Good and Services Tax (“GST’’), envisaged as the single biggest tax reform since Independence, is aimed to remove tax barriers between states to create a single market. GST is going to replace plethora of indirect taxes currently imposed at various stages of manufacturing, trading, etc. The implementation of GST will help to create a common national market and reduce the cascading effect of taxes on the costing and pricing of goods and services. It will have a far-reaching impact on almost all the realms of business operations in our country. It will impact tax structure, tax incidence, tax computation, supply chain optimization, credit availment & utilization, compliance etc., leading to a complete overhaul of the current indirect tax system in India.
GST is a tax on goods and services with comprehensive and continuous chain of set-off benefits from the producer’s level. It is essentially a tax only on value addition at each stage, and a supplier at each stage is permitted to set-off, through a tax credit mechanism, the GST paid on the purchase of goods and services as available for set-off on the GST to be paid on the supply of goods and services. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.
On June 14, 2016, the central government put the Model GST Law on public domain after getting an in-principal nod from the Empowered Committee of State Finance Ministers for seeking suggestion from the public at large. Further, 122nd Constitution Amendment Bill, 2014 (“GST BILL”) received the assent of the Hon’ble President On September 8, 2016 and enacted as the Constitution (101st Amendment) Act, 2016 [“the 101st Constitution Amendment Act”].
In series of event for GST implementation, on September 12, 2016, the Union Cabinet has approved formation of GST Council (Section 12 of the 101st Constitutional Amendment Act) followed by the government notifying September 16, 2016 as the appointed date for remaining Sections of the 101st Constitutional Amendment Act (i.e. Section 1 to 20, except Section 12). Since notification of the GST Council on 12 September 2016, six meetings of the GST Council have been held in New Delhi. These meetings were held on 22-23 September, 2016, 30 September ,2016, 18-19 October, 2016, 3-4 November, 2016, 2-3 December, 2016 and 11 December, 2016 (as mentioned in the report card issued by the government on November 14, 2016). Further, the two day seventh GST Council meeting took place recently on 22-23 December, 2016.
Earlier, the Central Board of Excise and Customs on September 26, 2016 has unveiled Draft Rules and formats under GST relating to registration, invoice and payment, followed by the Draft Rules and formats on GST returns and refunds on September 27, 2016, which got approval from the GST Council in its meeting dated September 30, 2016. Further, the government also unveiled the Revised Model GST Law and Draft Goods and Services Tax Compensation bill by placing it in public domain on November 26, 2016 after incorporating suggestions from trade and industry, in a way, Signalling that the GST might mark its advent soon.
Thought, the Government is committed to roll out GST as envisaged from April 1, 2017 but there may be some delay on account of the recent demonetisation of high-value currency by the government which has led to lot of tussles in the Parliament and moreover, the issue of dual control between the centre and state is not yet settled. The 101st Constitutional Amendment Act, to replace existing indirect taxes with the new GST law was notified on September 16, 2016, and the new ambitious tax reform has to be implemented within 12 months of that date i.e. before September 16, 2017.
The Revised Model CGST/SGST Act, 2016 consists of 197 sections divided into 27 chapters along with 5 schedules as compared to 162 sections divided into 25 chapters along with 4 schedules and Rules as to Valuation under first Model GST law. Further, the Model IGST Act,2016 consists of 24 sections divided into 11 chapters in comparison to 33 sections divided into 11 chapters under first Model GST law. Furthermore, the Compensation bill consists of 11 clauses.
The key areas under Revised Model GST Law viz. meaning & scope of supply, taxable person, threshold limits, principles of place of supply of goods and/or services, time of supply, valuation, GST credit, Adjudication, Appeal, Advance Ruling, offences , Penalties, Imprisonment and transitional provisions etc., have been summarized along with comparison of provisions of the Revised Model GST Law vis-à-vis first Model GST Law.
CA MADHURESH AGRAHARI