Changes in Revised Draft Model GST Law

2nd Dec
2016

Changes in Revised Draft Model GST Law

GST Council  has released Revised Draft Model GST Law, Nov 2016 (Revised Draft) and made a lot of Changes in Revised Draft Model GST Law, the gist of which is as follows:-

1.  Modified the Definition of Aggregate turnover 

Nontaxable supplies have been excluded from the aggregate turnover, while interstate supplies were added.  (Impact : – Positive)

Changes in Revised Draft Model GST Law

2. Modified the Definition of Capital Goods

Capital goods mean goods the value of which is capitalized in the books of accounts of the person claiming the credit and which are used or intended to be used in the course or furtherance of business. (Impact: – Positive and avoid reducing litigation)

3. Modified the Definition of “consideration

Consideration now excludes subsidy given by the Central Government or State Government. in the consideration. (Impact : – Positive )

4. Inserted the Definitions of ‘First Stage dealer’ and ‘Second Stage dealer’ have been inserted

It will help in passage of ITC smoothly by the intermediaries. (Impact : – Positive )

The Changes in Revised Draft Model GST Law brings a mixed bag of changes but most of them are favorable to the taxable person.

5. Modified the Definition of goods

Now Goods include “Actionable Claim”, but excluding money and securities. (Impact : – Positive )

6. Delete the Definition of India 

The definition in IGST Act should take care of the definition since interstate supply and intrastate supply definitions are also borrowed from IGST Act. (Impact : – Positive )

7.Insertion of Definitions of “Intra-State supply of goods” and “Inter-State supply of goods”

It has a positive impact to avoid any confusion and avoid any legal interpretations and consequent litigation.

8. Modified and Simplified the Definition of “Input Service

 Now it include any service used or intended to be used by a supplier in the course of or furtherance of business except for few exceptions relating to employee benefits, exempted goods etc. (Impact: – Positive )

The Changes in Revised Draft Model GST Law brings a cheers to taxable person as some of the changes are welcome to step and remove the practical difficulties.

9. Modified the Explanation to definition of services

  Now, as per the explanation, service includes transactions in money but does not include money and securities. Thereby, intangible properties are to be considered as goods. Money and Securities are neither goods nor services. Only service transactions in money and securities are liable for the tax. (Impact : – Positive )

10. Revised the definition of works contract

Now it does not include moveable property and includes only immovable property. (Impact : – Positive )

11. Changes in definition and scope of supply

a. Now importation of services for a consideration only are covered. That means service imports without consideration are not liable for the tax. (Impact : – Positive )

b.  Now the transaction between principal and agent shall not be treated as supply.  (Impact : – Positive )

12. The restriction is extended to another set of categories under Composition scheme:-

 i. A taxable person who is engaged in the supply of services. (Impact: Negative as this restriction is not reasonable and curtailing the option of the taxable person).

ii. Taxable person who make any supply of goods through an electronic commerce operator who is required to collect tax at source (Impact: Negative)

iii. Taxable person who is a manufacturer of goods as may be notified; (Impact: Negative and Harsh)

iv. A taxable person who makes any of the goods which are not leviable to tax under this Act. (Impact: Negative and Unreasonable)

A few changes in Revised Draft Model GST Law are having negative Impact and are unreasonable.

13. Withdraw the Remission of tax on supplies found deficient in quantity due to natural causes

Now the Section did not find a place in the new draft. Therefore, the tax is applicable on the goods found deficient in quantity. (Impact: Negative and Unreasonable)

14. Simplified the  provisions of Time of Supply of goods:

Now the liability to pay tax arises,

(i) date of issue of invoice or the last date by which is required to issue an invoice or

(ii) the date on which supplier receives the payment,

whichever is earlier(Impact : – Positive )

15. Modified the Provision of Time of supply of goods in case of reverse charge

In the case of the reverse charge, time of supply is modified as earliest of the following dates:

(i) The date of receipt of the goods; or

(ii) The date on which the payment is made; or

(iii) The date immediately following thirty days from the date of issue of an invoice by the supplier.  (Impact : – Positive )

16. Modified the provisions of Time of supply of  services

Time of supply of services is the earliest of the following two:

(i) The date of issue of an invoice by the supplier or the last date on which he is required to issue invoice; or

(ii) The date on which the supplier receives the payment with the respect to supply.  (Impact : – Positive )

Overall the changes in Revised Draft Model GST Law brings more clarity and avoid litigation.

17. Modified the provisions of Time of supply of services in case of reverse charge

Now Time of supply of services in case of reverse charge be  earliest of the following two:

(i) The date on which the payment is made; or

(ii) The date immediately following sixty days from the date of issue of an invoice by the supplier. (Impact : – Positive )

18. Modified the provisions of Value of taxable supply:

Now the following amounts need not be added to the value of taxable supply, the details of which is as follows:-

(a) the value, apportioned as appropriate, of such goods and/or services as are supplied directly or indirectly by the recipient of the supply free of charge or at reduced cost for use in connection with the supply of goods and/or services being valued, to the extent that such value has not been included in the price actually paid or payable;  as goods supplied free of cost which is a very common trade practice in many businesses are not liable for tax. Similarly, goods supplied at the reduced cost as per the practice are liable for tax on the consideration received. (Impact: Major relief)

(b) royalties and licence fees related to the supply of goods and/or services being valued that the recipient of supply must pay, either directly or indirectly, as a condition of the said supply, to the extent that such royalties and fees are not included in the price actually paid or payable;  (Impact : Positive and avoid litigation)

(c) any reimbursable expenditure or cost incurred by or on behalf of the supplier and charged in relation to the supply of goods and/or services; (Impact: Major relief)

(d) No tax on the reimbursable expenditure on the cost incurred by or on behalf of the supplier, as this, cannot be included in the value of taxable supply. (Impact: Major relief)

19. To permit the credit of input tax  in respect of Pipelines and Telecommunications Towers

 The credit is permitted over a period of three years. (Impact: Positive and welcome step)

 20. Credit on services to be reversed if payment is not made to supplier within three months
This amendment will bring in a lot of practical difficulties to the taxable person. Now a taxable person has to ensure that credit on services to be reversed if payment is not made to the supplier within three months.(Impact: Negative and operational issues )

21. Sale of Capital goods on which credit is availed:

In the case of sale of capital goods on which credit is taken, the supplier shall pay an amount equal to the credit availed, after deduction of percentage points as prescribed.

Proviso says that where refractory bricks, molds and dies, jigs and fixtures are supplied as scrap, the taxable person may pay tax on the transaction value of such goods.

23. Changes in pre-deposit to be made in case of appeals

Now appellant is required to make a deposit of 10% of the disputed tax demand at the time of filing the 1st appeal. The pre-deposit is restricted to disputed tax amount, as against amount in dispute which includes interest and penalty. (Impact: Positive)

Similarly in case of appeal before Tribunal, 10% of the balance disputed tax amount is to be deposited at the time of filing an appeal, as against 10% of the amount in dispute which includes interest and penalty. (Impact: Positive)

I hope you like this article on Changes in Revised Draft Model GST Law. Write your feedback to Saitaxonline2015@gmail.com.

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