DECEMBER 13, 2016

By Parag Mehta, CA

THE Model GST Law was placed in public domain in June 2016. The Government had invited suggestions and it appears that the Government has gone through all the representations and incorporated some of the changes suggested by the general public.

In this article, I have highlighted some of the favourable changes made in the Revised Model GST Law.

Favourable Changes:

A. Securities Not Liable to GST:

With no specific exclusion to "Securities" in the earlier version, there was a general apprehension that securities will be liable to GST. However, government has specifically excluded securities from the definition of "Goods" and "Services" (Section 2(49) and Section 2(92) of Revised GST Law). The apprehensions of the trade are now settled as it is now clear that securities will not be liable to GST.

B. Exclusion of Non Taxable Turnover from "aggregate turnover":

In the earlier version, assesse had to consider Non-Taxable turnover for calculating the aggregate turnover. However the revised model GST Law has excluded "Non-Taxable Turnover" from the definition of aggregate turnover (Section 2(6) of Revised GST Law)

C. Upper Limit on GST Rate:

There was no upper limit on GST rate in the earlier version. However the revised GST Law has put a cap of 14 % on CGST & SGST (Section 8(1) of CGST /SGST Law) & 28 % on IGST (Section 5(1) of IGST Law)

D. Capital Goods:

Capital Goods in the earlier law gave reference to specific assets as mentioned in the Cenvat Credit Rules. However, the revised law has simplified the definition to mean "goods, the value of which is capitalised in the books of accounts and which are intended to be used in the course of furtherance of business".

E. Zero Rate Supply:

Zero Rated Supply only referred to exports in the earlier version. However Section 2(111) read with Section 16 of Revised GST Law now includes SEZ unit and SEZ developer also in the said supply.

F. Removal of the clause "Temporary Application of Business Assets or Services to a private or Non-Business Use" from Schedule I:

The removal of the above clause has cleared the matter that perquisites to employees will not be liable to GST

G. Time of Supply (Section 12 & 13):

The deletion of clause "Time of supply shall be the date on which recipient shows receipt of supply in their books" is a very welcome change as it was impossible to adhere to the said condition.

H. Allowability of Input Tax Credit (Section 16):

Allowability of following input tax credit in the Revised GST Law:

-   Pipelines and telecommunication tower fixed to earth by foundation or structural support

- Works contract services input credit if it is an input service for further supply of Works contract service

- Food and Beverages, Outdoor Catering, beauty treatment, health services, cosmetic and plastic surgery for making an outward supply of same category of goods and services

- Rent-a-cab, life insurance, health insurance where the same is notified by Government to be obligatory under any law for the employer

I. Wrong Payment of Tax:

Section 19 of IGST Act clarifies that in case of wrong payment of tax under CGST / SGST instead of IGST and vice- versa, no interest will be payable for delay on payment on correct tax.

J. Provisional Refund:

Increase in provisional refund from 80 % to 90 % (Section 48)

K. Transitional Provision:

- Credit of Eligible duties and taxes in respect of input and input services during transit (Section 171)

- Refund claims filed after the appointed day for goods cleared or services provided before the appointed day and exported before or after the appointed to be disposed of under earlier law (Section 180).

- Transfer of unutilsed cenvat credit by taxable person having centralised registration under earlier law (Section 191)

- Cenvat credit reversed under earlier law due to non-payment of consideration within a period of three months, can be reclaimed if payment is made within three months from the introduction of GST (Section 197)

Conclusion:

The above are some of the favourable changes incorporated in the Revised Model GST Law. The Government is investing substantial time and efforts to ensure implementation of GST at earliest. Though there are still some lacunae which are being represented and discussed but the above changes reflect the seriousness on the part of authorities to implement a smooth GST law considering everybody's interest.