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 Goods And Service Tax (GST) Concept & Status As On 1st January, 2019
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Goods And Service Tax (GST) Concept & Status As On 1st January, 2019
January, 16th 2019
           GOODS AND SERVICE TAX (GST)

                CONCEPT & STATUS




CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS (CBIC)

             DEPARTMENT OF REVENUE

               MINISTRY OF FINANCE

              GOVERNMENT OF INDIA

               AS ON 1st JANUARY, 2019




                                                     1 | 49
The uniform system of taxation, which, with a few exceptions of no great
consequence, takes place in all the different parts of the United
Kingdom of Great Britain, leaves the interior commerce of the country,
the inland and coasting trade, almost entirely free. The inland trade is
almost perfectly free, and the greater part of goods may be carried from
one end of the kingdom to the other, without requiring any permit or
let-pass, without being subject to question, visit, or examination from
the revenue officers. ......This freedom of interior commerce, the effect
of uniformity of the system of taxation, is perhaps one of the principal
causes of the prosperity of Great Britain; every great country being
necessarily the best and most extensive market for the greater part of
the productions of its own industry. If the same freedom, in consequence
of the same uniformity, could be extended to Ireland and the
plantations, both the grandeur of the state and the prosperity of every
part of the empire, would probably be still greater than at present"

                                        ­ Adam Smith in `Wealth of Nations'




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      1. INTRODUCTION:

        Whether it was uniformity of taxation and consequent free interior trade or
possession of `the jewel in the crown' at the root of prosperity of Britain is
debatable, nonetheless the words of father of modern economics on the benefits of
uniformity of system of taxation cannot be taken too lightly. Before
implementation of Goods and Service Tax (GST), Indian taxation system was a
farrago of central, state and local area levies. By subsuming more than a score of
taxes under GST, road to a harmonized system of indirect tax has been paved
making India an economic union.

      2. CONSTITUTIONAL SCHEME OF INDIRECT TAXATION IN INDIA
         BEFORE GST :

2.1     Article 265 of the Constitution of India provides that no tax shall be levied
or collected except by authority of law. As per Article 246 of the Constitution,
Parliament has exclusive powers to make laws in respect of matters given in Union
List (List I of the Seventh Schedule) and State Government has the exclusive
jurisdiction to legislate on the matters containing in State List (List II of the Seventh
Schedule). In respect of the matters contained in Concurrent List (List III of the
Seventh Schedule), both the Central Government and State Governments have
concurrent powers to legislate.

2.2     Before advent of GST, the most important sources of indirect tax revenue for
the Union were customs duty (entry 83 of Union List), central excise duty (entry 84
of Union List), and service tax (entry 97 of Union List). Although entry 92C was
inserted in the Union List of the Seventh Schedule of the Constitution by the
Constitution (Eighty-eighth Amendment) Act, 2003 for levy of taxes on services, it
was not notified. So tax on services were continued to be levied under the residual
entry, i.e. entry 97, of the Union List till GST came into force. The Union also


                                                                                    3 | 49
levied tax called Central Sales Tax (CST) on inter-State sale and purchase of goods
and on inter-State consignments of goods by virtue of entry 92A and 92B
respectively. CST however is assigned to the State of origin, as per Central Sales
Tax Act, 1956 made under Article 269 of the Constitution.

2.3     On the State side, the most important sources of tax revenue were tax on sale
and purchase (entry 54 of the State List), excise duty on alcoholic liquors, opium
and narcotics (entry 51 of the State List), Taxes on luxuries, entertainments,
amusements, betting and gambling (entry 62 of the State List), octroi or entry tax
(entry 52 of the State List) and electricity tax ((entry 53 of the State List). CST was
also an important source of revenue though the same was levied by the Union.

      3. HISTORICAL EVOLUTION OF INDIRECT TAXATION IN POST-
         INDEPENDENCE INDIA TILL GST:

3.1     In post-Independence period, central excise duty was levied on a few
commodities which were in the nature of raw materials and intermediate inputs, and
consumer goods were outside the net by and large. The first set of reform was
suggested by the Taxation Enquiry Commission (1953-54) under the chairmanship
of Dr. John Matthai. The Commission recommended that sales tax should be used
specifically by the States as a source of revenue with Union governments'
intervention allowed generally only in case of inter-State sales. It also
recommended levy of a tax on inter-State sales subject to a ceiling of 1%, which
the States would administer and also retain the revenue.

3.2     The power to levy tax on sale and purchase of goods in the course of inter-
State trade and commerce was assigned to the Union by the Constitution (Sixth
Amendment) Act, 1956. By mid-1970s, central excise duty was extended to most
manufactured goods. Central excise duty was levied on unit, called specific duty,
and on value, called ad valorem duty. The number of rates was too many with no


                                                                                   4 | 49
offsetting of taxes paid on inputs leading to significant cascading and classification
disputes.

3.3   The Indirect Taxation Enquiry Committee constituted in 1976 under Shri L
K Jha recommended, inter alia, converting specific rates into ad valorem rates, rate
consolidation and input tax credit mechanism of value added tax at manufacturing
level (MANVAT). In 1986, the recommendation of the Jha Committee on moving
on to value added tax in manufacturing was partially implemented. This was called
modified value added tax (MODVAT). In principle, duty was payable on value
addition but in the beginning it was limited to select inputs and manufactured goods
only with one-to-one correlation between input and manufactured goods for
eligibility to take input tax credit. The comprehensive coverage of MODVAT was
achieved by 1996-97.

