CA Paras Mehra
Since now the demonitization is finally settled down, the next hot issue shall be the implementation of GST until and unless the BIP government comes out with something new.
As said, the implementation of GST shall be the first priority of the government because if it is not implemented by September, 2017, then our current taxation system shall lapse and there shall be no indirect taxation in India.
However, it is very much expected that the government will be able to implement GST by July, 2017. Therefore, once GST is implemented, it shall impact every citizen of our country.
As said, in order to decode this law and provide some valuable analysis, we have analyzed 10 critical points on GST model law. Let us proceed on to discuss.
#Point 1 – One Nation One tax?
From the time, the discussion on GST has been speed up, we are reading various headlines which projected GST as ‘One nation One tax.’ However, if someone could go through the GST model law, then he may question this nation friendly slogan.
Further, there is no doubt, that once GST is implemented there will be uniform law all across the nation. But what will happen after 2 years? Or will the law remain uniform across India? This is a perhaps a big question and unfortunately the answer is No. Let us understand this by an analysis.
As per section 8(3), the Central or a State Government may, on the recommendation of the Council may specify categories of supply of goods and/or services the tax on which is payable on reverse charge basis.
However, if GST council has recommended for any category to be under reverse charge, then states are not bound by that decision. There may a situation where some states may adopt the recommendation while some may not. In that case the uniformity of law across the nation shall stand defeated.
#Point 2 – Person not liable for registration if engaged exclusively in the business of supplying goods and/or services that are not liable to tax or are wholly exempt from tax under this Act [Clause 2 of schedule V of GST Model Law]
The next critical point is from the clause 2 of schedule V which states that the person shall not be liable to register under GST if he is engaged exclusively in the business of supplying goods and/or services that are not liable to tax or are wholly exempt from tax under this Act.
Let us analyze the above lines with the help of an example.
Mr. A was exclusively dealing in product X which is 100% exempt from the GST. He is supplying goods all across India. One fine day, he got a bulk order to supply the product X interstate along with some spare parts i.e. product Y which is not exempt under GST. Now, after this transaction following impact shall be there;
a) Mr. A shall not remain an exclusive supplier under GST hence provision of clause (2) of schedule V shall not apply.
b) Once, he comes out of clause (2), he shall be liable to register under GST in terms of clause (6) of schedule V and the basic exemption limit shall not apply because supply is being made interstate.
c) As Mr. A is not aware of this, entire he shall be in default for not registering under the act along with the default of not filing the returns.
In the ends, this shows that how much GST law is technical and even a small mistake could end up in big issue.
#Point 3 – Concept of Agriculturist and the Definition of Agriculture
Before, we could directly hit point here; we should first discuss the background. As per clause 2 of schedule V of GST model law, an agriculturist is not liable to register under act. However, the following answers are still left unanswered.
As said, the GST law is needs more clarification on the issues.
Now, we shall proceed on to discuss another concept. The concept under this point is related to the definition of the agriculture upon which the concept of agriculturist depends. The definition of agriculture is an inclusive definition, i.e. it starts as “Agriculture includes….” Hence, the scope of this definition is very large and which may be subject to litigation under GST regime.
#Point 4 – Case of Fiat India under Valuation
Under this point, we shall discuss the impact of very famous case of Fiat India under Excise law on the GST. Though the judgment was nullified by the recent amendment, however, there was no similar provision under GST law to nullify the impact of this judgment.
The Valuation of taxable supply of goods and/or services shall be the transaction value, that is the price actually paid or payable for the said supply of goods and/or services where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.
As per Supreme Court of India in case of CCE v. Fiat India (P) Ltd.  283 ELT 161, products are sold at considerable losses for an unduly long period of time for the purpose of market penetration, the transaction value cannot be accepted for the purpose of levy of excise duty and price could not be said to be a sole consideration.
Hence, department may use this judgment under GST to harass the taxpayers unnecessary. More clarification needed from the government on this topic.
#Point 5 – Definition of ‘Aggregate Turnover’ not corrected properly
The definition of aggregate turnover is very important in regard to calculation for basic exemption limit or for the purpose of composition scheme or for any other purpose. The Definition of aggregate turnover was the widest definition possible. It includes everything e.g. value of taxable, non taxable, exempt goods etc.
Hence, as the apex accounting body in India, the Institute of Chartered Accountants of India (ICAI) has suggested that the definition of aggregate turnover be suitably amended so as to exclude the value of exempt and non taxable turnover from the aggregate turnover.
The government accepts the first recommendation and amended the definition to exclude the value of non taxable turnover. However, the important point is that even after the amendment by the government, the value of non taxable turnover is still include in the definition of aggregate turnover. Let us see how.
Read the following definition clearly.
“Aggregate turnover” means the aggregate value of all taxable supplies, non taxable supply, exempt supplies, exports of goods and/or services and inter-State supplies of a person having the same PAN, to be computed on all India basis and excludes taxes, if any, charged under the CGST Act, SGST Act and the IGST Act, as the case may be;
“Exempt supply” means supply of any goods and/or services which are not taxable under this Act and includes such supply of goods and/or services which attract nil rate of tax or which may be exempt from tax under section 11.
After reading the above two definitions, it is very clear that the definition of exempted supply still includes the value of such supply which are not taxable under the act and hence the definition of aggregate turnover still includes the value of non taxable supplies.
About the Author
CA Paras Mehra is a Chartered Accountant deals in taxation including GST. He is also a public speaker and editor of monthly magazine GST.HUBCO.
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