Taking into consideration majority of the concerns raised by the Trade and Industry, the Government has, on November 26, 2016, released the Revised version of the Model GST Law along with Draft GST Compensation Bill. Apart from addressing key concerns of the Industry in a very decent manner, the Revised Model GST Law has also proposed an anti-profiteering mechanism to ensure benefit of lower taxes is shared with consumers, and also ensures no tax on securities and subsidies provided by the Government.
The Draft GST Law is a model which the Central Government and each of the State Governments would use to draft their respective Central and State GST Acts. Further, a Revised Model of the Integrated GST Act, 2016, which will govern levy of GST on inter-State supplies by the Central Government, is also issued.
These documents can be accessed at the following links:
For easy digest, the key changes brought in by the Revised Model GST Law are given as under:
- 1. Capping of GST rate: The Revised Model GST Law has capped the Central and State GST rates at 14% each and 28% for IGST.
- 2. Non-taxable turnover excluded from ambit of aggregate turnover: The definition of the term aggregate turnover shall not include non-taxable turnover, though, exempted turnover still continues to be a part of aggregate turnover for reckoning threshold exemptions.
- 3. No GST on securities: Unlike Earlier Model GST Law, the Revised Model GST Law has excluded securities from the ambit of the term ‘goods’. Meaning thereby, that the concerns of the stock market participants, brokers etc. has been addressed and there would no GST on securities.
- 4. Incorporation of concepts of ‘Mixed Supply’ and ‘Composite Supply’: In line with provisions under Section 66F of Finance Act, 1994, provisions have been inserted to determine taxability of bundled supplies in the following manner:
- ü Composite supply i.e. supplies naturally bundled àIt shall be treated as a supply of principal supply
- ü Mixed supply i.e. two or more individual supplies or combination thereof, not constituting composite supplyà It shall be treated as a supply which attracts the highest rate of tax
- 5. Supplies to Special Economic Zones (SEZs) would be zero-rated: The anomaly of taxation of supplies made to SEZs units has been removed as the Revised Model GST Law provides that supply of goods and/or services to a SEZ Developer or an SEZ Unit will now be treated as ‘zero-rated supplies’ i.e. such supplies will now attract nil rate of tax under GST.
- 6. Deletion of event of entry in books of accounts of recipient, for determining time of supply: In Revised Model GST Law, concept of recipient showing receipt of supply in its books of accounts, has been deleted from the list of events determining time of supply in GST.
- 7. Provisions for determination of time of supply when there is change in rate of tax extended for supply of goods as well which were restricted only to supply of services in Earlier Model GST Law.
- 8. Subsidies received from Central and State Governments have been excluded from the transaction value for GST chargeability.
- 9. Separate principles of Place of Supply have been incorporated for import-export transactions
- 10. Transitional provisions have been revamped to address the various concerns raised by the Industry like transitional credit on goods in transit, carry forward of credit by exempted service providers, first and second stage dealers etc.
- 11. Anti-profiteering Measure: The Revised Model GST Law has proposed an anti-profiteering mechanism to ensure benefit of lower taxes in GST is shared with consumers. It is stated that an Authority will be constituted to examine whether input tax credits availed by any registered taxable person or the reduction in the price on account of any reduction in the tax rate have actually resulted in a commensurate reduction in the price of the said goods and/or services supplied by him. But, there is concern among Trade how this clause need to be measured/ implemented and should not turn out to be harassment for the Trade and Industry.
Write back to us with your suggestions:
The Government aims to implement the GST from April 1, 2017, and to that effect the GST Council will consider these Revised Laws in its meeting scheduled for 2nd and 3rd December, 2016. It is indeed the best time for the Trade and Industry to gear up and see if all their major concerns have been addressed or not so as to see advent of the kind of GST, Country India is envisaging.
Readers are requested to write back to us for any inputs/ suggestions on the Revised Model GST Laws for our compilation and submission to Government, latest by December 3, 2016. Suggestions can be submitted at email id: firstname.lastname@example.org
FCA, FCS, LLB, B.Com (Hons)
Author of a book on Goods and Services Tax, titled, "GST LAW AND ANALYSIS – WITH CONCEPTUAL PROCEDURES" (2nd Edition)
A2Z TAXCORP LLP
Tax and Law Practitioners