Overview of the GST Bills, 2017 tabled in the Lok Sabha on 27 March 2017
The Goods and Services Tax (GST) which is one of the most monumental reforms that India has seen, has experienced substantial ups and downs regarding its final status of implementation. As a measure for finalising the GST law, the Union Finance Minister, Arun Jaitley has tabled the following money bills before the lower house of parliament i.e. Lok Sabha on 27 March 2017:
The lower house of parliament held a 7-hour debate in relation to the GST bills tabled before it on 29 March 2017. As a conclusion to the debate, all the above-mentioned bills were cleared and passed by the lower house.
- Central Goods and Services Tax Bill, 2017 (CGST Bill, 2017)
- Union Territory Goods and Services Tax Bill, 2017 (UTGST Bill, 2017)
- Integrated Goods and Services Tax Bill, 2017 (IGST Bill, 2017)
- Goods and Services Tax (Compensation to States) Bill, 2017
Comparing the bills that have been proposed with the Model GST law (MGL) introduced in the public domain on 25 November 2016, it appears that the MGL has undergone further changes. The key changes in the Law are:
CGST Bill, 2017
- The CGST Bill, 2017 will be applicable to India except Jammu and Kashmir.
- The definition of deemed exports is narrowed down by introducing a condition stating that it will be applicable to goods that are manufactured in India.
- Drawback in GST is defined to mean the rebate of duty, tax or cess chargeable on any imported inputs or any domestic inputs or input services used in manufacturing exported goods.
- The meaning of the term works contract is curtailed down to include only a contract of immovable property.
- The definition of a voucher has been provided which needs to be read in line with Time of Supply Rules.
- Union territory is defined to mean:
- Andaman and Nicobar Islands
- Dadra and Nagar Haveli
- Daman and Diu
- Other Territory
- Supply and Leviability
- The value of gifts exceeding INR 50,000 supplied by an employer to an employee will be treated as supply of goods or services or both, even if no consideration is charged.
- Sale of land, sale of building, actionable claims (other than lottery and betting games) will be out of the purview of GST.
- Reverse charge in case of procurements from unregistered dealers will be taxable.
- The CGST cap rate has been increased from 14% to 20%.
- The CGST Bill, 2017 provides for levying a tax on commodities such as crude petroleum, high-speed diesel oil, and natural gas and aviation turbine fuel from a date to be notified in future.
- Composition Levy
The composition rates will be prescribed; however, it will not exceed:
- For manufacturer - 1%
- For restaurants - 2.5%
- For other suppliers - 0.5%
- Time of Supply (TOS)
In cases where there is a delay in the payment of consideration by the customer to the supplier and where any interest, late fee or penalty is charged by the supplier, then the TOS of such additional value (interest, penalty and late fee) shall be the date of receipt.
- Input Tax Credit (ITC)
- The time limit for reversal of ITC in a case of non-payment by the customer to the supplier has been relaxed from three months to 180 days.
- The restriction of availability of 50% ITC in the case of banks/financial institutions will not apply to the tax paid on inter-branch supplies made by one registered person to another registered person having the same Permanent Account Number (PAN).
- The CGST Bill, 2017 provides for the availability of ITC in a case of restricted input services such as outdoor catering, beauty treatment, healthcare, rent-a-cab, life insurance, health insurance, etc. if used for the same category of outward supply.
- ITC may not be available in respect of telecommunication towers and pipelines since these items have been specifically removed from the explanation of ‘plant and machinery’.
- Registration and Returns
- An agriculturist, to the extent of supplying produce by cultivating land, shall not be liable to get registered.
- Every person who supplies from the territorial waters of India will be required to obtain a registration in a coastal state or union territory where the nearest point of the baseline is located.
- No furnishing details of outward supplies during the period from the 11th day to the 15th day of the month, succeeding the tax period to which the return relates, will be allowed.
- Records and Tax Invoice
- The period for retention of accounts has been increased from 60 months to 72 months from the due date of furnishing the annual return for the year pertaining to such accounts.
