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Model GST Laws – Law & Practice Part-1

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MODEL LAW GST – LAW & PRACTICE (PART-1)

1. History ............................................................................................................................................................ 2

Kelkar Committee Recommendations ................................................................................................................ 2

Empowered Committee of State Finance Ministers ........................................................................................... 3

2. GST Panels & their Reports ............................................................................................................................. 3

3. Model GST Law ............................................................................................................................................... 4

Goods & Service Tax Act’2016 ............................................................................................................................ 4

The Integrated Goods & Service Tax Act’2016 ................................................................................................... 5

4. Classes of Officers [Section-4] ........................................................................................................................ 6

Jurisdictions ........................................................................................................................................................ 6

Powers of Officers .............................................................................................................................................. 6

Powers of First Appellate Authority ................................................................................................................... 7

5. Levy and Collection of Central/State Goods and Services Tax [Section 7] ..................................................... 8

6. Composition Levy [Section 8] ......................................................................................................................... 8

7. Taxable Person [Section 9] ............................................................................................................................. 9

8. Power to Grant EMEXMPTION from Tax [Section 10] .................................................................................. 12

9. Remission of Tax on Supplies [Section 11] ................................................................................................... 13

10. Time of Supply of Goods [Section 12] ..................................................................................................... 14

Normal Supply of Goods ............................................................................................................................... 15

Continuous Supply of Goods [Section 12(3)] ................................................................................................ 15

Goods on Reverse Charge Basis [Section 12(5)] ........................................................................................... 16

Time of Supply cannot be Determined [Section 12(7)] ................................................................................ 16

11. Time of Supply of Services [Section 13] ................................................................................................... 17

Normal Supply Of Services ............................................................................................................................ 17

Continuous Supply of Goods [Section 13(3)] ................................................................................................ 18

Supply of Services on Reverse Charge Basis [Section 13(5)] ........................................................................ 19

Time of Supply cannot be Determined [Section 13(7)] ................................................................................ 19

12. Change in Rate of Tax in Respect of Supply of Services [Section 14] ...................................................... 20

If taxable services has been provided BEFORE the change in effective rate of Tax ..................................... 20

If taxable services has been provided AFTER the change in effective rate of Tax........................................ 20

13. Value of Taxable Supply [Section 15] ...................................................................................................... 21

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GST – LAW & PRACTICE

INTRODUCTION TO GST

"Goods and Services Tax" would be a comprehensive indirect tax on manufacture,

sale and consumption of goods and services throughout India, to replace taxes levied

by the Central and State governments. Goods and services tax would be levied and

collected at each stage of sale or purchase of goods or services based on the input

tax credit method. This method allows GST-registered businesses to claim tax credit

to the value of GST they paid on purchase of goods or services as part of their normal

commercial activity. Taxable goods and services are not distinguished from one

another and are taxed at a single rate in a supply chain till the goods or services reach

the consumer. Administrative responsibility would generally rest with a single authority

to levy tax on goods and services. Exports would be zero-rated and imports would be

levied the same taxes as domestic goods and services adhering to the destination

principle.

1. HISTORY

In 2000, the Vajpayee government set up the Empowered Committee of State Finance

Ministers with the aim of facilitating a switch from the existing national-level central

excise duty and state-level sales tax model to a value added tax (VAT) model.

KELKAR COMMITTEE RECOMMENDATIONS

Dr. Vijay Kelkar, was head of Kelkar Committee which submitted Roadmaps for Fiscal

Consolidations. This committee was set up in August’2012 which submitted reforms

for medium terms & fiscal consolidations. Among other various suggestions

recommendations for Indirect Taxes were as follows:

implementing the nationwide Goods and Services Tax (GST) recommended by

the 13th Finance Commission. This should increase output, exports and tax

revenues.

The committee recommends reforming union excise duties and service tax to

allow for integration into the GST regime. The standard tax rate of 12% should

be gradually phased down to the 8% proposed for the central GST.

Currently items on the negative list of services are exempt from tax. The list

should be reviewed and pruned



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Then, Finance Minister P. Chidambram, made announcement for introduction of GST

on 28.02.2006. It was then proposed to be introduced wef 01.04.2010.

EMPOWERED COMMITTEE OF STATE FINANCE MINISTERS

Task of designing GST was given to empowered committee of State Finance

Ministers. First discussion paper was released on 10.11.2009. All proposed GST Laws

have been developed on the basis of discussion paper.