3.4   The next wave of reform in indirect tax sphere came with the New Economic
Policy of 1991. The Tax Reforms Committee under the chairmanship of Prof. Raja
J Chelliah was appointed in 1991. This Committee recommended broadening of the
tax base by taxing services and pruning exemptions, consolidation and lowering of
rates, extension of MODVAT on all inputs including capital goods. It suggested
that reform of tax structure must have to be accompanied by a reform of tax
administration, if complete benefits were to be derived from the tax reforms. Many
of the recommendations of the Chelliah Committee were implemented. In 1999-
2000, tax rates were merged in three rates, with additional rates on a few luxury
goods. In 2000-01, three rates were merged into one rate called Central Value
Added Tax (CENVAT). A few commodities were subjected to special excise duty.

3.5   Taxation of services by the Union was introduced in 1994 bringing in its
ambit only three services, namely general insurance, telecommunication and stock
broking. Gradually, more and more services were brought into the fold. Over the


                                                                                  5 | 49
next decade, more and more services were brought under the tax net. In 1994, tax
rate on three services was 5% which gradually increased and in 2017 it was 15%
(including cess). Before 2012, services were taxed under a `positive list' approach.
This approach was prone to `tax avoidance'. In 2012 budget, negative list approach
was adopted where 17 services were out of taxation net and all other services were
subject to tax. In 2004, the input tax credit scheme for CENVAT and Service Tax
was merged to permit cross utilization of credits across these taxes.

3.6   Before state level VAT was introduced by States in the first half of the first
decade of this century, sales tax was levied in States since independence. Sales tax
was plagued by some serious flaws. It was levied by States in an uncoordinated
manner the consequences of which were different rates of sales tax on different
commodities in different States. Rates of sales tax were more than ten in some
States and these varied for the same commodity in different States. Inter-state sales
were subjected to levy of Central Sales Tax. As this tax was appropriated by the
exporting State credit was not allowed by the dealer in the importing State. This
resulted into exportation of tax from richer to poorer states and also cascading of
taxes. Interestingly, States had power of taxation over services from the very
beginning. States levied tax on advertisements, luxuries, entertainments,
amusements, betting and gambling.

3.7   A report, titled "Reform of Domestic Trade Taxes in India", on reforming
indirect taxes, especially State sales tax, by National Institute of Public Finance and
Policy under the leadership of Dr. Amaresh Bagchi, was prepared in 1994. This
Report prepared the ground for implementation of VAT in States. Some of the key
recommendations were; replacing sales tax by VAT by moving over to a multistage
system of taxation; allowing input tax credits for all inputs, including on machinery
and equipment; harmonization and rationalization of tax rates across States with


                                                                                   6 | 49
two or three rates within specified bands; pruning of exemptions and concessions
except for a basic threshold limit and items like unprocessed food; zero rating of
exports, inter-State sales and consignment transfers to registered dealers; taxing
inter-State sales to non-registered persons as local sales; modernization of tax
administration, computerization of operations and simplification of forms and
procedures.

3.8     The first preliminary discussion on transition from sales tax regime to VAT
regime took place in a meeting of Chief Ministers convened by the Union Finance
Minister in 1995. A standing Committee of State Finance Ministers was constituted,
as a result of meeting of the Union Finance Ministers and Chief Ministers in
November, 1999, to deliberate on the design of VAT which was later made the
Empowered Committee of State Finance Ministers (EC). Haryana was the first
State to implement VAT, in 2003. In 2005, VAT was implemented in most of the
states. Uttar Pradesh was the last State to implement VAT, from 1st January, 2008.

      4. INTERNATIONAL PERSPECTIVES ON GST / VAT:

4.1     VAT and GST are used inter-changeably as the latter denotes
comprehensiveness of VAT by coverage of goods and services. France was the first
country to implement VAT, in 1954. Presently, more than 160 countries have
implemented GST / VAT in some form or the other. The most popular form of VAT
is where taxes paid on inputs are allowed to be adjusted in the liability at the output.
The VAT or GST regime in practice varies from one country to another in terms of
its technical aspects like `definition of supply', `extent of coverage of goods and
services', `treatment of exemptions and zero rating' etc. However, at a broader level,
it has one common principle, it is a destination based consumption tax. From
economic point of view, VAT is considered to be a superior system over sales tax of
taxing consumption because the former is neutral in allocation of resources as it


                                                                                   7 | 49
taxes value addition. Besides, there are certain distinct advantages of VAT. It is less
cascading making the taxation system transparent and anti-inflationary. From
revenue point of view, VAT leads to greater compliance because of creation of
transaction trails.

4.2     When compared globally, VAT structures are either overly centralized where
tax is levied and administered by the Central government (Germany, Switzerland,
Austria), or dual GST structure wherein both Centre and States administer tax
independently (Canada) or with some co-ordination between the national and sub-
national entities (Brazil, Russia). While a centralized structure reduces fiscal
autonomy for the States, a decentralized structure enhances compliance burden for
the taxpayers. Canada is a federal country with unique model of taxation in which
certain provinces have joined federal GST and others have not. Provinces which
administer their taxes separately are called `non- participating provinces', whereas
provinces which have teamed up with the Federal Government for tax administration
are called `participating provinces'.

