Author: admin_gst

Goods and Services Tax – GST – By: – Monarch Bhatt – Dated:- 5-11-2016 Last Replied Date:- 6-11-2016 – On 03rd day of November, 2016 GST council began it s two days discussion wherein, centre had proposed for four tier rate structure. The proposed rate structure by the centre was 6%, 12%, 18% and 26%, which was finalised with slight modification and the finalised rates are 5%, 12%, 18% and 28%. My quick views on GST rates are as follows. In my view GST rates, adopted by the council for recommendation are very reasonable as it is subsuming all the current indirect tax levies including excise duty, VAT, Service Tax, and entry tax. I consider it as five tier rate structure and not four tier rate structure as one of the important rate under GS

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ries made from precious metals with or without stones may attract lower rate than currently announced lowest rate of 5%. However, jewellery made up with higher caret stone or over the specified grams may get covered under the category of luxury goods to attract 28% GST. However, it will lead to grey market and therefore such recommendation will be avoided by the council. The common usage goods will attract lowest tax rate of 5%. The higher rate of 28% will apply to luxury goods like cars. Additional cesses will also be imposed over and above 28% slab rate on Luxury cars, tobacco products, and aerated drinks. Therefore, such luxury products will be chargeable to much higher rate than recommended rate by the GST council. Services likely to at

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Goods and Services Tax – GST – By: – Bimal jain – Dated:- 5-11-2016 Last Replied Date:- 6-11-2016 – Dear Professional Colleague, GST Council fixes four-tier rate structure at 5%, 12%, 18% and 28% Moving swiftly on the road to formalising the biggest reform of the indirect tax regime, the Goods and Services Tax ( GST ) Council on November 3, 2016, has decided four-tier GST tax structure of 5, 12, 18 and 28%, with zero rate for essential items and the highest for luxury and de-merits goods that would also attract an additional cess. With a view to keeping inflation under check, essential items including food, which presently constitute roughly half of the consumer inflation basket, will be taxed at zero rate. The lowest rate of 5% would be for common use items, while there would be two standard rates of 12 and 18% under the GST regime targeted to be rolled out from April 1, 2017. Announcing the decisions arrived at the first day of the two-day GST Council meeting, the Hon ble Finance Mi

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tax rate of 40% by States like Kerala. While the Centre proposed to levy a 4% GST on gold, a final decision was put off… Shri. Jaitley said. He further added that individual items which will fall under different tax slabs will be decided later. Conclusion: One of the critical aspect for successful implementation of GST relate to the determination of GST rate, which is revenue neutral i.e. RNR. Dr. Arvind Subramanian, Chief Economic Advisor, said that the rate structure is revenue neutral but there are going to be efficiency gains which could finance some of the revenue. Undoubtedly, the interest of common man has been duly taken care of which is evident from finalisation of 5% tax rate on common use items, as against 6% proposed earlier. Further, zero rating of necessities is also a welcome move in the beneficial interest of aamaadmi. Not to mention, classification of products in slabs will be an important process playing crucial role, more so, because the luxury goods would be

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mer. Considering the standard rate of GST as stated to be 12% and 18%, it is likely that GST might see significant reduction in the prices of the specified goods with corresponding reduction in production cost with standard tax rate at 12%/18% against 26-30% at present. On services – Currently, w.e.f. June 1, 2016, rate of Service tax is 14% plus Swachh Bharat Cess at 0.5% and Krishi Kalyan Cess at 0.5%, totalling to 15%. Though, Shri. Jaitley didn't elaborate which tax rate will apply to services, apparently, with GST standard rate at 18%, services in GST regime will become costly. Earlier, the Centre proposed that services should be taxed at 12% and 18% i.e. most services would be taxed at 18% but those that have abatement should face a levy of 12%. The Government is committed to implement GST from April 1, 2017, so has set a deadline of finalizing the modalities of the new indirect tax by getting the subsequent GST laws passed during the winter session of Parliament beginning No

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Goods and Services Tax – GST – By: – Puneet Agrawal – Dated:- 5-11-2016 – TIME OF SUPPLY OF GOODS Liability to pay CGST/ SGST on any supply of goods and/ or services shall arises at the time of supply as determined in terms of Section 12 (Time of Supply of Goods) or Section 13 (Time of Supply of Services) of the CGST/ SGST Act. Further as per Section 27 of the IGST Act, time of supply of goods and/ or services, made in the course of inter-state trade or commerce, is also to be determined in terms of Section 12 and Section 13 of the CGST/ SGST Act. As mentioned above, there are separate sections dealing with determination of time of supply of goods and time of supply of service . If any transaction involves both supply of goods and supply o

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red to be removed (goods are not capable of being moved, goods are supplied in installed/ assembles form, goods are supplied by supplier to his agent/ principle); Date of which invoice is issued; Date on which supplier receives the payment i.e. when the payment is entered into the books of account; or credited to bank account, whichever is earlier; date on which receipt of goods entered in books of accounts. In case of continuous supply of goods, time of supply shall be expiry of the period to which successive statement of accounts or successive payments relate. If no successive statements of account, date of issue of invoice or date of receipt of payment whichever earlier. In case tax is required to be paid under reverse charge, point of s

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Goods and Services Tax – GST – By: – Puneet Agrawal – Dated:- 5-11-2016 – TIME OF SUPPLY OF SERVICES Rules for determining time of supply of services are contained in Section 13 of the CGST/ SGST Act. Even for the purpose of determining time of supply of services, made in the course of inter-state trade or commerce, Section 13 of the CGST/ SGST Act would be applied. Section 13 is pari materia to the Point of taxation Rules, 2011 as contained in the service tax law. Time of supply of service shall be: If invoice is issued within the prescribed period, the earliest of: date of issue of invoice; or date of receipt of payment If invoice is not issued within the prescribed period, the earliest of: date of completion of provision of service; or

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le from contract, earlier of Each receipt of payment by supplier; Each issuance of invoice Where payment is linked to completion of an event – Time of completion of that event. Although continuous supply of services is defined in Section 2(31) of the CGST Act but for the purpose of the above provision that definition does not apply. Central Government/ State Government, on recommendation of council, would notify the services that shall be treated as continuous supply of services . In case tax is payable under reverse charge, time of supply shall be earliest of following: date of receipt of services; date on which payment is made; date of receipt of invoice; date of debit in the books of accounts. Where supply of service ceases before its co

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Goods and Services Tax – GST – Dated:- 4-11-2016 – Statement of the Union Finance Minister after the conclusion of second day of the GST council meeting as on 4-11-2016 There will be an informal meeting of the ministers on November 20, primarily aimed at hammering out political consensus. The GST Council, headed by Jaitley, will meet on November 24-25 after the informal meeting. We will try and thrash out a solution on November 20. This has to be a well thought-out solution, Jaitley said. There was a view that assessees should be divided horizontally with ₹ 1.5 crore be the cut-off base. Under this model, states were to assess businesses with an annual turnover ₹ 1.5 crore, while both the Centre and states were to do so for bus

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Goods and Services Tax – GST – Dated:- 4-11-2016 – The Electronics System Design and Manufacturing (ESDM) industry would receive a major boost with the introduction of GST in terms of attracting foreign investment and creating a level-playing field, an industry body said today. Once the GST is introduced, the total tax rates (for ESDM industry) will actually come down. So, it is something the industry is eagerly looking forward to, India Electronics and Semiconductor Association (IESA) President M N Vidyashankar said . IESA is the trade body representing the ESDM industry in India. A four-tier GST tax structure of 5 per cent, 12 per cent, 18 per cent and 28 per cent that aims to lower tax incidence on most goods and keep out essential item

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Goods and Services Tax – GST – Dated:- 4-11-2016 – Multiple GST tax slabs are perhaps necessary in India given the wide disparity in consumption levels and they are likely to have limited impact on most sectors, says a report. A large number of tax slabs agreed upon by the GST Council may however dilute some of the benefits of the GST system, but preliminary understanding of the proposed tax rates suggests broadly neutral impact for sectors, said the report by Kotak Institutional Equities. The structure aims to minimise the impact on CPI inflation and revenues of governments as the proposed GST rates are similar to current 'overall' rates for most goods, the report said, adding that hence, we see limited impact on overall governmen

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Goods and Services Tax – GST – By: – Balasubramanian Natarajan – Dated:- 4-11-2016 Last Replied Date:- 4-11-2016 – Presently interstate Stock transfers are not taxable under CST on submission of duly completed Form F. CBEC in their FAQ has clarified as under: Q 7. Are self-supplies taxable under GST? Ans. Inter-state self-supplies such as stock transfers will be taxable as a taxable person has to take state wise registration in terms of Schedule 1(5). Such transactions have been made taxable even if there is no consideration. However, intra-state self-supplies are not taxable. Q 6. Whether supplies made without consideration will also come within the purview of Supply under GST? Ans. Yes only those cases which are specified under Schedule