2. GST PANELS & THEIR REPORTS

Further in February’2013 3 GST panels were constituted which are as follows:

In 2015, Reports were issued by these committees with respect to:

Refund Process

Registration

Payment Process

After considering all suggestions, Constitution (One Hundred & Twenty Second

Amendment) Bill 2014 was introduced in December’2014 by Finance Minister Arun

Jaitely with now revised implementation date of 01.04.2016. [Author Comments - Still

waiting for new Dates] This GST Bill was passed by Loksabha (Lower House) in 2015 but

GST Panel-1

•Determination of Revenue Neutral Rate (RNR)

•Place of Provision of Services Rules

GST Panel-2

•GST on Inter State Supplies

•GST on Imports

GST Panel-3

•Dual Administrative Controls

•Threshold Limits & Other Exemptions including list of common exempted items.



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still pending in Rajya Sabha (Upper House). After Rajya Sabha pass it, Union & States

have to pass GST Acts.

3. MODEL GST LAW

On June 14, 2016 the Finance Ministry has released the 'Model GST Law'. It outlines

the structure of the GST regime. Further, the draft of 'Integrated GST Bill, 2016' is

also released along with such Model GST laws. It also provides the framework for

levy and collection of CGST and SGST. "CGST" is the tax levied under the Central

Goods and Services Tax Bill, 2016. "IGST" is the tax levied under the Integrated

Goods and Services Tax Bill, 2016. This model law is 190 pages long.

Model Law is divided between:

GOODS & SERVICE TAX ACT’2016

Brief of this proposed legislation is as follows:

GOODS AND SERVICES TAX ACT, 2016

THE INTEGRATED GOODS AND SERVICES TAX ACT, 2016

GST Act25 Chapters162 Sections

1 Rules4 Schedules



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This has 4 Schedules which are:

It also have 1 Rules which is GST Valuation (Determination of the Value of

supply of Goods and Services) Rules, 2016.

THE INTEGRATED GOODS & SERVICE TAX ACT’2016

This act contains 11 chapters & 33 Section.

I Matters to be treated as supply without consideration.

II Matters to be treated as supply of goods or services.

III Liability to be registered

IV Activities or transactions in respect of which the Central Government, a State Government or any Local Authority shall not be regarded as a taxable person.



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ADMINISTRATION 4. CLASSES OF OFFICERS [SECTION-4]

There shall be different classes of Officers under the Central GST and States GST

Acts. They are as follows:

Under Central GST Under States GST (a) Principal Chief Commissioners of CGST or Principal Directors General of CGST

a) Commissioner of SGST

(b) Chief Commissioners of CGST or Directors General of CGST

b) Special Commissioners of SGST,

(c) Principal Commissioners of CGST or Principal Additional Directors General of CGST

c) Additional Commissioners of SGST,

(d) Commissioners of CGST or Additional Directors General of CGST

d) Joint Commissioners of SGST,

(e) First Appellate Authority e) Deputy Commissioners of SGST,

(f) Additional Commissioners of CGST or Additional Directors of CGST

f) Assistant Commissioners of SGST, and

(g) Joint Commissioners of CGST or Joint Directors of CGST

g) such other class of officers and persons as may be appointed for the purposes of this Act.

(h) Deputy Commissioners of CGST or Deputy Directors of CGST

(i) Assistant Commissioners of CGST or Assistant Directors of CGST

(j) such other class of officers as may be appointed for the purposes of this Act.

This list is indicative and there may be more officers as required.

JURISDICTIONS

The Commissioner shall have jurisdiction over the whole of the State of.

All other officers shall have jurisdiction over the whole of the State or over such

areas as the Commissioner may, by notification, specify.

POWERS OF OFFICERS

Subject to such conditions and limitations as may be imposed, an officer may

exercise the powers and discharge the duties conferred or imposed on him under

this Act



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POWERS OF FIRST APPELLATE AUTHORITY

Notwithstanding anything contained in this section, a First Appellate Authority shall

not exercise the powers and discharge the duties conferred or imposed on an officer

of Central Goods and Services Tax other than those specified in section 79 of this

Act.



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LEVY OF, AND EXEMPTION FROM TAXES Taxes shall be levied and exemptions shall be provide as defined.

5. LEVY AND COLLECTION OF CENTRAL/STATE GOODS AND SERVICES TAX [SECTION 7]

6. COMPOSITION LEVY [SECTION 8]

A registered person whose “aggregate turnover” in a financial year does not exceed

Rs. 50,00,000/- can opt for Composition.

Composition Scheme shall not be available for persons who are dealing in

inter-states supplies of goods and/or services.

Provided further that no such permission shall be granted to a taxable person unless

all the registered taxable persons, having the same PAN as held by the said taxable

person, also opt to pay tax under the provisions of this sub-section.

