Background
The model
law of the much anticipated GST will probably be out by the end of January next
year for general public for feedback however a model GST Act is getting
circulated of which source of release
could not be independently verified in the absence of it being unavailable on
the government portal.
We are tried to brief the features of the Model GST as per this model.
There would be
separate Acts for CGST, SGST and IGST. The model Act would guide for drafting
GST Act for each of the state.
Levy of Tax
Charging
section 7 of the Act provides that there
shall be levied a tax called the Central/State Goods and Services Tax
(CGST/SGST) on all intra-State supplies of goods and/or services at the rate
specified in the Schedule . . . to this Act and collected in such manner as may
be prescribed.
The CGST/SGST shall be paid by every
taxable person in accordance with the provisions of this Act. The essential features of the Act
are as follows:
1. There should be a taxable
person:
Taxable
person has been defined in the section 9 of the Act.
It covers
àany person carrying on business in India
àInclude Central Government, State Governments
and local authorities in relation to transactions in which they are engaged as
public authorities
àEmployees, in relation services
provided to employer, kept out of definition of taxable person
2. The taxable person should be
engaged in the business
The definition
of taxable person provides that the person should be engaged in carrying out
any business.
The business
has been defined in section 2 (13) in very wide term.
It includes
the following:
(a) any
trade, commerce, manufacture, profession, vocation or any other similar activity,
whether or not it is for a pecuniary benefit;
(b) any
transaction in connection with or incidental or ancillary to (a) above;
(c) any
transaction in the nature of (a) above, whether or not there is volume, frequency, continuity or regularity of such
transaction;
(d) supply
or acquisition of goods including capital assets and services in connection with commencement or closure of business;
(e)provision
by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or
benefits to its members as the case may be;
(f)
admission, for a consideration, of persons to any premises; and
(g) services
supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his
trade, profession or vocation;
but does not
include agriculture;
3. The business should be in
relation to goods or services:
To levy GST,
the business should be in relation to goods or services. The term goods and
services have been defined as follows:
Section 2
(31): “goods’’ means every kind of movable property other than actionable claim
and money but includes securities, growing crops, grass and things attached to
or forming part of the land which are agreed to be severed before supply or
under the contract of supply;
Section 2
(59): “services’’ mean anything
other than goods
Note: The
service has been defined very large. It could include immovable property also.
4. There should be supply
GST is
levied on supply of goods or
service. Supply has been defined in section 3 of the Act as follows:
Supply
defined in very wide term to cover all forms of supply such as:
è Sale, Transfer, Barter, Exchange,
Licence, Rental, Lease, disposal and importation of assets for consideration in
the course of business
è Schedule I: Supply without
consideration as deemed supply
è Schedule II: Determination of
what is supply of goods and supply of services
5. The
supply should be of goods/services
6. Such
supply should be in the course of business
7. The tax
shall be levied at the time of supply
of goods/services.
àTax shall be levied at the time of
supply of goods/services. The time of supply of goods and services have been
provided separately.
àTime of supply of goods shall be
earliest of the following dates: (section 11)
i. Date of
removal of goods by supplier to the buyer for supply
ii. Where
goods are not required to be removed, the date on which goods are made
available to the buyer
iii. Date
when supplier issues invoice for supply
iv. Date on
which supplier receive payment for supply
v. Date on
which buyer shows receipt of goods in books of account
Distinction has been made between
REMOVAL and SUPPLY. Where goods
have been removed but supply has not taken place, the time of supply shall be when
it become known that supply has taken place or 12 months from removal date,
whichever is earlier
àTime of supply of service shall be
earliest of following: (section 12)
i. The date
of issue of invoice or date of receipt of payment, whichever is earlier.
(provided invoice issued within prescribed time)
ii. Date of
completion of service or receipt of payment, whichever is earlier. (if invoice
not issued within prescribed time)
iii. Date on
which recipient shows receipt of service in books of account. (If not covered
by case i and ii above)
àIn case of services covered by reverse
charge, the time of supply shall be earliest of
i. Date of
receipt of service
ii. Date of
which payment is made
iii. Date of
receipt of invoice
iv. Date of
debit in books of account
è Provisions have been made for
determining time of supply of service in case of continuous supply of service
on milestone basis
8. Nature of
tax (CGST/SGST/IGST) shall depend upon nature of supply
à Supply of goods shall be :
i.
Interstate supply: if supply involves movement of goods from one state to another
ii. Intra
state supply: If goods remain within the state
à Supply of service shall be
i.
Interstate supply: If service provider and service receiver are located in different
states
ii. Intra
state supply: If located in the same state
àAbove principles of supply of goods and
supply of service are by default principle.
In case of
specified goods and services, nature of supply may change depending
upon the
place of supply.
9. Nature of supply would depend
upon place of supply.
Separate
provisions have been made for determining place of supply of goods (section 15)
and place of supply of service (section 16) in case of specified goods and
services.
10. The supply should be for a
consideration
àTax can be levied only when there is
consideration. In the absence of consideration, no tax shall be levied
Consideration has been defined in
section 2 (20) in relation to supply of goods/services as:
i. Any
payment in money or otherwise in respect of supply of goods or services, whether
by person or by any other person
ii. Monetary
value of any act or forbearance in respect of supply of goods or services
iii.
Refundable deposit shall not be considered as consideration unless this is adjusted
against value of goods/services supplied
11. The tax shall be levied on
value of taxable supply:
àValue of taxable supply shall be
transaction value. Transaction value shall include the following:
i. Price
paid or payable for supply of goods or services
ii. Value of
free supply or supply at reduced cost by recipient of supply to supplier
iii.
Royalties and licence fees relatable to supply of goods and service
iv. Any
duty, tax, cess, fees levied other than CGST/SGST/IGST
v.