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be treated as a supply of goods or a supply of services. SCHEDULE I MATTERS TO BE TREATED AS SUPPLY WITHOUT CONSIDERATION 1. Permanent transfer/disposal of business assets. 2. Temporary application of business assets to a private or non-business use. 3. Services put to a private or non-business use. 4. Assets retained after deregistration. 5. Supply of goods and / or services by a taxable person to another taxable or nontaxable person in the course or furtherance of business. Provided that the supply of goods by a registered taxable person to a job-worker in terms of section 43A shall not be treated as supply of goods Second proviso to Section 9(1) of Model CGST/SGST Law is as under Provided further that a person who is required to be regi

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PAN number is clubbed together all purposes such as: For Registration – For determining threshold limit For Composition Scheme Supply has been defined to cover in its scope only when it is for consideration with the exceptions provided therein, One such exemption so as to treat them as supply even when there is no consideration is supplies specified in Schedule I It s interesting to note that sl no 5 of the said schedule I covers Supply of goods and / or services by a taxable person to another taxable or nontaxable person in the course or furtherance of business. It comes in to play only when the supply is by one Taxable person to another taxable or non taxable person. This makes it abundantly clear that person supplying and the recipient

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4th GST Council Meeting Dated:- 4-11-2016 GST Council – Minutes – Circulars – GST – Minutes of the 4th GST Council Meeting held on 3-4 November 2016 The fourth meeting of the GST Council (hereinafter referred to as 'the Council ') was held on 3-4 November 2016 in the Parliament House Annexe, New Delhi under the Chairpersonship of the Hon'ble Union Finance Minister, Shri Arun Jaitley. The list of the Hon'ble Members of the GST Council who attended the meeting is at Annexure 1 . The list of officers of the Centre and the States who attended the meeting is at Annexure 2 . 2. In his opening remarks, the Hon'ble Chairperson of the Council welcomed all the members and noted that the earlier meetings had been fruitful but some agenda items from the 3rd Council Meeting were left for consideration. He noted that these agenda items as also the other outstanding work of the Council could be moved forward in the next few meetings. 3. The following six agenda poin

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a stated that the existing paragraph 10 of the minutes should be replaced by the following- 'The Hon'ble Minister from Maharashtra stated that apart from ₹ 7,000 crores that his State stood to lose due to subsuming octroi in GST, they would also lose another ₹ 7,000 crores due to removal of Local Body Tax from 1 st August 2015 at the instance of the Hon'ble Prime Minister of India. The action was in consonance with GST. As the State compensated the revenue to the Local bodies, the amount of compensation paid should be considered for the purpose of revenue collected by the State for year 2015-16. Similarly, his State stood to lose ₹ 700 crores due to abolition of Sugarcane Purchase Tax. He stated that his State should not suffer any loss on this count and taxes on account of octroi, Local Body Tax and Sugarcane Purchase Tax should be included in the definition of revenue.' It was agreed to by the Council to replace the version of the Hon'ble Mi

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years or average growth rate of last fi ve years may be considered. ' It was agreed to by the Council to replace the version of the Hon'ble Minister's statement recorded in paragraphs 44 and 31 of the draft Minutes with the formulation as proposed above. Furthermore, it was also suggested to add the following words before the last sentence of paragraph 60: The option of having cess in principle was closed and. This suggestion was not agreed to as this paragraph related to the Chairperson's remarks and he had made no such observation as suggested in the above formulation. iii. The Hon'ble Minister from Karnataka suggested to add the following in either paragraph 31 or 32 of the minutes: The Hon'ble Minister from Kamataka stated that, on the lines of the Hon'ble Union Finance Minister's argument that compensating for the loss arising out of reduction of CST would not be as per the Constitutional mandate as enshrined in the Constitutional Amendment, e

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ph 34 recorded the decision of the Council and the suggestion made by the Hon'ble Minister from Odisha could not be added there. However, it could be added as the view of the Hon' ble Minister of Odisha if a suitable formulation was given in writing by the State. In pursuance of this, a written formulation was received from the Government of Odisha to record the following in Para 13 of the draft Minutes: 'The Hon'ble Minister from Odisha stated that many States were awaiting the verdict of the Hon'ble Supreme Court on the Constitutional validity of the Entry Tax Acts of the States. If the verdict went in favour of States, the Entry Tax for the base year 2015-16, which would be collected later, following the favourable judgement, should be considered in the definition of 'Revenue'. v. The Officer from Uttarakhand stated that in paragraph 21, it should be recorded that the exemption of taxes given by the Central Government should also be counted towards the

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genda item 1, the Council decided to adopt the draft minutes of the 3rd meeting of the Council with the following changes- I. To replace the version of the Hon'ble Minister of Maharashtra's statement recorded in paragraph 10 of the draft Minutes with the following: 'The Hon'ble Minister from Maharashtra stated that apart from ₹ 7,000 crores that his State stood to lose due to subsuming octroi in GST, they would also lose another ₹ 7,000 crores due to removal of Local Body Tax from 1 sl August 2015 at the instance of the Hon'ble Prime Minister of India. The action was in consonance with GST. As the State compensated the revenue to the Local bodies, the amount of compensation paid should be considered for the purpose of revenue collected by the State for year 2015-16. Similarly, his State stood to lose ₹ 700 crores due to abolition of Sugarcane Purchase Tax. He stated that his State should not suffer any loss on this count and taxes on account of

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considered.' iv. To add the following in either paragraph 31 or 32 of the minutes: 'The Hon'ble Minister from Karnataka stated that, on the lines of the Hon'ble Union Finance Minister's argument that compensating for the loss arising out of reduction of CST would not be as per the Constitutional mandate as enshrined in the Constitutional Amendment, even compensating on the basis of a flat projected revenue growth rate of 14% went against the Constitutional mandate. It did not really compensate the States that have witnessed average revenue growth of more than 14% in past five years, from the loss of revenue due to introduction of GST. He argued that the States should be compensated in accordance with their past revenue performance to honour the spirit of the Constitutional provision. ' v. To add the following in paragraph 13: 'The Hon'ble Minister from Odisha stated that many States were awaiting the verdict of the Hon'ble Supreme Court on the

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n the public domain. Agenda Item 2: Presentation by the Goods and Service Tax Network (GSTN) on the status of development of GST Portal, Data migrationlEnrolment plan, Risk factors and mitigation plan 7. On this agenda item, a presentation was made by Shri Navin Kumar, Chairman, GSTN along with Shri Prakash Kumar, Chief Executive Officer (CEO), GSTN. The presentation broadly covered the status of development of the Information Technology (IT) systems for GST, provided an update on data migration/enrolment and on risk factors and mitigation plan. As regards the IT system, it was informed that MIS Infosys Technologies was selected as the Managed Service Provider (MSP) for GSTN in September 2015 and their scope of work included application, design and development; one-time taxpayer data porting; IT infrastructure procurement, supply, installation and information security; Data Centre (DC) and Disaster Recovery (DR); Hosting Services; Helpdesk and Training. The presentation gave an

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d be conducted from 2 January 2017 to 15 February 2017. On migration of existing taxpayers, the Council was informed that all those whose PAN had been verified would be migrated in GST regime. It was further informed that GSTN would be providing to States material like provisional ids and passwords, instruction manual, draft of advertisements, jingles, Computer Based Training Material (CBT) on how to enroll etc. It was further informed that the States might be required to issue a notification under Value Added Tax (VAT) asking taxpayers to provide data for enrolment. The need for quick availability of GST rules relating to Input Tax Credit (lTC), Transitional Provisions, Advance Ruling, Appeal, e- Transit Pass and Composition was highlighted during presentation. While narrating the risk factors, it was pointed out that finalization of the Model GST Law by the end of November 2016 was necessary to allow time for incorporating all changes in the GST system being developed on Model GST Ac

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ted in local languages as well. The Chairman, GSTN clarified that the helpdesk was being operated from a centralized location in Gurugram in English and Hindi and the States were to run their own helpdesk centres in regional languages. He also added that GSTN would assist the States by providing training materials and content for knowledge management (KM) tool, which the States could get translated into local languages. The Hon'ble Minister from Jammu Kashmir expressed that GST Helpdesk and the State run helpdesks could use common content while being located at two different places. The Secretary to the Council clarified that a centralized call centre would not be able to cope with the workload for the whole country and that local call centres would need to be developed in regional languages. The Hon'ble Minister from West Bengal observed that it was important to have software handshake between the call centre of the States and that of the GSTN so that there was adequate link

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eting was called which was attended by the officers of the North Eastern States, BSNL and the Department of Telecommunications (DoT). The Dot and BSNL officials promised to look into the problem of connectivity in NE-States. The Hon'ble Minister from Delhi suggested that there should be an offline application for enrolment and it was informed by CEO, GSTN that the same would be ready by the end of November 2016. The Hon'ble Minister from Jammu Kashmir observed that the DR site should be in two different cities. It was clarified that the DC was located in Delhi while the DR site was in Bengaluru. The Hon'ble Minister from Tamil Nadu expressed that Beta testing should be done before GST rollout. The CEO, GSTN clarified that Beta testing was not being done with the public on account of paucity of time. However, test as mandated in the contract would be carried out. The Hon'ble Minister from Tamil Nadu also enquired regarding the alignment of back end system of 25 States/

