Highlights of the Revised Draft Model GST Law

The revised draft model GST law was made available on 26th November, 2016. Key highlights of the revised Draft Model GST Law are categorized into the following sections:

  • What are the changes?
  • What are the new additions?
  • What are the exclusions?

What are the changes?

Subject Topic Draft Law- 14th June, 2016 Revised Draft law- 26th November, 2016
Registration Threshold limit Rs 5 Lakhs for North East states

Rs 10 Lakhs for Rest of India

Rs 10 Lakhs for Special Category States *

Rs 20 Lakhs for other than Special Category States

* Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand

Aggregate turnover Aggregate value Includes all Taxable Supplies , Non Taxable Supplies, Exempt Supplies and Export supplies Includes all Taxable Supplies , Exempt Supplies and Export supplies
Supply Import of services Importation of services, whether or not for a consideration and whether or not in the course or furtherance of business. Importation of services, for a consideration and whether or not in the course or furtherance of business.
Composition levy Rate of tax Not Less than 1% of Turnover in a State during the financial year. Not Less than 2.5 % of Turnover in a State during the financial year for Manufacturer* and 1 % for others.

* Except manufacturer of such goods as may be notified on the recommendation of the Council

Composition levy Restriction A registered taxable person engaged in inter-State outward supplies of goods and/or services cannot opt for composition levy. Along with the existing condition of Interstate Outward supplies, the following are new additions :

1)      Engaged in supply of services
2)      Engaged in supply of goods which are not leviable to tax under GST
3)      Engaged in any supply of goods through an electronic commerce operator
4)      Manufacturer of such goods as may be notified on the recommendation of the Council

Time of supply of goods Forward charge Earliest of the following :

1.       Date of removal of goods
2.       Date of invoice
3.       Date of receipt of payment
4.       Date of entry ( receipt of goods ) in books of accounts

Earliest of following :

1.       Date of invoice
2.       Date of receipt of payment

Time of supply of goods Reverse charge Earliest of the following :

1.       Date of receipt of Goods
2.       Date of payment
3.       Date of invoice
4.       Date of debit in the books of accounts

 

Earliest of Following :

1.       Date of receipt of goods
2.       Date of payment made
3.       30 days from date of invoice

If above events are unable to be determined, then the date of entry in the books of account of the recipient will be the time of supply

Time of supply of services Forward charge In case invoice issued within prescribed period :  Earliest of following :

1.       Date of invoice
2.       Receipt of payment

In case invoice is not issued within prescribed period :Earliest of the following

1.       Date of completion of the Service
2.       Receipt of Payment

 

Earliest of Following :

1.       Date of invoice
2.       Date of receipt of payment

 

Time of supply of services Reverse charge Earliest of the following :

1.       Date of receipt of services
2.       Date on which the payment is made
3.       Date of receipt of invoice
4.       Date of debit in the books of accounts

Earliest of the following :

1.       Date of payment
2.       60 days from date of invoice

If above events are unable to be determined, than date of entry in the books of account of the recipient will be the time of supply

Value of supply Subsides Value will include subsidies provided in any form or manner, linked to the supply Subsidies directly linked to the price excluding subsidies provided by the Central and State governments
Job work Input tax credit Principal manufacturer need to receive the inputs sent for job work within 180 days Principal need to receive the inputs sent for job work within 1 year
Job work Input tax credit Period to receive back the capital goods is 2 Years Period to receive back the capital goods is 3 Years
Refund Interest on delayed refund Interest will be paid, if not refunded within 3 months Interest will be paid, if not refunded within sixty days
Transition provision Registered business  ( manufacturer, trader and service provider ) Conditions to carry forward the Input Tax Credit (ITC)  to GST are :

1.       The closing balance of ITC should reflect in last return filed
2.       The credit should be allowed under current law and
3.       It is allowed as input tax credit under GST

Conditions to carry forward Input Tax Credit (ITC)  to GST are :

1.       The closing balance of ITC should reflect in the last return filed
2.       It is allowed as input tax credit under GST

 

 

 

Schedules Schedule I This schedule provides the list of transaction or activities which needs to be treated as supply even 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 non-taxable person in the course or furtherance of business.

As per the revised draft law, the transaction or activities mentioned under No.2,3,4 and 5 are excluded and revised Schedule I contains :

1.       Permanent transfer/disposal of business assets where input tax credit has been availed on such assets.
2.       Supply of goods or services between related persons, or between distinct persons as specified in section 10, when made in the course or furtherance of business.
3.       Supply of goods by a principal to his agent, where the agent undertakes to supply such goods on behalf of the principal, or vice versa.
4.       Importation of services by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business.

 

What are the new additions?

Topic New Addition Details
Definition Capital goods Capital goods means goods, the value of which is capitalised 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
Supply Mixed supply Two or more individual supplies of goods or services or a combination, supplied by a taxable person for a single price.
Supply Composite supply Supply made by a taxable person to a recipient, comprising of two or more supplies of goods or services, or any combination which is naturally bundled and supplied in the ordinary course of business.
Time of supply Supply of voucher The time of supply will be earliest of the following :

1.       Date of issue of voucher, if supplier is identifiable
2.       Date of redemption of voucher, in all other cases

Value of supply Interest, late fee or penalty Interest or late fee or penalty for delayed payment of a supply will be taxable.
Value of supply Post supply discount Post supply discount will be excluded from transaction value only if :

1.       discount is known  in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices and
2.       Input tax credit has been reversed by the recipient of the supply as is attributable to the discount on the basis of document issued by the supplier.

Invoice Reverse charge mechanism A registered taxable person who is liable to pay tax on reverse charge should issue a Tax Invoice on making any inward supply of goods or services from unregistered person.
ITC on capital goods For pipeline and telecom towers Maximum of 1/3rd ITC in first year, maximum of 2/3rd ITC in second financial year including the claim of first year, and remaining in any subsequent financial year.
ITC Reversal of ITC on supply of service If the recipient fails to pay the supplier of service,  the amount towards the value of supply of services along with tax payable within a period of three months from the date of issue of invoice, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability along with interest.
Anti-profiteering clause Anti-profiteering To examine whether the benefit of input tax credit availed by any registered taxable person or any reduction in the tax rate has actually been passed on to customer, by way of reduction in price of the goods or services.
Transition provision Excise duty A First stage Dealer / Second Stage Dealer / Importer is allowed to avail Input Tax credit on closing Stock.
Transition provision Entry tax Entry Tax paid is allowed to be availed as input tax credit on closing stock held.
Transition provision Service tax Service Provider engaged in providing exempted services which are taxable in GST, can avail the Input Tax credit on Inputs.
Schedules Schedule III This schedule gives list of activities or transactions which shall be treated as neither supply of goods nor supply of services.

Read more on transition provisions

What are the exclusions*?

Topic Exclusion Details
Definition of goods Securities As per the definition, Securities are excluded from goods
Value of supply Royalties, License Fee and Free of charge goods or services These are excluded from section on value of supply
Value of supply Valuation rules The valuation rules (comparison, computed and residual method) are excluded from Revised Draft law.

 

*These are excluded from the revised draft law as compared to draft law published on 14th June, 2016. As the law is in still draft stage, these may be prescribed at a later stage.

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Pugal T & Yarab A

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