Draft GST Rules – A Brief Understanding

As a step towards implementation of GST in India, the Central Board of Excise and Customs (“CBEC”) has released the Draft Goods and Services Tax Rules (“GST Rules”) on the public domain recently. Along with GST Rules, CBEC has also released draft formats of the various Forms mentioned in the said Rules.

The Draft GST Rules provides an insight as to how the Rules would be framed under the GST Regime. The GST Rules released by CBEC covers only the topics relating to Registration, Payments, Refunds, Invoicing System and Returns under the Model GST Act.

It is expected that the GST Council would convene a meeting on September 30, 2016 to finalise the provisions relating to Rules and hence CBEC has also invited suggestions and recommendations from the Trade and Industry in relation to the same. An attempt has been made in this article to give brief understanding of the provisions of the Draft GST Rules released by CBEC.

Draft Rules Related to Registration

• Application for registration to be made electronically on the Common Portal or the GST Network (“GSTN”) within the due dates as per the Model GST Act (“GST Law”)
• Validation of PAN, E-Mail ID and Contact Number is mandatory before submission of application.
• Documents prescribed for registration has to be uploaded before submission of application.
• Registration will be granted within 3 common working days if no discrepancy found. If any discrepancy is found, the same will be communicated through the GSTN within the above time limit.
• Any discrepancy communicated by Central GST officer would also be forwarded to the concerned State GST Officer for his action and vice versa. Reply to discrepancies has to be furnished within 7 common working days.
• The Registration is deemed to have been granted if the officer fails to take action within the prescribed time limits.
• Registration Certificate will be available on the GSTN for the principle place of business and for every additional place of business.
• Separate registration for each business vertical is allowed subject to conditions.
• Display of Registration Certification and GSTIN is mandatory.
• No fee is prescribed for obtaining registration. However, the advance deposit of tax is applicable to prescribed persons before obtaining registration.
• Amendments has to be communicated filing prescribed form on GSTN within fifteen days of occurrence. Certain amendments are approved immediately upon submission of application.
• There are separate provisions and forms for Suo Moto Registration, Cancellation of Registration and its Revocation.
• Verification of premises may be taken up by the proper officer after granting registration.

Transition Provision

• All existing dealers will be automatically granted registration under the GST law on a provisional basis.
• The provisional registration will be given final status upon submission of prescribed information and documents within six months. No time limit prescribed for the officer to grant final registration.
• Any person holding provisional registration may file a declaration on GSTN that he is not required to obtain registration under the GST Law and the provisional registration would be cancelled.

Draft Rules Related to Payment

• The tax payable by every person under GST Law including interest, penalty or any other sum is reflected in “Electronic Tax Liability Register”.
• The basis for amounts payable as per Electronic Tax Liability Register can be on account of self-assessed tax in periodical returns or input tax credit mismatches or tax demands by authorities etc.
• Payment of amounts reflected in Electronic Tax Liability Register can be made through the balances in “Electronic Credit Ledger” or “Electronic Cash Ledger”.
• Balance in Electronic Credit Ledger represents the claim of input tax credits made through periodical returns.
• Balance in Electronic Cash Ledger represents the amounts deposited by the taxable person.
• The balances of both ledgers can be used for payment of tax and other liabilities reflected in Electronic Tax Liability Register subject to the restrictions as per the GST Law.
• The payments are made through debit and corresponding credit entries in Ledgers and Liability Register respectively. A unique transaction number will be assigned by GSTN for each payment.
• Different Modes are prescribed for deposit of amount in Cash Ledger including over the counter payments in banks by generating payment challan on GSTN.
• Credit or Cash ledger stands has to be debited to the extent of refund claimed as per the provisions of GSTN. The amount would be added back to the respective ledger to the extent of refund rejected.
• All of the above transactions are required to be made through GSTN.

Draft Rules Related to Refunds

• A common refund application is prescribed for all refunds arising on various instances including refund of unutilised input tax credits except for certain persons notified. The refund application has to be filed through GSTN.
• The refund of balance in Electronic Cash Ledger can be claimed through periodical returns.
• Refund application has to be accompanied by prescribed documents along with CA Certificate to certify that incidence of the tax has not been passed to any person, wherever applicable.
• The acknowledgment for filing refund application will be available in GSTN only after verification of information and documents filed. Any deficiency will be communicated in prescribed form through GSTN.
• Any deficiency noted by Central GST officer will be communicated to State GST officer and vice versa.
• Acknowledgment for refund of balance in Electronic Cash Ledger will be given immediately.
• The refund of tax on supplies made to Developer of SEZ or Unit in a SEZ shall be made by the respective developer of the SEZ or the SEZ unit itself.
• Provisional Refund of 80% to prescribed taxable persons as per the GST law is subject to conditions including GST Compliance Rating of more than 5 on a scale of 10.
• Refunds including provisional refunds will be directly credited to the bank accounts of the tax payer as declared while obtaining registration including interest on delayed refunds.

Draft Rules Related to Returns

• Separate forms are prescribed for outward supplies, inward supplies and the discrepancies noted between the two.
• Separate forms are prescribed for periodical returns by Regular Taxable Persons, Persons who have opted for Composition, Non-Resident Taxable Persons, Persons who are required to deduct or collect tax at source etc.
• Separate forms are prescribed for communicating the input tax mismatches, final acceptance, mismatches adding to the output liability etc.
• Annual Returns is mandatory for all registered persons. Apart from Annual Returns, CA Certified audit report has to be filed for persons whose turnover crosses the threshold limit.
• The information contained in this article is only for informative purposes. You may consult your professional advisor before taking any decisions.

Author is Practicing Chartered Accountant in Indirect Taxation and can be reached at preetham@slpassociates.in

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