4.3     The rate of GST varies across countries. While Malaysia has a lower rate of
6% (Malaysia though scrapped GST in 2018 due to popular uproar against it),
Hungary has one of the highest rate of 27%. Australia levies GST at the rate of 10%
whereas Canada has multiple rate slabs. The average rate of VAT across the EU is
around 19.5%.



      5. NEED FOR GST IN INDIA:

5.1     The introduction of CENVAT removed to a great extent cascading burden by
expanding the coverage of credit for all inputs, including capital goods. CENVAT
scheme later also allowed credit of services and the basket of inputs, capital goods


                                                                                  8 | 49
and input services could be used for payment of both central excise duty and service
tax. Similarly, the introduction of VAT in the States has removed the cascading
effect by giving set-off for tax paid on inputs as well as tax paid on previous
purchases and has again been an improvement over the previous sales tax regime.

5.2   But both the CENVAT and the State VAT have certain incompleteness. The
incompleteness in CENVAT is that it has yet not been extended to include chain of
value addition in the distributive trade below the stage of production. Similarly, in
the State-level VAT, CENVAT load on the goods has not yet been removed and the
cascading effect of that part of tax burden has remained unrelieved. Moreover, there
are several taxes in the States, such as, Luxury Tax, Entertainment Tax, etc. which
have still not been subsumed in the VAT. Further, there has also not been any
integration of VAT on goods with tax on services at the State level with removal of
cascading effect of service tax.

5.3   CST was another source of distortion in terms of its cascading nature. It was
also against one of the basic principles of consumption taxes that tax should accrue
to the jurisdiction where consumption takes place. Despite remarkable
harmonization in VAT regimes under the auspices of the EC, the national market
was fragmented with too many obstacles in free movement of goods necessitated by
procedural requirement under VAT and CST.

5.4   In the constitutional scheme, taxation powers on goods was with Central
Government but it was limited upto the stage of manufacture and production while
States have powers to tax sale and purchase of goods. Centre had powers to tax
services and States also had powers to tax certain services specified in clause (29A)
of Article 366 of the Constitution. This sort of division of taxing powers created a
grey zone which led to legal disputes. Determination of what constitutes a goods or



                                                                                9 | 49
service is difficult because in modern complex system of production, a product is
normally a mixture of goods and services.

5.5     As can be seen from the previous paragraphs, India moved towards value
added taxation both at Central and State level, and this process was complete by
2005. Integration of Central VAT and State VAT therefore is nothing but an
inevitable consequence of the reform process. The Constitution of India envisages a
federal nature of power bestowed upon both Union and States in the Constitution
itself. As a natural corollary of this, any unification of the taxation system required
a dual GST, levied and collected both by the Union and the States.

      6. GST : A HISTORICAL PERSPECTIVE:

6.1     The Kelkar Task Force on Fiscal Responsibility and Budget Management
(FRBM) recommended in 2005 introduction of a comprehensive tax on all goods
and service replacing Central level VAT and State level VATs. It recommended
replacing all indirect taxes except the customs duty with value added tax on all goods
and services with complete set off in all stages of making of a product.

6.2     An announcement was made by the then Union Finance Minister in Budget
(2007-08) to the effect that GST would be introduced with effect from April 1, 2010
and that the EC, on his request, would work with the Central Government to prepare
a road map for introduction of GST in India. After this announcement, the EC
decided to set up a Joint Working Group in May 10, 2007, with the then Adviser to
the Union Finance Minister and Member-Secretary of the Empowered Committee
as its Co-conveners and four Joint Secretaries of the Department of Revenue of
Union Finance Ministry and all Finance Secretaries of the States as its members.
This Joint Working Group got itself divided into three Sub-Groups and had several
rounds of internal discussions as well as interaction with experts and representatives


                                                                                 10 | 49
of Chambers of Commerce & Industry. On the basis of these discussions and
interaction, the Sub-Groups submitted their reports which were then integrated and
consolidated into the report of Joint Working Group (November 19, 2007).

6.3     This report was discussed in detail in the meeting of the EC on November 28,
2007, and the States were also requested to communicate their observations on the
report in writing. On the basis of these discussions in the EC and the written
observations, certain modifications were considered necessary and were discussed
with the Co-conveners and the representatives of the Department of Revenue of
Union Finance Ministry. With the modifications duly made, a final version of the
views of EC on the model and road map for the GST was prepared (April 30, 2008).
These views of EC were then sent to the Government of India, and the comments of
Government of India were received on December 12, 2008. These comments were
duly considered by the EC (December 16, 2008), and it was decided that a
Committee      of   Principal   Secretaries/Secretaries   of   Finance/Taxation     and
Commissioners of Trade Taxes of the States would be set up to consider these
comments, and submit their views. These views were submitted and were accepted
in principle by the EC (January 21, 2009). Based on discussions within the EC and
between the EC and the Central Government, the EC released its First Discussion
Paper (FDP) on GST in November, 2009. This spelled out the features of the
proposed GST and has formed the basis for discussion between the Centre and the
States.

