India: India Is Moving Towards Goods And Services Tax (GST) Implementation

Last Updated: 13 April 2017
Article by SKP  

The GST roll-out proposed for implementation from 1 July 2017, is close to finally becoming a reality with a plethora of developments paving the way for its implementation. Post the Parliament's winter session, the key highlights of the progression towards GST implementation are:

  • The GST Council in its 10th meeting, which was held on 18 February 2017, approved the GST (Compensation to States) Bill, which stipulated the manner in which the states will be compensated, in the event of loss due to the implementation of GST, for a period of five years.
  • On 24 February 2017, the Finance Ministry launched a mobile application to provide GST updates to the taxpayers on GST.
  • In its 11th meeting held on 3 and 4 March 2017, the GST Council approved the Central GST (CGST) and Integrated GST (IGST) Bills.
  • The Revised Model GST draft was unveiled in November 2016 and had proposed an anti-profiteering mechanism to ensure that the benefit of lower taxes is shared with customers. The GST Council may set up a quasi-judicial authority or rope in an existing body to protect consumers from profiteering by business entities.
  • In the GST Councils 12th meeting, held on 12 March 2017, the Union Territory GST Bill and State GST Bill were also approved.
  • The GST Council also approved a maximum of 15% cess on the highest GST rate of 28% on aerated drinks, luxury goods and tobacco.
  • On 22 March 2017, the Union Cabinet chaired by the Prime Minister of India formally approved the Union Territory GST Bill, CGST Bill, IGST Bill and GST (Compensation to States) Bill, prior to their presentation in the budget session ending on 12 April 2017.
  • The Union Cabinet also approved the proposals to amend the existing laws for smooth GST implementation and repeal the Acts which will become irrelevant post GST implementation.
  • The Finance Minister has approved the reorganisation of the field formations of the Central Board of Excise and Customs (CBEC) which is the apex body for indirect taxes. The reorganised formations will be operational with effect from 1 June 2017. Furthermore, CBEC will be renamed as the Central Board of Indirect Taxes and Customs (CBIC) in the GST regime after getting legislative approval.

Latest updates

Formation of GST Working Group for specific sectors

  • In consideration of various representations made by the industry, the Finance Ministry vide CBEC's order dated 24 March 2017, has set up a GST Working Group to examine sector specific issues of the sectors given below, which have special peculiarities for a smooth transition to the new GST regime. The working groups have to focus specifically on procedural simplification and a possible rate structure for these sectors and are instructed to submit their reports by 10 April 2017.

    • Banking
    • Finance and Insurance
    • Telecommunication
    • Exports
    • Information Technology/ Information Technology Enabled Services
    • Transport and Logistics
    • Textiles
    • Micro, Small and Medium Enterprises
    • Oil and Gas
    • Gems and Jewellery
    • Services received and provided by the government.
  • In the office order, the CBEC has illustrated some of the issues which may be faced under the GST regime:

    • Services provided between establishments of the same entity without an invoice or payment in certain sectors with high volumes of transactions with operations spread on a country-wide basis.
    • Critical infrastructure of the country.
    • Exports, including value addition and manufacturing in domestic tariff area (DTA) for export/Export Oriented Units (EOUs) and Special Economic Zones (SEZs).
    • Cascading effect due to exclusions of certain products from GST and commitments relating to fiscal stability in Production Sharing Contracts.
  • This is a welcome initiative, with a motive to tackle the unresolved issues of these industries for a hassle free transition. Furthermore, this initiative also signals a possibility of clarifications by way of rules being issued at a later stage to address the concerns of the industry. The industry must take the benefit of this opportunity and represent the varied issues before the GST Working Group to seek a solution.

Announcement of major public outreach program

  • Keeping in sync with the fast pace of GST advancement, the Prime Minister of India has announced a major public outreach to explain the provisions and benefits of GST. This is a clear indicator of the government's pro-activeness to achieve its targeted implementation of GST on 1 July 2017.

Introduction of CGST, IGST and the GST (Compensation to States) Bills in Lok Sabha

  • In a landmark move, in the history of Indian tax reforms, the Finance Minister on 27 March 2017 introduced the CGST, IGST, Union Territory GST and the GST (Compensation to States) Bills in the Lok Sabha (i.e. the Lower House of the Indian Parliament). These have also been made available in the public domain. Although the legislations are introduced as money bills, a well-timed introduction of such bills is opportune as it will provide the government adequate time to present it before the Rajya Sabha and bring back any amendments adopted by the Rajya Sabha, before the end of the Parliament session on 12 April 2017. Though amendments of the Rajya Sabha are not binding on the Lok Sabha, the introduction of Bills in the Lok Sabha shows the government's eagerness to achieve the target deadline of 1 July 2017 for rolling out GST in India.

As per the recent news articles, the Prime Minister has called a cabinet meeting today to review GST reforms. The meeting will be followed by a 7-hour debate in the Lok Sabha over the supporting bills, which were presented to the Parliament by the Finance Minister.

SKP's comments

It is apparent that the path for the GST regime is in the final stages of completion. Once the GST Bills are cleared by the Parliament, the state GST Bills will be presented in the respective state Assemblies and they will be required to clear the respective state GST laws.

Furthermore, the 13th GST Council meeting has been scheduled for 31 March 2017, wherein the GST Council will discuss the final draft rules relating to the Composition, Valuation, Input Tax Credit and Transition along with the amendments in the rules that were approved in the earlier meetings. Pending classification of goods and services, under various slab rates are to be undertaken after 31 March 2017.

As a way forward, a few updates which the Industry should look out for are:
  • The various changes in the CGST, IGST and the GST (Compensation to States) Bills, 2017 that were introduced in the Lok Sabha session dated 27 March 2017.
  • The approval of the GST Rules relating to Composition, Valuation, Input Tax Credit and Transition and the finalisation of the amendments in the GST Rules relating to Registration, Payment, Refunds, Returns and Invoices in the 13th council meeting dated 31 March 2017, followed by its release in the public domain.
  • 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 GSTN model as explained in its public outreach awareness sessions.
Also as a next step, considering the efforts put in by the government to achieve the target timeline of 1 July 2017, it is imperative for the industry to gear up and start the implementation process to be GST ready on the go live date.

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.

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