Author: admin_gst

Goods and Services Tax – GST – By: – atul rathod – Dated:- 24-9-2016 Last Replied Date:- 26-9-2016 – Background:- As we all know Model law of GST has come in public domain and bill has been passed in Rajya Sabha and expected to get effective from 01.04.2017. The purpose of this article is to give overview on impact of GST on manufacture and Trader due to change in Indirect tax structure. Positive Impact on Manufacture One Tax: In Present structure of GST, there is various kind of taxes such as excise duty, Service tax, VAT, Entry tax, Central Sales Tax etc. But in GST Regime there is only one tax i.e GST however, there will be three parts such CGST, SGST, IGST. This is measure relief for the manufacturer. Rate of tax: In current tax regime the consumer pays approximately 25-26% more than the cost of production due to excise duty (at 12.5%) and value added tax (almost 14.5%) though there hasn t been any indication of a GST rate, but experts suggest between 18% and 22%. Ultimately goods

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gime of tax there are numerous issues on classification of goods due to separate rates on different goods and exemptions on certain goods. But in regime of GST there shall be minimization of classification issues due to uniform rate and less expected exemptions. Speedy Movement of Goods: In GST Regime of tax structure there will be minimization of trade barriers, such as filing of way bills/entry permits, Compliance under Entry tax will be abolished. There is much compliance in current regime on interstate movements or locally such as way bills, statutory forms etc which lead to slow movements of goods Where as this concept is going to be abolished though check points will still be eligible. CENVAT Credit: In Regime of Present tax, the manufacturer is unable to utilize the credit of Central Sales tax and VAT provided output is charged under Composition Scheme, which becomes the Cost for him. But In Regime of GST, A Manufacturer will be eligible to take Credit of SGST (Earlier VAT) as w

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eparate authorities for VAT, Service Tax, Central Excise, CST, etc. In GST Regime it is expected that assessment will be done by State authorities for SGST, Central Authorities for CGST, and Interstate authorities for IGST. Electronic Mode for Forms: In current Regime of tax there is very much manual filing of documents such as initial declaration, Numbering of Invoices etc. But in GST Regime there will be less manual filing of documents and more through electronic mode. Further, the communication with department also could be through electronic mode. Compliance:-In GST Regime huge Compliance would be there however, it could be negative impact as well as positive. Negative Impact Time of Supply: In Current Regime of tax the time of duty on manufacture attracts at the time of removal where as in GST Regime it will earliest of the four such as (Date of Issue of Invoice, Date of Payment, Date of Removal, Debit in the books of Receiver). No SSI Exemption: In Current tax structure a manufac

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gistic Sector etc. Introduction of Reverse Charge on Goods: In Current Regime Of tax structure there was reverse charge on specified services but in case of GST even the reverse charge will be applicable on goods. Post supply Discount: If the Discount has to be given post supply than it must be known to both the parties at the time of supply or pre-supply and the proof of being known is the clause of discount must be there either in contract or agreement or offer etc. Matching Concept of Returns: In Current if the tax has been made the purchaser to supplier then he is eligible to take the Credit it is immaterial whether the same has been credited to Central Government by the Supplier or not. But in GST Regime, the matching concept if Tax Credit will be there, if Credits pertaining to Supplier does not match with Purchaser than it will not be accepted in return unless it is rectified by both the parties. Denial of CENVAT Credit on purchases made from unorganized/unregistered Person: In

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n. However, net impact is neutral, on either of them needs to pay GST. Composition levy Increased: In Current Regime of taxation the limit under Composition Scheme is ₹ 40 lakhs where as under GST it is increased upto ₹ 50 Lakhs. It is beneficial as ₹ 10 lakhs in turnover is a big thing from trader point of view. But currently it is 1% but in GST Regime it will be minimum of 1%, it could be more than that. Credit of Excise Duty and Service tax: In Current Regime of taxation then a trader is not eligible to take Credit of input service as well as the Excise duty. However, In GST Regime he will be eligible to take all credits and it will make positive impact on trader. No Margin to Disclose: Currently a trader who wants to pass on the CENVAT Credit of excise duty needs to obtain dealer registration and have to disclose the margin. But now this is no more relevant as trader is eligible to take Credit as well as no requirement of Separate dealer registration. No Reversal

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Current Regime of tax, on being made available the Form C, CST rates charged at the rate of 2% instead of 14.5% which is local tax rate, however in GST Regime interstate will be taxed at standard rate i.e IGST. Goods sent to job work are taxable: In Current GST Regime of tax, the goods sent for job work are not liable to CST on being made available of Form H whereas in Current GST Regime it became taxable. Compliances: Instead of 12 Returns A Trader needs to file 37 returns in year and much more compliances which is similar to manufacturer as explained supera. The author can also be reached at atuljain1926@gmail.com – Reply By Ganeshan Kalyani – The Reply = The assessment part seems to be going to be difficult. The returns shall be filed in form GSTR 1, GSTR2 and so on. The return would have transaction of both SGST, CGST and IGST then how different authority i.e. state authority, central authority and interstate authority shall verify same return again and again ? – Reply By yogesh Pa

