GST – An Update on the Key Developments During This Week
Ranjeet Mahtani and Stella Joseph
This week witnessed significant progress towards GST, with the GST Bills receiving Presidential assent and becoming enactments viz. the Central Goods and Services Tax Act, 2017 (“CGST Act”), the Integrated Goods and Services Tax Act, 2017 (ÏGST Act”), the Union Territory Goods and Services Tax Act, 2017 (ÜTGST Act”) and the Goods and Services Tax (Compensation to States) Act, 2017 (“the Compensation Act”). The provisions under these enactments shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint. This is a crucial milestone in the journey towards GST, as now, there is certainty with regards to the exact shape and contour of the GST legislations, as and when GST is implemented in the country.
In addition to the above, the draft e-way bill rules and assessment and audit rules have also been made available on the CBEC website. The requirement to generate e-way bills would apply for movement of goods that are above the value of Rs. 50,000. The draft rules require the person in charge of the conveyance to carry copies of invoice/bill of supply/delivery challan and a copy of the e-way bill or the e-way bill number, either physically or mapped to a Radio Frequency Identification Device (RFID) embedded on to the conveyance. The e-way bill regime is seen as a deterrence to black economy and evasion of tax. However, there are apprehensions that, like the present e-permit/ waybill regime, the e-way bill regime under GST, would continue to increase logistics costs for the business in terms of time and money and result in corruption at check-points.
If one was to compare the draft GST legislations released in November, 2016 with the final form of the legislations as enacted in April, 2017, few significant changes emerge as follows:
- India is defined to exclude the State of Jammu and Kashmir (“J&K”). Accordingly, separate set of legislations will have to be enacted for the State.
- Significantly, reverse charge mechanism has been stipulated for supplies made from an un-registered person to a registered person. This places a significant onus on registered persons to map all their transactions with unregistered persons and discharge GST under reverse charge.
- The anti-profiteering clause has been modified. It now specifically casts an obligation to pass on the benefit to the recipient, accruing on account of decrease in tax rate or increase in credits.
- Supplies made to SEZ units/developers would now enjoy treatment similar to physical exports. They are treated as zero-rated supplies, with both the options – either to pay output liability and claim refund of the same, or claim exemption on the output liability and claim refund of inputs used for the output supply.
- Gift of value less than INR 50,000 made by an employer to an employee have been excluded from the ambit of deemed supply. Accordingly, an gift of value above INR 50,000 from the employer to an employee would be considered as a deemed supply. This would also require businesses to map their transactions with employees to determine which of those would be liable to GST.
- Actionable claims and real estate has been kept out of the ambit of GST (and treated as neither supply of goods nor supply of services under GST).
- Under GST, the definition of works contract has been restricted only to immovable property. Hence works contract in relation to movable property may again witness litigation, as regards classification as a composite supply or mixed supply and as goods or service.
With enactment of the GST legislations at the Central level (which are likely to be replicated at the State level in due course), it becomes crucial for businesses to set the wheels in motion, without any further delay, on transitional measures to be adopted to ensure smooth implementation of GST.