Government is not leaving any stone unturned to get the GST implemented from 1st July, 2017. Now with the Introduction of GST Bill in Parliament, it now appears certain that India will be headed for a GST rollout from 1ST July, 2017.
Government earlier on June put in public domain the Model GST Law for suggestions of public in large. Considering some of those suggestions, government once again laid the Revised Model GST Law(Hereinafter called as "Earlier Law") in public domain in the last week of November, 2016.
Gradually Government conducted a series of 12 GST Council meet for deciding on crucial issues involved in GST. The GST Council in last two meeting approved 4 legislations relating to GST. Thereafter with the pace of running against time, on 27th March, 2017, the finance ministry laid all four GST related bills before the parliament for its approval.
Following 4 important bills have been introduced in the parliament:
- The Central Goods and Services Tax Bill, 2017
- The Integrated Goods and Services Tax Bill, 2017
- The Union Territory Goods and Services Tax Bill, 2017
- The Goods and Services Tax (Compensation to States) Bill, 2017
As we all are aware that in the November edition of GST Law, the government made significant changes when compared to its earlier June version. Once Again, in the GST bill introduced in parliament, it made some significant amendments. Here we will discuss few of these important changes, which are as follows:
1. Non-Applicability of GST Law in the State of Jammu and Kashmir:
- Earlier the GST Law was proposed to be applicable to J&K as well.
- However in the Bill, the applicability of GST Law is extended to whole of India except the state of J&K.
2. Change in the Scope of Taxable Event i.e. Supply:
- Earlier the supply of goods or services between related persons, when made in the course or furtherance of business was treated as Supply even when there is no consideration.
- Employer and Employee were covered in the definition of related person.
- Thus any supply of Goods or services by employer to his employees even if that supply is free of cost would have been covered under the scope of GST.
- Now the bill provides that such gifts not exceeding Rs. 50,000 by an employer to an employee shall not be treated as supply for the purpose of GST.
3. Removal of uncertainty relating to chargeability of GST on Supply of Immovable Property:
- Earlier the "Goods" were defined as every kind of movable property other than money and securities but includes actionable claim.
- Further the "Services" were defined as anything other than goods.
- Thus there was an apprehension that Government may levy GST on supply of Immovable Property such as Land or building apart from levy of Stamp duty on such transactions.
- Now in the bill introduced in the parliament, the government has removed that uncertainty by providing in Schedule III that, "Sale of land and, sale of building except the sale of under construction building will nether be treated as a supply of goods not a supply of services. Thus GST can’t be levied in those supplies.
4. Non Chargeability of GST on Actionable Claims:
- As "Actionable claim" were included in the definition of "Goods", there may be chargeability of GST on supply of Actionable Claim under earlier law.
- In the Schedule III of newly introduced bill, Actionable Claim, other than lottery, betting and gambling will neither be treated as a supply of goods not a supply of services. Thus GST can’t be levied in that case.
5. Fixing the Upper cap of GST rate at 20% in case of CGST Law, and 40% in case of IGST Law:
- Earlier the upper cap fixed was 14% and 25% respectively in both the laws.
- With a view to keep some flexibility to increase the rates in future, the upper cap has been fixed at 20% and 40% respectively under CGST and IGST Law.
- However the applicable slab rate will be same as approved by council i.e. 5%, 12%, 18% and 28%.
6. Payment of GST by recipient under Reverse Charge in case of supply of taxable goods or services or both by a unregistered supplier to a registered person.
- In line with the purchase tax on purchase of goods from an unregistered dealer prevailing in many of the states, the GST Bill has introduced the same.
- Liability to pay GST in such cases will be on the recipient of such goods or services.
7. Reduction in Composition rates, a welcome move for MSME sector:
- Earlier it was proposed to levy 1% composition rate for trader and 2.5% for manufacturer.
- Further composition scheme was not allowed for a supplier of services.
- Now in the bill, some reduction in composition rates has been made which is a welcome move for the MSME sector.
- 1% of composition rate will be applicable in case of a manufacturer instead of earlier 2.5%.
- Further 0.50% of composition rate will be applicable in case of a trader instead of earlier 1%.
- Further the composition scheme will now be allowed to Restaurant Sector with a composition rate of 2.5%.
8. Requirement to seek permission from proper officer for composition scheme is dispensed with:
- Now a registered person, whose aggregate turnover in the preceding financial year did not exceed, may OPT to pay under composition scheme.
9. Change in the provision for determining the liability to pay tax in case of Services (Time of Supply of Services):
- Earlier, the time of supply of services was the earlier of date of issue of Invoice, or the last date on which the invoice should have been issued or date of receipt of payment by the supplier.
- Now in the bill, as introduced in the parliament, the provisions of service tax for determining liability to pay service tax has been incorporated in the GST bill.
- Thus the time of supply of services shall be earlier of the following dates:
- If the invoice is issued within the period prescribed, the date of issue of invoices or the date of receipt of payment, whichever is earlier;
- If the invoice is not issued within the period prescribed, the date of provision of services, or the date of receipt of payment, whichever is earlier;
- The date on which the recipient shows the receipt of services in his books of accounts, in a case where aforesaid clause (a) or (b) does not apply.
10. Change in Actual Payment Condition for Non-reversal of Credits:
- Earlier where a recipient fails to pay to the supplier of services, the amount towards the value of supply along with taxes thereon within a period of 3 months from the date of issue of invoices by the supplier, an amount equal to ITC availed were required to be paid along with interest thereon.
- Thus the aforesaid provision was restricted only in case of Services.
- Further there was no provision made in the law for re-allowing the credit reversed earlier due to application of aforesaid provisions.
- Now in the bill, the aforesaid provision is also extended to supply of Goods.
- Further the time period for payment is extended to 180 days from earlier 3 months.
- Further provision has also been made for re-availing the credit reversed earlier at the time of actual payment.
11. Credit of Rent-a-cab, life insurance, and health insurance allowed, if used for making an outward taxable supply of same category.
- Earlier the credit of rent-a-cab, life insurance, and health insurance were fully denied except where the government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force.
- The aforesaid provision of denial of credit would have multifold consequences. For example, a life insurance company, in case re-insurance of life insurance, will not be eligible to take credit of GST paid on re-insurance amount.
- With a view to avoid the genuine hardships, the credit of aforesaid services will be allowed if used for making an outward taxable supply of same category or as a part of taxable composite or mixed supply.
Disclaimer: This write up is based on the understanding and interpretation of author and the same is not intended to be a professional advice.
The author is a Chartered Accountant and can also be reached at firstname.lastname@example.org