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it not appeared in the returns, like in case of litigation, many assesses paid duty/service tax under protest Amount paid against conditional stay, Pri-Deposit at filling commissioner appeal as well as tribunal appeals, also in case of disputed service, assesses take credit and revert the duty/service tax under protest in the sane month to minimize litigation & Interest liability. How above type credit/balance we have carried forward in records & last returns before implementation of GST Law?? We have take credit in current law.Please Guide in both queries. – Reply By atul rathod – The Reply = Ganeshan Kalyani: Dear Sir,No Provision regardig Scrutiny of Return is given in Model GST Law. In my Article i have mentioned about assessment which will be done by one authority up to certain limit and if turnover of the business cross that limit than it will be done by another authority. As per my view the assessment of Return would be done by only one authoity which would be common for

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GST threshold fixed at ₹ 20 lakh in GST council s meet, rate to be decided in October – Goods and Services Tax – GST – Dated:- 24-9-2016 – GST threshold fixed at ₹ 20 lakh in GST council's meet, rate to be decided in October Read more at: http://economictimes.indiatimes.com/articleshow/54480851.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst New Delhi, Sep 23 (PTI) In a big step forward on GST implementation, the Centre and states today reached an agreement on keeping traders with annual revenue of up to ₹ 20 lakh out of the new national sales tax regime that will subsume all cesses. While the two sides, at the meeting of the GST Council, agreed on the contentious issues of revenue threshold

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e government and not both. Broad principles for compensating states for any loss of revenue when the new regime is rolled out from April 1, 2017 were also discussed at the two day meeting of the panel that is headed by Union Finance Minister and includes representatives of all states. On service tax, it was decided that in absence of expertise with states, the Centre will continue to exercise control over all the 11 lakh service tax registered dealers irrespective of their revenue levels, he said. Jaitley said the next meeting on September 30 will finalise the draft rules regarding implementation of exemptions. While 2015-16 will be the base year for calculating revenue compensating to states for any loss of revenue arising from rollout of

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Goods and Services Tax – Started By: – Ankur Jain – Dated:- 23-9-2016 Last Replied Date:- 24-9-2016 – I believe that it would be permissible to claim input credit even when the output is zero rated under GST.However, what is the proposal on input credit when output is exempt from GST, not zero rated? Please advise.The question is in the context of books, which are exempt from indirect taxes under the present tax regimes, namely Service Tax and VAT. There is no clarity as of now whether books wo

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Goods and Services Tax – GST – By: – CS SANJAY MALHOTRA – Dated:- 23-9-2016 Last Replied Date:- 30-12-2016 – Input Tax Credit – An analysis in Goods & Service Tax Goods and Service Tax – One Nation, One Tax would benefit all the stakeholders i.e. Industry, Consumers, Government, Professional, Society, etc on account of Reduction in cost of various commodities as the Input Tax credit is available in the complete chain, which breaks in the present Indirect Tax (Excise/VAT) chain. For e.g. In case of Garments, VAT is leviable on Cotton, Cotton yarn in the manufacturing chain but Fabric is Tax Free as is Goods Declared of Special Importance under Section 14 of Central Sales Tax Act 1956. Cost of Fabric goes up with the Input Tax cost not admissible due to Fabric Being Tax free. As a result of same, cost of Garments also goes by VAT cost (Presently 5% + surcharge applicable in few states). Input Tax Credit in Model GST Law (Section 16 – 18) CENVAT / VAT Credit in the present Indirect T

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light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol; [(B) any goods used for – (a) construction or execution of works contract of a building or a civil structure or a part thereof; or (b) laying of foundation or making of structures for support of capital goods, except for the provision of service portion in the execution of a works contract or construction service as listed under clause (b) of section 66E of the Act;] [(C) capital goods, except when,- (i) used as parts or components in the manufacture of a final product; or (ii) the value of such capital goods is upto ten thousand rupees per piece;] (D) motor vehicles; (E) any goods, such as food items, goods used in a guesthouse, residential colony, club or a recreation facility and clinical establishment, when such goods are used primarily for personal use or consumption of any employee; and (F) any goods which have no relationship whatsoever with the manufacture of a final product. Explanation. – For t

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motion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal; [but excludes],- [(A) service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act (hereinafter referred as specified services) in so far as they are used for – (a) construction or execution of works contract of a building or a civil structure or a part  thereof; or (b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or] [(B) services provided by way of renting of a motor vehicle], in so far as they relate to a motor vehicle whic

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as may be provided under this Act or the Rules made thereunder, used or intended to be used by supplier for making an outward supply in the course of furtherance of business. Rule 2(a) of CCR defines capital goods means:- (A) the following goods, namely:- (i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading 6805, grinding wheels and the like, and parts thereof falling under 35[heading 6804 and wagons of sub-heading 860692] of the First Schedule to the Excise Tariff Act; (ii) pollution control equipment; (iii) components, spares and accessories of the goods specified at (i) and (ii); (iv) moulds and dies, jigs and fixtures; (v) refractories and refractory materials; (vi) tubes and pipes and fittings thereof; (vii) [storage tank and] [(viii) motor vehicles other than those falling under tariff headings 8702, 8703, 8704, 8711 and their chassis,[but including dumpers and tippers]] used- in the factory of the manufacturer of the final products, or [(1A) outsid

