India: Tax Updates - Aug 08 2016

Last Updated: 26 September 2016
Article by HSA Advocates

The Constitution (122nd Amendment) Bill, 2014, popularly known as "GST Bill", has been finally passed in the Rajya Sabha on 3rd August, 2016, after extensive debate and deliberation. The GST Bill is an enabling amendment to the Constitution paving way for 'one nation one tax' regime to become a reality. Finance Minister, Mr. Arun Jaitley has promised to keep goods and service tax (GST) rate 'as low as possible' but refused to commit to a specific rate. The tax rate would be decided by the GST Council comprising of the Union Finance Minister and representatives of all 29 states in India. Though, there are still many steps remaining, like ratification of the GST Bill by 50% of state legislatures, one crucial hurdle is now over.

Historical background

Goods and service tax era started in France in 1954. This was later followed by various European countries. It was welcomed in Asia with same euphoria, Malaysia being the latest one to adopt GST. In India, the genesis of GST was laid down by the NDA Government under Atal Bihari Vajpayee by appointing Dr. Asim Dasgupta Committee to design the model for GST. UPA Government took the matter further. However, the first concrete step was taken when the GST Bill was passed by Lok Sabha on 6th May, 2015. The GST Bill as passed by the Lok Sabha was referred to the Select Committee of Rajya Sabha, which gave its report on 22nd July, 2015. The GST Bill was passed by Rajya Sabha on 3rd August, 2016 with certain amendments as proposed by the Select Committee. The Lok Sabha has on 8th August 2016, taken up the amendments to the GST Bill and passed the bill, approving the changes made by Rajya Sabha. It may be noted that the Constitution (122nd Amendment) Bill, 2014 will enter into the statute book as "The Constitution (101st Amendment) Bill, 2016".

Salient features of GST Bill

Following are the salient features of the GST Bill as passed by Rajya Sabha:

  1. Simultaneous power to the Union and the State legislatures to legislate on GST.
  2. Creation of a GST Council.
  3. Exhaustive definition of "Services" as "anything other than goods".
  4. Integration of central taxes like Central Excise Duty, Additional Excise Duties, Service Tax, Countervailing Duty and Special Additional Duty of Customs (SAD), in to single tax known as CGST.
  5. Integration of VAT/Sales Tax, Central Sales Tax, Entertainment Tax, Octroi and Entry Tax, Purchase Tax and Luxury Tax, and taxes on lottery and gambling in to single tax known as SGST.
  6. Wide coverage of goods and services under GST, except alcoholic liquor for human consumption. Petroleum and petroleum products shall be subject to the levy of GST from future date to be notified after considering the recommendations of the GST Council. Electricity has been specifically kept out of the purview of GST.
  7. Simultaneous levy and collection of CGST and SGST across the value chain by Central Government and State Governments respectively on all intra-State transactions.
  8. GST, being a destination based tax, all SGST on the supplies will accrue to the consuming States.
  9. Term "IGST", as existed in the GST Bill passed by Lok Sabha in May 2015, is been replaced with "goods and services tax levied on supplies in the course of inter-State trade or commerce" (for the sake of coherency, hereinafter referred as "IGST").
  10. States' share of the IGST shall not form a part of the Consolidated Fund of India.
  11. IGST shall be levied by the Central Government, on supplies in the course of inter-State trade or commerce.
  12. CGST and the Centre's share of IGST will be distributed between the Centre and States.
  13. Mandatory obligation on the Parliament to form laws to provide compensation to the States by Centre for loss of revenue arising on account of implementation of the GST. However, compensation shall not be provided for more than 5 years from the date of implementation of GST, or for any shorter period as may be decided by the Parliament.
  14. GST Council to establish a mechanism to adjudicate disputes between: (i) Centre and States vs. one or more States; (ii) Centre vs. one or more States; and (iii) State vs. State.
  15. Taking a major shift from earlier approach, proposal for additional 1% tax on inter-state supply has been rejected by Rajya Sabha. Provisions to this effect has been struck down from the GST Bill as passed by Rajya Sabha.

Though the GST Bill has been passed by Rajya Sabha, the following key steps are still required to be undertaken before GST becomes a reality:

  1. Ratification of the GST Bill by minimum 50% of total states i.e. 15 States.
  2. Formation of the GST Council
  3. Consensus on final tax rate and threshold limits.
  4. Drafting of GST legislations (i.e. CGST, SGST, IGST and other relevant rules, etc.,) and get them pass in Parliament and State legislatures.
  5. Putting in place a dispute resolution mechanism.
  6. Launching of GST NET and its link with each States' IT infrastructure.

Considering the fact that provisions providing for 1% additional tax by producer states has been deleted, this may cause a setback and slow down the GST wagon in the states not ruled by the BJP.

Model GST Law

Recently, in June, 2016, the "Empowered Committee of State Finance Ministers" released the 'Model GST Law'. The model law was released with an objective to give a first-hand experience to the general public and to solicit comments from the experts.

Nevertheless, it has been received by the trade and industry groups as a foundation on which GST structure is proposed to be based. No doubt, it is the first serious attempt and most authentic document to rely upon if one wants to have a feel of future GST regime.