Section 2(6) “aggregate turnover” means the aggregate value of all taxable and

non-taxable supplies, exempt supplies and exports of goods and/or services of a

person having the same PAN, to be computed on all India basis and excludes taxes,

if any, charged under the CGST Act, SGST Act and the IGST Act, as the case may

be;

Explanation.- Aggregate turnover does not include the value of supplies on which tax

is levied on reverse charge basis and the value of inward supplies.

On Intra-State Sale of Goods or Services

• CGST or SGST

• @Rate specified in Schedule

Payable

• CGST/SGST shall be paid by every taxable person

Reverse Charge

• On Certain categories

• as may be notified by Central/State Government



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Section 2(42) “exempt supply” means supply of any goods and/or services which

are not taxable under this Act and includes such supply of goods and/or services

which are specified in Schedule of the Act or which may be exempt from tax under

section 10.

A taxable person to whom the provisions of sub-section (1) apply shall not collect

any tax from the recipient on supplies made by him nor shall he be entitled to any

credit of input tax.

7. TAXABLE PERSON [SECTION 9]

This section defines taxable person and threshold limit for their turnover.

Taxable Person means a person who carries on any business at any place in India

and who is registered or required to be registered under Schedule III of this act.



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Limits for Taxability is as follows:

Note: Agriculturist shall not be considered as a taxable person.

Registered Person

Turnover Rs. 10 Lakhs

Taxable Person

Registered Person

Turnover Rs. 5 Lakhs

Taxable Person

All over India (Except North East including Sikkim)

North East Including Sikkim



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Can Central Government or State Government or Local Authority be

considered as Taxable Person?

Yes, as per Section 9(2) “The Central Government, a State Government or any local

authority shall be regarded as a taxable person in respect of activities or transactions

in which they are engaged as public authorities other than the activities or transactions

as specified in Schedule IV to this Act.”

Persons shall not be considered as Taxable

Person

Employee Providing service to Employer

any person engaged in the business of

exclusively supplying goods and/or services

that are not liable to tax

any person receving servies for personal use, other than for use in the course or furtherance of

his business.



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8. POWER TO GRANT EMEXMPTION FROM TAX [SECTION 10]

This section defines EXEMPTION from DUTY => Duty foregone by Central or a

State Government in Public Interest

Sec. 10(1) GENERAL EXEMPTION

Section 10(2) AD-HOC EXEMPTION

Coverage of Goods or Service

Any goods or Service Any Goods or Service

Circumstances leading to issuance of exemption

Public Interest Public Interest + Circumstances of Exceptional Nature

Mode of Granting Exemption

Notification in Official Gazette [Such notifications are called Exemption Notification]

Special Order [Such orders are called Exemption Order]

Date from which Exemption will come into force

Sec. 10(4) Exemption becomes effective from date of its issuance, unless otherwise provided.

No specific legal provision Current Position in Indirect Taxes Assessee makes a request for consideration of his case for ad-hoc exemption Government consider the request and finds it a fit case issues Ad-Hoc exemption:

Subsequent clarification in Exemption Notification / Order [Section 5(3)]

Clarification as to SCOPE or APPLICABILITY may be done by INSERTION of an EXPLANATION

Such clarification if inserted within 1 year, it shall have RETROSPECTIVE EFFECTB (as it shall be deemed to be part of the original notification/order from the very beginning]



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9. REMISSION OF TAX ON SUPPLIES [SECTION 11]

This section deals with Remission* of tax on supplies found deficient in quantity due

to natural causes**. Rules shall be made having regard to the nature of supply and fix

the limit or limits of percentage beyond which no remission shall be allowed.

*Remission means waiver or cancellation of Duty legally payable.

[Author’s Note: Current Excise Laws allows Remission of Duty on Goods lost or Destroyed by

Natural Causes or by Unavoidable accidents. Model GST Law speaks only about Natural Causes. So

Unavoidable Accidents might be covered by rules made in this regard]



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TIME & VALUE OF SUPPLY This chapter deals with Time of Supply of Goods, Services and Value of Taxable

Supply along with Changes in Rate of Tax in respect of supply of Services. Provisions

relating to time and value of supply are contained in Section 12 to 14.

10. TIME OF SUPPLY OF GOODS [SECTION 12]

The provisions are broadly similar to present laws. The liability to pay CGST/SGCT

on the goods shall arise AT THE TIME OF SUPPLY.

Types of Supply

Normal SupplyContinuous

SupplyReverse Charge

Time cannot be determined



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NORMAL SUPPLY OF GOODS

The time of supply shall be EARLIEST of the following dates:

CONTINUOUS SUPPLY OF GOODS [SECTION 12(3)]

Section 2(30) “continuous supply of goods” means a supply of goods which is

provided, or agreed to be provided, continuously or on recurrent basis, under a

contract, whether or not by means of a wire, cable, pipeline or other conduit, and for

which the supplier invoices the recipient on a regular or periodic basis.