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was proposed for such goods which at present cumulatively attracted a duty of 27% (VAT 14.5% and Central Excise duty 12.5%) in addition to the cascading effect and the effect of the Central Sales Tax (CST). He also recalled the suggestion to have a cess to meet the compensation requirement of the States. He clarified that if the estimated compensation requirement of ₹ 50,000 crores was to be raised through the tax route in GST, an additional ₹ 1.72 lakh crores of tax would be required to be levied, as only 29% of the tax collected under GST accrued to the Central Government. He stated that it was desirable that no extra tax burden be put on the common people under GST. He further mentioned that today only few items were being taxed at a rate between 35% to 65% or more and all these items could not be put in a slab of 40%. He informed that internationally, the practice was to keep alcohol, cigarette and petroleum products out of GST tax structure. He suggested to collect a c

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He pointed out that the planned expenditure of the Central and the State Governments was increasing and for this, funds are to be generated from taxes. He suggested to tax luxury goods at a rate higher than 26%. He also cautioned that tax on poor should not be so low that revenue generation was adversely affected. He suggested that the proposed 26% rate could be made 28% and 6% rate could be increased to 8%. He also noted that the tax structure should not be very rigid and a holistic view was needed. The Hon'ble Chairperson observed that GST would have some natural advantages such as a single national market, seamless movement of trucks at State borders and elimination of cascading of tax through a seamless flow of input tax credit. He also pointed out that for compensation, a growth rate of 14% had been assumed and overall tax collection might grow at a lower rate. He also pointed to the danger of higher rate of tax leading to greater evasion as seen from the example of high dutie

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he report of the Chief Economic Advisor. He questioned the logic of taxing the poor at a higher rate by increasing the existing VAT rate of 5% to a GST rate of 6% while reducing the existing combined tax rate of 28% to 26%. He suggested that the lower band of tax rate should be 5% and the upper band rate should be 40%. He observed that the 40% band rate could cover demerit goods, sin goods, luxury goods and fat goods. He also suggested that in the 28% or 40% rate, the States should have a band of rates to choose from. He also suggested that the Council needed to discuss the split up of rates between the Centre and the States and suggested that it should be in proportion of the revenues of the Centre and the States being collected today. The Hon'ble Chairperson observed that the goods covered in the tax bracket of 26%-28% also included items like refrigerators and televisions which were today also consumed by the lower middle classes and taxes on them could not be raised to 40%.

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e band to 28% but did not support the proposal of raising the 6% rate band to 8%. He observed that a large number of commodities attracted V AT at the rate of 5%. He also suggested that the items which presently attracted Nil rate of Central Excise or Service tax but State VAT should not be taken to the 12% band. He noted that there was a lot of concern at the proposal to tax gold at 4% and he suggested that it should be reduced to 2%. The Hon'ble Minister from Bihar suggested that the higher rate of tax should be kept at 30% and luxury items should be taxed at 40%. The Hon'ble Chairperson stated that if evasion could be checked by having moderate rates of GST, this would also positively impact Direct Tax collection as more transactions would get accounted in the books of account. 15. The Hon'ble Deputy Chief Minister of Gujarat suggested to keep tax on diamonds at the rate of 0%, keeping in view the fact that it accounted for export turnover of ₹ 2 lakh crore, pro

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that levying cess for generating revenue for compensation for five years was not desirable. He suggested that instead of deciding the special rate after five years, a special rate of tax for demerit goods may be decided at present only. The Hon'ble Chairperson stated that the GST Council should not only have the ownership of fixing compensation but also the ownership of raising compensation. 16. The Hon'ble Minister from Punjab expressed his agreement to the suggested slab of tax rates. However, he added that the principle of fixing tax rate based on the existing bands of taxation should be operated as a principle and not as a rigid rule. The Hon'ble Chairperson agreed that while fixing rates of tax on individual goods, the evolution of the economy and the existing distortions needed to be kept in mind. On the suggestion of having a higher slab rate of 40%, he reiterated that if GST rate was higher, the compensation kitty would be lower. He observed that at this stage, a

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he society. He therefore supported the idea of delinking compensation from the slab rates. He also observed that all goods presently in the slab of 26% could not be moved to the slab of 40% and creation of one more slab would cause loss of public support. He also agreed with the observation of the Hon'ble Minister from Jammu Kashmir that if Centre's finances were squeezed, it could adversely affect funding of the Centrally Sponsored Schemes. He also suggested that cess could be continued beyond five years and its proceeds could be shared between the Centre and the States and that this could solve multiple challenges. The Hon'ble Chairperson observed that while some developed countries had two rates in GST other than the exempt category, several other developed countries had multiple rate structure. He observed that in the Indian context, a two band rate would lead to either a steep increase or a sharp reduction in the tax incidence, and both were not desirable. 17. The

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bserved that on gold, the cumulative tax in most States was 2% (1 % VAT and 1 % Central Excise) and increasing the rate to 4% would generate negative feelings in the country. He also observed that a lower rate of tax on gold would encourage compliance and would cater to the concerns of the common man. The Hon'ble Chairperson observed that in the gold sector, the problem was not so much regarding levy of tax but regarding problems of inspection and maintenance of books and accounts. He observed that if tax on gold was to be reduced, some other goods would need to bear this tax burden. The Hon'ble Minister from West Bengal further observed that increasing the existing tax rate of 5% to 6% would adversely affect items like cotton, edible oil, newsprint, spices of all varieties, vegetable oil, micro nutrients, bio fertilizers, etc. He therefore supported the view of the Hon'ble Minister of Kerala that the existing rate of 5% under VAT should be retained instead of raising it to

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) and for aerated drinks was 39% (with cascading effect). He suggested to have a rate of 40% tax on luxury cars and aerated drinks. Summing up his proposal, he said that there should be five rates of 0% for food grains, 5%, 12%, 18%, 28% and 40% and the officers should fit the goods into the slabs of 12% and 18% taking into account the inflationary impact. He observed that some logical adjustments could also be done for goods falling in the slab of 28%. He stated that after the officers had carried out this exercise, it should be brought back to the Council for consideration. On gold and diamond, he stated that a view could be taken later on. He further observed that the average combined rate of tax on tobacco was in the range of 60%-65% and the House needed to take a call whether taxation on it should be kept separate from compensation and further whether a tax in addition to 40% should be imposed on it, and if so, at what rate. He added that tobacco was truly a sin good which adverse

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iding whether the proposed slab of 6% could be reduced to 5%; the proposed slab of 26% could be increased to 28%; the proposed slab on gold could be reduced from 4% to 2% and whether a new slab of 40% could be introduced. Post lunch, the Secretary to the Council briefed the Hon'ble Ministers on certain factual aspects the emerged from the officers' discussion. He stated that tax base for proposed 6% slab was estimated to be ₹ 3.661akh crores and reducing it to 5% is expected to lead to a revenue loss of around ₹ 3,700 crores. Tax base for 26% slab was estimated to be ₹ 12.83 lakh crores and increasing it to 28% is expected to lead to an additional revenue of around ₹ 25,600 crores. Reducing tax on gold from 4% to 2% would lead to an estimated revenue loss of around ₹ 9,000 crores and if it was reduced to 3%, the estimated revenue loss is expected to be around ₹ 4,500 crores. For aerated drinks, luxury cars and pan masala the total taxable bas

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year sunset period. He added that an additional slab of 40% would be open to public criticism. He also reminded that cess was to be raised only for a few States who needed compensation and any residual amount after five years would be shared with the States. He added that the Council could take a decision based on the facts as presented. 20. The Hon'ble Deputy Chief Minister of Gujarat suggested that a slab rate of 40% should be made part of GST tax rate instead of a cess. The Hon'ble Minister from Maharashtra supported this suggestion. The Hon'ble Minister from Tamil Nadu suggested that tax on gold should be reduced from 4% but the Hon'ble Minister from Bihar and Assam opposed this proposal. The Hon'ble Chairperson stated that cess could have a sunset clause and the Council could thereafter decide the GST rate on goods attracting cess. The Hon'ble Minister from Kerala supported the proposal to exempt food grains from tax and to reduce the proposed 6% slab t

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he fitment exercise was over. He cautioned against an obsession for revenue neutral rate and observed that more revenue was needed for welfare measures and he noted that many other commodities were taxed at a rate closer to 40%. 21. The Hon'ble Minister from Tamil Nadu stated that as Service tax was proposed to be raised from 15% to 18%, on goods side, duties could be reduced on a significant number of commodities. Gold could be one of them as mangalsutra had important cultural and emotional aspect in his State. He observed that gold was not a pure luxury good and 60% of the bottom part of the population also bought gold. He also added that if luxury goods were brought into the demerit rate, the manufacturing States would stand to gain .. The Hon'ble Chairperson stated that many goods presently in the tax bracket of 26%-28% like soap, oil, television, cheaper mobile sets etc. were used by common people and a choice would have be to be made whether duty on such goods or on go