- A payment voucher is required to be issued in the case of persons liable to make the payment under reverse charge.
- A provision to issue refund vouchers has been inserted in case of receipt of advance payment and issuance of receipt voucher, but no subsequent supply of goods or services or both.
- Tax Deduction at Source (TDS)
- The limit for applicability of TDS is reduced from INR 500,000 to INR 250,000 for supplies under a contract.
- Furthermore, no tax deduction is required to be made if the transaction is in the nature of inter-state supply.
- Anti-Profiteering measures
The intensity of the anti-profiteering measures has been brought down. The direct penalty clause has been removed if the price being charged is not reduced. The anti-profiteering measure will apply only to the following scenarios:
- If ITC availed by any registered person has resulted in any commensurate reduction in the price of goods.
- The reduction in tax rate has resulted in any commensurate reduction in the price of goods.
IGST Bill, 2017
No refund of ITC will be allowed if the supplier of goods or services or both, avails drawback in respect of CGST or claims refund of IGST paid on such supplies.
- Transitional Provisions
In the CGST Bill, most of the provisions in the erstwhile MGL have been rearranged and incorporated into four sections.
- The amount of Central Value Added Tax (CENVAT) Credit carried forward to the first GST return shall not be allowed where no returns have been filed by a person for a period of six months prior to the date of implementation of GST.
- The condition of passing the benefit of credit in case of goods lying in stock in the form of reduced prices to the recipient has been done away with. This condition has been made applicable only to persons other than a manufacturer or a supplier of services who avails credit without possession of any documents that provide evidence of payment of duty in respect of such inputs.
Goods and Services Tax (Compensation to States) Bill, 2017
- The IGST Bill, 2017 will be applicable to India except Jammu and Kashmir.
- The scope of the term intermediary is widened to include the broker, agent of goods or services or securities. Accordingly, the stock market brokers will now be considered as intermediaries.
- Clarity has been provided for determination of situs of sale in case of supplies made in territorial waters (transactions of high seas sales, sales in territorial waters)
- Where the location of the supplier and the Point of Sale (POS) is between a state and a union territory or between two different union territories, it will be treated as interstate supply.
- The IGST cap rate is increased from 28% to 40%.
- The IGST Bill, 2017 provides for levy of tax on commodities such as crude petroleum, high-speed diesel oil, and natural gas and aviation turbine fuel from a date to be notified in future.
- The concept of zero-rated supplies is revised under the new IGST Bill, 2017. As per the IGST Bill, 2017, a registered person making a zero-rated supply will now be eligible to claim a refund under either of the two options provided under the IGST Bill.
- Upfront exemption of IGST on supplies under a bond or Letter of Undertaking and claiming refund of unutilised ITC; or
- Payment of IGST on supplies and claim a refund of the tax paid later.
- Furthermore, the concept of refund to Special Economic Zone (SEZ) on payment of IGST has been removed.
- The Goods and Services Tax (Compensation to States) Bill, 2017 has proposed a new Cess on specific goods like pan masala, tobacco, coal, briquettes, lignite, aerated water, motors car, etc. as notified by the government.
- Cess on the above-mentioned goods/services has been proposed to be levied on both intra-state and interstate supplies of goods and services.
It is apparent that the path for the GST regime is in the final stages of completion to facilitate timely and smooth implementation. On the clearance of the GST Bills by the Parliament, the State GST Bills will be presented in the respective State Assemblies, which will be required to clear the respective State GST Laws.
As a way forward, the few updates that the Industry should look out for are:
Also, India Inc. should strive to ensure that they keep up with the pace set by the government and ensure they are GST compliant from day one of the target date of 1 July 2017.
- The release of the classification of the goods and services slab rates.
- The recommendations of the GST Working Group and its adaptation thereof.
- Tracking the approval and release of the State GST Laws.
- The government’s proposed assistance for implementation of GST and the structure of the Goods and Services Tax Network (GSTN) model as explained in its public outreach awareness sessions.
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