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s falling within Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading 6805, grinding wheels and the like, and parts thereof falling under heading 6804 of the Schedule to this Act; (ii) pollution control equipment; (iii) components, spares and accessories of the goods specified at (i) and (ii); (iv) moulds and dies, jigs and fixtures; (v) refractories and refractory materials; (vi) tubes and pipes and fittings thereof; (vii) storage tank; and (viii) motor vehicles other than those falling under tariff headings 8702, 8703, 8704, 8711 and their chassis but including dumpers and tippers used- (1) at the place of business for supply of goods; or (2) outside the place of business for generation of electricity for captive use at theplace of business; or (3) for supply of services, (B) motor vehicle designed for transportation of goods including their chassis registered in the name of the supplier of service, when used for (i) supplying the service of renting of such motor vehicle; or (ii)

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2016 is self explanatory and also depicts the fact the Input Tax Credit in Model GST Law is linked to Supply as against Manufacture in the present Excise / VAT Act. ELIGIBILITY OF INPUT TAX CREDIT Any person who has taken Registration within 30 days from the date when he becomes liable for registration and has been granted same is eligible to avail the Input Tax Credit of Input lying in stock, WIP & Inputs contained in finished goods on the day when he becomes liable to pay tax. Credit of Input Tax shall be recorded in his Electronic Ledger maintained at GSTIN site. Sec 16(2) The above provisions of Input Tax Credit are admissible to Persons who get themselves voluntarily registered under GST Act. (Persons falling under Sec 19(3)] Persons switching over from Composite Levy (Section 8) to Normal Tax are also eligible to avail Input Tax Credit under GST.- Sec 16(3) TIME LIMIT FOR AVAILING INPUT TAX CREDIT (Sec 16(3A) Taxable person shall avail the credit of Input Tax with a period of

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t in the present Excise / VAT Laws, CENVAT Credit is not admissible on some of the items as covered under the definition part as listed in table produced above. Similarly, Input Tax Credit is not admissible in respect of goods and supplies as listed out below: Sec 16(9) : Notwithstanding anything contained in sub-section (1), (2), (2A) or (3) input tax credit shall not be available in respect of the following: (a) motor vehicles, except when they are supplied in the usual course of business or are used for providing the following taxable services- (i) transportation of passengers, or (ii) transportation of goods, or (iii) imparting training on motor driving skills; (b) goods and / or services provided in relation to food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as leave or home travel conces

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in the present Tax Regime i.e. Input Tax Credit shall not be admissible on Capital Goods if the Depreciation has been availed in respect of the Tax component under Income Tax Act 1961. Important aspects to be noted while availing Input Tax Credit – Sec 16(11)] Registered Taxable Person availing Credit of Input Tax shall ensure following: Tax Invoice / Debit Note / Supplementary Invoice or any document as may be prescribed by the Government issued under CGST/SGST/IGST Act shall be available in his possession. Goods / Services must have been received Tax charged by the Supplier in documents prescribed above has ACTUALLY been paid into respective Government treasury in Cash / Utilisation of Input Tax credit. (This is the most challenging and harsh provisions as the receiver of goods should be punished for fault of supplier of goods / services if that person fail to deposit tax / return). GST Council should review the above mechanism and put the supplier of goods / services on penal mode.

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Tax in respects of Input sent on Job Work (Sec 16A) Input Tax credit is admissible to registered Taxable person if the inputs are sent to job worker for job work and are received back within a period of 180 Days. Credit of Input Tax is even admissible if the inputs are sent directly by job worker from supplier premises to Job worker premises, wherein period of 180 days would count from receipt of material by job worker. Period of 2 years shall be considered for bringing back Capital Goods after job work for availing Input Tax credit. In case of non receipt of Inputs / Capital goods within defined time frame, Input Tax credit has to be paid back with Interest and the same may be reclaimed back upon receipt of goods after period of 180 days / 2 years. Manner of Distribution of Credit by Input Service Distributor (Sec 17) Input Credit of IGST & CGST shall be distributed as IGST if both the ISD and recipient of credit are situated in different states. Input Credit of IGST & CGST s

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1st GST Council Meeting Dated:- 23-9-2016 GST Council – Minutes – Circulars – GST – Minutes of the 1st GST Council Me e ting (22nd and 23rd September 2016) The first meeting of the GST Council (hereinafter referred to as 'the Council ') was held on 22 nd and 23rd September 2016 under the Chairpersonship of the Hon'ble Union Finance Minister, Shri Arun Jaitley in Vigyan Bhawan, New Delhi. The meeting was attended by the Hon'ble Union Minister of State for Revenue, Shri Santosh Kumar Gangwar, the Hon'ble Chief Minister of Puducherry, Shri V. Narayanasamy, the Hon'ble Deputy Chief Minister of Arunachal Pradesh, Shri Chowna Mein, the Hon'ble Deputy Chief Minister of Delhi, Shri Manish Sisodia and the Hon'ble Ministers from the other States. The meeting was also attended by the officials of the Centre and the States. The list of the Hon'ble Ministers who attended the meeting is at Annexure 1 – The list of officers of the Cen

