Tax on Goods and Services – Indirect Taxation

Following the Constitutional Amendment and assent of the Hon’ble President of India to the Goods and Services Tax Act (GST Act), officially ‘The Constitution (One Hundred and Twenty Second Amendment) Bill 2014′, the Parliament of India has passed the constituent Acts on Goods and Services Tax (GST) on 6 April 2017 (listed below), which have received the Presidential assent on 12 April 2017.


Goods and Services Tax (GST) Acts

> The Central Goods and Services Tax (CGST) Act 2017 (pdf)
> The Integrated Goods and Services Tax (IGST) Act 2017 (pdf)
> The Union Territory Goods and Services Tax (UTGST) Act 2017 (pdf)
> The Goods and Services Tax (Compensation to States) Act 2017 (pdf)

The above stated Acts (along with State ratification and legislation on the subject i.e.SGST Act) upon becoming law, are expected to bring about landmark indirect taxation reform by annexing and consolidating almost all of the various State and Central laws on the subject and through the imposition of a single (GST) value-added tax on the supply of goods and services on its end-user or consumer (destination based consumption tax).

 
Final GST Rules

The Final GST Rules subsequent to GST Council approval have been part released, the said Rules are available for download through the CBEC website

> Composition Rules (pdf)
> Valuation Rules (pdf)
> Input Tax Credit (ITC) Rules (pdf)
> Invoice, Debit and Credit Notes Rules (pdf)
> Payment Rules (pdf)
> Refund Rules (pdf)
> Registration Rules (pdf)

 

GST Rates, Compensation Cess Rates, Classification of Services and Reverse Charge List

  • GST rates and GST Compensation Cess rates on ‘goods’,
  • GST rates for ‘services‘ as well as those on the ‘Reverse Charge List’,
    was discussed recently at the 14th GST Council meeting as held in Srinagar, Jammu & Kashmir.
  • GST rates as approved by the GST Council, for ‘goods’ and ‘services’ are at Nil rate, 5%, 12%, 18% and 28%, to be levied on goods and services as classified thereunder (the information in respect of both GST rates and Compensation Cess rates have been uploaded, link as provided below, however the same has been notified as subject to further vetting during which the said lists may undergo some changes).
  • GST rates for certain goods like textile, footwear, biris, precious metals, etc. are yet to be decided by the GST Council.

 
Goods

> GST Rates
> GST Compensation Cess Rates


Services

> Classification Scheme
> GST Rates
> Reverse Charge List

 

Focus

MinusTax provides the latest information^ and analysis (see core focus areas below) on GST as it continues to develop and evolve leading up to its expected ‘roll-out’ date of 1 July 2017.

^Due to the latest developments including the passing of the above mentioned Acts, information on GST as previously published on various MinusTax’ webpages is being currently updated and some pages may not be available.


Dual Levy

The Goods and Services Tax (GST) levy for supply of goods and services within a State (‘intra-State’ supply) will be in the form of a dual and concurrent GST levy structure, withCentral GST‘ (CGST or Central Tax) to be levied by Central Government and ‘State GST’ (SGST or State Tax) levied by the concerned State, on the same ‘taxable supply’.

  • For ‘inter-State’ supply and import of such goods and services, the Central Government would levy and collect ‘Integrated GST’ (IGST or Integrated Tax).
  • ‘Union Territory GST’ (UTGST or Union Territory Tax) shall be levied on ‘intra-Union Territory’ supply by the Central Government for the concerned Territory (without legislature).


GST Council and GST Rates

The CGST and SGST would be levied at rates to be jointly decided by the Central Government and State Governments. The GST rates would be notified on the recommendations of the GST Council, established under Article 279A of the Constitution of India.

The GST Council is the top decision-making body on GST and will have representation from the Central government as well as all the State Governments. The GST Council will be chaired by the Union Finance Minister with a State Finance Minister as Deputy Chairman. All the Ministers in charge of Finance or Taxation or any other Minister nominated by each State Government along with the Minister of State for Finance in charge of revenue at the centre are part of the Council.

The Goods and Services Tax Council shall make recommendations to the Union and the States on —

  • The taxes, cesses and surcharges levied by the Union, the States and the local bodies which may be subsumed in the goods and services tax
  • The goods and services that may be subjected to, or exempted from the goods and services tax
  • Principles of levy, apportionment of Goods and Services Tax levied on supplies in the course of inter-State trade or commerce under article 269A and the principles that govern the place of supply
  • The threshold limit of turnover below which goods and services may be exempted from goods and services tax
  • The rates including floor rates with bands of goods and services tax etc.


Input Tax Credit (ITC)

To prevent a cascading effect of taxes being levied on previously paid taxes and thus causing an inflationary effect on the end prices of such goods and services, as is the prevailing situation, Input Tax Credit (ITC) for input (GST) tax paid at each stage of supply chain will be available at the subsequent stage of value addition and supply, making GST essentially a tax on ‘value addition’ at each such stage. The final consumer will bear only the GST charged by the last registered ‘dealer/supplier’ in the supply chain of the subject goods and/or services, with input tax set-offs taken by the various registered suppliers/dealers at all stages of supply chain leading to the final consumption.


Order of ITC Set-off

The amount of Input Tax Credit (ITC) on account of IGST available in the electronic credit ledger shall first be utilized towards payment of IGST and the amount remaining, if any, may be utilized towards the payment of CGST and SGST, in that order.

The amount of ITC on account of CGST available in the electronic credit ledger shall first be utilized towards payment of CGST and the amount remaining, if any, may be utilized towards the payment of IGST, and similar order of application shall apply for SGST.