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ould be six rates in GST: 12% and 18% as standard rates, 6% and 26% as subsidiary rates, 0% and 40% as special rates. He observed that over five years, the 40% tax structure could disappear. He stated that exempted category of goods should be avoided. He further suggested to work out average weighted GST rate after fixing the incidence of tax on each item. He also suggested that over a period of time, there should be a move towards a three rate structure. The Hon'ble Minister from Telangana suggested that the tax rate for gold could be decided later after working out the loss due to 0% tax for goods used by the poorer sections and 18% tax for goods used by the common people. He suggested to retain the proposed 26% slab and to apply cess on top of that. The Hon'ble Minister from Tamil Nadu suggested that gold and diamond should be treated on the same footing as like the diamond craftsmen in Gujarat, there was a Viswakarma community for gold spread over a wider area of the countr

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ould be a review every year by the Council to examine what cesses could be subsumed into GST tax. He added that officers would also examine as to what items presently attracting combined tax rate of28% could be put into 18% slab. He also added that for luxury goods, the present incidence of taxation would be maintained. He further added that the rate of tax on gold could be kept open till the completion of the fitment exercise of goods into bands of 12% and 18% by the officers and reporting back to the Council. 24. In reference to the summing up by the Hon'ble Chairperson, the Hon'ble Minister from West Bengal suggested that the GST rate of 40% could be kept for luxury cars, pan masala and aerated drinks and for tobacco, there could be a GST rate of 40% plus cess. He observed that by this rate structure, all States would get revenue and Centre would also get revenue for compensation. He advised not to be too sensitive about the world opinion as they were democratically elect

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ur products would mean a loss of ₹ 17,000 crores from the compensation kitty which would go to the States. He also added that the present collection from the Clean Environment Cess at the rate of ₹ 400 per metric ton on coal, lignite and peat might not be sustainable for five years if the international prices of coal increased in future. The Hon 'ble Minister from Assam stated that smaller States often depended upon devolution of fund from the Centre to meet their financial deficit and therefore Centre's tax collection needed to be robust. He added that the Hon'ble Chairperson had made a fair proposal of sunset clause for cess and the GST Council would decide the sharing of the surplus amount in the compensation fund. He also reminded that taking the tax and cess together, the consumer was not paying anything less than the existing tax rate. He also reminded that States had got a 14% assured revenue growth for five years. Keeping these facts in mind, he urged t

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pirit of cooperative federalism. 26. The Hon'ble Minister from Jammu Kashmir observed that as States were insulated for the next five years with an assured 14% revenue growth, this issue need not be discussed much. The Hon'ble Minister from Tamil Nadu stated that they did not want dependency on compensation as they had to survive on their own after five years. The Hon'ble Minister from Odisha and Tamil Nadu also supported the proposal of keeping a GST rate slab of 40%. The Hon'ble Chairperson stated that if compensation was funded from GST, it would not lead to additional tax burden on people. The Hon'ble Minister from Jammu Kashmir disagreed and stated that it would constitute an additional burden as the incidence of taxation would have been lower without an additional cess. The Hon'ble Minister from West Bengal added that there was higher burden as no input tax credit was available on cess. The Hon'ble Minister from Punjab stated that the Central Go

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ed in the product would need to be refunded. The revenue implication for this would need to be studied. The Secretary to the Council added that food grains being tax exempt was not the same as being zero rated. He added that as per the present policy, there was no zero rating for any commodity except when they were exported or supplied to a Special Economic Zone (SEZ). The Hon'ble Minister from Bihar stated that the thrust ofthe suggestion was that there should be no additional burden on the farmers. The Hon'ble Ministers from Andhra Pradesh and West Bengal also stated that basically there should be no tax on agriculture produce. The Hon'ble Minister from Meghalaya supported the suggestion of the Hon'ble Minister from Punjab and stated that while fixing tax on different commodities, farmers should be given special attention. 28. The Hon'ble Minister from Punjab suggested that the surplus amount left in the Compensation Fund at the end of the five year compensatio

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include items like food grains. (ii) There shall be a low band of tax rate of 5% and would generally cover goods which presently attract combined tax rate of Central Excise and V AT (including cascading on account of these two taxes) between 3% and less than 9%. Such goods are normally consumed by the vulnerable sections of the society or have high impact on inflation. (iii) There shall be a standard tax rate of 12% and would generally cover goods which presently attract combined tax rate of Central Excise and VAT (including cascading on account of these two taxes) between 9% and less than 15%. (iv) There shall be another standard tax rate of 18% and would generally cover goods which presently attract combined tax rate of Central Excise and VAT between 15% and less than 21 % (including cascading on account of these two taxes) (v) There shall be a higher band of tax rate of28% and would generally cover goods which presently attract combined tax rate of Central Excise and V

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e allocated to the National Disaster Relief Fund (NDRF). (xi) Cess shall be part of the Compensation Act and it shall have a sunset clause of five years. (xii) Any residual amount left in the Compensation Fund after the five year compensation period shall be shared in the ratio of 50% each for the Central Government and the State Governments. In the 50% share of the States, the amount shall be distributed to the individual States based on their share of all-India collection of SGST. (xiii) There shall be a review every year by the Council to examine if, based on the need for compensation, cesses levied for compensation purpose could be subsumed into the GST tax net. Similarly, additional cesses can be imposed by the Council to meet the requirement of compensation. (xiv) A Committee of officers of the Central Government and the State Governments shall carry out an exercise of fitment of goods in the various slab rates, namely exempted category, lower rate, the two standard r

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GST Council Meeting) 30. This agenda item was taken up for discussion on 4 November, 2016. Initiating the discussion, the Secretary to the Council brought to the notice of the Members that the GSTN had earlier shared data of the existing taxpayers under VAT, Central Excise and Service tax as on 01.01.2016 and in the 3 rd GST Council meeting held on 18-19 October 2016, the States were requested to send updated data upto 31 August 2016. He informed that while 19 States had sent updated data, the data from other States was only upto 1 st January 2016. He further informed that turnover wise segmented data of the taxpayers and the tax paid was available from 14 States and that there was a mismatch in the number of total taxpayers as given in this data when compared to the earlier data given by the States to the GSTN. Therefore, there was a need to match these two data sets. He recalled that in the last meeting of the Council, five options were placed before the Council to achieve sing

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ratio in order to facilitate the taxpayer to know who would be his assessing officer. He expressed that as Indirect tax was also moving towards minimal human interface, it might not be relevant to provide for a system where the taxpayer has to be looked after by a particular tax jurisdiction. 31. Initiating the discussion, the Hon'ble Minister from Tamil Nadu stated that earlier the Option II (all taxpayers below a turnover of ₹ 1.5 crores to be administered by State administration and to follow cross empowerment model of Option N for taxpayers above the turnover of ₹ 1.5 crores) was eliminated due to the logic of a large number of taxpayers going into the jurisdiction of the State tax administration. He stated that the veracity regarding the number of taxpayers needed to be tested due to fundamental difference in the numbers presented by the Hon'bJe Minister from West Bengal and the Central administration. He therefore suggested that Option II should also remain

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from West Bengal recalled the unanimous decision of the Empowered Committee that taxpayers with turnover below ₹ 1.5 crore shall be with the States for both goods and services and those above ₹ 1.5 crore turnover could be administered on the basis of crossempowerment with a 5% cap on audit. He stated that by following this approach, taxpayers accounting for only 7.3% of revenue shall be below ₹ 1.5 crores and taxpayers accounting for 92.7% of revenue would be administered under cross-empowerment model. The Hon'ble Chief Minister from Puducherry supported Option II for taxpayers below ₹ 1.5 crore turnover and for taxpayers above ₹ 1.5 crore turnover, he proposed an equal division between the Central and the State tax administrations. He stated that there should be a via media under which neither the Centre nor the State should suffer. The Hon'ble Minister from Bihar suggested that for three years, retailers of goods should be with the State adminis

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that the audit sample should be 10% and not 5%. 34. The Hon'ble Minister from Chhattisgarh observed that Option IV was the most preferable. However keeping in view the apprehensions of the small taxpayers, earlier Option III was decided upon. However, keeping in view the difficulties expressed in distinguishing between supplies of goods and services and the apprehensions of the small taxpayers, he suggested that for 3 years, Option III could be adopted with the modification that the three categories of taxpayers dealing both in goods and services, namely works contractors, restaurants and hotels could be administered by the State Governments. The Chairman CBEC stated that the Central Government's suggestion to adopt Option IV needed to be viewed in a broader context. He pointed out that registrations were to be done by G'S'TN and all registrations were deemed to be done within three working days and were sent to the respective States. Similarly payments were done on