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4. Before taking up the agenda points, the Chairperson invited the Members of the Council to make general comments, if any. The following issues were highlighted- (i) The Hon'ble Minister from Kerala expressed that given the good experience with the Empowered Committee of State Finance Ministers during the last sixteen years, the institution of Empowered Committee should continue. After some discussion, it was decided that the decision regarding the continuance or otherwise of the Empowered Committee rested with the Empowered Committee. However, the forum for discussing and deciding all issues relating to GST shall be the Council. (ii) The Hon'ble Minister from Kerala observed that the Rules of Procedures and Conduct of Business in the Council should have a clause that decisions would be arrived at by consensus. The Chairperson observed that consensus was key to a forum where sovereignty is shared. However, we must provide for a possible scenario where voting can be re

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ir). The Chairperson suggested a broad formulation, subject to legal vetting, namely that in a state where there is a proclamation under Article 356 of the Constitution of India, for the purposes of the Council, the person nominated by the Governor of the State shall exercise the power of a Minister. (iii) Rule 3(2) – The Hon'ble Minister from West Bengal observed that the detailed agenda notes were circulated only two days before the Council meeting, which left little time for their examination in the States. He suggested that the agenda be circulated at least 10-15 days in advance. The Chairperson observed that as there was a tight time-frame for implementation of GST, a 15-day notice along with agenda notes before every meeting could derail the deadline. It was agreed that a meeting notice along with agenda points shall be sent at least 7 days prior to the date of the meeting of the Council and the agenda notes would be sent at least 3 working days prior to the date of the m

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erson agreed that Rule 4 should be deleted. (vi) Rule 5(2) – Some members observed that Rule 5(2) was too restrictive as a Minister nominated to the Council might not be able to attend a meeting due to some other pre-occupation. The Chairperson observed that the rule could be re-formulated to provide that where the originally nominated Member was unable to attend a Council meeting on account of some reason, another Minister could be nominated to attend a particular meeting of the Council. It was further agreed to amend Rule 5(2) to provide that in the absence of the Member Minister or another nominated Minister from a State, a nominated officer could also attend and speak in the meeting of the Council. However, he would not be allowed to vote. An officer accompanying a Minister could also speak on technical matters, ifrequired. (vii) Rule 6 including its Heading – On the suggestion of the Hon'ble Minister from Mizoram, it was decided that the expression Vice-Chairman be rep

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ted in the Bhubaneswar Empowered Committee meeting in 2013 and it was now part of the Constitution. This provision compelled the Union and the States to come to a consensus. He also observed that there cannot be a situation where the Union Government gets excluded in decision making relating to the taxation policy of the Union oflndia, which is not desirable. The Hon'ble Minister from Bihar observed that under the leadership of the Chairperson, a healthy convention should be developed of taking decision by consensus. (xi) In respect of Rule 16, the Hon'ble Ministers from Tamil Nadu and Uttar Pradesh suggested that there should be different weightage of votes for States within the two-third weightage of votes given to the States. The Hon'ble Minister from Tamil Nadu stated that States with a population of 20 crores and 1 crore should not be treated equally in terms of votes. It was pointed out that such an approach was followed for Rajya Sabha membership. Some criteria li

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e decided that all States shall have equal vote within the two-third share. Agenda Item 2: Proposed timetable for the implementation of CST 6. The Secretary to the Council briefed the Members of the Council regarding the proposed timetable for completing various steps in order to implement GST by 1st April 2017. He stated that the Draft IGST, CGST and SGST Laws and Rules, GST Rate Structure and Exemption Lists would have to be recommended by the Council by 22nd November 2016. By December 2016, the CGST and lGST Acts would need to be passed by the Parliament and the SGST Acts by the respective State Legislatures in the Winter Session of 2016. For this purpose, if need be, the Winter Sessions would have to be advanced to December 2016. On the setting up of the Information Technology (IT) Framework, he informed that the target dates for development of backend IT systems of banks, RBI and Central and State accounting authorities was November 2016 and that of CBEC and 9 States who

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h the IT systems but they would be in a position to pass the legislation only by February 2017. The Hon'ble Minister from Jammu and Kashmir stated that they would be able to pass the law only by January 2017. The Chairperson observed that the States that were going for elections would need to make a special provision for passing their SGST Legislation. He also advised the States to meet the deadline and for this, where needed, a one-day special session of the legislature could be convened. The Hon'ble Minister from Tamil Nadu suggested that implementation of GST should be by 1st September 2017 as it was a challenging task and the officers needed to be deployed properly. He also mentioned that inadequate preparations could harm the taxation system. 8. After discussion, it was agreed that the implementation date for GST would be 1st April 2017. The Chairperson observed that between 22nd September 2016 and 22nd November 2016, a lot of work was required to be done and that offi

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ders should be kept out of the Composition scheme. EXEMPTION THRESHOLD 10. The Secretary to the Council explained that by raising the exemption limit to ₹ 25 lakhs, 60% of tax-payers would be out of the tax net but the loss of revenue would only be 2%. The Hon'ble Chief Minister of Puducherry stated that an exemption limit of ₹ 25 lakhs for his Union Territory would mean that 12% of traders would go out of the tax net and would result in substantial revenue loss. He suggested that for the small states, the threshold for exemption should be ₹ 10 lakhs. The Hon'ble Deputy Chief Minister of Delhi stated that the exemption limit of ₹ 10 lakhs was too low and that they had a good experience after increasing the threshold limit to ₹ 20 lakhs. The Hon'ble Minister from Kerala observed that the potential revenue loss by increasing the threshold was low but it would keep a large number of traders out of the tax net, which would help administrati

