Union Finance Minister Arun Jaitley has tabled four GST Bills in the ongoing Budget session of Parliament. The Bills introduced in the Lok Sabha include Central GST (CGST), Integrated GST (IGST), Union Territory GST (UTGST) and the Bill for Compensation to States. The Bills were earlier cleared by the GST Council, followed by Union Cabinet approval. According to media reports, the GST Bills, although introduced as Money Bills, shall be taken up for discussion in both the houses of Parliament before their passage in the current session. Some of the significant changes are contained in the definitions, levy of tax, input tax credit, transitional provisions, zero rated supply etc. The list of exemption, classification of goods and services, and machinery provisions including valuation and other rules are yet to be notified. Subsequent to the passage of Central GST Bills in Parliament, states will take up State GST Bills for clearance in the respective state legislative assemblies.
“The tabling of the bills in the Parliament is an important milestone in the process of implementation of GST. The GST bills address several issues arising from the revised draft of the Model GST Law released in November 2016, as highlighted by the industry. However, it cannot be denied that the GST framework continues to be fairly complex and the government would need to mitigate genuine concerns of the industry. Therefore, a continuous, sympathetic and transparent engagement with trade and industry is imperative,” says EY in a research report.
According to EY, there are several additional challenges that the taxpayer would need to handle, the key ones being tax treatment on transactions related to the state of Jammu and Kashmir, and compliances in relation to identification of procurements from unregistered persons. “The proposed implementation date of 1 July 2017 now appears to be achievable and it is important that businesses get ready to embrace GST,” it says.
Here we are taking a look at some key things
Key changes in CGST Bill, 2017
# CGST Law shall apply to the whole of India except the State of Jammu and Kashmir.
# As per Schedule I (dealing with supply made without consideration) read with section 7, gifts not exceeding Rs 50,000 in value in a financial year by an employer to an employee (considered as related parties) shall not be treated as supply of goods or services.
# Schedule III (dealing with activities not treated as goods or services) has undergone the following changes:
* Actionable claims other than lottery, betting and gambling shall not be treated as supply of goods or services.
* Services by foreign diplomatic mission located in India shall not be treated as supply of service.
* Constructed building (where entire consideration is received after issuance of completion certificate) and sale of land are not to be treated as supply of goods or services.
# CGST is applicable on intra-state supplies goods or services except on supply of alcoholic liquor for human consumption.
# The CGST rate cap has been increased from 14% to 20%.
# Central tax (i.e., CGST) will be levied on supply of petroleum crude, high-speed diesel (HSD), petrol, natural gas and aviation turbine fuel (ATF) from such date as may be notified by the Government on recommendation of the Council.
# A registered person procuring taxable goods or services from an unregistered person will be required to pay tax under reverse charge basis. This amendment is likely to have a massive impact on the compliance complexity for taxpayers as also on the competitiveness of unregistered entities.
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# The government may by notification increase the threshold limit for composite dealers from Rs 50 lakh to Rs 1 crore on the recommendation of the Council.
# Tax rates for composite dealers are prescribed as follows:
* For manufacturers — 1% of turnover in state or turnover in Union Territory,
* In case of composite supply involving food (restaurant services etc.) — 2.5% of turnover
In case of other suppliers — 0.5% of turnover
Time of supply
# Time of supply of services shall be the earliest of the following:
* When invoice is issued within the prescribed period — date of issue of invoice or date of receipt of payment, whichever is earlier
* When invoice is not issued within the prescribed period — date of provision of service or date of receipt of payment, whichever is earlier
* In cases not covered above — date on which the recipient shows the receipt of services in the books of account.
# Time of supply in case of addition in the value of supply by way of interest, late fee or penalty for delayed payment of any consideration shall be the date on which supplier receives such addition in value.
# Provisions earlier contained in Schedule V have been merged with the provisions of Registration under Chapter VI.
# A person who makes a supply from the territorial waters of India shall obtain registration in the coastal state or Union Territory where the nearest point of the appropriate base line is located.
Accounts and records
# Transporter, irrespective of whether he is registered or not, is required to maintain records of consignor, consignee and other relevant details of goods as prescribed.
# Books of account and records shall be required to be retained for 72 months from the due date of furnishing of annual return instead of 60 months as per earlier draft.
# Furnishing details of outward supplies will not be allowed from days 11 to 15 of the month succeeding the relevant tax period.
# While furnishing the details of inward supplies, details of imported goods on which IGST is payable under section 3 of the Customs Tariff Act, 1975 are also to be furnished.
# Return for a tax period will not be allowed to be furnished if return for any previous tax period is not furnished.
Key changes in IGST Bill, 2017
# IGST law shall extend to the whole of India except the State of Jammu and Kashmir.
# IGST rate cap has been increased from 28% to 40%. Further, IGST shall not be levied on alcoholic liquor on human consumption.
# IGST shall be levied on supply of petroleum crude, HSD, petrol, natural gas and ATF from a date to be notified based on recommendation of the Council.
# IGST shall be payable by the registered recipient of goods or services under the reverse charge mechanism on taxable purchases made from the unregistered supplier.
# Supply of goods/services shall be treated as supply in the course of inter-state trade, where the location of the supplier and the place of supply are in:
* Two different states
* Two different Union Territories
* A state and a Union Territory
# As per Explanation 1 to section 8(2) of IGST law, an establishment in a state or Union Territory and any other establishment being a business vertical registered within that the state or Union Territory shall be treated as establishments of distinct persons.
# Where the location of the supplier is in the territorial waters or the place of supply is in territorial waters, then the location of such supplier/place of supply shall be deemed to be in the coastal state or Union Territory where the nearest point of the appropriate baseline is located.
# There are no significant changes made in provisions relating to place of supply of goods and services.
# Registered supplier to SEZ unit/developer (such supplies being treated as zero rated supplies) shall be eligible to claim refund under the following two options:
Upfront exemption of IGST on supplies under bond or Letter of Undertaking and claiming refund of unutilized ITC, or
Pay IGST on supplies and claim refund of the tax paid
# The above options were available only to the exporter and has now been extended to supplies to SEZ unit/developer.
UTGST Bill, 2017
# Union Territory GST law has been newly introduced.
# It shall extend to the Union territories of the Andaman and Nicobar Islands, Lakshadweep, Dadra and Nagar Haveli, Daman and Diu, Chandigarh and other territory.
# Provisions of CGST in so far as they relate to supply, composition levy, composite and mixed supply, time and value of supply, ITC, transitional provisions relating to interest and penalty, and administrative and other provisions also apply to UTGST.
# Transitional provisions are in line with the provisions of the revised draft model GST law as pertaining to SGST.
Key changes in Bill for Compensation to States
# The base year revenue of states will include any cess or surcharge or fee levied by states.
# States will receive provisional compensation bi-monthly instead of quarterly from the Center for loss of revenue from GST implementation.
# After the end of 5 years from the implementation of GST, the residual amount lying in the compensation fund will be shared equally between the Center and states.
# The rate of cess on demerit goods for providing compensation to states has been specified in the Bill.