      7. CHALLENGES IN DESIGNING GST:

7.1     In the discussion that preceded amendment in the Constitution for GST, there
were a number of thorny issues that required resolution and agreement between
Central Government and State Governments. Implementing a tax reform as vast as
GST in a diverse country like India required the reconciliation of interests of various

                                                                                  11 | 49
States with that of the Centre. Some of the challenging issues, addressed in the run
up to GST, were the following:

7.2   Origin-based versus Destination-based taxation: GST is a destination based
consumption tax. Under destination based taxation, tax accrues to the destination
place where consumption of the goods or services takes place. The existing VAT
regime was based on origin principle where Central Sales Tax was assigned to the
State of origin where production or sale happened and not to the State where
consumption happened. Many manufacturing States expressed concerns over the
loss of revenue on account of shift from origin based taxation to destination based
taxation.

7.2.1 An argument put forward on behalf of producing states in support of origin
based taxation is that they need to collect at least some tax from inter-State sales in
order to recover the cost of infrastructure and public services provided by the State
Governments to the industries producing the goods which are consumed in other
states. This line of reasoning is based on the assumption that in the absence of a tax
on inter-State sales, the location of export industries within their jurisdiction would
not contribute to the tax revenues of the exporting state. This view was missing the
fact that any value addition in a jurisdiction necessarily means extra income in the
hands of the residents of that jurisdiction. Spending of this income on consumer
goods expands the sales tax base of the producing states and thereby contributes to
their revenues. In fact, to the extent that consumer expenditures are dependent on
the level of income of the residents of a State, it is the producing States that stand to
gain the most in additional sales tax revenues (even under the destination basis of
consumption taxes) from increased export output.




                                                                                  12 | 49
7.3   Rate Structure and Compensation: There was uncertainty about gains in
revenue after implementation of GST. Though attempts were made to estimate a
revenue neutral rate, nonetheless it remains an estimate only. It was difficult to
estimate accurately as to how much the States will gain from tax on services and
how much they will lose on account of removal of cascading effect and phasing out
of CST. In view of this, States asked for compensation during the first five years of
implementation of GST.

7.3.1 A Committee headed by the Chief Economic Adviser Dr. Arvind
Subramanian on possible tax rates under GST suggested RNR (Revenue Neutral
Rate). The term RNR refers to that single rate, which preserves revenue at desired
(current) levels. This would differ from the standard rate, which is the rate that would
apply to a majority of goods and services. In practice, there will be a structure of
rates, but for the sake of analytical clarity and precision it is appropriate to think of
the RNR as a single rate. It is a given single rate that gets converted into a whole rate
structure, depending on policy choices about exemptions, what commodities to
charge at a lower rate and what to charge at a very high rate.

7.3.2 The Committee recommended RNR of 15-15.5% (to be levied by the Centre
and States combined). The lower rates (to be applied to certain goods consumed by
the poor) should be 12%. Further, the sin or demerit rates (to be applied on luxury
cars, aerated beverages, pan masala, and tobacco) should be 40%.

7.4   Dispute Settlement: A harmonized system of taxation necessarily required
that all stakeholders stick to the decisions taken by the supreme body, which was
later constituted as the Goods and Services Tax Council (the Council). However, the
possibility of departure from the recommendations of such body cannot be
completely ruled out. Any departure would definitely affect other stakeholders and



                                                                                  13 | 49
in such circumstances there must be a statutory body to which affected parties may
approach for dispute resolution. The nature of such dispute resolution body was a
bone of contention. Under the Constitution (One Hundred Fifteenth Amendment)
Bill, 2011, a Goods and Services Tax Dispute Settlement Authority was to be
constituted for this purpose. This body was judicial in nature. The proposed
constitution of this Authority was challenged because it's powers would override the
supremacy of the Parliament and the State Legislatures. The Constitution (One
Hundred Twenty Second Amendment) Bill, 2014 departed from the previous GST
amendment bill and proposed that the Goods and Services Tax Council may decide
about the modalities to resolve disputes arising out of its recommendations.

7.5   Alcohol and Petroleum products: Alcoholic liquor for human consumption
and petroleum products are major contributor to revenue of States. As States were
uncertain about impact of GST on their finances and moreover loss of autonomy in
collection of tax revenue, States unanimously argued for exclusion of these products
from the ambit of GST. In the 115th Amendment Bill alcoholic liquor for human
consumption and five petroleum products namely crude petroleum, high speed
diesel, motor spirit or petrol, aviation turbine fuel and natural gas were kept out of
GST. But in the 122nd Amendment Bill, only alcoholic liquor for human
consumption was kept outside GST and above mentioned five petroleum products
were proposed to be brought under GST from a date to be recommended by the
Council. The Central Government has also retained its power to tax tobacco and
tobacco products, though these are also under GST. Thus, to ensure smooth
transition and provide fiscal buffer to States, it was agreed to keep alcohol
completely out of the ambit of GST.




                                                                                14 | 49
      8. CONSTITUTIONAL AMENDMENT:

8.1     As explained above, unification of Central VAT and State VAT was possible
in form of a dual levy under the constitutional scheme. Power of taxation is assigned
to either Union or States subject-wise under Schedule VII of the Constitution. While
the Centre is empowered to tax goods upto the production or manufacturing stage,
the States have the power to tax goods at distribution stage. The Union can tax
services using residuary powers but States could not. Under a unified Goods and
Services Tax scheme, both should have power to tax the complete supply chain from
production to distribution, and both goods and services. The scheme of the
Constitution did not provide for any concurrent taxing powers to the Union as well
as the States and for the purpose of introducing goods and services tax amendment
of the Constitution conferring simultaneous power on Parliament as well as the State
Legislatures to make laws for levying goods and services tax on every transaction of
supply of goods or services was necessary.