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ter from Mizoram also supported a threshold limit of ₹ 5 lakhs. The Hon'ble Minister from Assam supported a threshold of ₹ 10 lakhs. 13. Given the difference in opinions, the issue was deferred for reconsideration to the next day. In the meeting of 23rd September 2016, after further discussion, it was agreed that the threshold exemption shall be ₹ 20 lakhs. The Chairperson also observed that taking note of the concerns expressed by the Hon 'ble Chief Minister of Puducherry, this decision would be reviewed after 5 years (during which compensation for any loss of revenue is guaranteed) and a decision regarding any modification to the exemption threshold would be taken thereafter. 14. As regards the Special Category States enumerated in Article 279A of the Constitution, it was decided that the threshold exemption shall be ₹ 10 lakhs. COMPOSITION (OR COMPOUNDING) THRESHOLD 15. The Secretary in his introductory remarks stated that at present, th

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arrived at, to calculate the compensation, viz- (i) a base year and (ii) the projected growth rate. 18. In the presentation, it was further explained that it would be desirable to take 2015-16 as the base year for making growth projection of Revenue and projected growth rate might be taken as average growth rate of revenue collection in the preceding 3 financial years ending 31st March, 2016, 31st March, 2015 and 31st March, 2014 over the previous year. It was also explained that the projected growth rate shall be calculated on the basis of the figures of revenue collected as audited by the Comptroller and Auditor General of India. 19. The Hon'ble Deputy Chief Minister of Delhi desired to know as to why the year of 2016-17 could not be taken as the base year. It was explained by J.S. (Rev), that the audited figures of the year would become available much later and hence, it might be difficult for States to calculate their budgetary estimates for 2017-18. The Hon'bl

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la would take into account the impact on revenue of the tax holidays provided by the States. The Hon'ble Minister from Telangana explained that his was a new State and therefore only figures for the year 2016-17 would be available. The Hon'ble Minister from Gujarat expressed the view that the base year should be the best 3 years' average of the last 10 years. The Hon'ble Minister from Kerala was not in agreement with the method of ascertaining the projected growth rate of revenue. He also expressed the view that it should be taken as the best 3 years of the last 10 years. He further pointed out that during VAT compensation, the best 3 of the last 5 years were taken into account to ascertain the growth rate. He also supported the view that the compensation needed to be paid regularly by making a provision for ways and means accommodation in the law. 21. The Hon'ble Minister from Madhya Pradesh reminded that during the implementation of VAT, goi ng backwards by 5 y

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dated fund of the States. His view was that all taxes which were subsumed should be compensated and there should be no condition of all revenue being audited by the CAG. He also suggested that the payment should be made on a monthly basis. The Hon 'ble Minister from Odisha suggested that the best 3 out of of 5 years be taken to ascertain growth rate and compensation payment be made monthly and adjusted at the end of the year on the basis of CAG-audited figures and also that the base year could be 2015-16. 23. The Hon'ble Minister from Tamil Nadu expressed that compensation be given for all revenue which was getting subsumed in GST. As for ascertaining rate of growth, the best of 3 years out of the preceding 6 years be taken into consideration to account for the floods in Tamil Nadu. He was also of the view that the States should assess their revenue loss by December and convey to the Centre and compensation should be paid on that basis. The projected growth rate should take

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e Minister from Assam brought to the notice of the Council that last year was an election year in Assam and the then Government did not make much effort to garner revenue and therefore, in the case of Assam, the current year should be taken as the base year and that the VAT formula could be adopted for compensation. 27. The Hon'ble Deputy Chief Minister of Arunachal Pradesh stated that their revenue was growing every year and therefore current year should be taken as the base year and for projecting growth, the preceding 3 years should be taken into consideration. 28. The Hon'ble Chief Minister of Puducherry suggested that year 2015-16 should be taken as the base year and formula as used during VAT transition should be used to calculate compensation. He also brought to the notice of the Council that the definition in Article 366(26B) of State to include a Union Territory with Legislature is not mentioned in Clause 18 of the Constitution (One Hundred and First Amendment) A

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compensation be paid forthwith. He also suggested some independent mechanisms for the flow of the compensation amount. 30. The Hon'ble Minister from Andhra Pradesh supported the use of VAT methodology and suggested that payments be made periodically preferably along with the devolution amount. He . also desired that the CST compensation be released forthwith. The Hon'ble Minister of Chattisgarh while supporting the idea of using VAT methodology for payment of compensation, desired to know the impact of petroleum items which were outside GST on the calculation of the growth rate. He also suggested that 2016-17 be taken as the base year. 31. The Hon'ble Minister from Haryana brought to the notice of the Council that they had problems similar to that of Punjab as they also had a lot of agricultural produce in the State. The Hon'ble Minister from Telangana brought to the notice of the Council that Telangana would stand to lose ₹ 700 crores of R.D.Cess (Rural Dev

