The Government affirms determination to introduce Goods and
Services Tax (GST) in the coming year to replace existing multiple
taxes. A milestone is accomplished as the Empowered Committee of
State Finance Ministers have in principle approved model GST law.
The current political consensus appears to be favourable in Rajya
Sabha leading to passage of Constitution Amendment Bill
facilitating introduction of GST.
Certain business processes like registration, tax payment,
refund and filing of return were already released earlier. The
Ministry of Finance has now released the Model GST Law, the salient
features of which are set out below:
GST shall comprise of Central GST
(CGST), State GST (SGST) and Integrated GST (IGST) levied on the
same taxable value. Taxable event under GST is 'supply of goods
and services' instead of the existing multiple taxable events
like manufacture, rendering of service and sales of goods.
'Supply' includes all forms of supply such as sale,
transfer, barter, exchange, license, rental, lease or disposal of
goods and services, import of service as well as specified deemed
supplies such as works contract.
GST law retains the distinction
between goods and services. Supply of intangible goods will be
considered as supply of service eliminating scope of litigation.
The law provides separate principles for determination of time and
place of supply of goods and services.
All persons supplying goods and
services having aggregate turnover exceeding INR One million (in
case of North-East states- INR Five hundred thousand) would be
liable to pay GST. Aggregate turnover would be computed on an all
India basis and shall include all supplies including exempted and
non-taxable supplies. Import and inter-state supplies shall be
taxable without any threshold limit. Small suppliers with turnover
upto INR Five million can opt for composition scheme at lower rate.
Only agriculturists have been kept out of GST net. Rate schedule is
aligned with HSN code.
GST law permits seamless tax credit.
However, cross-utilisation of credit between CGST and SGST is not
GST law provides special provisions
concerning e-commerce. E-commerce operator is required to pay
amount at specified rate from the collection directly to the
Government. This will capture all e-commerce transactions bringing
them into GST net. Aggregator providing goods and services under
their brand would be liable to pay GST. GST law also provides for
collection of tax at source.
Further, the law also provides for
appointment of SGST officers as CGST officers to simplify
administration. Three classes of officers, viz., (i) CGST officers
(ii) SGST officers and (iii) IGST officers shall administer the
respective GST law. Suppliers are liable to be registered in each
State from where supply of goods and/ or services is made.
It also provides for demand of tax
within five years in cases involving suppression, etc. and in other
cases within three years.
GST law contains transition provision
for registration, carry forward of tax credit (CENVAT & VAT),
claim of tax credit on stocks by new tax payers, etc.
Introduction of GST will be the biggest tax reform in the
history of independent India. GST is expected to simplify tax
administration, ensure 'Ease of Doing Business' and promote
'Make in India'. This is the time when businesses ought to
try and align their business model/structure with the proposed tax
structure to plug potential tax losses and improve
This is the brief overview of proposed GST law. We will keep you
regularly updated on further developments in this direction.
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