8.2     The Constitution (115th Amendment) Bill, 2011, in relation to the introduction
of GST, was introduced in the Lok Sabha on 11th March, 2011. The Bill was referred
to the Standing Committee on Finance on 29th March, 2011. The Standing
Committee submitted its report on the Bill in August, 2013. However, the Bill, which
was pending in the Lok Sabha, lapsed with the dissolution of the 15th Lok Sabha.

8.3     The Constitution (122nd Amendment) Bill, 2014 was introduced in the 16th
Lok Sabha on 19th December, 2014. The Constitution Amendment Bill was passed
by the Lok Sabha in May, 2015. The Bill was referred to the Select Committee of
Rajya Sabha on 12th May, 2015. The Select Committee submitted its Report on the
Bill on 22nd July, 2015. The Bill with certain amendments was finally passed in the
Rajya Sabha and thereafter by Lok Sabha in August, 2016. Further the bill was
ratified by required number of States and received assent of the President on 8th

                                                                                15 | 49
September, 2016 and has since been enacted as Constitution (101st Amendment) Act,
2016 w.e.f. 16th September, 2016.

8.4        The important changes introduced in the Constitution by the 101st Amendment
Act are the following:

      i.    Insertion of new article 246A which makes enabling provisions for the
            Union and States with respect to the GST legislation. It further specifies
            that Parliament has exclusive power to make laws with respect to GST on
            inter-State supplies.

  ii.       Article 268A of the Constitution has been omitted. The said article
            empowered the Government of India to levy taxes on services. As tax on
            services has been brought under GST, such a provision was no longer
            required.

 iii.       Article 269A has been inserted which provides for goods and services tax
            on supplies in the course of inter-State trade or commerce which shall be
            levied and collected by the Government of India and such tax shall be
            apportioned between the Union and the States in the manner as may be
            provided by Parliament by law on the recommendations of the Goods and
            Services Tax Council. It also provides that Parliament may, by law,
            formulate the principles for determining the place of supply, and when a
            supply of goods, or of services, or both takes place in the course of inter-
            State trade or commerce.

 iv.        Article 270 has been amended to provide for distribution of goods and
            services tax collected by the Union between the Union and the States.

  v.        Article 271 has been amended which restricts power of the Parliament to
            levy surcharge under GST. In effect, surcharge cannot be imposed on goods


                                                                                    16 | 49
         and services which are subject to tax under Article 246A.

 vi.     Article 279A has been inserted to provide for the constitution and mandate
         of GST Council.

 vii.    Article 366 has been amended to exclude alcoholic liquor for human
         consumption from the ambit of GST, and services have been defined.

viii.    Article 368 has been amended to provide for a special procedure which
         requires the ratification of the Bill by the legislatures of not less than one
         half of the States in addition to the method of voting provided for
         amendment of the Constitution. Thus, any modification in GST Council
         shall also require the ratification by the legislatures of one half of the States.

 ix.     Entries in List I and List II have been either substituted or omitted to restrict
         power to tax goods or services specified in these Lists or to take away
         powers to tax goods and services which have been subsumed in GST.

  x.     Parliament shall, by law, on the recommendation of the Goods and Services
         Tax Council, provide for compensation to the States for loss of revenue
         arising on account of implementation of the goods and services tax for five
         years.

 xi.     In case of petroleum and petroleum products, it has been provided that these
         goods shall not be subject to the levy of Goods and Services Tax till a date
         notified on the recommendation of the Goods and Services Tax Council.

      9. GOODS & SERVICE TAX COUNCIL:

9.1     As provided for in Article 279A of the Constitution, the Goods and Services
Tax Council (the Council) was notified with effect from 12 th September, 2016. The
Council is comprised of the Union Finance Minister (who will be the Chairman of
the Council), the Minister of State (Revenue) and the State Finance/Taxation

                                                                                     17 | 49
Ministers as members. It shall make recommendations to the Union and the States
on the following issues:

   i.   the taxes, cesses and surcharges levied by the Centre, the States and the local
        bodies which may be subsumed under GST;

  ii.   the goods and services that may be subjected to or exempted from the GST;

 iii.   model GST laws, principles of levy, apportionment of IGST and the principles
        that govern the place of supply;

 iv.    the threshold limit of turnover below which the goods and services may be
        exempted from GST;

  v.    the rates including floor rates with bands of GST;

 vi.    any special rate or rates for a specified period to raise additional resources
        during any natural calamity or disaster;

vii.    special provision with respect to the North- East States, J&K, Himachal
        Pradesh and Uttarakhand; and

viii.   any other matter relating to the GST, as the Council may decide.

9.2     The Council shall recommend the date on which the goods and services tax
be levied on petroleum crude, high speed diesel, motor spirit (commonly known as
petrol), natural gas and aviation turbine fuel. While discharging the functions
conferred by this article, the Goods and Services Tax Council shall be guided by the
need for a harmonized structure of goods and services tax and for the development
of a harmonized national market for goods and services.

