Michaela Merz

India – 1 July 2017 seems the possible date for GST implementation

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Eleventh meeting of GST Council – GST Council clears CGST and IGST law

In a constructive meeting of the GST Council, various important aspects have been finalised. The CGST and IGST laws have been formally approved by the GST Council.The laws would now be vetted from a legal perspective again to incorporate minor changes (from a legal wording perspective) post which the same would be tabled before the Cabinet for their approval. Once the laws are cleared by the Cabinet, the same would be presented before the Parliament in the second half of the budget session.

SGST law

With regard to the SGST law, the following were highlighted:

  • The SGST laws would be a replica of the CGST law
  • The legal committee would be working for the next 3 days to finalise the SGST law
  • Once the SGST law is finalised, the same would be circulated to the State Legislatures and Union Territories’ with Legislatures (Delhi and Puducherry) for their approval
  • For other Union Territories which do not have a Legislature, another law called UTGST Act would be formulated (which would be same as the SGST law). Such law would be passed by the Parliament
  • The SGST and UGST law would be presented before the GST Council in its next meeting on 16th March 2017 for approval

Rates

Post finalisation of the SGST and UGST laws, a major meeting would be held where fitment of rates for various goods/ services would be presented before the GST Council and approved. Additionally, it was highlighted that the ceiling rate of GST rates have been provided in the legislation itself.

Further, following rates have been finalised under the composition scheme for turnover below Rs. 50 lakhs:

  • Restaurants in service sector – 5% (2.5% CGST and 2.5% SGST)
  • Traders – 1% (0.5% CGST and 0.5% SGST)
  • Manufacturers – 2% (1% CGST and 1% SGST)

Press Release by the Government

In a press release by the Government, the following essential features of the CGST and IGST laws have been reiterated:

  • There would be a State wise single registration for the taxpayer. Most of the compliances would be automated, and there would be minimal physical interface between the taxpayer and Government officials
  • Common return (on State wise basis) for CGST, SGST and IGST
  • Threshold is Rs.20 lakhs per annum and Rs.10 lakhs for Special Category States (such as Arunachal Pradesh, Sikkim, Uttarakhand, Himachal Pradesh and North-East States)
  • Composition scheme available for assessees with annual turnover upto Rs. 50 lakhs. Assesees eligible for the same include all traders, select manufacturing sectors, and restaurants in the services sector
  • All goods and services used in the course or furtherance of business eligible for input tax credit eligible on all goods and services except for a few restrictions specified in the law
  • Method of cross utilisation of credit prescribed (for IGST, CGST, SGST and UTGST)
  • Concept of Input service distributor (ISD) to continue to allow the flow of credit of input services
  • 90% refund allowed on provisional basis to exporters within 7 days of filing of refund application
  • Provisions incorporated in GST law to ensure single administration for assessees
  • Commissioner empowered to allow payment of tax in instalments (in case of financial hardship of assessees)
  • Provisions introduced for advance ruling, appellate mechanism and transition
  • Anti-profiteering provision incorporated to ensure that reduction of tax incidence is passed on to the consumers

Summary

With approval of the CGST and IGST law, uncertainties regarding GST roll-out has been largely done away with. It appears that GST Council has agreed to most legislative recommendations of the States.
Pending minor legal drafting, the Government seems set to pass the laws in the second half of Budget session of Parliament which begins from 9 March 2017. The implementation of GST from 1 July 2017 seems like a reality now.
The next immediate step for the Government would be on fitment on rates for various goods and services as well as finalisation of various GST Rules.

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