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taxpayer could go to the administration with which he was most comfortable with. He also pointed out that in Direct Tax, all returns landed in Bengaluru and in Customs, all Bills of Entry landed in Mumbai., though they might have been filed in Tuticorin or Haldia and then, if needed, an alert was sent to Tuticorin or Haldia. The Hon'ble Chairperson observed that in the GST system, all returns would land in GSTN where analysis would be by computers and suspicious returns would be thrown up for scrutiny. He observed that out of total 1 crore taxpayers, only about 5 lakh taxpayers would require scrutiny and the issue to be examined was how work would be divided for these 5 lakh taxpayers. He observed that due to use of Information Technology, work would get reduced for both the Central and the State administrations and that he had received a suggestion that in the long run, there should be convergence of Services by creating a GST cadre of officers. However, till such a thing happened

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limited bandwidth. He emphasised the importance of co-location of taxpayer and the tax administration. The Hon'ble Chairperson stated that in goods, the threshold limit for payment of Central Excise duty was turnover of more that ₹ 1.5 crore, whereas the State tax administration was dealing with small retailers. In Service tax, the Central administration was dealing with all taxpayers above the turnover threshold of ₹ 10 lakhs, He stated that the formulation for single interface in the 1 st GST Council meeting was made keeping these realities into account. However, given the objections raised by the Hon'ble Minister from West Bengal and the problems of lack of distinction between goods and services for certain sectors like works contracts and restaurants, one option could be to consider the proposal made by the Hon'ble Minister from Chhattisgarh. He also shared the apprehensions expressed to him by large service tax taxpayers regarding the inadequate capacity of

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bureaucracy based on competencies of the Central and State tax administrations in two years' time. For the first two to three years, an interim arrangement could be worked out. The Hon'ble Minister from Tamil Nadu stated that States had their own system of giving identity to goods and migrating this to the Harmonised System of Nomenclature (HSN) would be a huge challenge. He added that identity alignment of goods could not be done centrally and manufacturers in small sector would require a sense of ownership from the State tax department. The Hon'ble Minister from West Bengal observed that all major Banks as also eighteen telecom companies were registered with the State tax administration in his State for various activities like building telecom towers, obtaining way bills, disposing scrap etc. The Hon'ble Chairperson observed that these activities related to goods and He suggested that keeping these aspects in mind, an optimally acceptable solution needed to be worked

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mber of taxpayers below the turnover of ₹ 1.5 crore was 85%, they only accounted for 5% of revenue and that the 15% of taxpayers above the turnover of ₹ 1.5 crore accounted for 95% of revenue. The Hon'ble Minister from U.P. observed that even if registration of a taxpayer was automatic, co-location was important to ensure raising of demand where tax was not paid. The Hon'ble Minister from Telangana also supported the proposal to allow taxpayers below the turnover of₹ 1.5 crore to be administered by States. 38. There was a discussion on the number of taxpayer base. Shri Upender Gupta, Commissioner, GST, CBEC stated that the total PAN matched taxpayer base which would be migrated to GST was .around 117 lakhs. He further mentioned that GSTN had informed that out of 117 lakh taxpayer presently registered Central Excise, Service Tax and V AT, PAN had been verified in case of 93 lakh taxpayers and all these 93 lakh taxpayers would be migrated in GST and GSTIN wo

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he taxpayers should be with the States and one-third should be with the Centre. The Hon'ble Minister from Bihar suggested that further work could be done on this subject before arriving at the final opinion and a committee could be constituted for it. The Hon'ble Minister from Maharashtra supported this proposal and suggested to make a committee of officers to examine this issue further and to also hear the stakeholders in the matter. The Hon'ble Chairperson observed that every argument had a basis but the issue would need to be now decided politically. He observed that while there might be corresponding pressure from the tax administrations of the Central and the State Governments to retain the maximum number of taxpayers, the basic point to be kept in mind was that resources of the Centre and the States must be used optimally to ensure that everyone had optimum work. 39. The Hon'ble Minister from Tamil Nadu raised a different issue. He observed that if increasing t

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5% assessees fell within the bracket of a turnover of up to ₹ 20 lakhs and they accounted for only 1 % of the revenue. The Hon'ble Minister from U'P. stated that in his State, only 3% of revenue was accounted for by taxpayers upto a turnover of ₹ 20 lakhs. The Hon 'ble Minister from Telangana observed that the decision regarding exemption threshold of ₹ 20 lakhs was taken to take small taxpayers out of the tax base. 40. The Hon'ble Minister from Karnataka agreed with the earlier observation of the Hon'ble Minister from Jammu Kashmir that this subject involved a fair bit of turf issue. He observed that as fairly large number of potential assessees were outside the tax net, the most important priority was to bring them into the tax net through enforcement action and for this, both administrations needed to work together to expand the taxpayer base. He observed that another priority for the administrations should be to reduce harassment and publi

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ided both by the number of taxpayers and the quantum of revenue. 41. The Hon'ble Minister from West Bengal strongly stated that the proposed division would be equitable taking into account the proportion of tax officials of the Centre and the States where the State officials where possibly five times more than the Central officials. The Hon'ble Deputy Chief Minister of Delhi stated that eventually the tax administration of the Centre and the States needed to be converged. He also suggested to have a policy of deputation of officers between the Centre and the States and cautioned against the decision becoming a victim of the number of people employed in the tax administrations of the Centre and the States. The Hon'ble Minister from Kerala stated that he was taken aback at the debate and wondered why a compromise could not be reached on this issue when the same could be reached on a more important issue of tax rates. He urged the Hon'ble Chairperson not to be influence

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e Hon'ble Minister from Tamil Nadu observed that if after increasing the taxable threshold, 20 lakh Service Tax taxpayers were to go out of the tax net, and only 90,000 Service Tax taxpayers were to be left below the turnover of ₹ 1.5 crore, then such assessees would avoid payment of tax by splitting up their operations. 43. The House felt that to take a decision in this matter, more data was required and that it could be shared after the lunch break. Post lunch break, the Secretary to the Council shared some relevant data with the House. He informed that the total number of existing taxpayers was around 93 lakhs, out of which VAT dealers were around 63 lakhs, Service Tax taxpayers were around 26 lakhs and Central Excise taxpayers were around 4 lakhs. He further informed that the total number of taxpayers with a turnover below ₹ 20 lakhs was around 54 lakhs and out of this, VAT dealers were around 36 lakhs, Service Tax taxpayers were around 17 lakhs and Central Excis

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he turnover of ₹ 10 lakhs and ₹ 20 lakhs was not available. The Secretary to the Council added that irrespective of the method of division, both administrations should be empowered to take information based enforcement action and there should be no exclusion of jurisdiction. 44. The Hon'ble Minister from West Bengal once again strongly reiterated that based on the data shared by the Secretary to the Council, the proposed division of taxpayers was equitable on the basis of proportionality of the strength of the officers. The Hon'ble Deputy Chief Minister of Gujarat made an alternate suggestion that there should be no threshold ceiling of ₹ 1.5 crore and the taxpayers paying all three taxes could be divided in the ratio of two-third to the States and one-third to the Centre. The Hon'ble Minister from Kerala opposed this suggestion of vertical division. He observed that the Central tax administration did not have officers to reach tax payers at the taluka

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f the Hon'ble Deputy Chief Minister of Gujarat. The Hon'ble Chief Minister of Puducherry observed that with ₹ 20 lakh taxable threshold, a large number of taxpayers would go out of the tax net and the officers of the State and the Central Governments needed to be fully involved in the administration of GST. He further observed that the discussions also needed to focus on how to check tax evasion. 45. The Hon'ble Minister from Tamil Nadu suggested to revisit the taxable threshold for goods and services and take it back to ₹ 10 lakhs and then adopt Option II. The Hon'ble Minister from U.P, observed that the intention behind keeping taxpayers below ₹ 1.5 crore turnover with the States was hat such taxpayers were located in small cities and they could interact in the same language with the officers. The Hon'ble Chairperson stated that in a situation where 85% of taxpayers were below Rs, 1.5 crore turnover and 15% were above it, Option II would not

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the Council and the demand was to apply this decision to services looking at the number of Service Tax taxpayers. The Hon'ble Minister from Iharkhand stated that the method of division on the basis of ₹ 1.5 crore turnover or a vertical two-third/one-third division looked the same. The Hon'ble Minister from Tamil Nadu stated that if taxpayer base was reducing by 42%, there was a need to look at the existing workforce and the possibility of redeploying one-third of the workforce of both the Central and the State tax administrations. However, subsequently he also observed that the entire taxpayer base might not shrink because dealers making inter-State supply would need to be registered irrespecti ve of the turnover threshold. 46. The Hon 'ble Minister from Chhattisgarh reiterated his proposal to go by the decision of the 1st meeting of the Council with the modification that the taxpayers in the sectors of hotel, restaurant and works contract should be with the States

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hat these two options or a mix of the two needed to be further discussed informally to find a political solution. He suggested to have an informal meeting of all State Ministers on 20 November, 2016 in New Delhi to discuss this issue. This was agreed to unanimously. 48. In view of the above discussions, for Agenda item 4, the Council adopted the following decision: to defer decision on the issue of provision for Cross-Empowerment to ensure Single Interface under GST and to meet informally on 20 November, 2016 to find a solution for this issue. Agenda item 5: Date of the next meeting of the GST Council 49. The Chairperson informed that as the Model GST Law was not yet ready, the proposed meeting of the Council on 9-10 November, 2016 would not be held. Instead he proposed that the Council could meet on 24-25 November, 2016 from 3 PM to 8 PM on both days as this would give sufficient time to complete the work on Model GST Law and to present it for Council's consideration.