Incidental expenses at the time or before delivery of goods/services
vi. Subsidy
linked to supply
vii. Any
discount allowed after supply has been effected. Discount allowed before or at
the time of supply shall not be included in the transaction value.
àWhere value cannot be determined as per
above, it shall be calculated in accordance with the rules framed in this
behalf.
12. The rate of tax shall be as
specified in the schedule:
The rate of
tax has not been provided in the Act. It would be provided separately in the schedule.
There may be different rate of taxes for different class of goods and services.
13. The tax may be paid after
availing input tax credit.
à Tax may be paid after adjusting the eligible
credit.
àWhere goods and services are used
partly for business and partly for other purpose, credit shall restricted as
attributable to business
àWhere goods (excl. capital goods) and
services are partly used for taxable supply and partly for non taxable supply,
credit restricted to taxable supply.
à Order of utilisation shall be as follows:
i. IGST to
be used for IGST, CGST and SGST in that order
ii. CGST to
be used for CGST and IGST in that order
iii. SGST to
be used for SGST and ISGT in that order
iv. CGST to
SGST and SGST to CGST adjustment not possible
à Excess credit may be carried forward to next tax
period
à Credit can be claimed as refund where accumulated
due to export or where tax on input is higher than tax on output
à Certain expenditure mainly in the nature of
personal expenses have been excluded from the eligibility of credit
14. Option has been provided for
payment of tax under compounded scheme
àSection 8 of the model Act talks about
compounding scheme. The option would be available to registered taxable person
whose turnover in a financial year does not exceed Rs. 50 lacs.
àThe term “turnover” has been defined in
very wide term which includes:
i. Taxable
supply
ii. Non
taxable supply
iii. Exempt
supply
iv. Export
àPayment under compounding scheme shall
be considered as “amount” not “tax”.
àThe rate under compounding scheme shall
not be less than 1 % as may be
notified.
The amount needs to be paid on turnover (not on taxable turnover). This means
it would be applicable on exempted, non-taxable and export supply also.
àCompounded scheme option not eligible
to person making inter-state supply and the person liable to pay tax under
reverse charge mechanism.
à In case of services to be specified by CG/SG, in
respect of specified category of taxable
service, option of compounding scheme would be available. Here, the rate
may be less than 1% also as nothing has been specifically mentioned.
15. The government may provide
exemption from tax:
àExemption may be granted by government
based on recommendation of council.
The
exemption may be absolute or conditional.
àWhere exemption has been granted
absolutely, it would be mandatory to claim the exemption.
16. Registration needs to be
taken by person liable to pay tax (section 26)
àThere would be separate categories of
registrations for different taxable persons viz., normal taxpayer, taxpayer
under compounding scheme, casual dealers, nonresident supplier, input service
distributor and unique ID for UN bodies/ governmental authorities and PSUs.
à Registration would be PAN based.
àAn entity having a single PAN but
effecting supplies from multiple States would be required to take registration
in each of the States from where the supply is being made.
àSeparate registrations may be taken for
different business verticals within the same State. This would be optional and
not mandatory.
à The facility of taking registration through Tax
Return Preparer (TRP) and
Facilitation
Centre (FC) has been introduced.
17. Taxable person needs to file
the return
àEvery taxable person required to file
return submitting details of outward supply on or before 10th of the succeeding
month (section 34)
àDetails of inward supplies need to be submitted
before 15th of the succeeding month (section 35)
à Final return shall be submitted on or before 20th
of the succeeding month giving details of inward and outward supplies of goods
and/or services, input tax credit availed, tax payable, tax paid and other
particulars.
àPerson deducting TDS has to file the
return within 10th of the succeeding month.
àThere is no mention about ISD in the
Act.
à Every registered dealer, other than casual and
non-resident dealer, is required to file annual return on or before 30th
December after end of FY.
18. Tax needs to be paid on or
before filing of return
Ø It has been provided in the model
law that the tax should be paid before filing of return.
Ø If tax is not paid, the return
filed shall be deemed to be invalid.
19. Tax
deduction at source (TDS)
Ø CG or SG may mandate deduction of
tax @ 1% on payment made or credited by:
i.
Department of CG or SG
ii. Local
authorities
iii.
Governmental agencies
iv. Other
notified categories
Ø It should be deducted on
specified goods or service to be notified
Ø Applicable when total value of
such supply under a contract exceeds Rs. 10 lacs
Ø TDS should be deducted within
10th of next month. Delay in payment would attract late fee of Rs. 100 per day
20. Assessment
Every
registered person shall self assess the tax payable by him under the Act
Returns
furnished by taxpayer would be subject to scrutiny by department
Department
may carry out best judgment assessment in case of non-filers of return and
unregistered person.
21. Audit
Every
registered taxable person whose turnover during a financial year exceeds the
prescribed limit shall get his accounts audited by a chartered accountant or cost
accountant.
The
department officer may carry out the audit of any assessee by a special or general
order
The audit
should be completed with 3 months from the date of commencement of audit
There is
provision of special audit by CA or CMA also in case of exceptional circumstances.
22. There
are provision for recovery of tax, interest, imposition of penalties, detention
and confiscation of goods, arrest and prosecution.
23.
Provisions for appeals and reviews have also been provided.
24. Facility
of Advance Ruling would be available. However, presently, no provision has been
made for settlement commission.
25.
Transitional Provisions
Transitional
provisions have not been discussed in detail. It has only provided
that the
taxable person may carry forward the unutilised balance of cenvat credit of
excise and service tax taken under Cenvat Credit Rules, 2004 and VAT credit lying
with him on the date of switching over to GST.
The credit may be
carried forward in such manner as may be prescribed.
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