This article covers the major highlights of the draft modern GST law including the intention of legislation along with the probable impact on industry & operation:
LEVY OF CENTRAL/STATE GOODS AND SERVICES TAX
Model GST law is proposed to be levy CGSTS & SGST on local supply & IGST on Inter- state supplies.
On certain categories of supplies (yet to be notify), person receiving the supplies require to pay GST on REVERSE CHARGE BASIS.
Person shall be a taxable person &is required to pay tax under proposed law if aggregate turnover in any FY exceeds Rs. 10 lakhs; however, if a person is doing business in North eastern states including Sikkim such threshold limit is reduced to Rs 5 Lakhs.
“Aggregate turnover includes both taxable and exempted supplies onall India basis.
Such low threshold limit is required to keep the GST rate on the lower side, higher the threshold higher the revenue neutral rate”.
Central Government, State Government or any local authority shall be regarded as a taxable person for activities other than the activities as specified in Schedule IV to this Act.
Person shall not be considered as Taxable Person
TIME AND VALUE OF GOODS
VALUE OF TAXABLE SUPPLY
The value of a supply of goods and/or services shall be the TRANSACTION VALUE (T.V.).Specific Inclusion and exclusion from transaction value is prescribed under the draft law.
Other valuation methods like Comparison method, Computed method, & Residual method are also prescribed under the Draft GST Valuation Rules, 2016. However, methods prescribed in the rules are applicable only in the prescribed situations.
“Model GST law surprisingly doesn’t include the MRP method for valuation available in the existing Central Excise law which will surely affect the FMCG industry.
Though the computation of TV is well defined, but there are possibilities, that it can be litigated in the GST regime e.g. post supply discount/incentive to be included in T.V.(as same mentioned in the inclusion list in the provision) but what is pre supply discount/incentive and post supply need to be proved or subsidy is linked or not may also be litigated”
TIME OF SUPPLY OF GOODS (TOSG)for regular suppliesshall be earliest of the following:
|Date on which the goods are removed for supply to the recipient (in case of movable goods)||Date on which the goods are made available to the recipient (in case of immovable goods)||Date of issuing of Invoice by supplier||Date of receipt of payment|
TOSG in case other than regular supplies are as mentioned below:
|Continuous supply*||Reverse Charge*||Sale or return basis|
– Date of receipt of payment or;
– Date of issue of invoice/date of expiry of predefined period.
– Date of receipt of goods or;
– Date on which payment is made or;
– Date of receipt of invoice or
– Date of debit in accounts.
|Earliest of :|
– 6month from date of removal or
– Date of confirmation of supply.
*Supply fall under continuous supply or consider as reverse charge shall be notify by govt. latter on
TIME OF SUPPLY OF SERVICES (TOSS)for regular supplies shall be earliest of the following:
|When Invoice issued within prescribed time(a)||When Invoice not issued within prescribed time(b)||If a or b not apply|
Date of receipt of payment or;
Date of issue of invoice
Date of receipt of goods or;
Date of completion of services.
|Date of which recipient shows the services in his books of accounts|
“Government should better specifically classify goods & services as Time of supply of services & goods are different & may invite complexities”
INPUT TAX CREDIT UNDER GST REGIME
“ITC can only be available if relevant supplier has paid such taxes and shown in the relevant return . No such provision is there in existing central excise & service tax provisions. It may increase the procedural complexities.
Further, under IT based regime in GST, mechanism to take ITC on stock held as on date of registration yet to specify in the draft law,”
REFUND UNDER GST REGIME
SCOPE OF SUPPLY- TAXABLE EVENT
Supply under GST law includes all forms of supply of goods &/or services such as sale, barter, rent, lease etc. for consideration in course or furtherance of business; importation of services (not goods) whether or not in course of or furtherance of business; supplies without consideration covered in Schedule I.
“Above provision specifically covers E-commerce industry under the preview of supply of services to avoid e-commerce industry related litigations.
Controversial matters like right to use, deemed services etc. seems to be completely wiped out in the GST regime.
Furtherance of business is specifically included in the provision to cover all activity which are not in the normal course of business such as expansion of business but related to business.
Such broader definition of Taxable event was required to cover all the transaction and to eliminate the litigation.”
Traditional concept of state VAT laws of composition scheme is taken up in the draft law also with almost all similar conditions such as turnover limit; prohibition to inter-state supply; cannot collect tax etc.
Additionally, being the PAN based registration under GST, if taxable person opting to register under composition levy in one state, he is required to opt to register under composition levy in all other states and for all other organization having same PAN.
OTHER RELEVANT PROVISION
Draft GST model law give you clear idea how would be the GST regime look like and how it works. But for the better understanding of procedural requirement in the GST regime we need to wait till the GST rules get out.