GST Referencer

Team

CA Mohan Aggarwal

CA Saurabh Agarwal

CA Divesh Gupta

Goods and Services Tax (GST) in IndiaGST is one indirect tax for the whole nation, which will make India one unified common market.

GST is a single tax on the supply of goods and services, right from the manufacturer to theconsumer. Credits of input taxes paid at each stage will be available in the subsequent stageof value addition, which makes GST essentially a tax only on value addition at each stage. The

final consumer will thus bear only the GST charged by the last dealer in the supply chain, withsetoff benefits at all the previous stages.

Indian system of taxation of goods and services is characterized by cascading, distortionary taxon production of goods and services which leads to miss-allocation of resources, hamperingproductivity and slower economic growth. To remove this hurdle, a pure and simple tax systemlike GST (Goods and Service Tax) is need of the hour in the country.

Which taxes at the Centre and State level are being subsumed into GST?At the Central level, Central Excise Duty, Additional Excise Duty, Service Tax, AdditionalCustoms Duty and Special Additional Duty of Customs will be subsumed.

At the State level, Value Added Tax/Sales Tax, Entertainment Tax (other than the taxes leviedby the local bodies), Central Sales Tax (levied by the Centre and collected by the States),Octroi and Entry tax, Purchase Tax, Luxury tax, and Taxes on lottery, betting and gambling willbe subsumed.

Roadmap of GST in India

122nd Constitutional Amendment Bill has been passed by Rajya sabhaand Lok Sabha.

122nd Constitutional Amendment Bill to be ratified by atleast 50% of theState Legislatures under Article 368 of the Constitution.

Assent by President of India to the 122nd Constitutional Amendment Bill.

After Constitutional amendment, GST Council (GSTC) to be constitutedwithin 60 days under Section 279A of the amended Constitution.

GSTC to recommend GST Law and procedure. IGST and CGST bill forparliament/Centre and Model SGST bill for State Legislature.

CGST and IGST Laws to be introduced in Parliament and to be passedby simple majority.

SGST Laws to be passed by concerned state legislatures.

Once Approval from Parliament and States, GSTN (GST network aSection 8 Company) will launch the IT Platform for implementation ofGST.

Relevance of term ‘Supply’ in GST

The taxable event for levy of Goods and Services Tax (GST) is ‘supply’ and hence

Section 3 of the Model GST Law, released by the Finance Ministry on 14th June

2016, covers the meaning and scope of ‘supply’.

As GST will be applicable on ‘supply’, erstwhile taxable events such as

‘manufacture’, ‘sale’, ‘provision of services’ will lose their relevance.

Certain supplies, even if made without consideration, such as permanent transfer

of business assets, self-supply of goods or services, assets retained after

deregistration, will attract GST. Even ‘barter’ of goods transaction which were

hitherto un-taxed in the VAT regime, will attract GST.

The liability to pay GST will arise at the time of supply as determined for goods

and services.

Taxable Event

Under GST

Supply

Provision of Services

Under Todays Regime

Sales

Manufacturing

Meaning and scope of supply

Sec 2(92) “Supply” shall have the meaning as assigned to it in section 3

Sec 3 Meaning & scope of supply

Sub-

section 1

Supply includes

all forms of supply of goods [sec. 2(48)] and/or services [sec. 2(88)]

such as sale, transfer, barter, exchange, license, rental, lease or

disposal made or agreed to be made

for a consideration [sec. 2(28)]

by a person [sec. 2(74)]

in the course or furtherance of business, [sec. 2(17)]

Supply includes

importation of service, [sec. 2(52)]

whether or not for a consideration and

whether or not in the course or furtherance of business, and

Supply includes

a supply specified in Schedule I,

made or agreed to be made

without a consideration.

Section 3 Meaning & scope of supply

Sub-

Section 2

Schedule II,

in respect of matters mentioned therein,

Shall apply for determining what is, or is to be treated as a supply of

goods or a supply of services.

Sub-

section 2A

Where a person acting as an agent [sec. 2(5)] who,

for an agreed commission or brokerage,

either supplies or receives any goods and/or services

on behalf of any principal [sec. 2(77)],

The transaction between such principal and agent

shall be deemed to be a supply.

