The Goods and Services Tax (GST) bill was passed in Indian Parliament (Rajya Sabha on August 3 and has been approved by the Lok Sabha on the 8th August). It has been ratified by 50% of the states. The government is aiming for an implementation date of 1 April 2017. However based on the feedback received from our colleagues, the industry is hoping that such date could be delayed to July 2017 as a lot remain to be done to allow the implementation. The new GST Law will impact IT systems, accounting processes, contracts and business models. In short, it’s going to have consequences on each industry even if some will be more impacted than others. Consequently, businesses should anticipate. The Model GST law released in June 2016 is the first version from the Government of India. The Model law is somewhat unclear on various fundamental concepts such as ‘scope of supply’, supplies without consideration being taxable, place of supply in a situation where there are multiple establishments within India providing and receiving services etc. Also, the Model law has not considered industry specific issues of several industries such as international transport. Hence, the Model law would undergo several changes. However to date, number of points should draw your attention:
- new definition of place of supply for taxation purpose;
- Local agent likely considered as establishment of foreign entities; The definition of agent in Model GST law is wide. Whether agents would be considered as establishment of foreign entities is unclear.
- unclear treatment of the ancillary Services;
- input GST to manage (deductibility only if the supplier paid the GST to the Government);
It should be kept in mind that the Government still has to achieve several milestones to implement GST, namely discussions by GST Council with various stakeholders on the GST legislation, development of the IT platform, finalisation of GST legislation etc. This gives the opportunity to the industry key players to influence the future law and to prepare for the changes.
For further information please find below attached summaries indicating various sectors prepared by our Indian colleagues:
Decoding the Model GST Law – Impact on Aviation Sector
Decoding the Model GST Law – Impact on Entertainment and Media Sector
Decoding the Model GST Law – Impact on the FMCG Sector
Decoding the Model GST Law – Impact on Financial Services Sector
Decoding the Model GST Law – Key futures of the draft Model GST Law
Decoding the Model GST Law – Impact on Infrastructure Sector
Decoding the Model GST Law – Impact on IT/ITES Sector
Decoding the Model GST Law – Impact on Pharma Sector
Decoding the Model GST Law – Impact on Real Estate Sector
Decoding the Model GST Law – Impact on Telecom Companies
If you have any questions, please do not hesitate to contact Pratik Jain, Partner PwC India on +91 (124) 330 6507 or firstname.lastname@example.org.
Katharina Wieland Müller / pixelio.de