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ribed in the 14th Finance Commission may be used as the guiding principle for payment of compensation. He expressed that devolution amount to States prior to implementation of GST should be protected. 33. The Chairperson invited the Chief Economic Advisor to share his views on the methodology of compensation. He expressed that any calculation based on the best 3 of the previous 5 years would lead to a situation where going forward, the nominal GDP growth would be substantially lower as compared to revenue growth during the last 3 or 5 years and this would create challenges. He further added that inflation was likely to be below 4% compared to past rates of inflation of 9-10%. He also shared results of his calculation of rate of growth of revenue for the whole country and this came to 12.3%. The Hon'ble Ministers from Jammu and Kashmir and Assam noted that if the revenue of the Central Government fell, the amount devolved to the States would also fall. The Hon'ble Minister fr

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0% compensation for 5 years. While it was agreed then for best 3 out of 5 years' growth rate, it was linked to diminishing amount of compensation for 3 years, namely 100% for year one, 75% for year two and 50% for year three. Therefore, it might be inappropriate to adopt only part of the formula. 36. The IS. (Rev) clarified that compensation would include all taxes such as CST, Octroi, Purchase Tax, etc which are levied by the State Governments and now proposed to be subsumed in GST including cesses, if any, imposed by the States. The frequency of release could be decided by the Council and could be an interim figure. There was considerable discussion in the Council on various other methods of calculating the compensation figure such as trends of Nominal GDP growth rate, application of buoyancy factor, variation in the GDP estimates, taking taxlGDP ratio as a factor, removing outliers from growth data of 5 years and the need to keep calculations reliable but simple. 37. The C

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d that the advantage of the last methodology would be that special factors affecting revenue collection of a state like Jammu and Kashmir would be addressed. The Hon'ble Minister from Kerala opposed the last methodology but was agreeable to the suggestion of considering the best 3 growth rates out of the 5 years preceding the base year and excluding the two outliers. The Hon'ble Minister from Tamil Nadu did not favour this proposal. The Hon'ble Minister from West Bengal observed that the general consensus was to go for 6 years and take the best growth rate of 3 years out of them. The Hon'ble Ministers of Assam, Uttar Pradesh and Haryana supported the idea of a secular growth rate and Uttar Pradesh suggested that the secular growth rate be pegged at 14%. The Hon'ble Minister from Tamil Nadu stated that projection of a secular growth rate could punish states whose tax administration collected taxes more efficiently. The Chairperson observed that this issue may continu

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entation outlining the broad features of the proposed cross-empowerment model. This model essentially provided for a protocol on the basis of which scrutiny of returns of taxpayers and their audit would take place. It was proposed that an overall cap might be agreed upon on the number of interventions (of scrutiny of returns and audit) to be done by the Central and State authorities taken together. Within this cap, on an annual basis, the list of taxpayers to be subjected to detailed scrutiny of returns and audit would be drawn by the Union and State Government officers in each State on the basis of certain risk parameters. Based on these lists, allocation of taxpayers to the Central and State tax administrations would be done on the basis of certain predefined criteria. The consequential actions like raising demand, adjudication, appeal, etc. shall be done by the administration that conducted scrutiny of returns/audit and it would cover both the CGST and the SGST. For enforcement acti

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ow the turnover threshold of ₹ 1.5 crore were to be administered by State tax authorities, then States would end up administering a disproportionately large number of taxpayers whereas the effort should be to work on a model which would help to optimally utilize the well-trained officers of both the Centre and the States to get the best results. 43. The Hon'ble Deputy Chief Minister of Delhi stated that no policy should be made to accommodate excess officers of a particular administration. He suggested that the Central Government officers could be deputed to the States. He also pointed out that often, the jurisdiction of the Central tax authorities was not co-terminus with the boundaries of a State. He emphasized that in the GST regime, the jurisdiction of the Central tax authorities in a State should be co-terminus with that of the States. The Hon'ble Minister from Tamil Nadu also emphasized the need for structural alignment of the two tax administrations. The Hon&#39

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on the big taxpayers and the small taxpayers should be left to the administration of the State tax authorities. 45. The Hon'ble Minister from Kerala observed that the proposal being discussed in this meeting had never come up for discussion earlier. He stated that the protocol appeared unworkable and very complicated. It was not clear how the CGST administration would draw the priority list. He also observed that changing the tax jurisdiction of dealers every two years was inefficient. He also suggested that Central Government staff should be deputed to work in States. 46. The Hon'ble Minister from West Bengal stated that the Empowered Committee had earlier unanimously agreed that taxpayers below the threshold of ₹ 1.5 crores would not face dual administration and that this needed to be respected. The State administration dealt with traders and this position should continue in GST. He observed that the Centre's proposal of cross-empowerment was too complex but a

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nistration, it would be better that for now, the Central tax administration should continue to administer all existing Service Tax registrants. The Centre shall give training to the officers of the State Governments on Service Tax and till such time, the present arrangement shall continue. Thereafter, the following modalities for single interface were discussed but discussion remained inconclusive. I. Traders/manufacturers of goods with a turnover of less than ₹ 1.5 crores shall be under the jurisdiction of the State administration. ii. The traders/manufacturers of goods with a turnover above ₹ 1.5 crores shall be administered by both the Central and State tax administrations on the basis of the cross-empowerment model presented in the meeting which can be suitably modified by a Committee of Central and State Government officials. iii. All existing registered service providers irrespective of the value of turnover, for the present, shall continue to be administered

