Dr. Sanjiv Agarwal,FCA, FCS

The model GST law as released by the Government / Empowered Committee on GST is in public domain since mid June 2016. The proposed  provisions only conveys the Government’s intention to levy GST in India and the manner in which it will be administered, levied , collected and implemented.

However, the said proposed provisions require refinement, improvement and changes in order to be business friendly and lead to ease of doing business, boost economic growth, tax collection and balancing between inflation, revenue neutrality and participation of citizens by way of contribution to the exchequer in the form of goods and service tax.

It is desirable and expected that the draftsmen should consider the following suggestions and inputs while finalizing the model law in its present form .

Specific Suggestions

  • Multiple state wise registrations will be a major hurdle for service providers who operate in multiple states or all India basis.
  • Procedures proposed for registration and returns are complex, cumbersome and regressive. Provision of classification, valuation supply etc also go against the principle of ease of doing business.
  • Department should not have power to refuse registration ab initio which will adversely affect the business men. Grant of registration must be made obligatory as is at present.
  • Multiple registrations of same person in different states should be done away with. The concept of centralized registration should be provided for. Further, the assessee should be mandated to provide in his return, the details of all locations from which supply of goods / services is made by him.
  • Threshold limit for registration should be common for entire country. Presently it is proposed Rs. 4 lakh for North East and Rs. 9 lakh for others. Alternatively, there should be a sunset clause for this, (say 2 years).
  • Definition of aggregate turnover be suitably amended so as to exclude the value of exempt and non-taxable supplies from aggregate turnover to make it meaningful and objective. Otherwise the purpose of exemption / threshold will be defeated.
  • Definition of supply should be ‘comprehensive’ and not inclusive. It is defined as ‘supply includes’ rather than supply means….’. This will add to litigation. The supply of capital goods (whether to own depot or to the customer) be kept outside the purview of GST , and only the leasing / renting / transfer of right to use the asset be subject to tax.
  • Inter-state activities should exclude activities of same person. These activities are unnecessary under the GST law, unworkable and will be tantamount to creating inter-state fiscal frontiers, impeding free flow of goods and / services within the common market of India.
  • The definition of manufacturer should be delinked from Central Excise Act and an elaborate definition of the term ‘manufacture’ be provided to avoid litigation and interpretational issues.
  • Threshold exemption limit should be kept at least at Rs. 25 lakh for services and Rs. 2 crore for goods as anybody with lower limit can always voluntarily get registered. Also, small and medium entities may find it difficult to maintain electronic records and wish to avoid unnecessary inspections / litigations from the tax Department.
  • Composition Scheme is meant for small taxable persons like neighborhood stores who does not keep record of their turnover and does not issue invoices. No facility is given to them in case they are expected to keep their turnover record. Also, the rate of tax should be percentage of their taxable supplies (inputs), the record of which exist in electronic ledger. Linking of rates with total turnover will distort the total scheme.
  • Composition threshold should be not below Rs. one crore. Disallowing composition benefit to the persons who effect any inter­state supply of goods and / or services shall work against the interest of small assessees as there might be a possibility that in aggregate turnover of Rs. 50 lakhs only a small amount constitute inter-state supply of goods or services which will deny him of the benefit of composition scheme.
  • Valuation rules are too cumbersome so as to even prescribe valuation of services without consideration.
  • Transaction value of goods and services should factor the ‘discounts’. There should be no tax on free supplies.
  • In GST system, it is expected that the figures submitted for GST returns will be validated with figures submitted to Income tax. Given the fact that the sale and provision of services is one of the factors for charging of tax, the taxable figures in GST will be far different than figures in accounts or in income tax. A system needs to be built so that the figures in other data base could be used for validation of figures in GST.
  • The concept of granting input tax credits based on the matching concept of uploading data and filing of valid returns by the supplier of such taxable person will most certainly lead to innumerable amount of litigations on account of a few unscrupulous dealers.
  • Input tax credit (Cenvat) should not be denied to real estate sector and allowed to works contracts only. Guidelines for valuation of land should be made clear and transparent. Also, non-subsuming of stamp duty in GST should be reconsidered.
  • Reversal of input tax credit used for goods and / or services used for personal or private consumption should be allowed.
  • Concept of TCS to be done away with as it proves to be detrimental to small suppliers and leads to blockage of funds in TCS.
  • Rate of interest on delay in payment of refunds by the Government should be kept at par with the provisions relating to interest payable on delay in payment of taxes by the tax payer.
  • Requirement of double payment of taxes be eliminated. Further, the refund / adjustment procedure for such cases be made fast-tracked, simple and quick.
  • Government should not hurry implementation of GST from April, 2017. There is lot of ground work to be done. The most important is awareness, education, training and trial runs. 1st April 2017 is not that sacrosanct but introduction of a perfect law at the right time is more important. Country can wait for a strong and robust GST law for some more time.

