Quick Review of Model Goods and Services Tax Act, 2016

CA Deepak Aggarwal

Report of Sub-Committee-II on Model GST Law

Empowered Committee of State Finance Ministers

September, 2015

Goods and Services Tax Act, 2016 (GST)

• This act may be called the Central GST Act, 2016 (CGST) / State GST Act, 2016 (SGST).
• It extends to the whole India. In case of SGST, to the respective state.
• CGST/SGST will be levied on all intra-state supplies of goods/ services.
• Goods mean every kind of moveable property other than actionable claim and money but includes securities, growing crops, grass and things attached to or forming part of the land which are agreed to be served before supply of under the contract of supply.
• Services mean anything other than goods.
• Supply of goods / services includes all forms of supply such as sale, transfer, barter, exchange, license, rental, lease or disposal and importation of services, made or agreed to be made for a consideration by a person in the course or furtherance of business and also includes a supply specified in schedule I, made or agreed to be made without a consideration. Schedule I covers permanent transfer/disposal of business assets, temporary application of business assets to a private or non business use, services put to a private or non business use, self supply of goods/services and asset retained after deregistration.

• Intra-State supply means a supply in which the goods remain within the same state.
• CGST/SGST will be paid by every taxable person. Taxable person means a person who carries on any business at any place in India/state and who is registered or required to be registered under schedule III. Schedule III covers mainly person making any inter- state supply, casual taxable person and persons who are required to pay tax under reverse charge. In case of Employee Employer relationship exists, employee will not be considered as a taxable person.
• A Compounded levy scheme for whose turnover in a financial year does not exceed 50 lacs, option to pay at the rate not less than 1% of the turnover during the year. However such option will not be available for those persons who are involve in inter -state supplies of goods/ services and also who are liable to pay under reveres charge.
• Taxable event in case of supply of goods will be earliest of 4 events – the date on which goods are removed by supplier or the date on which goods are made available to the buyer, the date on which supplier issues the invoices, the date on which supplier receives the payment, the date on which buyer shows the receipt of goods in his books of account.
• Taxable event in case of supply of services will be the date of issue of invoice or the date of receipt of payment whichever is earlier (Where invoice issued within the prescribed time) or the date of completion of the provision of service or the date of receipt of payment whichever is earlier (Where invoice not issued within the prescribed time). In other cases, the date on which the recipient shows the receipt of services in his books of account.
• Taxable event in case of reverse charge liability will be earliest of the date of receipt of services or the date of which payment is made or the date of receipt of invoice or the date of debit in the books of accounts.
• Place of supply of goods/ services will be decided as per the detailed provision given in the act itself.
• The value of a supply of goods/services shall be the transaction value i.e. the price actually paid or payable before the supply. This price will be applicable where supplier and recipient are not related and the price is the sole consideration for the supply.
• The value of a supply of goods/services, in case of supply of goods by a taxable person to any person other than a taxable person shall be retail sale price. Retail sale price means the maximum price at which the goods in packaged form may be sold to the ultimate consumers.
• Every taxable person entitled to take credit of input tax and may deduct the amount of admissible credit in respect of a tax period from the output tax for the same period. Tax period means the period for which the tax return is required to be filed.
• No input tax credit of SGST will be utilized towards payment of CGST and vice versa.
• Separate Rules may be notified for remission of tax on supplies found deficient in quantity due to natural causes subject to overall limit beyond which remission cannot be granted.
• In case of default in payment of tax, the proper office within 3 years can issue SCN in case of normal circumstances and in case of fraud or other similar cases; the SCN can be issued within 5 years.
• The proper officer after considering the submission will determine the amount of tax, interest and penalty due from such person and issue an order with in a period of 1 year or 18 months in case of fraud cases.
• An opportunity of being heard will be granted on receipt of a written request from the person chargeable to tax or where any adverse decision is contemplated against such person.
• Adjournment may be provided in case sufficient cause is shown but not more than 3 times to a person during the proceedings.
• The adjudication proceedings shall be deemed to be concluded if the notice to show cause is not decided within one year or 18 months as the case may be.
• Refund of tax is permissible on making application within 2 years from the relevant date. However the limitation of 2 years will not be applicable where tax or interest has been paid under protest.
• Every person who is liable to be registered shall get himself registered within 30 days from the date on which he became liable to registration.
• In case a person having multiple businesses vertical in a state may obtain a separate registration for each business vertical.
• PAN is mandatory to get registered under GST Act.
• In case a person fails to obtain registration, the proper officer may proceed to register such person.
• Every registered taxable person while supplying taxable goods/services shall issue a tax invoice showing the amount of tax and other particulars as may be prescribed.
• Credit and debit notes are required to be issued in case of any excess or less value of supply already made. Such credit and debit notes are required to be issued up to 30^th Following the end of the financial year in which supply was made or the date of filing of the relevant annual return whichever is earlier.
• Every registered taxable person whose turnover during the year exceeds the prescribed limit shall get his accounts audited by a CA or Cost accountant and shall submit to the proper officer a copy of the audited statement of accounts, the reconciliation statement and such other documents as may be prescribed.
• Every registered taxable person shall for every tax period furnish a return electronically of inward and outward supplies of goods/ services, input tax credit availed , tax paid and other particulars as may be prescribed within 21 days after the end of such tax period.
• A registered taxable person shall not be allowed to furnish return for a tax period if return for any previous tax period has not been furnished by him.
• Every taxable person shall pay the tax due as per such return not later than the last date on which he is required to furnish such return; otherwise return will not be treated as a valid return. However NIL tax return is also required to be filed.
• Every registered taxable person shall furnish an annual return for every financial year electronically on or before the 31^st day of December following the end of such financial year.
• A special provision relating to tax deducted at source is proposed in case the total value of supply under a contract exceeds 10 lacs. CG or SG has empowered to notify the category of entities. Such entities will be liable to get registered if they are not already registered. The deductee shall claim credit of the tax deducted
• The commissioner of CGST/SGST or any officer authorised by him, may undertake audit of the business transactions of any taxable person. A prior intimation not less than 15 days is required to conduct such audit.
• A Special audit by CA or CWA, nominated by commission is also proposed if it is required as per nature and complexity of the case and the interest of revenue.
• Every taxable person shall be assigned a GST compliance rating score based on his record of compliance base on parameters to be prescribed in this behalf. Such rating will be updated at periodic intervals and intimate to the taxable person and also placed in the public domain.
• For filing appeal, a mandatory pre-deposit @ 10% of the amount disputed is required in case of first appeal and further pre-deposit @ 10% of the amount disputed is required in case of second appeal to the Appellate tribunal. Such amount may be increased in serious cases. Serious cases shall mean a case involving a disputed tax liability of not less than 25 crores and department has a very good case against the taxpayer.
• An interest on refund of pre-deposit is proposed not less than 5% and not exceeding 36%.

(Author can be reached at cadeepak@yahoo.com)