The ITC on account of CGST and SGST shall not be utilized towards payment of the other.


Administrative and Compliance Benefits

From an administrative and compliance standpoint, a single GST tax will simplify such matters and bring the cost and complexity of compliance down for the registered dealers/suppliers etc. and provide for more free movement and sale of goods in a ‘national common market’. Further, with a single GST tax rate for goods and services across the country, GST will bring parity and certainty to the indirect tax burden to be borne by the end-consumer.


Taxes to be subsumed by GST

At the Central Government level, the following taxes shall be replaced by GST —

  • Central Excise Duty
  • Additional Excise Duty
  • Central Sales Tax (CST)
  • Service Tax
  • Additional Customs Duty (Countervailing Duty or CVD)
  • Special Additional Duty of Customs (SAD)

At the State Government level, the following taxes shall be replaced by GST —

  • State Value Added Tax/Sales Tax (VAT)
  • Entertainment Tax (other than the tax levied by the local bodies)
  • Octroi and Entry Tax
  • Purchase Tax
  • Luxury Tax
  • Taxes on lottery, betting and gambling
  • State Cesses and Surcharges


Get Professional Help – Understand, Plan and Setup for GST

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Chapter VI of the Central Goods and Services Tax (CGST) Act 2017 (the Act) details the persons liable, not liable and ‘compulsorily liable’ for registration for GST under the Act, along with procedure and other essential matters on registration. The Act further provides benefits of registration, compliance obligations and liabilities for failure to so register when required by the relevant and applicable provisions of the Act.

> Read more on ‘GST Registration’


Get Professional Help – Register/Migrate to GST

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Supply’ of taxable goods and/or services is the principal ‘taxable event’ (subject to other prescribed conditions and/or provisions) and the threshold/jurisdictional requirement for the consequential levy of Goods & Services Tax (GST), and is also the distinguishing feature of GST as an indirect form of taxation.

> Read more on ‘Supply’


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Section 7 of the IGST Act (subject to the provisions of section 10 (for ‘goods’)/section 12 (for ‘services’) of the said Act) treats the supply of ‘goods’ and/or ‘services‘ as an ‘inter-State supply’ (or in the course of inter-State trade or commerce), where the location of the supplier and the place of supply are in ––

  • Two different States;
  • Two different Union territories; or
  • A State and a Union territory.

> Read more on ‘Inter-State Supply’


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‘Composition Levy’ (the Scheme) is expressed as an alternative method for levy of tax* under the recently passed CGST Act, designed for small taxpayers with turnover within the prescribed limit and subject to other conditions (see below). The Scheme seeks to reduce the burden of regulatory compliance, impose lower rates of taxation and provide incentives to the said small businesses etc. engaged in the supply of taxable goods.

> Read more on ‘Composition Levy’


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Chapter IV of the Central Goods and Services Tax Act 2017 (CGST Act) contains the necessary provisions to determine the ‘time’ and ‘value’ of supply for the purposes of levy of Central Tax as well as Union Territory Tax and Integrated Tax under the UTGST Act and IGST Act respectively.

> Read more on ‘Time and Value of Supply’


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The ‘place’ of supply (and the related ‘location of the supplier’) is subject to the provisions of Chapter V (see below) of the IGST Act, which determines whether a supply is ‘intra-State’ or ‘inter-State’ in nature, and in the latter case results in the consequential levy of Integrated GST or IGST (generally when the said place of supply and location of supplier are in different States/Union Territories etc).

> Read more on ‘Place of Supply’


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The core feature of the Goods and Services Tax (GST) concept of indirect taxation provided for in the GST Acts^ as recently passed by the Indian Parliament, is the entitlement to ‘input tax credit’ (ITC) for ‘input tax’ paid by eligible persons (see below) on supply of goods and/or services.

> Read more on ‘Input Tax Credit’


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Section 2 of the Central Goods and Services Tax Act 2017 (CGST Act) defines “electronic commerce” to mean the supply of goods or services or both, including digital products over digital or electronic network. The said provision also defines an “electronic commerce operator” (the Operator) to mean any person who owns, operates or manages digital or electronic facility or platform for electronic commerce.

> Read more on ‘Electronic Commerce’


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Chapter XII of the Central Goods and Services Tax Act 2017 (the Central Act or CGST Act) contains the provisions on Assessment (as briefly discussed below) and similarly applies for assessment purposes under the Integrated Goods and Services Tax Act 2017 (the Integrated Act or IGST Act) and the Union Territory Goods and Services Tax Act 2017 (the Union Territory Act or UTGST Act).

> Read more on ‘Assessment and Audit’


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Chapter IX of the Central Goods and Services Tax Act 2017 (the CGST Act) provides for ‘Returns’ required to be furnished by concerned persons in different circumstances under the said Act (which has been briefly discussed below) for compliance and payment of tax under the CGST Act, the Integrated Goods and Services Tax (IGST) Act 2017 and the Union Territory Goods and Services Tax (UTGST) Act 2017.

> Read more on ‘Returns, Invoice and Records’


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Subject to the provisions under Chapter X of the Central Goods and Services Tax Act 2017 (the Central Act or CGST Act) and the rules^ made thereunder, section 49 requires every taxable person to discharge his/her/its tax (Central Tax, Integrated Tax and/or Union Territory Tax, as the case may be) under the Central Act (and/or the Integrated Goods and Services Tax (IGST) Act 2017 and/or Union Territory Goods and Services Tax (UTGST) Act 2017, as the case may be) and other dues.

> Read more on ‘Payment and Refund’


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