With the GST law expected to come into force from April 1, 2017, there is growing public interest in the transformative new tax regime. Our expert, who is a partner in Ahmedabad-based chartered accountancy firm, Pipara & Co, analyses the proposed new law
By Naman Pipara
THE union finance ministry released the ‘model’ GST (Goods and Services Tax) law on June 14, outlining the structure of the proposed GST regime. The draft of the Integrated GST bill, 2016,’ was also released at the same time.
These provide the framework for the levy and collection of the central GST (CGST) and state GST (SGST).
CGST relates to the tax levied under the Central Goods and Services Tax Bill, 2016. IGST is the tax levied under the Integrated Goods and Services Tax Bill, 2016.
Threshold limit for registration
A dealer is required to take registration under this law if his aggregate turnover in a financial year exceeds Rs.9 lakh. However, dealers conducting business in northeastern states are required to register if their turnover exceeds Rs.4 lakh.
Place of registration
A dealer has to take registration in the state from where taxable goods or services are supplied.
Migration of existing taxpayers to GST
Every person already registered under extant law will be issued a certificate of registration on a provisional basis. This certificate shall be valid for period of six months. Such person will have to furnish the requisite information within six months and on furnishing of such information, final registration certificate shall be granted by the central/state government.
GST compliance rating score
Every taxable person shall be assigned a GST compliance rating score based on his record of compliance with the provisions of this act. The score shall be updated at periodic intervals and intimated to the taxable person and also placed in the public domain.
Levy of tax
The person registered under this law is liable to pay tax if his aggregate turnover in a financial year exceeds Rs.10 lakh. However, a dealer conducting business in any of the northeastern states is required to pay tax if his aggregate turnover exceeds Rs.5 lakh.
A negative list has also been prescribed for transactions and activities of government and local authorities which shall be exempt from GST levy, like activities of issuance of passport, visa, driving licence, birth certificate or death certificate, etc.
The taxable event under the GST regime will be supply of goods or services. Supply includes all forms of supply of goods and/or services such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration. It also includes importation of service, whether or not for a consideration.
Point of taxation
CGST/SGST shall be payable at the earliest of the following dates, namely:
• Date on which the goods are removed for supply to the recipient (in case of movable goods)
• Date on which the goods are made available to the recipient (in case of immovable goods)
• Date of issuing invoice by supplier; or
• Date of receipt of payment by supplier; or
• Date on which recipient shows the receipt of the goods in his books of account.
Tax Collected at Source on online sales of goods or service
Every e-commerce operator engaged in facilitating the supply of any goods and/or services (like Amazon, Flipkart, etc.) shall collect tax at source at the time of credit or at the time of payment whichever is earlier. Thresholds for the same are yet to be finalised.
Such rules shall apply to the supply of goods and/or services under the IGST/CGST/SGST bill.
Some of the methods prescribed for valuation are:
• Transaction value: As per this method the value of goods and/or services shall be the transaction value
• Transaction value of goods or services of like kind: Where value of supply cannot be determined under previous method [i.e. point a], the value shall be determined on the basis of transaction value of goods and/or services of like kind and quality supplied at or about the same time to customers
• Computed value method: Where value cannot be determined under previous method [i.e., point b], it shall be based on computed value which shall include cost of production, manufacture or processing of the goods or the cost of the provision of services, the charges if any, for design and brand and amount towards profit and general expenses
• Residual method: Where the value cannot be determined under the computed value method, the value shall be determined using reasonable means consistent with the principles and general provisions of these rules
A person can claim refund of any tax and interest by making an application in that regard to the prescribed officer of IGST/CGST/ SGST. The application can be made before the expiry of two years from the relevant date as may be prescribed.
Utilisation of credit
Utilisation of IGST: The amount of input tax credit on account of IGST available in the electronic credit ledger of dealer shall first be utilised towards payment of IGST and the amount remaining, if any, may be utilised towards the payment of CGST and SGST, in that order.
Utilisation of SGST: The amount of input tax credit on account of SGST available in the electronic credit ledger shall first be utilised towards payment of SGST and the amount remaining, if any, may be utilised towards the payment of IGST.
Utilisation of CGST: The amount of input tax credit on account of CGST available in the electronic credit ledger shall first be utilised towards payment of CGST and the amount remaining, if any, may be utilised towards the payment of IGST.
Note: The input tax credit on account of CGST shall not be available for payment of SGST.
Any tax, interest, penalty, fee, etc., shall be paid via internet banking or by using credit/debit cards or NEFT or RTGS. This amount shall be credited to the electronic cash ledger of dealer.
Tax Deduction at Source
The central or state governments may mandate certain departments (viz, local authority, government agencies) to deduct tax at the rate of one percent on notified goods or services, where the total value of such supply, under a contract, exceeds Rs.10 lakh.
A person can claim refund of any tax and interest by making an application in that regard to the prescribed officer of IGST/CGST/SGST. The application can be made before the expiry of two years from the relevant date as may be prescribed. It has been provided that the limitation of two years shall not apply where such tax or interest or the amount has been paid under protest.
Dealers shall be required to furnish following returns:
• Monthly return: Every registered taxable person shall have to e-file a monthly return for inward and outward supplies of goods and/or services, input tax credit availed, tax payable, tax paid and other particulars within 20 days after the end of such month
• Return for composition scheme: Dealers paying tax under composition scheme shall have to furnish a return for each quarter or part thereof, electronically within 18 days after the end of such quarter
• TDS return: Every dealer who is required to deduct tax at source shall furnish a return electronically within 10 days after the end of the month in which deduction is made
• Return for input service distributor: Every input service distributor shall file e-return for every calendar month or part thereof, within 13 days after the end of such month
• First return: Every registered taxable person paying CGST/SGST on all intra-state supplies of goods and/or services shall have to furnish the first return from the date on which he became liable to registration till the end of the month in which the registration has been granted
• Annual return: Every registered taxable person shall have to furnish an annual return for every financial year electronically on or before the 31st day of December following the end of such financial year
• Final return: Every registered taxable person who applies for cancellation of registration shall have to furnish a final return within three months of the date of cancellation or date of cancellation order, whichever is later, in a prescribed form.
• Under the model GST law, a registered taxable person will be entitled to take credit of the amount of cenvat credit/ Value Added Tax carried forward in a return furnished by him in respect of the period ending with the day immediately preceding the appointed day
• As per the model law, a registered taxable person shall be entitled to take in his electronic credit ledger/credit of the un-availed cenvat credit/ un-availed input tax credit in respect of capital goods not carried forward in a return furnished by him for the period ending with the day immediately preceding the appointed day
• If a person registered under GST was not liable to be registered under the earlier law or if he was manufacturing exempted goods under the earlier law which are not taxable, then he will be allowed to take credit of eligible duties and taxes in respect of inputs held in stocks or semi-finished/finished goods
• Every claim for refund of any duty/tax and interest, if any, paid on such duty/tax or any other amount, filed by any person before the appointed day, shall be disposed of in accordance with the provisions of earlier law and any amount eventually accruing to him shall be paid in cash. However, where any claim for refund is fully or partially rejected, the amount so rejected shall lapse