India: Latest Developments In The Run Up To GST

Last Updated: 11 May 2017
Article by SKP  

In the third Governing Council meet of NITI Aayog, the Prime Minister Narendra Modi stated that GST reflects the spirit of "one nation, one aspiration and one determination". He urged all state Chief Ministers to make the required legislative arrangements and speed up capital expenditure and infrastructure creation to ensure GST is implemented on 1 July 2017.

Action on State GST Laws

With most of the states having been prompted to pass GST Bills by the end of May, five states have already enacted their State GST Bills, namely:

  1. Bihar
  2. Chhattisgarh
  3. Jharkhand
  4. Rajasthan
  5. Telangana

Furthermore, the GST Bill has also been tabled in the Uttarakhand State Assembly and approved by the Uttar Pradesh cabinet.

Goods and Services Tax Network (GSTN)

The GSTN, a Special Purpose Vehicle (SPV), is ready with a robust IT backbone and a portal to enable real-time taxpayer registration, the filing of returns, handling of invoices and connecting states for two-way data flow. The CEO of GSTN, Prakash Kumar, discussed the following key points in relation to GSTN in an interview with the press:

  • The network is equipped to handle 2.6 billion transactions every month from an estimated 8 million GST taxpayers, which could be doubled without requiring any changes.
  • The GST trial runs have begun from 1 May 2017 with 3000 identified taxpayers who have migrated and enrolled into the new system, who will test the system by uploading invoice data, filing returns and paying taxes.
  • This system is highly secure and will be protected against any data leakages.
  • The payment for GST would not take place at the GST portal. The taxpayer will create a challan and then must choose a bank where he will go to make the payment. To authenticate the data integrity, there would be a process called server-to-server authentication to double-check whether the data sent by the bank is authentic.
  • High-level encryption algorithms are also being used by the GSTN.
  • The GSTN is equipped with two main data centres and other Tier 3 data centres to ensure that in the event of a natural calamity, there will be other data centres that will remain operational throughout the period.

GST rate for services

The Revenue Secretary, Hasmukh Adhia, stated that there may be two slabs for services under GST, with segments such as transport facing a lower levy in comparison to the 18% tax on all other services. This is being done to factor in the current abatements that are available under the existing service tax regime.

Migration of existing registrations

More than 6 million taxpayers enrolled on the GST portal between 8 November 2016 and 30 April 2017. The enrolment process was closed from 1 May 2017 but would re-open for taxpayers who could not enrol themselves, as well as for those who enrolled but could not sign the enrollment form.

GST question and answer session on social media

As a public outreach measure, the Revenue Secretary and the GST Commissioner, Upender Gupta, answered various questions to clarify GST related queries. The important discussion aspects have been summarised below:

  • An assessee having a Domestic Tariff Area (DTA) and an Export Oriented Unit (EOU) in the same state would only require a single registration.
  • The Harmonised System of Nomenclature (HSN) codes would be based on the assesses turnover:

    • For turnovers up to INR 15 million: No HSN code should be mentioned.
    • For turnovers between INR 15 million and INR 50 million: A two-digit HSN code would be applicable.
    • For turnovers above INR 50 million: A four digit HSN code would be applicable.
  • No invoice details would be required to be furnished for returns in the case of Business to Consumer (B2C) supplies.

SKP's comments

At this stage, the industry would be required to look out for the opening of a window for fresh GST registrations and completion of migration in case the same remains pending. Furthermore, the passage of the finalisation of the relevant State GST Rules and various GST Rules should be tracked. In addition, the restructuring of the company's information technology network and business strategies, etc. should be prioritised.

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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