Key takeaways along with 5 Major Carve-outs coming from 11th Meeting of GST Council held on 4th March, 2017:
GST Council on its 11th Meeting held on 4th March, 2017, at Delhi approved the Draft Central Goods and Services Tax (CGST) Bill and the Draft Integrated GST (IGST) Bill. The remaining two Bills namely, State Goods and Services Tax (SGST) Bill and the Union territory Goods and Services Tax (UTGST) Bill, which would be almost a replica of the CGST Act, would be taken-up for approval after their legal vetting in the next meeting of GST Council scheduled on 16 March 2017.
Main Features of the 2 Bills (CGST & IGST) as finalized by the GST Council:
| 1. | A State-wise single registration for a taxpayer for filing returns, paying taxes, and to fulfill other compliance requirements. |
| 2. | Most of the compliance requirements would be fulfilled online, thus leaving very little room for physical interface between the taxpayer and the tax official. |
| 3. | A taxpayer has to file one single return state-wise to report all his supplies, whether made within or outside the State or exported out of the country and pay the applicable taxes on them. |
| 4. | Taxes which need to be paid by the assesse under GST regime can be Central Goods and Services Tax (CGST), State Goods and Services Tax (SGST), Union Territory Goods and Services Tax (UTGST) and Integrated Goods and Services Tax (IGST). |
| 5. | A business entity with an annual turnover of up to Rs. 20 lakhs would not be required to take registration in the GST regime, unless he voluntarily chooses to do so to be a part of the input tax credit (ITC) chain.
The annual turnover threshold in the Special Category States (as enumerated in Article 279A of the Constitution such as Arunachal Pradesh, Sikkim, Uttarakhand, Himachal Pradesh, Assam and the other States of the North-East) for not taking registration is Rs. 10 lakhs. |
| 6. | A business entity with turnover up to Rs. 50 lakhs can avail the benefit of a composition scheme under which it has to pay a much lower rate of tax and has to fulfill very minimal compliance requirements. The Composition Scheme is available for all traders, select manufacturing sectors and for restaurants in the services sector. |
| 7. | In order to prevent cascading of taxes, ITC would be admissible on all goods and services used in the course or furtherance of business, except on a few items listed in the Law. |
| 8. | In order to ensure that ITC can be used seamlessly for payment of taxes, it has been provided that the ITC entitlement arising out of taxes paid under the Central Law can be cross-utilised for payment of taxes under the laws of the States or Union Territories.
For example, a taxpayer can use the ITC accruing to him due to payment of IGST to discharge his tax liability of CGST / SGST / UTGST. Conversely, a taxpayer can use the ITC accruing to him on account of payment of CGST / SGST / UTGST, for payment of IGST. Such payments are to be made in a pre-defined order. |
| 9. | In the Services sector, the existing mechanism of Input Service Distributor (ISD) under the Service Tax law has been retained to allow the flow of ITC in respect of input services within a legal entity. |
| 10. | To prevent lock-in of capital of exporters, a provision has been made to refund, within 7 days of filing the application for refund by an exporter, 90% of the claimed amount on a provisional basis. |
| 11. | An agriculturist, to the extent of supply of produce out of cultivation of land, would not be liable to take registration in the GST regime. |
| 12. | To provide certainty in tax matters, a provision has been made for an Advance Ruling Authority. |
| 13. | Exhaustive provisions for Appellate mechanism have been made. |
| 14. | Detailed transitional provisions have been provided to ensure migration of existing taxpayers and seamless transfer of unutilised ITC in the GST regime. |
| 15. | An anti-profiteering provision has been incorporated to ensure that the reduction of tax incidence is passed on to the consumers. |
| 16. | In order to mitigate any financial hardship being suffered by a taxpayer, Commissioner has been empowered to allow payment of taxes in installments. |
5 Major Carve-outs as approved in CGST/IGST Law in compare to Draft CGST/IGST law released in public portal on 26th November 2016 are as follows:
| S. No. | Carve-outs | Explanation |
| 1. | Insertion of UTGST | § UTGST (Union Territory Goods and Services Tax) has been introduced in line with SGST ( State Goods and Services Tax).
§ ITC of IGST is allowed to be set-off against UTGST and vice versa. |
| 2. | Allowability of Composition Scheme for Restaurants in Service Sector | § In the November Edition of Draft GST Law, Composition Scheme was outrightly denied for Service Sector. No exception has been made in that edition.
§ However considering the difficulties which Small Restaurants may face, now the composition scheme is allowed to them as an exception to general rule. |
| 3. | Composition Scheme restricted to some selected Manufacturing Sector | § Earlier there was no exception of composition scheme to any Manufacturing Sector except that the Rate of Composition was 2.5% as compare to 1% for Trader.
§ However now it seems that only few selected Sectors in Manufacturing will be allowed the Composition Scheme. |
| 4. | Liability to be registered in case of an Agriculturist. | § Schedule V to Revised Draft CGST Law provides an exception from registration in case of an agriculturist, for the purpose of agriculture.
§ Definition of Agriculturist as contained in Revised Draft GST Law was “A person who cultivates land personally, for the purpose of agriculture”. § With this definition, a major hassle was created in the Agriculture Sector as the implication of this definition may have a larger impact on Agriculture Sector. § Now as per the law approved by council, an agriculturist, to the extent of supply of produce out of cultivation of land, would not be liable to take registration in the GST regime. § Thus requirement of Cultivation of Land personally has been removed. |
| 5. | Empowering of Commissioner to allow payment of taxes in Installments to mitigate any financial hardships | § Now the commissioner has been empowered to allow payment of taxes in Installments to mitigate any financial hardships being suffered by a tax payer. |
(Disclaimer: This write up is based on the understanding and interpretation of author and the same is not intended to be a professional advice.)
[The author is a Chartered Accountant and can also be reached at [email protected]]
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