Sub-

section 3

Subject to sub-section (2),

the Central or a State Government may,

upon recommendation of the Council,

specify, by notification,

the transactions that are to be treated as—

(i) a supply of goods and not as a supply of services; or

(ii) a supply of services and not as a supply of goods; or

(iii) Neither a supply of goods nor a supply of services.

Section 3 Meaning & scope of supply

Sub

section 4

Notwithstanding anything contained in sub-section (1),

the supply of any branded service

by an aggregator, as defined in section 43B,

under a brand name or trade name owned by him

shall be deemed to be a supply of the said service by the said

aggregator

SCHEDULE I

MATTERS TO BE TREATED AS SUPPLY WITHOUT CONSIDERATION

1 Permanent transfer/disposal of business assets.

2 Temporary application of business assets to a private or non-business

use.

3 Services put to a private or non-business use.

4 Assets retained after deregistration.

5 Supply of goods and / or services by a taxable person to another

taxable or nontaxable person in the course or furtherance of business.

Provided that the supply of goods by a registered taxable person to a

job-worker in terms of section 43A shall not be treated as supply of

goods.

SCHEDULE II

MATTERS TO BE TREATED AS SUPPLY OF GOODS OR SERVICES

1 Transfer

1. Any transfer of the title in goods is a supply of goods.

2. Any transfer of goods or of right in goods or of undivided share in goods

without the transfer of title thereof, is a supply of services.

3. Any transfer of title in goods under an agreement which stipulates that

property in goods will pass at a future date upon payment of full

consideration as agreed, is a supply of goods.

2 Land and Building

1. Any lease, tenancy, easement, license to occupy land is a supply of

services.

2. Any lease or letting out of the building including a commercial, industrial

or Residential complex for business or commerce, either wholly or partly, is

a supply of services.

3 Treatment or process

1. Any treatment or process which is being applied to another person’s

goods is a supply of services.

SCHEDULE II

MATTERS TO BE TREATED AS SUPPLY OF GOODS OR SERVICES

4 Transfer of business assets

1. Where goods forming part of the assets of a business are transferred or disposed

of by or under the directions of the person carrying on the business so as no

longer to form part of those assets, whether or not for a consideration, such

transfer or disposal is a supply of goods by the person.

2. Where, by or under the direction of a person carrying on a business, goods held

or used for the purposes of the business are put to any private use or are used, or

made available to any person for use, for any purpose other than a purpose of

the business, whether or not for a consideration, the usage or making available

of such goods is a supply of services.

3. Where any goods, forming part of the business assets of a taxable person, are

sold by any other person who has the power to do so to recover any debt owed

by the taxable person, the goods shall be deemed to be supplied by the

taxable person in the course or furtherance of his business.

4. Where any person ceases to be a taxable person, any goods forming part of the

assets of any business carried on by him shall be deemed to be supplied by him

in the course or furtherance of his business immediately before he ceases to be

a taxable person, unless—

a) the business is transferred as a going concern to another person; or

b) the business is carried on by a personal representative who is deemed to

be a taxable person.

SCHEDULE II

MATTERS TO BE TREATED AS SUPPLY OF GOODS OR SERVICES

5 The following shall be treated as “supply of service”

a) Renting of immovable property;

b) Construction of a complex, building, civil structure or a part thereof, including a

Complex or building intended for sale to a buyer, wholly or partly, except

where the entire consideration has been received after issuance of

completion certificate, where required, by the competent authority or before

its first occupation, whichever is earlier.

Explanation- For the purposes of this clause-1. The expression "competent authority" means the Government or any

authority authorized to issue completion certificate under any law for the

time being in force and in case of non-requirement of such certificate from

such authority, from any of the following, namely:–

i. An architect registered with the Council of Architecture constituted

under the Architects Act, 1972; or

ii. a chartered engineer registered with the Institution of Engineers

(India); or

iii. a licensed surveyor of the respective local body of the city or town or

village or development or planning authority.