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– Four-tier GST rate structure of 5, 12, 18, 28 percent has been announced by the GST Council in addition to zero rated goods – TMI Updates – Highlights

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Goods and Services Tax – GST – Dated:- 3-11-2016 – New Delhi: In the latest, four-tier GST rate structure of 5, 12, 18, 28 percent has been announced by the GST Council. Zero-tax rate will be applied to 50 percent of items in CPI basket, including foodgrains used by common man, says Arun Jaitley. 5% duty will be levied on mass consumption items used by common people; 2 Standard Rates of 12%, 18% will be there in GST, said he. Items taxed at 30-31 percent (excise plus VAT) will be taxed at 28 percent, said Jaitley. Furthermore, additional revenue from highest tax slab is to be used to keep essential use items at 5% and transferring common items to 18%. The long-delayed tax, which would transform Asia s third largest economy into a single ma

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Goods and Services Tax – GST – By: – Mr. M. GOVINDARAJAN – Dated:- 3-11-2016 – Time of supply The time of supply fixes the point when the liability to charge GST arises. Section 12 of the Act deals with the time of supply of goods and Section 13 of the Act deals with the time of supply of services. Time of supply of goods Section 12(2) provides that the time of supply of goods shall be the earliest of the following- (a) (i) the date on which the goods are removed by the supplier for supply to the recipient, in a case where the goods are required to be removed; or (ii) the date on which the goods are made available to the recipient, in a caswe where the goods are not required to be removed; or Explanation 1 to this Section provides that the provisions contained in (ii) shall apply in cases where the goods- are physically not capable of being moved; or are supplied in assembled or installed form; or are supplied by the supplier to his agent or his principal. (b) the date on which the su

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f account, then the time of supply shall be- the date of issue of invoice; or the date of receipt of payment whichever is earlier. Section 12(4) gives powers to the Central Government or a Statement to specify, by notification, on the recommendation of the Council, the supply of goods that shall be treated as continuous supply of goods. Time of supply on reverse charge basis Section 12(5) provides that in case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earliest of the following- the date of receipt of goods; or the date on which the payment is made; the date of receipt of invoice; or the date of debit in the books of accounts. The explanation to this section provides that that the date on which the payment is made shall be- the date on which the payment is entered in the books of accounts of the recipient; or the date on which the payment is debited in his bank account, whichever is earlier. Time of supply g

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n of the provision of service or the date of receipt of payment, whichever is earlier, if the invoice is not issued within the prescribed period; or (c) the date on which the recipient shows the receipt of services in his books of account in a case where the provisions of above two clauses do not apply. Explanation 1 to this section provides that the supply shall be deemed to have been made to the extent it is covered by the invoice or payment. Explanation 2 to this section provides that the date of receipt of payment shall be- the date on which the payment is entered in the books of account of the supplier; or the date on which the payment is credited to his bank account, whichever is earlier. Continuous supply of services Section 13(3) provides that in case of continued supply of services, the time of supply shall be- Where the due date of payment is ascertainable from the contract, the date on which the payment is liable to be made by the recipient of service, whether or not any inv

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e on which the payment is made shall be- the date on which the payment is entered in the books of account of the recipient; or the date on which the payment is debited in his bank account, whichever is earlier. Cessation of service Section 13(6) provides that in a case where supply of services ceases under a contract before the completion of supply, such services shall be deemed to have been provided at the time when the supply ceases. Non possibility to determine the time of supply Section 13(7) provides that where it is not possible to determine the time of supply of services as mentioned above, the time of supply shall- in a case where a periodical return has to be filed, be the date on which such return is to be filed; or in any other case, be the date on which CGST/SGST is paid. Change in rate of tax in respect of supply of services It is inevitable in case of services, change of tax rate at any time. The Government may vide Finance Act increase the rate of tax. For example, servi

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ive rate of tax but the payment is received after the change in effective rate of tax, the time of supply shall be the date of issue of invoice; or where the payment is received before the change in effective rate of tad, but the invoice for the same has been issued after the change in effective rate of tax, the time of supply shall be the date of receipt of payment. The time of supply, in case that taxable service has been provided after the change in effective rate of tax, shall be determined in the following manner- where the payment is received after the change in effective rate of tax but the invoice has been issued prior to the change in effective rate of tax, the time of supply shall be the date of receipt of the payment; or where the invoice has been issued and the payment is received before the change in effective rate of tax, the time of supply shall be the date of receipt of payment or date of issue of invoice, whichever is earlier; and where the invoice has been issued afte

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supply. Inclusion in transaction value Section 15(2) provides that the transaction value shall include- any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods and/or services; the value, apportioned as appropriate, of such goods and/or services as are supplied directly or indirectly by the recipient of the supply free of charge or at reduced cost for use in connection with the supply of goods and/or services being valued, to the extent that such value has not been included in the price actually paid or payable; any taxes, duties, fees and charges levied under any statute other than SGST Act or CGSG Act or the IGST Act; incidental expenses, such as, commission and packing, charged by the supplier to the recipient of a supply, including any amount charged for anything done by the supplier in respect of the supply of goods and/or services at th

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Goods and Services Tax – GST – By: – Puneet Agrawal – Dated:- 3-11-2016 Last Replied Date:- 4-11-2016 – Link to the video : https://www.youtube.com/watch?v=UnTX60ZfvnY GST 10 point series on Input tax credit – concept One of the major reason for introducing GST is making the credit mechanism seamless so that there is no cascading effect of taxes. In the Model GST law provisions relating to input tax credit are majorly covered in Section 16, 16A, 17, 18, 28, 29 and 35 of the CGST Act/ SGST Act. Vide Section 27 of the IGST Act, provisions relating to input tax credit and utilization thereof, as applicable in CGST Act would apply even in respect of IGST. Input tax credit in relation to taxable person means credit of : {IGST and CGST}/{IGST and SGST} charged on any supply of goods and/or services to him (includes even importation) which are used, or are intended to be used, in the course or furtherance of his business and includes the tax payable on reverse charge basis Thus as per the de

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ssible to him. Thus registration is a pre-requisite for taking credit of input tax. The eligible input tax credit would be credited to the electronic credit ledger and it can be used for payment of taxes under the Act or Rules made thereunder. For newly registered person, ITC is allowed in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day preceding the date from which the person becomes liable to pay tax provided he applies for registration within 30 days of becoming liable to obtain registration. A taxable person shall not be entitled to take input tax credit in respect of any supply after the earlier of following two events filing of return under section 27 for the month of September following the end of financial year to with such invoice pertains; or filing of the relevant annual return GST 10 Point Series on Manner of taking Input tax credit – conditions and restrictions Registered taxable person shall be entitled to t

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e. to ensure availability of credit of tax paid in a easy and convenient manner to taxpayers. Where the goods against an invoice are received in lots or installments, the registered taxable person shall be entitled to the credit upon receipt of the last lot or installment. Where the registered taxable person has claimed depreciation on the tax component of the cost of capital goods under the provisions of the Income Tax Act 1961, the input tax credit shall not be allowed on the said tax component. At first, taxable person is only allowed to take the credit of input tax, as self assessed in the his return, on a provisional basis and such amount shall be credited to the electronic credit ledger. The claim of input tax credit shall be finally accepted once the details of inward supplies furnished by the taxable person is matched with the corresponding details of outward supplies furnished by corresponding taxable person. Where after matching it is discovered that the ITC claimed by recipi

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Goods and Services Tax – GST – By: – Puneet Agrawal (Athena Law Associates) – Dated:- 2-11-2016 – In the GST Regime, tax whether CGST, SGST or IGST is chargeable only when there is a supply of goods and/ or services. Thus it is imperative to understand the meaning of the term supply . Meaning and scope of supply is defined in Section 3 of the Central Goods and Services Tax Act/ State Goods and Services Tax Act. Meaning of Supply is defined in an inclusive manner that means the transaction which are covers within the definition are only illustrative. As per the definition, supply includes all forms of supply of goods and/ or services such as: Sale, transfer, barter, exchange, license, rental, lease, disposal Made or agreed to be made for a

