CA Ravi Kumar Somani
Constitutional amendment bill for levying Goods and services tax has already been passed in loksabha. Had it not been for the rigid stand of the opposition the same would have been passed in the monsoon session of the parliament held in august 2015. Past apart, with the current business mood along with support from the states and sheer determination of the central government to bring the revolutionary tax reform at the earliest date possible, it seems that the current parliament logjam is not there to be subsisting for too long. Once the constitution bill is passed, lot of clean-up action including the future optimization plans has to be worked around to re-engineer the entire business model in accordance with the new tax regime.
If tremendous efforts are required to completely plan, implement and execute the new business models under the strictures of the GST law, then the major tranche of those efforts will have to be devoted in ensuring smooth “transition” into the new regime. Current article is written to bring about an awareness in respect of various transitional aspects that needs to be taken care of by the business entities to ensure smooth transition into the new world of taxation. In this regard, major transitional issues in the GST regime are listed below:
This article focuses on the transitional issues that shall be faced in respect of ‘Obtaining registration under GST’ and the immediate action that needs to be taken by the business entities to ensure smooth registration process.
Transitional issues in registration under GST
Transitional provisions are required to provide the process for conveniently obtaining a new registration certificate from the GST authorities of both centre and state and to surrender an existing registration certificates pertaining to various taxes subsumed. For smooth transition to registration requirements, following is expected:
Immediate action to be taken:
Group Registration concept – Best practices internationally
There is concept of Group registration that is prevalent in few of the world’s major economies, Such concept of group registration if brought in India can have following benefits:
Summary of the group registration concept as is prevalent in few developed countries is tabulated below for ease of reference:
|United Kingdom||Australia||New Zealand||Canada|
|Corporate bodies that are under “common
control” and are established or have a fixed establishment in the United Kingdom may apply to register as a VAT group.
A VAT group is treated as a single taxable person. The group members share a single VAT number and submit a single VAT return.
No VAT is charged on supplies made between group members.
Group members are jointly and severally liable for all VAT liabilities.
|Subject to certain requirements, two or more entities that are closely related may form a GST group.
The effect of GST grouping is to treat the group members as a single entity for certain purposes. In general, all GST liabilities and input tax credit entitlements for group members are attributed to a representative member of the group, and the group submits a single GST return (incorporated as part of the Business Activity Statement;
The representative member of the group must be an Australian resident. However, nonresidents may be included in a GST group as members.
Transactions between group members
are not considered taxable for GST purposes and consequently are effectively ignored.
When the legal entities are considered as “Closely related” is defined under the act.
|A group must appoint a representative member. Group members
making supplies outside the group must issue tax invoices.
The representative group member must
account for GST with respect to all group members’ taxable
activities and file returns. Group members must adopt the same tax periods and accounting basis for GST purposes.
Group members are also jointly and severally liable for all
Transactions between group members are not generally liable to
GST. This measure applies on the condition that the supply is made to a group member that would have been entitled to input tax recovery if the supplier had not been a member of the group.
Group registration is allowed for corporations
or other taxable persons that are “under common control.”
|Although, GST/HST group registration is not permitted in Canada.
Legal entities that are “closely connected” must register for GST/
However, “closely related” corporations and partnerships may
elect to deem supplies made between members of the group as being made for no consideration if the members are engaged exclusively in making taxable and zero-rated supplies.
This provision effectively makes sales between group members subject to
the zero rate.
When the legal entities are considered as “Closely Connected” is defined under the act.
This article has been focused only on the transitional issues involved in the registration aspect of the GST. Detailed discussion/analysis on the transitional issues in case of other areas as listed above shall be followed in the subsequent articles to be posted in this series.
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