Transitional issues in Goods and Services Tax – Series 1
By: – Ravi Kumar Somani
Goods and Services Tax – GST
Dated:- 30-9-2015
Constitutional amendment bill for levying Goods and services tax has already been passed in loksabha. Had it not been for the rigid stand of the opposition the same would have been passed in the monsoon session of the parliament held in august 2015. Past apart, with the current business mood along with support from the states and sheer determination of the central government to bring the revolutionary tax reform at the earliest date possible, it seems that the current parliament logjam is not there to be subsisting for too long. Once the constitution bill is passed, lot of clean-up action including the future optimization plans has to be worked around to re-engineer the entire business model in accordance with the new tax regime.
If tremendous efforts are required to completely plan, implement and execute the new business models under the stri
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ents;
* Treatment for units covered under industrial incentives/exemptions;
* Transition entries in the books of accounts;
* Treatment for transactions covered under Purchase tax/reverse charge;
* Pending refund claims;
* Filing of returns, completion of assessments, audits, appeals etc.
This article focuses on the transitional issues that shall be faced in respect of 'Obtaining registration under GST' and the immediate action that needs to be taken by the business entities to ensure smooth registration process.
Transitional issues in registration under GST
Transitional provisions are required to provide the process for conveniently obtaining a new registration certificate from the GST authorities of both centre and state and to surrender an existing registration certificates pertaining to various taxes subsumed. For smooth transition to registration requirements, following is expected:
* Registration process is expected to be online wherein, registration number will be
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here the business entity is having a permanent establishment in the form of registered office, factory, branch, depot, warehouse or any other fixed or permanent establishment.
* Single centralized registration is expected to be issued covering all the units, branches of the assessee within that state and the jurisdiction shall be decided based on the principal place of business within that state.
* A nominal fee may be charged for grant of registration certificate in the GST regime to recover the administrative costs of physical inspection etc.
* All the existing registration certificates are expected to be continued for the purpose of filing of periodical returns, payment of dues, completion of assessments/appeals/audit, refunds, generation of requisite forms etc. The same are expected to be phased out over a period of time. Separate application for surrendering the old registration certificates may not be provided for.
* No separate registration certificate may be required un
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the issues if any faced with the current PAN no. obtained from the income tax authorities.
Group Registration concept – Best practices internationally
There is concept of Group registration that is prevalent in few of the world's major economies, Such concept of group registration if brought in India can have following benefits:
* Reduction in the compliance costs;
* Simplified administration for supplies between the group companies;
* One GST return & one payment for the entire group. This is especially useful for businesses with a centralized accounting function.
* Cash flow benefits in the form of real cash savings for taxable supplies made between the group especially for the supplies made to the partially exempt group members.
Summary of the group registration concept as is prevalent in few developed countries is tabulated below for ease of reference:
United Kingdom
Australia
New Zealand
Canada
Corporate bodies that are under “common
control” and are established o
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urposes and consequently are effectively ignored.
When the legal entities are considered as “Closely related” is defined under the act.
A group must appoint a representative member. Group members
making supplies outside the group must issue tax invoices.
The representative group member must
account for GST with respect to all group members' taxable
activities and file returns. Group members must adopt the same tax periods and accounting basis for GST purposes.
Group members are also jointly and severally liable for all
GST liabilities.
Transactions between group members are not generally liable to
GST. This measure applies on the condition that the supply is made to a group member that would have been entitled to input tax recovery if the supplier had not been a member of the group.
Group registration is allowed for corporations
or other taxable persons that are “under common control.”
Although, GST/HST group registration is not permitted in Canada.
Legal entities that ar
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