 General suggestions

  • It should be ensured that all states have verbatim same provisions for rates, levy, administration and procedures. Only negative list or exemptions may vary based on regional issues.
  • A large number of compliances / returns / reconciliations are proposed. This will only burden all stakeholders; will make GST inefficient and a regressive tax. Cost of compliance will be major issue which may take away the benefits of GST.
  • Smooth, transparent and simple transition provisions are needed rather than revenue centric provisions. These ought to be practical too. Transitional provisions should bear this objective. Supplies effected under the current tax regime, but which are delivered or received after the date of implementation of GST, normally referred to as goods – in – transit. The transitional provisions should suitably provide for credit of taxes / duties paid under the current law.
  • Refund of any credit balance other than for exports is not allowed. This should be allowed subject to safeguards / limitations.
  • Special focus on awareness and training of all-officers, professionals and assessees is required including making available literature on GST available in different languages.
  • Current / past disputes on GST introduction should be proactively addressed by way of speedy redressal of cases and / or practical, proactive and objective Dispute Resolution Scheme so that baggage of disputes in not carried forward.
  • Non compliances attract very harsh and heavy penalties / punishment and need to be diluted in view of GST being a new levy and new law. Prosecution threshold should be kept at Rs. 2 crores as minimum. There should be a provision that except in fraudulent cases, no arrest / prosecution be made in first year of implementation.
  • No new taxes should be allowed to be levied by states in GST regime when compensation for revenue loss, if any is guaranteed.
  • GST is the future tax. GST law should, therefore be forward looking and open for futuristic businesses such as e-commerce, technology based, IT etc and recognize internet, digital economy, start ups etc.

GST law should be a very simple tax law as the proposed law / provisions are too complex to understand by a common man.

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6 responses to “Suggestions For Model GST Law”

  1. KAUSHIK R MAHETA says:

    How to check payment made by an individual against GST ?

  2. Sudhir says:

    The GST on CO-op HSG Society should be reduced from 18% to 5 %. As it is used for living and not as luxury.

  3. satish somani says:

    Sir, I am a senior citizen and have only one rental income. The law requires me to file gst deposits every month and filing of return every month. This will render me a babu and I will be worried all month long to get the job completed. Could it not be simpler for single rental income person. Please take up the matter with the gst council and allow senior citizens to file return twice a year and deposit gst quarterly like it used to be.
    thanks
    sincerely
    Satish somani

  4. Madhav Kelkar says:

    GST SOLUTION
    1) Direct payment of C GST
    2) Direct payment of State GST
    3) Direct payment of octroi / entry tax to districts
    4) No road permit or any form required.
    5) No more hassle of passing on excise duty credit from party to party
    6) No more “C” forms
    7) Free movements of goods all over india.
    8) No more waiting or octroi payments
    9) Easy e-payments & return of central GST & State GST
    10) “E” GST returns to be monitor by Govt. People very strictly

    It has been discussed in parliament that why there should be different taxation for same products in different states where by smuggling of products within states was going on for years together. This creates revenue loss where tax in more.

    GST was introduce or discussed in parliament 8-10 years back by then Prime Minister Manmohan singh and was criticized by opposition party BJP they were trying to pinpoint loopholes or bad points but not solutions. Now BJP is in power and the same bill is being discussed without any solution. Problem still persists and the burocrate are making this GST more complicated. All the states of india were crying for their revenue loss which they were getting by way of CST. Even today there is no solution to this problem which is creating unrest in state governments.

    Few years’ back postal authority has introduce pin code system as per their wish and convenience which I believe to be changed and should be made as per state and not as per zone.

    Postal pin code change to state code
    Zone 1 01 Delhi
    2 02 Maharashtra
    3 03 Gujarat
    4 04 so any

    Present pin code is of six digit needs to be rearranged as shown below
         
    For state For Districts

    You can accommodate as many as 99 states and 99 districts 999 words

    01– Delhi, 02–Maharashtra, ————, 30—Assam, 31—Orissa.

    Now who so ever it may be manufacturer or trader he should invoice party with proper new pincode.

    Example – S. K. Enteprises.
    L.T. Road,
    Shop No. ?????
    Indore – 30 00 100

    First two digits stands for that state, middle two digits stands for district. And last three digit for words or local area.

    Govt. had already categorized goods for GST such as agri food no tax

    1} XYZ item 5 %
    2} ABC item 10%
    3} EFG item 15%

    For Example

    While invoicing party should charges GST as per Govt. notification once the invoice is made.

    80 % will be credited to Central Govt.
    15 % will be credited to State Govt.
    5 % will be credited to Dist. authority.

    This will give direct fund to local authority to make developments in that state or district.

    Consigner________
    Cosignee_________with pin code 14 00 091

    Product Rate Qty Value GST% GST Invoice Total
    A 50 100 5000 5% 250
    B 105 25 2625 12% 315
    C 240 10 2400 20% 480
    _____ _____ _____
    GST payable 10025.00 1045.00 11070.00

    80 % Central Govt. 836.00
    15 % State Govt. 156.75
    5 % Dist.(octroi) 52.25
    ———————————
    Invoice total 11070.00

    Any party who is making invoice should file their return within 1st week of next month that is Jan Sale should be file before 7th of Feb we must prepare programs (computer) where this segregation will be done automatically. When saler makes on line payment immediately that state & district will get their credit in their account.

