Key features of the Draft of GST Law put in the public domain

Published On - December 10, 2015

admin GST

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Some Key features of the Draft GST Law put in the public domain
 
          Definitions:- 

  1. Definition of capital goods is not restricted or linked to any tariff and is fairly general in nature
  2. Composite supply has been defined as combination of goods and services. What could be the intention of lawmakers is critical ?
  3. Continuous supply of goods has also been defined
  4. Branch has not been defined as a person
  5. Declared services have been drawn from the current service tax regime
  6. Declared services continue to have software – but it does not contain packaged software – which will again create a confusion
  7. Right to use / Hire Purchase / Catering contracts have not been included under list of declared services
  8. Govt does not seem to have included within its fold the various governmental authorities. Local authorities have been separately defined. Neither has been the word governmental authorities defined anywhere
  9. New Term market value has been coined in the draft law
  10. List of Deemed related person has been identified
  11. Works contract has been defined as contract in relation to immovable property. Movable property seems to have been left out as an inadvertent error.

          Others Provisions :-

  1. Central / States have been given recommendatory powers to decide whether a supply is of goods or services or neither goods neither services. No mention of composite supplies here.
  2. Composition turnover limit has been set as Rs. 50 Lacs. No ITC and not tax can be collected under this scheme.
  3. There is also a discussion about a compounded scheme for certain specified services. Thus this provision may have been incorporated for bigger works contractor / catering contractors for simplified assessment.
  4. Even for supply of goods, the collection of advances has been made a taxable event which is not all practical, if the exact composition of goods is not known.
  5. Specific provisions for goods supplied on sale or return basis.
  6. Continous supply – where milestones are defined, such milestones shall become the due dates irrespective of whether payment has been received or not.
  7. Place of supply of goods have to be read with Article 286 and its past history.
  8. Proportion theory has been incorporated as a solution to services being provided in multiple locations which may make the matters very complicated for service providers.
  9. Value of supply does not refer to free issue materials.
  10. ITC for exempt supplies can-not be taken. Will lead to cascading effect and thus should have been avoided.
  11. Negative list of ITC seems to have been carried over from the existing indirect tax regime. Blanket ban of certain ITC not good, even when it is very clearly mentioned that ITC towards exempt supplies shall not be available. When immovable properties can be brought to tax by way of deeming fictions, how can the department restrict the Cenvat credit stating the resulting property to be immovable in nature.
  12. ITC availability is subject to proper payment of tax. Suitable mechanism in law to should be ensured to safeguard the buyers for recovery of amounts due from the seller in this context
  13. Period of limitation for recoveries without fraud – one year and otherwise – 5 yrs.
  14. Specific time limits have been set for issuing of orders, which if stuck to would be very good.
  15. Tax Invoice is required for all the taxable supplies.
  16. Returns :by 10th for the outward supplies  / by 15th for inward supplies / Monthly return – by 20th
  17. TDS on both specified goods as well as specified services supplier if the value of contract exceeds Rs. 10 Lacs.
  18. Very detailed penal provisions. Imprisonment if the tax found to have been evaded is Rs. 25 Lacs.
  19. Unique provisions on “General Disciplines related to Penalty” to avoid hardships to genuine taxable person.
  20. Unique feature to give a GST compliance rating to all taxable persons.
  21. Transitional provisions seem to be very weak and hardly cover the relevant issues except tax credit lying in the closing stock.
  22. As far as incentive schemes, the draft very loosely says that they may or may not be continued.
  23. Lease of land has been treated as services.
  24. The law is silent on taxable threshold for taking the registration under GST.

IGST:- 

  1. A very interesting definition of supply of goods and/or services.
  2. Place of supply of goods and services have been made part of the act instead of rules.
  3. A lot of provisions under the IGST act have been linked to CGST Act.
  4. Levy of additional tax only for supplies made for a consideration and no ITC available for the said tax.