Goods and Services Tax

GST- which has already derailed is certainly going to miss the deadline of 1 April 2017. The fix which the biggest indirect tax reform is facing is of the administrative control upon the taxpayer. In the recent GST Council Meet no conclusion was reached upon this issue and the next meeting has been scheduled for December 23 and December 24. Centre is devising a method that the computers will select 5% taxpayers and allocate them to centre and the state authorities on random basis. Justification for such a system is Computer Assisted Scrutiny Selection (CASS) followed by the Income Tax Department. They say that even under Income Tax, Assessee is not sure as to who is going to assess his income. But what they have forgotten is that the assessee under Income Tax does know under whose jurisdiction his PAN number falls and which wing of the department is likely to assess him. There is absolutely no confusion as to which authority he has to approach. Under GST, they are proposing...

Q1: What is Input Tax? Input Tax is tax paid on supply of goods and/or service which is used or intended to be used in course or furtherance of business. Q2: What if the intention to use in business is extinguished at the later stage? If taxpayer has claimed the ITC against an invoice which he intended to use in business but at the later stage it is not used. The mount of ITC claimed shall have to be reversed. If appropriate balance is not available in ITC ledger the same has to be paid in cash.  Q3: What taxes are eligible for Input Credit? Under GST, taxpayer can avail ITC of only IGST/CGST/SGST paid by them on the supply procured. No other duty/cess/tax shall be eligible for ITC. Compensation Cess as proposed by Draft Compensation Law shall not be eligible for claiming input tax credit. Q4: What are the conditions to avail Input tax Credit? The taxpayer has to satisfy four conditions for availing input tax credit: 1.      ...

It is apprehended that delay in GST is certainly going to have impact on the mathematics of the Budget for the Financial Year 2017-18. It is most certain that GST will get deferred for one quarter at least. In this scenario, old laws shall prevail for first 3 months and GST for next nine months. The government has to work on the Part B of the budget on the basis of the revenue collection expected under both laws. Accordingly amendments would be brought in the present tax structure. It is most likely that service tax rate might be increased to 16-17% in lieu of GST rate being decided at 18% for levy on services. Although delay in the biggest tax reform might sour the flavor of many professionals, the business community is certainly going to welcome the delay. It will give them time to understand the new law and rules. 3 months would be enough time for them to implement the change in their business policies and accounting packages. If GST further gets postponed from July 1,...

GST Council concluded its meeting yesterday without any consensus on the dual control under GST. There is still a stumble block of the administrative powers centre and state governments are going to hold. After resolving the compensation issues, states are not ready to withdraw their control upon the taxpayers. Earlier it was decided that states will have sole control upon the taxpayers having aggregate turnover up to Rs. 1.5 crores and above that both centre and state will have dual control in case of goods. But for services it was decided that all the taxpayers shall remain under the control of central government.  Next meeting on this issue has been planned on 11 th and 12 th December. Even if breakthrough is obtained in this meeting, winter session will get over in next 3 days i.e. 15.12.2016. In such a scenario it does not look like that government will be able to get the bill passed so quickly. Even if it brings these bills as money bill, 14 days time have to be...

GST Council had its meeting yesterday regarding the administrative control of taxpayer between centre and state government, but no consensus was achieved. The issue of paramount importance was put at the back-burner and was kept for discussion today i.e. 03.12.2016. Without the consensus being reached on this critical issue, it is unlikely that government will table the GST Bills in the Parliament. Finance Minister himself said that we have to roll out GST maximum by September 16, 2017 beyond which it would be difficult to levy present indirect taxes. Only 9 days are left for current winter session and it is unlikely that the bills will be presented. Such a hesitation of the finance head of the nation is surely a red sign that GST is set to get deferred for another 6 months from its targeted date of 01.04.2017.   Looking at the issues GST has apart from the drafting errors, it seems that the government should pull up its socks and try to resolve them. Legislature and draf...

                 Government has officially released the draft GST Compensation law on 26.11.2016. As per the provisions of section 8 of the Draft law it has been proposed that every taxpayer shall pay a cess at the rate decided on the value of each supply made by him/her. Such Cess shall be utilized for compensating the loss to the states due to enforcement of GST. Also as per provisions of section 16 of the CGST Act such cesses shall not be allowed as input tax credit against the supply made by the supplier. This shall have inflationary effect and prove to be an additional burden on the final consumer. It has been proposed that GST shall subsume all the indirect taxes except a few. GST Council has also decided that there shall be four rate structures under GST. Although the tax revenue of the government will increase post GST there shall be gradual reduction in the prices. Further it has been made mandatory for the taxpayers to p...

It is most likely that the new indirect tax regime of Goods and Services Tax will get enforced from 01.04.2017. While the industry is busy in analyzing the GST Impacts with their GST Consultants, Hotel Industry seems to be relaxing and eagerly waiting for the new regime. Hotel industry is likely to have far reaching positive impact of GST. At the very outset when the hotel industry is paying Service tax, VAT, Luxury Tax and other taxes whose sum total comes to 30-35%, they are going to gain to the extent of 17% under GST, assuming that the standard rate of GST i.e. 18% would apply. Since even today the consumers are ready to pay high taxes at a luxury hotel, it is expected that the hotel industry would retain the margin with themselves rather than passing on to its customer. Once GST is enforced, multiple tax regimes will go away and hence reduce the compliance cost enabling the ease of doing business for industry. It has also been proposed that there shall be least inter...

Section 9 of the law prescribes that any person whose annual aggregate turnover in the preceding financial year has not exceeded Rs. 50 lakhs can opt for composition scheme under GST. Under this scheme, on approval of proper officer, taxpayer has to pay taxes at the prescribed rates which shall not be less than 1%.   Persons who are engaged in 1) manufacturing of specified goods or supply of services or 2) supply of exempted goods 3) Inter-state outward supply 4) Supply through e-commerce operator shall not be eligible to claim the benefit of Composition scheme.       First proviso to section 9(1) provides that the manufacturers are ineligible to claim benefit of composition scheme. As per Section 2(66) of the CGST/SGST Act, “Manufacturer” shall have the meaning assigned to it by the Central Excise Act 1944. Central Excise Act 1944 defines “manufacture” to includes any process, - (i)    incidental or ancillary to the completion of a m...

Since Model GST Law has been uploaded on the public portal, each one of us had been deliberating on the same to understand the mindset of the law makers. Although MGL sets a background about the expectation of the law makers, it is set to change drastically by incorporating the changes recommended by the states, professional bodies and business communities. A government official had already announced that the new law is being prepared in consultation with the states and once the law is finalized it shall be put on the public domain. In this period of time when we are expecting new law to come, we should restrain ourselves from going into the details of the old law. From the concept of supply, time of supply, place of supply to assessment and audit procedures all is going to change to a large extent. The anomalies which were found in MGL are expected to be done away once the new law comes in. We can expect a major change in the definition of goods and services. As contested ea...