    Sales whether he is a manufacturer or Trader will take full credit of central GST tax from where he has purchased his input. While preparing invoice he will tax his customer on his selling price which is naturally more than his purchase price (as in happening in VAT)

    If we adopt this system all states will get revenue and most important is all the districts will get revenue in place of octroi or entry tax. This will eliminate corruption at octroi / entry tax points. This will also make transporters happy because they will save time at octori point and also save fuel, this will give free flow of goods.

    Central Govt. & postal department in association with state govt. can decide

    pin code – first two digit for state
    pin code – second two digits for district or Taluka
    pin code – last three digits for words

    all cash transactions at octroi / entry tax point will be eliminated. At present sale tax or excise returns are filed with sale figure and tax there on with this procedure seller can make one invoice with different commodities with different GST.

    POSTAL PINCODE SHOULD BE OF SEVEN DIGIT.

    Stage I – First two digits of pin code
    Code no for state of india. Can accommodate as many as 99 states

    01 – Delhi
    02 – Punjab
    03 – Harayana
    04 – Rajasthan
    05 – Himachal Pradesh

    Every state mush have Nationalized bank account for collection of GST linked with above first two digits of pin code like income tax / sales tax / C. excise this GST will be credited to this account when payments are made online.

    Stage II -Middle two digits of pin code

    Code no for Dist. or Taluka for every state eligible for octroi / entry tax can accommodate as many as 99 districts.

    Maharashtra – 14

    01 – Mumbai
    02 – Thane
    03 – Pune
    04 – Chichwad
    05 – Kolhapur

    Example – address of Mumbai will have pincode – 14 01 091

    Stage III Last 3 digit of pin code no are for local area of the district or ward. This can accommodate as many as 999

    Say Mumbai will have pin code 14 01 091

    14 is state Maharashtra
    01 is for Mumbai
    091 is for local ward

    State GST and District octroi/entry tax credit is not allowed only central GST credit can be taken Payment may be made within 1st week of next month for earlier month sale. Second return for state GST & District (octroi/entry tax) GST also should be made with in 1st week of next month.

    Summery of GST Credit amount ————————-

    Summery of GST Payable amount————————

    Balance payable / balance credit

    Old excise credit may be taken as opening balance in Central GST.

    Old VAT credit may be taken as opening balance in State GST. (Only for that state and not for other state)

    Say party who is selling material is in Maharashtra & has got vat credit balance can take credit for Maharashtra state sale GST and not for other state once this credit is used further credit is not allowed but has to charges customer on every invoice made.

    SALE SUMMERY
    Inv. No Date Party Name (Pincode) Party GST No. Basic Inv. Value Total GST Payable Total Inv. Value Central GST 80% State Code State GST Dist. Code Dist. GST

    CENTRAL GST CREDIT SUMMERY
    Sr. No Party Name (Pincode) Party GST Basic Inv. Value “C” GST State GST Dist. GST Total Invoice Value

    Central GST – E-Payment

    Party Name (consignor) & Address – ??????????????????
    GST No – ??????????????????
    Bank Details – ??????????????????
    Payment period – ??????????????????
    Amount – ??????????????????
    Challan No. – ??????????????????

    Supporting Documents Summery.

    Opening balance or old Excise credit – ??????????????????
    New purchase bill credit – ??????????????????
    New E-Payment made – ??????????????????
    Last months sale –C GST payable – ??????????????????
    Balance of credit – ??????????????????
    Carried forward for the next month.

    STATE GST E-PAYMENT

    Party Name (consignor) & Address – ??????????????????
    GST No – ??????????????????
    Bank Details – ??????????????????
    Payment period – ??????????????????
    Amount – ??????????????????
    Challan No. – ??????????????????

    Inv. No
    Date Consignee Party Name Pincode Basic Inv. Value Total GST Payable State Pin code 15% Amount Dist Pin code 5% Amount Challan No.
    1 01.07.17 ?????????????-14 01 091 20000 3600 14 540 01 180 16614565
    2 02.07.17 ?????????????-20 05 060 28000 4200 20 630 05 210 16626636
    3 03.07.17 ?????????????-01 04 010 100000 18000 01 2700 04 900 14636633

    Thanks & Regards,
    Madhav Gajanan Kelkar
    09867206689

  5. Vineet Agarwal says:

    D/Sir. I am small trader and we feel very difficulties during trading due to some ppl who somehow purchase goods without bill and so further resale it without bill. Now my suggestion is that rules should be made that during transport if any goods found without bill or under bill then not only goods purchaser would be fined but goods seller too also should be fined equally and if it’s difficult to trace goods seller than both fine should be charged from purchaser….. In this way traders and factory owner both think twice to sell or purchase goods twice …… And my second suggestion is that nowadays many big traders and factory owner are issuing computerized bill now only that bill should be treated as valid which have online OTP no. on it issued by taxation computerized application. ..

  6. Abhishek says:

    Nice One

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