9.3     One half of the total number of Members of the Goods and Services Tax
Council shall constitute the quorum at its meetings. The Goods and Services Tax

                                                                                 18 | 49
Council shall determine the procedure in the performance of its functions. Every
decision of the Goods and Services Tax Council shall be taken at a meeting, by a
majority of not less than three-fourths of the weighted votes of the members present
and voting, in accordance with the following principles, namely: --

        i.     the vote of the Central Government shall have a weightage of one-third of
               the total votes cast, and

       ii.     the votes of all the State Governments taken together shall have a
               weightage of two-thirds of the total votes cast, in that meeting.

9.4          The Council has met for 31 times and no occasion has arisen so far that
required voting to decide any matter. The following major recommendations have
been made by the Council:

        i.     The threshold exemption limit would be Rs. 20 lakh. For special category
               States (except J&K) enumerated in article 279A of the Constitution,
               threshold exemption limit has been fixed at Rs. 10 lakh.

       ii.     Composition threshold shall be Rs. 1 Cr. As decided in the 23rd meeting
               of the Council, this limit shall be raised to Rs. 1.5 Cr after necessary
               amendments in the Act. Composition scheme shall not be available to
               inter-State suppliers, service providers (except restaurant service) and
               specified category of manufacturers. For special category States (except
               J&K and Uttarakhand) enumerated in article 279A of the Constitution,
               threshold exemption limit has been fixed at Rs. 75 lakh.

      iii.     Existing tax incentive schemes of Central or State governments may be
               continued by respective government by way of reimbursement through
               budgetary route. The schemes, in the present form, would not continue in
               GST. Further, 50% exemption of the CGST portion will be provided to

                                                                                   19 | 49
        CSD (Defense Canteens).

 iv.    Recommending GST laws, namely CGST Law, UTGST Law, IGST Law,
        SGST Law and GST Compensation Law paving the way for
        implementation of GST.

  v.    In order to ensure single interface, all administrative control over 90% of
        taxpayers having turnover below Rs. 1.5 crore would vest with State tax
        administration and over 10% with the Central tax administration. Further
        all administrative control over taxpayers having turnover above Rs.1.5
        crore shall be divided equally in the ratio of 50% each for the Central and
        State tax administration.

 vi.    Powers under the IGST Act shall also be cross-empowered on the same
        basis as under CGST and SGST Acts with few exceptions.

vii.    Power to collect GST in territorial waters shall be delegated by Central
        Government to the States.

viii.   Formula and mechanism for GST Compensation Cess has been finalized.

 ix.    Rules on composition, registration, input tax credit, invoice,
        determination of value of supply, accounts and records, returns, payment,
        refund, assessment and audit, advance ruling, appeals and revision,
        transitional provisions, anti-profiteering, E-way Bill, inspection, search
        and seizure, demands and recovery and offences and penalties have been
        recommended.

  x.    The following classes of taxpayers shall be exempted from obtaining
        registration:

           a.     Suppliers of services, having turnover upto Rs. 20 lakh, making
                inter State supplies;

                                                                              20 | 49
            b.      Suppliers of services, having turnover upto Rs. 20 lakh, making
                 supplies through e-commerce platforms.

   xi.   The reverse charge mechanism under sub-section (4) of section 9 of the
         CGST Act, 2017 and under sub-section (4) of section 5 of the IGST Act,
         2017 has been suspended till 30.09.2019.

  xii.   There shall be no requirement on payment of tax on advance received for
         supply of goods by all taxpayers.

 xiii.   Supply from GTA to unregistered persons has been exempted from tax.

 xiv.    There would be a single cash ledger for each tax head. The modalities for
         implementation would be finalized in consultation with GSTN and the
         Accounting authorities.

  xv.    A scheme of single authority for disbursement of the refund amount
         sanctioned by either the Centre or the State tax authorities would be
         implemented on pilot basis. The modalities for the same shall be finalized
         shortly.

 xvi.    The new return filing system shall be introduced on a trial basis from
         01.04.2019 and on mandatory basis from 01.07.2019.

xvii.    The due date for furnishing the annual returns in FORM GSTR-9, FORM
         GSTR-9A and reconciliation statement in FORM GSTR-9C for the
         Financial Year 2017 ­ 2018 shall be extended till 30.06.2019.

xviii.   ITC in relation to invoices issued by the supplier during FY 2017-18 may
         be availed by the recipient till the due date for furnishing of FORM
         GSTR-3B for the month of March, 2019, subject to specified conditions.



                                                                              21 | 49
 xix.    TDS/TCS provisions to be implemented from 01.10.2018. Further, to
         provide some more time to TDS deductor to familiarize themselves with
         the new system, last date for furnishing return in FORM GSTR-7 for the
         months of October, November & December has been extended upto
         31.01.2019. Further, exemption from TDS for been made for supply made
         by PSU to PSU.

  xx.    The due date for furnishing FORM GSTR-8 by e-commerce operators for
         the months of October, November and December, 2018 shall be extended
         till 31.01.2019.

 xxi.    The due date for submitting FORM GST ITC-04 for the period July 2017
         to December 2018 shall be extended till 31.03.2019.

xxii.       E-Wallet Scheme shall be introduced for exporters from 01.04.2019
         and till then relief for exporters shall be given in form of broadly existing
         practice.

xxiii.   All taxpayers are required to file return FORM GSTR-3B & pay tax on
         monthly basis.