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Question 32 – Draft-Bills-Reports – Inspection, Search, Seizure and Arrest – FAQ on GST dated 21.9.2016 based on Draft Model GST – Question 32 – Q 32. What are the precautions to be observed while issuing summons? Ans. The following precautions should generally be observed when summoning a person:- (i) A summon should not be issued for appearance where it is not justified. The power to summon can be exercised only when there is an inquiry being undertaken and the attendance of the person is con

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Question 33 – Draft-Bills-Reports – Inspection, Search, Seizure and Arrest – FAQ on GST dated 21.9.2016 based on Draft Model GST – Question 33 – Q 33. Are there any class of officers who are required to assist CGST/SGST officers? Ans. Under section 65 of MGL, the following officers have been empowered and are required to assist CGST/SGST officers in the execution of MGL. The categories specified in MGL are as follows: i. Police; ii. Customs; iii. Officers of State/Central Government engaged in

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Question 31 – Draft-Bills-Reports – Inspection, Search, Seizure and Arrest – FAQ on GST dated 21.9.2016 based on Draft Model GST – Question 31 – Q 31. What are the guidelines for issue of summons? Ans. The Central Board of Excise and Customs (CBEC) in the Department of Revenue, Ministry of Finance has issued guidelines from time to time to ensure that summons provisions are not misused in the field. Some of the important highlights of these guidelines are given below: i. summons are to be issued as a last resort where assesses are not co-operating and this section should not be used for the top management; ii. the language of the summons should not be harsh and legal which causes unnecessary mental stress and embarrassment to the receiver;

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Question 29 – Draft-Bills-Reports – Inspection, Search, Seizure and Arrest – FAQ on GST dated 21.9.2016 based on Draft Model GST – Question 29 – Q 29. What are the responsibilities of the person so summoned? Ans. A person who is issued summon is legally bound to attend either in person or by an authorized representative and he is bound to state the truth before the officer who has issued the summon upon any subject which is the subject matter of examination and to produce such documents and oth

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Question 30 – Draft-Bills-Reports – Inspection, Search, Seizure and Arrest – FAQ on GST dated 21.9.2016 based on Draft Model GST – Question 30 – Q 30. What can be the consequences of nonappearance to summons? A. The proceeding before the official who has issued summons is deemed to be a judicial proceeding. If a person does not appear on the date when summoned without any reasonable justification, he can be prosecuted under section 174 of the Indian Penal Code (IPC). If he absconds to avoid ser

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Question 26 – Draft-Bills-Reports – Inspection, Search, Seizure and Arrest – FAQ on GST dated 21.9.2016 based on Draft Model GST – Question 26 – Q 26. What is a non-cognizable offence? Ans. Non-cogni

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Question 27 – Draft-Bills-Reports – Inspection, Search, Seizure and Arrest – FAQ on GST dated 21.9.2016 based on Draft Model GST – Question 27 – Q 27. What are cognizable and non-cognizable offences under MGL? Ans. In section 73 (4) of MGL, it is provided that the offences relating to taxable goods and /or services where the amount of tax evaded exceeds ₹ 2.5 crores, shall be cognizable and non-bailable. Other offences under the act are non-cognizable and bailable. – Statutory Provisions,

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Question 28 – Draft-Bills-Reports – Inspection, Search, Seizure and Arrest – FAQ on GST dated 21.9.2016 based on Draft Model GST – Question 28 – Q 28. When can the proper officer issue summons under MGL? Ans. Section 63 of MGL gives powers to a duly authorized CGST/SGST officer to call upon a person by issuing a summon to present himself before the officer issuing the summon to either give evidence or produce a document or any other thing in any inquiry which an officer is making. A summons to

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Question 24 – Draft-Bills-Reports – Inspection, Search, Seizure and Arrest – FAQ on GST dated 21.9.2016 based on Draft Model GST – Question 24 – Q 24. What are the broad guidelines for arrest followed in CBEC? Ans. Decision to arrest needs to be taken on case-tocase basis considering various factors, such as, nature and gravity of offence, quantum of duty evaded or credit wrongfully availed, nature and quality of evidence, possibility of evidences being tampered with or witnesses being influenc

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Question 25 – Draft-Bills-Reports – Inspection, Search, Seizure and Arrest – FAQ on GST dated 21.9.2016 based on Draft Model GST – Question 25 – Q 25. What is a cognizable offence? Ans. Generally, co

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Question 22 – Draft-Bills-Reports – Inspection, Search, Seizure and Arrest – FAQ on GST dated 21.9.2016 based on Draft Model GST – Question 22 – Q 22. What are the safeguards provided under MGL for a person who is placed under arrest? Ans. There are certain safeguards provided under section 62 for a person who is placed under arrest. These are: i. If a person is arrested for a cognizable offence, he must be informed in writing of the grounds of arrest and he must be produced before a magistrate

