Revised Model GST Law - Highlights


1. Registration: Earlier law said registration to be obtained after crossing 9 lakhs but can collect tax after crossing 10 lakhs turnover. Revised law states registration after crossing 20 lakhs. This requires dealers to issue revised invoice (for the period from applying for registration and obtaining registration) and collect tax.

2. Composition levy to be not less than 2.5% for manufacturers and not less than 1% for others. Composition scheme to be only for goods. Composition dealers and suppliers of exempt Goods/Service to issue Bill of Supply in lieu of Tax invoice

4. Tax Invoice for goods to be normally issued at the time of removal of goods or at the time when goods are made available to receiver. Invoice for services to be issued before or after provision of services but within prescribed time limit (to be defined in rules). Certain specified categories of goods/service to be defined where invoice may be issued subsequent to delivery of goods (Ex: Goods sent on approval basis) but within specified time frame. Certain categories of services to be also defined where document other than tax invoice may be issued (Ex: Job work). For purchase from unregistered persons, taxable person himself has to issue invoice. Supplementary invoice is equivalent to debit (where there is increase in consideration) and credit (decrease in consideration) note.

5. New Definitions: Two new definitions of mixed supply and composite supply introduced. Mixed supply (Ex: Food thali with exempt and taxable goods will attract highest applicable tax rate of any one of the item). Composite supply (Ex: Goods with Insurance/transport will attract tax rate of dominant good). Definition of aggregators (e-commerce), intangible property removed, definition of business vertical added. Securities (shares and mutual funds) removed from the definition of goods in revised model law.

6. IGST refund to foreign tourists re-introduced.

7. Cess (on luxury and sin goods only) for 5 years, states to be paid compensation every quarter. CESS to be applicable on CGST (and CGST component of IGST). CESS to be vattable (ITC available) but setoff will be only against output CESS (not against Output CGST/SGST/IGST).

8. Input Tax Credit: Restriction to claim ITC only for pipeline and telecom towers (Maximum of 1/3 rd ITC in first year, maximum of 2/3 rd ITC in second financial year including the claim of first year , and remaining in any subsequent financial year). Provisional ITC to be reversed only after 3 months. That is in the month subsequent to the month when both parties have been communicated of the mismatch (2 months earlier)

Illustration: April 2017 buyer makes a claim for ITC which supplier has not reported. April return filed on 20th May. Subsequently, discrepancy reported to both parties by end of May 2017. Both parties allowed to resolve difference in May return filed by 20th June. If unresolved, the ITC gets reversed for the June return filed by 20th July.

9. Other Taxes: Basic customs duty paid in imports to be cross-checked with ICEGATE software of customs. TDS and TCS at 1%. TDS to be applicable for contracts of value Rs 5 Lakhs and above (earlier 10 lakhs). TDS to be applicable on net value (excluding tax). TCS to be applicable on aggregate supplies of the month (net of sales return). Since same rules are expected in SGST Act, combined rate of TDS/TCS could be 2%.

10. Anti-profiteering clause to ensure the benefits from GST (input setoff) will be passed on to consumers

11. Zero rated supply defined (Can be direct export or supply to SEZ). No concept of deemed export.

· No mention of HSN anywhere in the draft law.

(Views expressed are strictly personal)