What you need to know about the Model GST Bill

In what may be termed as a milestone event on the path to Goods and Services Tax (GST) in India, the Government last week unveiled a draft version of the ‘Model GST Law’ for comments from various stakeholders..The empowered committee of the state finance ministers almost unanimously approved the model GST. However, Tamil Nadu has its reservations inasmuch as it is a manufacturing state and fears loss of revenue..In order to implement the GST, the Constitution (122nd Amendment) Bill needs to passed in the Rajya Sabha, which will in all probability be done during the coming Monsoon session of the Parliament..Once implemented, the GST will subsume all existing indirect tax provisions under customs law, central excise law, service tax law, VAT laws, etc..The key features of the GST Bill, 2016 are:.While the GST rate continues to be a mystery, the GST law will comprise of Central GST (CGST), State GST (SGST) and Integrated GST (IGST) which will be levied on the same taxable value..The CGST and SGST shall be simultaneously imposed on intra-state supply of goods and services, while the IGST on interstate supplies..Taxable event under GST is ‘supply of goods and services’ instead of the existing multiple taxable events like manufacture, rendering of service and sales of goods..For companies which outsource their manufacturing operations, additional compliance costs may be incurred, however traders are to benefit from this development. Also, it appears that service providers may have to obtain multi-state registrations..Further, the valuation for the purposes of calculation of GST will be on the ‘transaction value’ of the supply of goods and services. This is in contrast to the maximum retail price valuation in case of discounts offered by manufacturers and retailers..Also, an un-tested condition for service providers who were hitherto taxed on ‘gross amount’..The GST law maintains distinction between goods and services. The definition ‘goods’ is in line with the Sales of Goods Act, 1930 and services has been defined to mean anything other than goods. Therefore, all intangible services fall under ‘services’.The GST law also proposes a revenue threshold for traders who will come under GST at Rs.10 lakh. Whereas for northeastern states, this threshold will be Rs.5 lakh. However, agriculturalists have been left out of the definition of taxable persons.Looking to address the concerns of retailer’s loss of revenue, the law proposes collection of tax at source by the e-commerce companies. An e-commerce operator will now be required to collect tax at prescribed rates from the amount payable or paid to the supplier towards the supply of goods and/ or services made through the said operator, and pay the said tax to the Government..The Rs. 10 Lakh threshold will have no relevance in this case since the platforms will be liable to collect tax on every transaction no matter how small the seller might be..This measure is being seen as an accounting nightmare for e-commerce companies. While until now the burden of compliance was on the individual sellers, the burden has now been shifted on the e-commerce platform..Additionally, complications will arise owing to the high number of returns i.e. for returns, the companies will have to bear the tax cost from their own capital and seek refunds later..Credit can be taken of the CENVAT Credit/ Value added tax credit in a return furnished under the previous law. However, refunds are not permitted.Input tax credit, which is the amount of tax paid by the buyer on purchases made by him and subsequently sold, will not be permitted unless the tax charged in respect of such supply has been paid by the seller. Also, input tax credit of CGST shall not be utilised towards payment of SGST and similarly input tax credit of SGST shall not be utilised towards payment of CGST.The law provides for appointment of three classes of officers, viz., (i) CGST officers (ii) SGST officers and (iii) IGST officers who will be responsible for administering the respective GST law. Suppliers are liable to be registered in each State from where supply of goods and/ or services is made. The law gives central and state GST officers above a certain rank the powers to conduct audit and inspection as well as search and seizure operations in cases of tax evasion.The law provides for the constitution of a National GST appellate tribunal by the Centre, with a branch in each state to hear disputes. Appeals must be filed within 3 months from the date of communication of order..It also provides for an advanced ruling so that tax payers can get rulings on taxability of particular transactions beforehand.