In case of Continuous supply of goods where successive statements of accounts or

successive payments are involved; the time of supply shall be;

o the date of expiry of the period to which such successive statements of

accounts; or

o successive payments relate.

Date on which Goods are removed

Date on which

Invoice is Issued

Date on which

Payments is Received.

Date on which the Recepient shows

the Receipt of Goods in his

Books of Account.



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GOODS ON REVERSE CHARGE BASIS [SECTION 12(5)]

Time of Supply on Reverse Charge Basis will be EARLIEST of the following:

TIME OF SUPPLY CANNOT BE DETERMINED [SECTION 12(7)]

Where it is NOT POSSIBLE to determine the time of supply of goods, in that case

the time of supply shall be:

in case where a periodical return has to be filed, be the date on which such

return is to be filed, or

in any other case, be the date on which the CGST/SGST is paid.

Date of Receipt of

Goods

Date of which the payment is

made

Date of Receipt of

Invoice

Date on debit in the

Books of Accounts



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11. TIME OF SUPPLY OF SERVICES [SECTION 13]

The provisions are broadly similar to present laws. The liability to pay CGST/SGCT on

Services shall be determined AT THE TIME OF SUPPLY.

NORMAL SUPPLY OF SERVICES

The time of supply of Services shall be EARLIEST of the following dates:

Types of Supply

Normal SupplyContinuous

SupplyReverse Charge

Time cannot be determined

Earl

iest

of

the

follo

win

g Invoice Issued in Prescribed Time

Date of Issue of Invoice

Date of Receipt of Payments

Invoice not issued within Prescribed Time

Date of Completion of Service

Date of Receipt of Payments

In Other CaseDate of booking in Recipents Books.



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CONTINUOUS SUPPLY OF GOODS [SECTION 13(3)]

Section 2(31) “continuous supply of services” means a supply of services which is

provided, or agreed to be provided, continuously or on recurrent basis, under a

contract, for a period exceeding three months with periodic payment obligations and

includes supply of such service as the Central or a State Government may, whether

or not subject to any condition, by notification, specify.

In case of Continuous supply of services the time of supply shall be

Earl

iest

of

the

Follo

win

g

Due Date of Payment Asertainable from Contract

Date on which Payment is liable to be made

Whether any invoice is raised or not

Whether any payment has been received or not

Due Date of Payment is not Ascertainable from Contract

each such time when the supplier of service receives

the payment.

issues an invoice

In Other CaseWhere payment is linked to

completion of an eventthe time of completion of

that event.



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SUPPLY OF SERVICES ON REVERSE CHARGE BASIS [SECTION 13(5)]

Time of Supply of Services on Reverse Charge Basis will be EARLIEST of the

following:

TIME OF SUPPLY CANNOT BE DETERMINED [SECTION 13(7)]

Where it is NOT POSSIBLE to determine the time of supply of services, in that case

the time of supply shall be:

in case where a periodical return has to be filed, be the date on which such

return is to be filed, or

in any other case, be the date on which the CGST/SGST is paid.

Date of Receipt of Services

Date on which the payment is

made

Date of Receipt of

Invoice

Date on debit in the

Books of Accounts



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12. CHANGE IN RATE OF TAX IN RESPECT OF SUPPLY OF SERVICES [SECTION 14]

The provisions are broadly similar to present Rules 5 and 7 of Point of Taxation

Rules’2011.

IF TAXABLE SERVICES HAS BEEN PROVIDED BEFORE THE CHANGE IN EFFECTIVE RATE OF TAX

Time of Issue of Invoice

Time of Receipt of Payments

Point of Taxation / Applicable Rates

After After Earlier of:

Date of Payment; or

Date of issuing of Invoice

Before After Date of issuing of Invoice

After Before Date of Payment

IF TAXABLE SERVICES HAS BEEN PROVIDED AFTER THE CHANGE IN EFFECTIVE RATE OF TAX

Time of Issue of Invoice

Time of Receipt of Payments

Point of Taxation / Applicable Rates

Before Before Earlier of:

Date of Payment; or

Date of issuing of Invoice

After Before Date of issuing of Invoice

Before After Date of Payment

*****END of PART-1*****

DISCLAIMER: This document is for information only. All care has been taken for

laws but in case something has been missed request our readers to update us.

This should not be taken as any advice from our concern. We shall not be liable

for any loss if occurred for laws stated in this document.

Thanks & Regards Team GSTpanacea.com 7503031378 [email protected]


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