India: Comparative Analysis Of The GST Rules Released On 1 April 2017 Vis-À-Vis Rules As Released On 18 May 2017

Last Updated: 25 May 2017
Article by SKP  

The GST Council in the first day of its two-day meeting in Srinagar on 18 May 2017 has considered and finalised 7 rules pertaining to different aspects of the GST law. Taking into account the concerns raised by the industry, significant changes have been introduced in the final version of the rules. Some key aspects are

Invoice Rules

  • In the case of receipt of goods/services on which GST is to be paid by the recipient under the Reverse Charge Mechanism (RCM), an invoice will be required to be issued by the recipient which should be signed/digitally signed.
  • Receipt of advance - receipt voucher to be issued

    • In the case of receipt of an advance, where the rate of tax is not determinable, tax shall be paid at 18%.
    • In the case of receipt of an advance, where the nature of supply is not determinable, then it would be treated as interstate supply.
  • Refund voucher to be issued by the supplier when the advance is refunded on account of non-delivery of goods or services.
  • Payment voucher is to be issued by recipient where GST is applicable on an RCM basis.
  • Requirement for refund and payment vouchers are on similar lines as prescribed for receipt vouchers.

Payment Rules

  • The dealer can now intimate the jurisdictional officer regarding any discrepancy noted in his electronic liability ledger through form GST PMT-04.

Refund Rules

  • In the case where the refund is on account of supply made to a Special Economic Zone (SEZ), the application for a refund should be accompanied by a declaration that SEZ unit/developer has not availed Input Tax Credit (ITC).
  • A formula is prescribed for refund of tax under inverted duty structure
  • In the case of grant of provisional refund, the following conditions are deleted:

    • The assessee should have a GST compliance rating of not less than 5; and
    • The assessee should not have any pending proceeding/appeal on any issues.
  • If the refund order is withheld, the officer shall issue an order to the assessee along with the reasons for withholding the refund.
  • If the part of the whole refund is not admissible, the officer shall issue a notice requiring the assessee to reply within a period of 15 days and then issue an order as per the reply. The order shall be available electronically.

Registration Rules

  • A separate application is prescribed for Input Service Distributor (ISD) registration
  • Change in form Numbers at various places

Valuation Rules

  • Valuation on supply to distinct person/related person

    • Where the goods are intended for further supply 'as such', then the value at the option of the supplier should be 90% of the price charged for the supply of kind and quality by the recipient to his customer not being a related person.
      (It should be noted that the provision in relation to acceptance of declared invoice value where full ITC is available to the recipient has been retained. Accordingly, the above valuation mechanism in respect of 'as such' supply (which is optional) appears to be only recommendatory and not binding)
  • The purchase value of the goods repossessed from a defaulting borrower (who is not registered for recovery of loan/debt) shall be deemed to be the purchase value reduced by 5% per quarter between the date of purchase and date of disposal.
  • Rule 7 (Valuation in case of supply of services in case of pure agent) - Only three conditions are prescribed for qualifying a pure agent instead of the earlier eight conditions.
  • Rule 9 (Mechanism prescribed for calculating the tax where the value of supply is inclusive of GST) - The tax shall be calculated as:

TAX= Value Inclusive of Tax * Rate of tax
100 + Rate of Tax

ITC Rules

  • No time limit for re-availment of credit which was reversed earlier.
  • In the case of supply of capital goods or plant and machinery, the amount of ITC shall be calculated by reducing ITC by 5% for every quarter from the date of invoice.
SKP's comments
  • The 7 Rules approved by the GST Council have undergone significant changes. Clarity has been obtained on some key issues such as:
    • Treatment in case of receipt of advance where type of supply and place of supply is not known
    • Valuation where GST is not charged separately and is included in the value of supply
    • Relaxation in conditions for grant of provisional refund
    • Simplification in conditions of pure agent.
  • Rules for Transition and Returns, which are key to businesses looking to obtain clarity on ITC on goods in stock, have been referred to a legal committee for further vetting. It is important that the remaining rules are finalised and released in the public domain at the earliest.

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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