xxiv.    Taxpayers with turnover upto Rs. 1.5 Cr are required to file information
         in FORM GSTR-1 on a quarterly basis. Other taxpayers would have to
         file FORM GSTR-1 on a monthly basis.

xxv.     One more window for completion of migration process is being allowed.
         The due date for the taxpayers who did not file the complete FORM GST
         REG-26 but received only a Provisional ID (PID) till 31.12.2017 for
         furnishing the requisite details to the jurisdictional nodal officer shall be
         extended till 31.01.2019. Also, the due date for furnishing FORM GSTR-
         3B and FORM GSTR-1 for the period July, 2017 to February,


                                                                                 22 | 49
          2019/quarters July, 2017 to December, 2018 by such taxpayers shall be
          extended till 31.03.2019.

 xxvi.    Late fee shall be completely waived for all taxpayers in case FORM
          GSTR-1, FORM GSTR-3B &FORM GSTR-4 for the months / quarters
          July, 2017 to September, 2018, are furnished after 22.12.2018 but on or
          before 31.03.2019.

xxvii.    From October 2017 onwards, the amount of late fee for late filing of
          GSTR-3B payable by a registered person is as follows: o whose tax
          liability for that month was `NIL' will be Rs. 20/- per day instead of Rs.
          200/- per day; o whose tax liability for that month was not `NIL' will be
          Rs. 50/- per day instead of Rs. 200/- per day.

xxviii.   All the supporting documents/invoices in relation to a claim for refund in
          FORM GST RFD-01A shall be uploaded electronically on the common
          portal at the time of filing of the refund application itself, thereby
          obviating the need for a taxpayer to physically visit a tax office for
          submission of a refund application.

 xxix.    The following types of refunds shall also be made available through
          FORM GST RFD-01A: (a) Refund on account of assessment/Provisional
          Assessment/Appeal/Any Other Order; (b) Tax paid on an intra-State
          supply which is subsequently held to be inter-State supply and vice-versa;
          (c) Excess payment of Tax; and (d) Any other refund.

  xxx.    Supply of services to Nepal and Bhutan shall be exempted from GST
          even if payment has not been received in foreign convertible currency ­
          such suppliers shall be eligible for input tax credit.



                                                                               23 | 49
 xxxi.    Centralized UIN shall be issued to every Foreign Diplomatic Mission /
          UN Organization by the Central Government.

xxxii.    Rate of interest on delayed payments and delayed refund has been
          recommended.

xxxiii.   A Group of Ministers has been constituted to look into the issues being
          faced by MSMEs and to provide solutions for the same.

xxxiv.    A Group of Ministers has been constituted to study the revenue trend,
          including analyzing the reasons for structural patterns affecting the
          revenue collection in some of the States. The study would include the
          underlying reasons for deviation from the revenue collection targets vis a
          vis original assumptions discussed during the design of GST system, its
          implementation and related structural issues. The Group of Ministers will
          be assisted by the committee of experts from Central Government, State
          Governments and the NIPFP (National Institute of Public Finance and
          Planning), who would study and share the findings with GoM. The GoM
          in turn would give its recommendation to the GST Council.

xxxv.     A Group of Ministers constituted for promoting digital payment has
          recommended to allow cashback to an amount equal to 20% of GST paid
          or Rs. 100/-, whichever is lower for cases where payment is made by
          BHIM or Rupay card. The necessary infrastructure is being developed
          and soon the scheme would be implemented on pilot basis in State of
          Assam and few other States which volunteer for the same.

  9.5 In its 28th meeting held in New Delhi on 21.07.2018, the GST Council
  recommended certain amendments in the CGST Act, IGST Act, UTGST Act and
  the GST (Compensation to States) Act. These amendments have been passed by

                                                                               24 | 49
  Parliament and have been enacted, after receiving the assent of the Hon'ble
  President of India on 29.08.2018, as the Central Goods and Services Tax
  (Amendment) Act, 2018, the Integrated Goods and Services Tax (Amendment)
  Act, 2018, the Union Territory Goods and Services Tax (Amendment) Act, 2018
  and the Goods and Services Tax (Compensation to States) Amendment Act, 2018,
  respectively. The major amendments brought about by these Acts are as below:

  i.   Upper limit of turnover for opting for composition scheme to be raised from
       Rs. 1 Cr to Rs. 1.5 Cr. Present limit of turnover can now be raised on the
       recommendations of the Council.

 ii.   Composition dealers to be allowed to supply services (other than restaurant
       services), for up to a value not exceeding 10% of turnover in the preceding
       financial year, or Rs. 5 lakh, whichever is higher.

iii.   Levy of GST on reverse charge mechanism on receipt of supplies from
       unregistered suppliers, to be applicable to only specified goods in case of
       certain notified classes of registered persons, on the recommendations of the
       GST Council.

iv.    The threshold exemption limit for registration in the States of Assam,
       Arunachal Pradesh, Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand
       to be increased to Rs. 20 Lakh from Rs. 10 Lakh.

 v.    Taxpayers may opt for multiple registrations within a State/Union territory
       in respect of multiple places of business located within the same State/Union
       territory.

vi.    Mandatory registration is required for only those e-commerce operators who
       are required to collect tax at source.


