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Salient Features of Model GST Law

Ankur Jain

The Empowered Committee of State Finance Ministers has released the ‘Model Goods and Services (GST) Law’ on 14th June 2016. The salient features of the Model GST Law are as follows:

  • The GST would extend to whole of India
  • The concepts of ‘sale of goods’ and ‘rendering of services’ have been replaced with ‘supply of goods’ and ‘supply of services’ respectively
  • Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST) would be levied on all intra-State supplies of goods and services, at a rate to be notified
  • Similarly, Integrated Goods and Services Tax (IGST) shall be levied on inter-State supplies of goods and services at a rate to be notified
  • Separate Model Acts for the intra-State and inter-State transactions provided
  • Taxable person means a person who carries on any business at any place in India and is registered or required to be registered
  • Threshold limit prescribed of Rs. 10 lakhs and Rs. 5 lakhs (for North Eastern States and Sikkim)
  • Every person would be required to obtain registration in each State he operates
  • A person having multiple business verticals in a State may obtain separate registrations for each verticals in that State
  • Every person making a taxable supply of goods or services would have to issue tax invoice containing the prescribed particulars
  • Adjustment in tax charged in tax invoice can be made by issuing a credit note containing the prescribed particulars and within the prescribed time
  • Every taxable person in respect of each registration shall
    • furnish details of outward supplies by 10th of the succeeding month;
    • furnish details of input supplies by 15th of the succeeding month;
    • furnish a return of outward supplies, inward supplies, input tax credit availed, tax payable and tax paid by 20th of the succeeding month
  • No return can be filed unless the tax due as per the return has been deposited and consequently, his customers shall not be able to avail credit of the tax charged by him
  • No return can be filed unless a valid return for the previous tax period has been filed
  • In addition to the above mentioned periodic returns, each taxable person shall be required to file an Annual return as well
  • Composition Scheme available to a registered taxable person involved in intra-State supply of goods and services whose aggregate turnover is less than Rs. 50 lakhs (no availing credit and no recovery from the recipient)
  • Electronic Cash Ledger and Electronic Credit Ledger is being introduced where all transactions of an assessee shall be recorded and maintained
  • The input tax credit shall be credited in the electronic ledger as self assessed in the return and it may be used for the amount payable i.e. tax, interest, penalty etc
  • Input tax credit of CGST shall not be utilised for the payment of SGST and vice versa
  • Credit shall be allowed only in respect of the inputs attributable to taxable and zero rated supplies
  • Unutilised credit available on account of exports (whereby no export duty is payable) can be claimed as refund
  • Central/ State Government may be regarded as a taxable person in respect of activities engaged as public authorities except otherwise specified
  • Person under RCM receiving services of a certain value (to be notified) when used for personal use would not be treated as taxable person
  • Clarification issues with respect to a Notification within one year shall be deemed to be part of the Notification

 

Matters to be treated as Supply of Goods or Services

  • Any transfer of the title in goods or any transfer of title in goods under an agreement which stipulates that property in goods will pass at a future date upon payment of full consideration as agreed, would qualify as a supply of goods
  • Any transfer of goods or of right in goods or of undivided share in goods without the transfer of title thereof, would qualify as a supply of services
  • Any lease, tenancy, easement, licence to occupy land would qualify as a supply of services
  • Any lease or letting out of the building including a commercial, industrial or residential complex or business or commerce, either wholly or partly, would qualify as a supply of services
  • Any treatment or process which is being applied to another person’s goods would qualify as a supply of services
  • Where, by or under the direction of a person carrying on a business, goods held or used for the purposes of the business are put to any private use or are used, or made available to any person for use, for any purpose other than a purpose of the business, whether or not for a consideration, the usage or making available of such goods would qualify as a supply of services

 

Time of Supply

The liability to pay CGST/SCST on GOODS shall arise at the time of supply which shall be the earliest of the following dates:

(i) When goods are required to be removed by the supplier for supply, date on which goods are removed;

(ii) The date on which the goods are made available to the recipient in cases where goods are not required to be removed (i.e. 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)

  • the date on which the supplier issues the invoice with respect to the supply; or
  • the date on which the supplier receives the payment with respect to the supply; or
  • the date on which the recipient shows the receipt of the goods in his books of account

 

The liability to pay CGST/SCST on SERVICES shall arise at the time of supply of service which is as follows:

- Earlier of date of issue of invoice or the date of receipt of payment, if invoice was issued within prescribed period

- Earlier of date of completion of provision of service or the date of receipt of payment, if the invoice is not issued within prescribed period

- In case the above two provisions do not apply, the date on which the recipient shows the receipt of services in his books of account

- In a case where the supply of services ceases under a contract before the completion of the supply, such services shall be deemed to have been provided at the time when the supply ceases

  • The date of receipt of payment shall be the date on which the payment is entered books of accounts of supplier or the date on which the payment is credited to his bank account, whichever is earlier.
  • In case it is not possible to determine the time of supply under the provisions 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 the CGST/SGST is paid
  • Other provisions with respect to time of supply of goods or services have also been provided in situations of continuous supply and where tax is to be paid under reverse charge

 

Value of Taxable Supply

  • Value of taxable supply shall be the transaction value when supplier and recipient are not related and price is sole consideration
  • The transaction value shall include the following
  • 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
  • royalty and technical fees which was not included in the price actually paid or payable
  • any taxes, duties, fees and charges levied under any statute other than the SGST Act or the CGST Act or the IGST Act
  • incidental expenses such as commission or packaging in respect of supply of goods or service
  • subsidies provided in any form or manner, linked to the supply
  • any reimbursable expenditure or cost
  • any discount or incentive allowed after the supply has been effected (however if such post supply discount was known before the time of supply and specifically linked with invoices, the same shall not be included in the transaction value)

 

Transitional Provisions

  • Carry forward amount of CENVAT credit/VAT input tax credit in return will be allowed as Input Tax Credit
  • Unavailed CENVAT credit in respect of Capital Goods, which were not carried forward in return, would be allowed
  • Price revised upwards/downwards on or after the appointed day for transaction in goods and/or services prior to appointed day, issuance of supplementary invoice or debit note is mandatorily required within 30 days of such revision. In case of downward revision, tax liability can be reduced if corresponding input tax credit has been reduced.
  • Refund claim of duty/tax and interest filed before appointed day will be sanctioned in accordance with provision of earlier law; if in case rejected, amount shall lapse
  • In the proceeding of appeal, revision, review or reference relating to a claim for CENVAT credit found admissible under earlier law shall be refunded in cash not as Input Tax Credit

A National Goods and Service Tax Appellate Tribunal (Appellate Tribunal) will be established along with its branches (State GST Tribunals) each for every State