credit. The assessee can pay the tax after adjustment of the ITC. This will lead to a lot of confusion, delayed payment to the suppliers of both tax and the invoice.
The clauses (c ) and (d) of Section16(2) negates the intention and practicality.
Suggestion: Clauses (c ) and clause (d) of 16(2) be deleted
3. Section 17 (4) (a)
An assessee who buys motor vehicles for transportation of his own goods for his business purpose viz for movement of goods from/to job worker or to delivering to his customer or to pick up the goods from his supplier. However, the ITC is not allowed in such cases as per clause (a) of Section 17(4).
Further, the motor vehicles bought by an assessee that may be used for the transportation of their employees/ guest or goods is used in furtherance of business. Hence, it is suggested to allow ITC on motor vehicles.
Suggestion – The clause (a) of Section 17(4) be deleted.
4. Section 17 (4) (b) (i)& (iii)
An assessee provides canteen facility as mandated by statute. The assessee either has his own facility or outsource it (outdoor catering). This is held to be input service as per catena of decisions. Similarly is the case of rent a cab, health insurance services.
Suggestion: the sub-clause (i) and (iii) of Section 17(4) (b) be rephrased as:
(b) supply of goods and services, namely,
(i) food and beverages, outdoor catering, beauty treatment, heath services, cosmetic and plastic surgery except where such inward supply of goods or services is used by a registered taxable person directly or indirectly in relation to the furtherance of business
(iii)rent a cab, life insurance, health insurance except when used by a registered taxable person directly or indirectly in relation to the furtherance of business.
5. Section 48 – Refunds
Though in the explanation – refund includes supplies regarded as deemed export, it is not forthwith in the main part of the section.
Suggestion: In the first proviso to sub-section 3 of section 48, after the words including zero-rated supplies, and deemed exports be added.
6. Chapter XXVII – Transitional Provisions
As per the current provision, ITC is not available on CST. However, the goods in stock held on the appointed day shall suffer GST. Therefore, the transitional provision to provide ITC of CST paid on stocks held on the appointed day.
Suggestion: The CST (Central Sales Tax) on the stock of goods held by the manufacturer or a first stage dealer or a second stage dealer or a consignment agent or a commission agent on the appointed day be allowed as IGST credit as a transitional provision under this Chapter
Draft IGST LAW
7. Section 16 – Zero Rated Supply
After the clause (b) of sub-section 1 of section 16, the following be added:
(c ) supply of goods and /or services to a 100% EOU
Hope this Progressive Government shall take these suggestions and incorporate the same when the new Law is released.
Thank you, Sir.
With Best Regards
(S.Ramaswamy, Chief Commercial Officer, Nash Industries (I) Pvt Ltd, Phone:96860 88864, mailto:email@example.com)
The views/ suggestions are purely personal