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ions even without consideration are covered within the four corners of supply : Permanent transfer/ disposal of business asset; Temporary application of business asset to a private or non-business use: Example Use of Car owned by Business for personal travel. Services put to private or non-business use – Example where a CA prepares his own tax return Supply of goods and/ or services by a taxable person to another person in the course of furtherance of business – this is a very dangerous inclusion as this implies below. All transactions that are made by a taxable person to another person in the course of furtherance of business even when made without consideration are covered within the definition of supply. This inclusion dilutes sub clause

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Goods and Services Tax – GST – By: – Mr. M. GOVINDARAJAN – Dated:- 2-11-2016 – Taxable event The taxable event in respect of services is for the services provided or to be provided. The taxable event also depends upon the place of provision of service and point of taxation. Likewise the taxable event in excise duty is the removal of excisable goods manufactured or produced. In VAT the taxable event is the time of sale of goods. The taxable events under the existing indirect laws shall stand subsumed in the taxable event known as supply in the model GST law. Meaning and Scope of Supply Section 2(92) of the Act defines the term supply as having the meaning as assigned in Section 3. Section 3(1) provides that supply includes- all forms of supply of goods and/or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course of furtherance of business; importation of service, whether or not for a

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inducement of, the supply of goods and/or services, whether by the said person or by any other person. Deposit – consideration? The proviso to Section 2(28) provides that a deposit, whether refundable or not, given in respect of the supply of goods and/or services shall not be considered as payment made for the supply unless the supplies applies the deposit as consideration of the supply. Under service tax provisions the deposit is not liable to pay tax but the advance payment received for any service to be provided will be liable for taxation under service tax provisions. Litigation may arise for interpretation of the term deposit unless it is clearly defined. Supply without consideration Schedule I to the Act gives the list of matters to be treated as supply without consideration- Permanent transfer/disposal of business assets; Temporary application of business assets to a private or non business use; Services put to a private or non business use; Assets retained after deregistratio

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ons that are to be treated as- a supply of services and not as a supply of goods; or neither a supply of goods nor a supply of services. Essential ingredients to supply In order to constitute a supply the following element are required to be satisfied- supply of goods and/or services; supply is for a consideration; supply is made in the course of furtherance of business; supply is made in the taxable territory; supply is a taxable supply; supply is made by a taxable person. Under certain circumstances such as importation of service or supplies made without consideration, where one or more ingredients are not satisfied, it shall be treated as supply. Inter-state self supplies such as stock transfer will be taxable as a taxable person has to take state wise registration. Such transactions have been made taxable even if there is no consideration. However intra state supplies are not taxable. Title as well as possession both has to be transferred for a transaction to be considered as a sup

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e of business except in case of such supplies where the tax is payable on reverse charge basis. Continuous supply of goods Section 2(30) defines the term continuous supply of goods as a supply of goods which is provided, or agreed to be provided, continuously or on recurrent basis, under a contract, whether or not by means of a wire, cable, pipeline or other conduit, and for which the supplier invoices the recipient on a regular or period basis. Continuous supply of services Section 2(31) defines the term continuous supply of services as a supply of services which is provided or agreed to be provided, continuously or on recurrent basis, under contract, for a period exceeding three months with periodic payment obligations and includes supply of such service as the Central Government or a State Government may, whether or not subject to any condition, by notification, specify. Composite supply Section 2(27) defines the term composite supply as a supply consisting of- two or more goods; tw

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s export of service when- (a) the supplier of service is located in India; (b) the recipient of service is located outside India; (c) the place of supply of service is outside India; (d) the payment of such service has been received by the supplier of service in convertible foreign exchange; and (e) the supplier of service and recipient of service are not merely establishment of a distinct person. The explanation to this section provides that for the purposes of clause (e) an establishment of a person in India and any of his establishment outside India shall be treated as establishments of distinct persons. Import of service Section 2(52) provides that the supply of any service shall be treated as import of service , if- (a) the supplier of service is located outside India; (b) the recipient of service is located in India; (c) the place of supply of service in India; and (d) the supplier of service and the recipient of service are not merely establishments of a distinct person. Explana

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Goods and Services Tax – GST : 10 POINT SERIES ON SUPPLY – Goods and Services Tax – GST – TMI Updates – Highlights

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Goods and Services Tax – MEANING AND SCOPE OF ‘SUPPLY’ UNDER MODEL GST LAW – Goods and Services Tax – GST – TMI Updates – Highlights

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Hike GST rate by 1-2%, don t levy cess: Assocham – Goods and Services Tax – GST – Dated:- 2-11-2016 – Industry chamber Assocham has made a pitch to Finance Minister Arun Jaitley not to levy cess, but hike GST rate by 1-2 per cent to garner additional resources to compensate states for any revenue loss on rollout of the new regime from April next year. At the GST Council meeting last month, the Centre had proposed a four-tier GST rate structure of 8 per cent, 12 per cent, 18 per cent and a peak rate of 26 per cent, which will mostly apply to FMCG and consumer durables. Besides, a cess is also likely to be levied on demerit or sin goods and polluting items. In a letter to Jaitley, Assocham Secretary General D S Rawat said that even if multipl

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uits, vegetables, grains etc should be taxed at zero rate. Processed food products for mass consumption like dairy products, rice, edible oil, biscuits should attract 6 per cent duty. It further suggested that mobile phones, computers, fruit juices, pet foods be taxed at 12 per cent and other items at 18 per cent. Luxury cars, tobacco and pan masala should be taxed at 26 per cent, it said. Under the proposed 4-slab structure, the items which are currently taxed between 3-9 per cent will fall in the 6 per cent bracket; those in 9-15 per cent range will come under 12 per cent rate. Those products which are currently taxed between 15-21 per cent will attract 18 per cent levy while those above 21 per cent will be taxed at the peak rate of 26 pe

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Goods and Services Tax – GST – Dated:- 28-10-2016 – The Goods and Services Network(GSTN) has signed a Memorandum of Understanding (MoU) with Director General of Foreign Trade (DGFT) for sharing of foreign exchange realisation and Import Export code data, a move that is expected to strengthen processing of export transactions of taxpayers under GST, increase transparency and reduce human interface. The Memorandum of Understanding was signed by Shri Ajay K Bhalla, Director General of Foreign Trade and Shri Prakash Kumar, CEO, GSTN in New Delhi on 27.10.16. An electronic bank realisation certificate (eBRC) captures transaction level details of foreign exchange realised in India. The eBRC project implemented by DGFT created an integrated platf

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for refund of VAT. In addition, it is an important economic indicator as it quantifies transaction level export earnings. 2. DGFT has signed MOUs with 14 state governments and 2 central government agencies for sharing of the data. 3. At the state level, Commercial Tax Departments of 14 states have signed MoU with DGFT for receiving e-BRC data for VAT refund purposes. These are: (i) Maharashtra, (ii) Delhi, (iii) Andhra Pradesh,(iv) Odisha, (v) Chhattisgarh, (vi) Haryana, (vii) Tamil Nadu, (viii) Karnataka, (ix) Gujarat, (x) Uttar Pradesh, (xi) Madhya Pradesh, (xii) Kerala, (xiii) Goa, (xiv) Bihar. In addition, Ministry of Finance, Enforcement Directorate and Agricultural & Processed Food Products Export Development Authority have signe

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Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 28-10-2016 – Chapter XXII of the Model Law contains Chapter XXII comprising of sections 108 to 115 which deal with liability to pay GST in eight special cases as follows: Section Liability 108 Liability in case of transfer of business 109 Liability in case of amalgamation / merger of companies 110 Liability in case of company in liquidation 111 Liability of partners of firm to pay tax 112 Liability of guardians, trustees etc 113 Liability of Court of Wards etc. 114 Special provision regarding liability to pay tax in certain cases (death, discontinued business, hindu undivided family or association of persons, on partition, dissolution of firm, termination of guardianship or trust etc). 115 Liability in other cases (discontinued business of HUF, firm, AOP; change in constitution of firm or AOP etc.) This part covers sections 113 to 115 of the model GST law. Liability of Court of Wards etc. Where the estate of a taxable p

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Any other person by whatever name and the designation called, who in fact actually manages the business Liability to pay tax in certain cases Death Where a person liable to pay tax dies, then, if the business is continued by his legal representative or any other person, such legal or any other person shall be liable to pay tax, interest or penalty due from such person. If the business is discontinued whether before or after his death, his legal representative shall be liable to pay out of the estate of the deceased to the extent to which the capable of meeting the charge, tax, penalty or interest due from such person, whether such dues have been determined before his death but has remained as unpaid or is determined after his death. Taxable persons would include individuals and proprietorship concerns. In following cases, recovery can not be made from the legal representative of deceased person – If business of deceased person is discontinued There is no legal representative of deceas