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Question 23 – Draft-Bills-Reports – Inspection, Search, Seizure and Arrest – FAQ on GST dated 21.9.2016 based on Draft Model GST – Question 23 – Q 23. What are the precautions to be taken during arrest? Ans. The provisions of the Code of Criminal Procedure, 1973 (2 of 1974) relating to arrest and the procedure thereof must be adhered to. It is therefore necessary that all field officers of CGST/SGST be fully familiar with the provisions of the Code of Criminal Procedure, 1973. One important provision to be taken note of is section 57 of Cr.P.C., 1973 which provides that a person arrested without warrant shall not be detained for a longer period than, under the circumstances of the case, is reasonable but this shall not exceed twenty four h

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ion and name tags with their designations. The particulars of all such police personnel who handle interrogation of the arrestee must be recorded in a register. ii. The police officer carrying out the arrest shall prepare a memo of arrest at the time of arrest and such memo shall be attested by at least one witness, who may be either a member of the family of the arrestee or a respectable person of the locality from where the arrest is made. It shall also be counter signed by the arrestee and shall contain the time and date of arrest. iii. A person who has been arrested or detained and is being held in custody in a police station or interrogation center or other lock up, shall be entitled to have one friend or relative or other person known

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xt friend of the person who has been informed of the arrest and the names and particulars of the police officials in whose custody the arrestee is. vi. The arrestee should, where he so requests, be also examined at the time of his arrest and major and minor injuries, if any present on his/her body, must be recorded at that time. The Inspection Memo must be signed both by the arrestee and the police officer effecting the arrest and its copy provided to the arrestee. vii. The arrestee should be subjected to medical examination by the trained doctor every 48 hours during his detention in custody by a doctor on the panel of approved doctors appointed by Director, Health Services of the concerned State or Union Territory, Director, Health Servic

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Question 20 – Draft-Bills-Reports – Inspection, Search, Seizure and Arrest – FAQ on GST dated 21.9.2016 based on Draft Model GST – Question 20 – Q 20. What is meant by the term arrest ? Ans. The term arrest has not been defined in the Model GST Law. However, as per judicial pronouncements, it denotes the taking into custody of a person under some lawful command or authority . In other words a person is said to be arrested when he is taken and restrained of his liberty by power or colour of lawf

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Question 21 – Draft-Bills-Reports – Inspection, Search, Seizure and Arrest – FAQ on GST dated 21.9.2016 based on Draft Model GST – Question 21 – Q 21. When can the proper officer authorize arrest of any person under MGL? Ans. The Commissioner of CGST/SGST can authorize a CGST/SGST officer to arrest a person if he has reasons to believe that the person has committed an offence attracting a punishment prescribed under section 73 (1)(i), 73 (1)(ii) and 73 (2) of the CGST/SGST Act. This essentially

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Question 17 – Draft-Bills-Reports – Inspection, Search, Seizure and Arrest – FAQ on GST dated 21.9.2016 based on Draft Model GST – Question 17 – Q 17. What is the distinction in law between Seizure and Detention ? Ans. Denial of access to the owner of the property or the person who possesses the property at a particular point of time by a legal order/notice is called detention. Seizure is taking over of actual possession of the goods by the department. Detention order is issued when it is suspe

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Question 18 – Draft-Bills-Reports – Inspection, Search, Seizure and Arrest – FAQ on GST dated 21.9.2016 based on Draft Model GST – Question 18 – Q 18. What are the safeguards provided in MGL in respect of Search or Seizure? Ans. Certain safeguards are provided in section 60 of Model CGST/SGST Law in respect of the power of search or seizure. These are as follows: i. Seized goods or documents should not be retained beyond the period necessary for their examination; ii. Photocopies of the documents can be taken by the person from whose custody documents are seized; iii. For seized goods, if a notice is not issued within sixty days of its seizure, goods shall be returned to the person from whose possession it was seized. This period of sixty

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Question 19 – Draft-Bills-Reports – Inspection, Search, Seizure and Arrest – FAQ on GST dated 21.9.2016 based on Draft Model GST – Question 19 – Q 19. Is there any special document required to be car

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Question 25 – Draft-Bills-Reports – Offences and Penalties, Prosecution and Compounding – FAQ on GST dated 21.9.2016 based on Draft Model GST – Question 25 – Q 25. Are there any monetary limits prescribed for compounding of offence? Ans. Yes. The lower limit for compounding amount is to be the greater of the following amounts: 50% of tax involved, or 10,000. The upper limit for compounding amount is to be greater of the following amounts:- 150% of tax involved or Rs.30,000. – Statutory Provisio

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Question 15 – Draft-Bills-Reports – Inspection, Search, Seizure and Arrest – FAQ on GST dated 21.9.2016 based on Draft Model GST – Question 15 – Q 15. What is meant by the term Seizure ? Ans. The term seizure has not been specifically defined in the Model GST Law. In Law Lexicon Dictionary, seizure is defined as the act of taking possession of property by an officer under legal process. It generally implies taking possession forcibly contrary to the wishes of the owner of the property or who ha

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Question 26 – Draft-Bills-Reports – Offences and Penalties, Prosecution and Compounding – FAQ on GST dated 21.9.2016 based on Draft Model GST – Question 26 – Q 26. What is the consequence of compound

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