The salient features of 'Model GST Law' are as follows:

  1. Taxable event for CGST/SGST shall be the intra-state supply of goods and/or services. For IGST, taxable event shall be the supply of goods and/or services made in course of interstate trade and commerce.
  2. Central Government to notify certain categories of supply on which tax shall be payable in reverse charge by the receiver of supplies.
  3. Taxable Person is the person carrying on any business at any place in India/State of India who is registered or required to be registered under Schedule III of the Model GST Law. Person required to get so registered shall not be treated as taxable person if aggregate turnover is less then amount prescribed therein.
  4. Migration of existing taxpayers to GST shall be through a gradual process first by issuing provisional registration certificate for an extendable period of 6 month and then final certificate of registration on verification of documents.
  5. State Government, Central Government or any local authority shall be treated as taxable person in respect of activities in which they are engaged as public authorities other than activities mentioned in Schedule IV of Model GST Law.
  6. Non-taxable persons shall include:
  • agriculturist,
  • employees in relation to their employment,
  • persons exclusively supplying exempted or non-taxable goods and/or services,
  • persons liable to pay tax under reverse charge for services received of value not exceeding an annual threshold for personal use.
  1. Electronic commerce operator means person who facilitates supply of goods or services. E-commerce operator is required to:
  • withhold tax on collections and deposit the same with the Government within 10 days of the succeeding month.
  • file a monthly statement of all amounts collected towards supply of goods or services effected through it.
  1. GST on composition rate of 1 per cent of the turnover in respect of taxable persons having turnover less than Rs. 50,00,000/- (Rupees Fifty Lakh). Exceptions being:
  • persons paying tax under reverse charge mechanism; or
  • persons carrying out interstate supply of goods and service.
  1. Term supply has been defined in its widest sense and includes supply made against consideration or for free and includes:
  • all forms of supply of goods or services including sale, transfer, barter, exchange, rental lease or disposal made or agreed to be made, for a consideration, in the course or furtherance of business;
  • importation of service with or without consideration;
  • specified supplies made without consideration;
  • deemed supplies which includes works contract, construction services, restaurant, transfer of right to use intellectual property;
  • supply between agent and principal;
  • supply of branded services owned by an aggregator;
  1. Strict and complex provisions for availment of credit of GST on inputs have been prescribed viz.:
  • Details of all inward supplies and outward supplies to be provided monthly before 15th and 10th of every month respectively.
  • Monthly return of all transaction details including supplies, input credit, etc., to be provided by 20th of every month.
  • Quarterly returns to be filed by taxpayers opting to pay tax under composition scheme
  • Annual return to be filed by 31st December following the end of financial year.
  • Monthly matching of input tax claims with the output liability of the supplier and claims of reductions with the details of credit notes issued by supplier.
  1. Credit to be availed within 1 year of the date of the invoice but before filing return for the month of September following the financial year in which the invoice was raised or filing of annual return (31st December) whichever is earlier.
  2. Credit can be availed by receiver only if the tax in relation to such goods and services has been paid to the respective Government by the supplier and upon furnishing of monthly return by recipient.
  3. No limitation prescribed for issuance of show cause notice for initiating proceedings, however, limitation for concluding the entire adjudication process have been prescribed as under:
  • three years in case where non-payment of GST is not attributable to fraud, collusion, mis-statement; and
  • five years in case of evasion of GST due to fraud, collusion etc.
  1. Under the Model GST Law, mere wrong availment of credit, without actual utilization, has also been treated as an offence.
  2. Commissioner of CGST and SGST be having powers to arrest in certain cases.
  3. A comprehensive list of offences and penalties have been provided. Further, provisions have also been made for detention/confiscation of goods and conveyance and levy of penalty.
  4. Rebuttable presumption of culpable mental state has been introduced. To prove any fact, one has to prove it beyond reasonable doubts and not on the standards of preponderance of probability, as existing in current tax laws.
  5. Manner of service of any document under GST, has been made commensurate to the current technology. E-mail and SMS on registered mobile number has been included as valid mode of service of communications. Presumption of valid service as provided under Section 27 of the General Clauses Act, 1897, in respect of service by registered post, has also been introduced in GST.

HSA Comments

The above model law, in our view, is still in a very nascent state and is expected to undergo changes (by the GST Council) before the same is presented to the Parliament and the State legislatures for enactment. Also, objections, comments and recommendations from the industry on the draft legislations would be sought by the Government. Further, the other challenges before the Government are:

  • Fixing the median GST rate i.e. CGST, SGST and IGST.
  • List of commodities which would be exempted from payment of GST.
  • Common list of classification of commodities, based on Harmonized System of Nomenclature (HSN).

Despite the challenges, in our view, GST is the much needed tax reform that India desperately requires, especially to achieve its "Make in India" dream1. Manufacturers, traders, service providers including multinational corporations are deterred by the multiple taxation under the current taxation regime and often find it unviable to invest in India.

No doubt, transition phase will pose heavy challenges to trade and industry, however, same should be taken as a bitter pill to cure the already paralysed and ineffective tax system.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.