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ble to pay tax is the guardian of a ward on whose behalf the business is carried on by the guardian or a trustee who carries on the business under a trust for a beneficiary, if the guardianship or trust is terminated, the ward or, as the case may be, the beneficiary shall be liable to pay the tax, interest or penalty due from the taxable person up to the time the termination of the guardianship or trust whether such dues have been determined before the termination of the guardianship or trust but has remained as unpaid or is determined after such termination. Liability in other cases Discontinued Business Where a firm or AOP or HUF has discontinued the business, the tax payable by such entity up to the date of discontinuance may be determined as if no such discontinuance has taken place. Every person who was at the time of discontinuance, a partner of firm or member of AOP / HUF notwithstanding such discontinuance shall be liable jointly and severally for the payment of tax, interest o

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Goods and Services Tax – GST – Dated:- 27-10-2016 – From the facebook page of Mr. Arun Jaitley Two Important Issues before the GST Council The GST Council comprising of the Finance Ministers' of the Union and the State Governments has had three detailed meetings spread over several days. Two more meetings are proposed post Deepawali. The meetings have witnessed an intense debate on several issues, which has been an excellent example of deliberative democracy . Opposing viewpoints have ended up in convergence and so far all issues have been decided by a consensus. Some critical issues are pending before the GST Council for a final decision. Comments have been made in the public space with regard to two of these issues. Even though the final decision with regard to these two issues is yet to be taken by the GST Council, the rationale behind the proposals placed before the Council needs to be explained. (1) The Multi Rate Structure It has been proposed to the Council that there shoul

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he reality is that a multiple tax rate in India is inevitable for several reasons. Different items used by different segments of society have to be taxed differently. Otherwise the GST would be regressive. Air conditioners and hawai chappals cannot be taxed at the same rate. Total tax eventually collected has to be revenue neutral. The Government should not lose money necessary for expenditure nor make a windfall gain. The tax on some products in a narrow slab regime will substantially increase. This would be highly inflationary. A commodity being taxed by the Centre and the State at 11% at present will be taxed at 12%. If it's taxation is suddenly raised on standard rate of 18%, it would disrupt the market and would be highly inflationary. There are presently several items mainly used by the more affluent which are currently taxed at a VAT of 14.5% and an excise of 12.5%. If the cascading effect of these taxes and octroi is added, then range of taxation of these products is betwee

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are all resolved. Hopefully with higher compliances and more revenue after the initial period, the GST Council would continue to have a look at the expenditure requirement and the tax likely to be collected and rationalise the tax rates and the structures in future. It may be noted that some developed countries which do not have any section of the population below the poverty levels and where economic standards are high, have fewer tax slabs but many of them have 3-4 slabs. I am annexing to this blog an illustrative list of some of the countries which fall in this category. (2) Compensation Payable Through Cess The GST will result in the consuming States increasing their revenues from the very first year onwards. The GST Council has fixed a 14% revenue growth as a uniform, secular growth rate for all States. The revenue loss, if any, of a State has to be calculated on this basis. Some producing States may lose marginally in the initial years. The Constitutional amendment guarantees a f

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o out of every 100 rupees collected in GST only 29% remains with the centre. The tax impact of this levy would be exorbitantly high and almost unbearable. The alternative proposal is to have a cess account and continue same existing levies as cess for a period of five years before subsuming them as tax. This would include clean energy cess and cesses on luxury items and tobacco products, which in any case, presently also pay levy higher than 26%. This would ensure no additional burden on the tax payer and yet be able to compensate the losing States. It may further be noticed that benefitting States are not compensating the losing states. The Centre, as a non-beneficiary, has to compensate and the proposal for continuing existing cesses for five years to the extent of compensation required is the more benign way of compensating the losing States without burdening the tax payer. These are only at the proposal stage and would be discussed at length in the meeting of the GST Council early

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Goods and Services Tax – Started By: – SANDESH SHINDE – Dated:- 27-10-2016 Last Replied Date:- 27-10-2016 – Dear Sir, Please advise on the type of Goods are made available to the recipient (for goods not required to be removed) under time of supply of goods in GST regime.Thanks and regards. – Reply By Rajagopalan Ranganathan – The Reply = Sir, According to Section 2 (48) of Model GST Law ' goods means every kind of movable property other than actionable claim and money but includes securiti

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Goods and Services Tax – GST – By: – Puneet Agrawal (Athena Law Associates) – Dated:- 27-10-2016 Last Replied Date:- 27-10-2016 – The GST structure as it stands today shall only result in higher property costs for the home buyers. Non‑exclusion of land value from GST net, non-availability of ITC to developers and irrational Valuation Mechanism shall lead to such an anomaly. The Model GST law which has been shared with the stakeholders shall only add up to the woes of homebuyers unless necessary amendments are brought in. The much promoted and discussed benefit of GST i.e., reduction in costs is not extended to the real estate sector. The ill effects would be equally felt by the industry as well as home buyers. It is a glaring fact th

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twice on the same material i.e. – once at the time of purchase by the developer and second when the same shall be included by the contractor for discharging GST which he shall charge from the developers. Same shall be the fate of various services such as architects and engineers arranged by the developer and they shall also be included in the transaction value of the contractor for the computation of GST liability. These would cumulatively add up to result into very high GST because of the cascading effect and would thus be a matter of serious concern, for the homebuyers, for after all developers would pass on his cost to them. The situation is further frustrated by non-exclusion of value of land from the transaction value. In absence of an

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tax and VAT shall be roughly 12.5% of construction value, which totals to ₹ 1,87,500 [12.5% of 15lacs]. Whereas under GST, assuming a tax rate of 18%, tax liability shall be ₹ 9lacs [18% of price of flat- Please note that land is not excluded], which is way too higher than the current tax liability. This is apart from the cost of input taxes, which builder would bear, since unlike in present scenario, he would not be eligible to claim input tax credit on tax paid by his contractors. In other terms, one buying a house worth 50lacs should be ready to dole out another more than 7 lacs as tax, purely due to the structuring of law which could have been avoided. This can be avoided even now in case appropriate action is taken by the

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Cenvat Credit – By: – Anish Goyal – Dated:- 27-10-2016 – Service Tax on renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes has to be charged at the rate of 60% ( i.e. abatement 40%) as per Sr. No. 6 of the Abatement Notification No. 26/2012-ST dt. 20.06.2012. The condition provided for granting an abatement of 40% is written as same as above . The relevant extract of Sr. No. 6 of Notification No. 26/2012-ST dt. 20.06.2012, reads as under: Sl. No. Description of taxable service Percentage Conditions 6 Renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes. 60 Same as above. The condition mentioned i

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ional Connectivity Scheme Airport. 10 CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken by the service provider under the provisions of the CENVAT Credit Rules, 2004. The condition mentioned in Sr. No. 5A, stated supra stipulates that CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken by the service provider under the provisions of the CENVAT Credit Rules, 2004. However, the condition mentioned in Sr. 6 granting the accommodation service providers to pay service tax on 60% remains unchanged, it still reads, same as above . Thus, now the effect of insertion of Sr. No. 5A is that no CENVAT Credit of even input

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Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 27-10-2016 – Present Taxation of Education Education in India is presently covered as one of the priorities of the Government and as such is allowed tax relief both in direct and indirect taxes. So far as indirect taxes are concerned, education is considered as a service and as such it is subject to levy of service tax. No other indirect tax is levied. For the purpose of service tax, education has been distinguished from coaching or training which facilitates the education. Presently, educational services are excluded from the levy of Service Tax and are in 'Negative List' under section 66D(i) which are related to delivery of education as a part of the curriculum that has been prescribed for obtaining a qualification prescribed by law. Conduct of degree courses by colleges, universities or institutions which lead to grant of qualifications recognized by law are also in negative list. Similarly , vocational train

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nal Skill Development Corporation; (iii) an assessment agency approved by the Sector Skill Council or the National Skill Development Corporation; (iv) a training partner approved by the National Skill Development Corporation or the Sector Skill Council in relation to – (a) the National Skill Development Programme implemented by the National Skill Development Corporation; or (b) a vocational skill development course under the National Skill Certification and Monetary Reward Scheme; or (c) any other Scheme implemented by the National Skill Development Corporation. The present rate of service tax is 15% including cesses viz Swachh Bharat Cess (SBC) and Krishi Kalyan Cess (KKC). Proposed GST Law According to the Model law on GST which neither contains the exemptions nor the rates of taxation as of now, it appears that all services in relation to coaching and training would be subject to levy of GST as the scope of service is very wide. However, the rates are expected to be in the range of

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vocational education course. Hence, the exemption may be restricted to activities or transactions done by Central Government, State Government or any Local Authority. It, therefore, appears that education services provided by Government will not be taxable. There is no specific provisions for inclusions or exclusions of coaching and training services or any other activity related to education elsewhere in the proposed law. Likely Impact in GST Regime Based on the provisions of Model Law, it can be said that education sector shall be impacted both positively and negatively under the GST regime. The rate of tax is likely to go up by 3-5% as it is expected that GST may be levied @18-20%. If coaching is considered as an essential service, a lower GST rate is not ruled out. There are likely to be concerns in valuation of coaching services in view of the industry practice of discounts / concessions / scholarship. The proposed valuation rules are different from the existing ones and as such c

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