Area

Current Provision under Indirect taxes

Model GST Provision

Difference/ Remarks

Cross Utilisation of CENVAT and ITC

Currently, availment and cross utilisation in case of CENVAT and VAT is not permissible

Taxes paid against CGST allowed as ITC against CGST. Taxes paid against SGST allowed as ITC against SGST

Cross utilisation shall be allowed except cross utilization of ITC between the Central GST and State GST would not be allowed

Eligibility of CENVAT/ ITC

CENVAT on services inward transportation of goods (and outward transportation upto the place of removal) is allowed

Input tax credit is available on transportation of goods

Manufacturers will benefit from this change at large

Restriction on ITC of Capital goods

CENVAT Credit for capital good is available in two instalment i.e. 50% in the first year and 50% in the subsequent year

Full Input tax credit in the first year itself

This would lead to positive impact on cash flows

Payment of taxes and filing of returns by seller to avail Input tax credit (ITC)

Presently under the CENVAT scheme there is no such requirement. However, some State VAT lawshave such restrictions for availing ITC.

As per section 16(11), Input tax credit to the Purchaser/ Receiver of service/goods will be available only if supplier of goods/ services pays taxes and files their return

The buyers will now have to ensure that their vendors have robust IT infrastructure and compliance process, so that the vendors do not default on timely and appropriate payment of taxes.

Reduction/ Reversal of ITC

Under most of the VAT laws, there are various reversals/reduction in credit on account of stock transfers outside the state, procurement of items ineligible for credit, etc.

Further, currently no restriction on purpose of use subject to certain conditions

ITC shall be restricted to credit in relation to business purpose. Thus, ITC for the purpose other than business shall not be permissible

Reversal's of ITC willbe minimized considerably as all outward supply of goods and/or services would be levied under one GST framework only. Thus, reversal of ITC will only be limited for exempted / Non - GST supplies.

Area

Current Provision under Indirect taxes

Model GST Provision

Difference/ Remarks

Increase in time limit for application

Application for refund to be filed within one year from the relevant date

Application for refund to be filed within two year from the relevant date

Increase in time limit for application of refund to 2 years is a welcome move and the same will ease the procedural aspects involved in filing the refund

Documents requirement if refund claim is less than Rs. 5 lakhs

Various documentary evidences such as output and input invoices, FIRCs, bank statements, various declarations etc. are required to be submitted irrespective of the claim amount

If the refund claim is less than Rs. 5 lakhs , then it shall not be necessary for the claimant to furnish documentary evidences.

Instead, he may file a declaration based on the documentary evidence available

This move will serve as a huge relief for small assessees which will prevent the cost, time and effort spent in maintaining huge documentation

Time Limit for sanction of refund

No such provision

It has been specifically stated that the officials will be required to issue refund order within 90 days from the date of receipt of application.

The term 'application' shall mean complete application containing all information as may be prescribed.

Since the time limit has been specifically stated, it will ensure speedy disbursement of refund claims by the authorities and reduce the hassles faced in the current regime

Excise duty to be paid on the manufacture of goods and removal from factory

VAT is paid on sale of goods  within a state and CST is paid on sale of goods in interstate sale

Entry tax/Octroi is paid on entry of goods into state/local jurisdiction

Customs duty is paid on export/import of goods

CGST/SGST/IGST is  payable at earliest of

a. Removal of goods or

b. receipt of payment or

c. issuance of invoice or

d. date on which buyer shows receipt of goods

Under Reverse charge basis, earliest of

a. Date of receipt of goods

b. the date on which the payment is made, or

c. the date of receipt of invoice, or

d. the date of debit in the books of accounts

It can be observed that there are many parameters in determining time of supply.

Thus, determining the time of supply and further maintaining reconciliation between revenue as per financials and as per GST rules could be a major challenge to meet.

Service Tax is payable at earliest of

1. date of invoice or

2. receipt of payment

(subject to invoice is raised within 30 days from completion of service)

Under Revere charge basis

the date on which the payment is made subject to other rules specified

CGST/SGST/IGST is  payable at earliest of

a. Issuance of invoice or

b. receipt of payment or

c. date on which recipient shows receipt of services

Under Revere charge basis, earliest of

a. Date of receipt of services

b. the date on which the payment is made, or

c. the date of receipt of invoice, or

d. the date of debit in the books of accounts

Excise  - Value of goods shall be value determined under section 3, 4 or 4A of Excise Act 1944 read with rules made thereunder

Service Tax - Value of service shall be as per section 67 of the Finance Act, 1994 read with rules made thereunder

VAT - VAT is payable on sale price as defined under different state Act/rules

Customs - Customs duty is payable as per section 14 of the Customs Act, 1962 read with rules made thereunder

CGST/SGST/IGST would be payable on the transaction value. Transaction value is the price actually paid or payable for the said supply of goods and/or services between un-related parties.

(The value of the supply of goods and/or services which cannot be valued as per above shall be determined in such manner as may be prescribed in the rules e.g. related party transaction)

The transaction value is also said to include all expenses in relation to sale such as reimbursable expenditure, packing, commission, subsidies, discounts allowed after supply is effected etc.

Area

Current Provision under Indirect taxes

Model GST Provision

Difference/ Remarks

Place of supply of goods/services

CST -  Generally , CST is leviable at rate applicable to the sale of such goods in the State from where the interstate movement of goods has commenced

Service tax - Place of provision will be as per place of provision of service rules, 2012 - generally it is place of service recipient

Typically for goods the place of supply would be location where the good are delivered .

Whereas for services the place of supply would be location of recipient . However, there are multiple scenarios such as supply of services in relation to immovable property etc wherein this generic principle will not be applicable and specific rule will determine the place of supply.

At present inter-State supply of goods attract Central Sales Tax. Now, it provides that an inter-State supply of goods and/ or services will attract IGST (i.e. CGST plus SGST). Thus, it would be crucial to determine whether a transaction is an intra-Stateor Inter-State as taxes will be applicable accordingly.

In this regard, the model GST law provides separate provisions which will help an assessee determine the place of supply for goods and services

Area

Current Provision under Indirect taxes

Model GST Provision

Difference/ Remarks

Reverse Charge Mechanism

Currently RCM is applicable majorly only for receipt of certain services

Under model GST Provisions, RCM shall be applicable both for receiving goods and/ or services

Additional burden in the nature of RCM on receipt of goods as well