2. The expression "construction" includes additions, alterations, replacements or

remodeling of any existing civil structure;

SCHEDULE II

MATTERS TO BE TREATED AS SUPPLY OF GOODS OR SERVICES

5 c) temporary transfer or permitting the use or enjoyment of any intellectual property

right;

d) Development, design, programming, customization, adaptation, up gradation,

enhancement, implementation of information technology software;

e) Agreeing to the obligation to refrain from an act, or to tolerate an act or a

situation, or to do an act;

f) Works contract including transfer of property in goods (whether as goods or in

some other form) involved in the execution of a works contract;

g) Transfer of the right to use any goods for any purpose (whether or not for a

specified period) for cash, deferred payment or other valuable consideration; and

h) Supply, by way of or as part of any service or in any other manner whatsoever, of

goods, being food or any other article for human consumption or any drink (other

than alcoholic liquor for human consumption), where such supply or service is for

cash, deferred payment other valuable consideration.

6 The following shall be treated as supply of goods

a) supply of goods by any unincorporated association or body of persons to a member

thereof for cash, deferred payment or other valuable consideration.

Sec-7 levy and Collection of CGST/SGST

Sub Section 1 Sub Section 2 Sub Section 3

CGST and SGST shall

be levied on all Intra-

State supply of goods

& services.

CGST and SGST shall be

paid by every taxable

person [Sec(9)]

CG /SG may specify categories of

supple of Goods & Services on

which tax will be payable under

reverse charge mechanism.

At the rate specified in

relevant schedule

and collected in the

prescribed manner

Section-9:-Taxable Person means

Sub-Section 1 Sub-Section 2 Sub-Section 3

Person who carry on business at

any place in India or any state

and who is:

Registered or

Required to be reg. under

Sch. III

Exceptions:

An Agriculturist[Sec 2(8)]

A person required to be

registered under Para I of

Sch. III, If aggregate

turnover ≤ Rs. 10 lakhs

A person required to be

registered under Para I of

Sch. III, If aggregate

turnover ≤ Rs. 5 lakhs and

conduct business in any of

the North East States

including Sikkim.

CG, SG and Local

authority in respect of

activities/ transactions

in which they are

engaged as public

authorities other than

activities/ transaction

mentioned in

Schedule-IV.

Persons excluded:

Providing services as

employee to his employer.

Exclusively supplying Goods/

Services not taxable under

this Act.

Person under section 7(3)

receiving services for

personal use not exceeding

a specified limit, other than

for use in the course or

furtherance of his business.

SECTION-8: COMPOSITION LEVY

Sub-Section 1 Sub-Section 2 Sub-Section 3

Notwithstanding anything to thecontrary contained in the Act But

Subject to reverse chargeprovision[Sec7(3)].

Such taxableperson shall neithercollect any tax norbe entitled to takeany credit of inputtax to dischargeliability undercompositionscheme.

If proper officer hasreasons to believe that aperson is not eligible toopt this scheme, suchperson shall, in additionto differential tax, beliable to penaltyequivalent to the amountof differential tax payableas aforesaid.

Show cause notice shallbe given before levy ofpenalty.

On the recommendation of GST Council,Proper officer of SG/CG with Prescribedcondition & restriction may permit- A Reg. Taxable Person to pay amount

calculated at rate prescribed not lessthan 1% if

Aggregate turnover[Section 2(46)] in aF.Y.≤ Rs 50 Lacs.

Provided that: No such permission to a person

affecting Inter-State Supply of Goods &services.

No such permission unless the all reg.taxable persons having same PAN optfor this scheme.

SECTION-10: POWER TO GRANT EXEMPTION FROM TAX

Sub-

Section 1

CG/SG may exempt any goods & services from whole or any part of the

tax leviable by notification either :

absolutely or,

subject to such conditions as may be prescribed

If it is in public interest to do so, on the recommendation of GST council.

Sub-

Section 2

CG/SG may exempt any goods & services from tax leviable by Special

Order:

Under circumstances of exceptional nature.

If it is in public interest to do so, on the recommendation of GST council.

Sub-

Section 3

CG/SG may issue explanation within one year from date of issue of

notification under sub-section (1) or order issued under sub-section (2) for

clarifying:

the scope or

applicability of any notification or order.

Every such explanation shall have effect as if it had always been the part

of the first such notification or order, as the case may be