                                                                               25 | 49
vii.    Registration to remain temporarily suspended while cancellation of
        registration is under process, so that the taxpayer is relieved of continued
        compliance under the law.

viii.   The following transactions to be treated as no supply (no tax payable) under
        Schedule III:

           a. Supply of goods from a place in the non-taxable territory to another
              place in the non-taxable territory without such goods entering into
              India;

           b. Supply of warehoused goods to any person before clearance for home
              consumption; and

           c. Supply of goods in case of high sea sales.

 ix.    Scope of input tax credit is being widened, and it would now be made
        available in respect of the following:

           a. Most of the activities or transactions specified in Schedule III;

           b. Motor vehicles for transportation of persons having seating capacity
              of more than thirteen (including driver), vessels and aircraft;

           c. Services of general insurance, repair and maintenance in respect of
              motor vehicles, vessels and aircraft on which credit is available; and

           d. Goods or services which are obligatory for an employer to provide to
              its employees, under any law for the time being in force.

  x.    Registered persons may issue consolidated credit/debit notes in respect of
        multiple invoices issued in a Financial Year.



                                                                                  26 | 49
   xi.   Amount of pre-deposit payable for filing of appeal before the Appellate
         Authority and the Appellate Tribunal to be capped at Rs. 25 Cr and Rs. 50
         Cr respectively.

  xii.   Commissioner to be empowered to extend the time limit for return of inputs
         and capital sent on job work, upto a period of one year and two years,
         respectively.

 xiii.   Supply of services to qualify as exports, even if payment is received in Indian
         Rupees, where permitted by the RBI.

 xiv.    Place of supply in case of job work of any treatment or process done on goods
         temporarily imported into India and then exported without putting them to
         any other use in India, to be outside India.

  xv.    Recovery can be made from distinct persons, even if present in different
         State/Union territories.

 xvi.    The order of cross-utilisation of input tax credit is being rationalized.

xvii.    The amount of IGST not apportioned to the Centre or the States/UTs may,
         for the time being, on the recommendations of the Council, be apportioned
         at the rate of fifty per cent. to the Central Government and fifty per cent. to
         the State Governments or the Union territories, as the case may be, on ad hoc
         basis and this amount shall be adjusted against the amount finally
         apportioned.

xviii.   Fifty per cent of such amount, as may be recommended by the Council,
         which remains unutilised in the Compensation Fund, at any point of time in
         any financial year during the transition period shall be transferred to the
         Consolidated Fund of India as the share of Centre, and the balance fifty per


                                                                                     27 | 49
          cent. shall be distributed amongst the States in the ratio of their base year
          revenue.

xix.      In case of shortfall in the amount collected in the Fund against the
          requirement of compensation to be released for any two months' period, fifty
          per cent. of the same, but not exceeding the total amount transferred to the
          Centre and the States as recommended by the Council, shall be recovered
          from the Centre and the balance fifty per cent. from the States in the ratio of
          their base year revenue.

        These amendments will be made effective from 01.02.2019.

9.6       GST Council in its 28th meeting held on 21.07.2018 in New Delhi, also
approved the new return formats and associated changes in law. These changes
have been carried out in the law vide the Central Goods and Services Tax
(Amendment) Act, 2018. The main features of the new return filing format are as
follows:

   i.     All taxpayers excluding small taxpayers and a few exceptions like ISD etc.
          shall file one monthly return.

  ii.      The return is simple with two main tables. One for reporting outward
          supplies and one for availing input tax credit based on invoices uploaded by
          the supplier.

 iii.     Invoices can be uploaded continuously by the supplier and can be
          continuously viewed and locked by the buyer for availing input tax credit.
          This process would ensure that very large part of the return is automatically
          filled based on the invoices uploaded by the buyer and the supplier. Simply
          put, the process would be "UPLOAD ­ LOCK ­ PAY" for most tax payers.


                                                                                    28 | 49
iv.     Taxpayers would have facility to create his profile based on nature of
        supplies made and received. The fields of information which a taxpayer
        would be shown and would be required to fill in the return would depend on
        his profile.

 v.     NIL return filers (no purchase and no sale) shall be given facility to file return
        by sending SMS.

vi.     There shall be quarterly filing of return for the small taxpayers having
        turnover below Rs. 5 Cr as an optional facility. Quarterly return shall be
        similar to main return with monthly payment facility but for two kinds of
        registered persons ­ small traders making only B2C supply or making B2B
        + B2C supply. For such taxpayers, simplified returns have been designed
        called Sahaj and Sugam. In these returns details of information required to
        be filled is lesser than that in the regular return.

vii.    The new return design provides facility for amendment of invoice and also
        other details filed in the return. Amendment shall be carried out by filing of
        a return called amendment return. Payment would be allowed to be made
        through the amendment return as it will help save interest liability for the
        taxpayers.

        These amendments will be made effective from 01.07.2019.

 9.7     The GST Council in its 31st meeting held on 22.12.2018 at New Delhi gave
         in principle approval to the following amendments in the GST Acts:

  (i)    Creation of a Centralised Appellate Authority for Advance Ruling (AAAR)
         to deal with cases of conflicting decisions by two or more State Appellate
         Advance Ruling Authorities on the same issue.


                                                                                    29 | 49
 (ii)   Amendment of section 50 of the CGST Act to provide that interest should
        be charged only on the net tax liability of the taxpayer, after taking into
        account the admissible input tax credit, i.e. interest would be leviable only
        on the amount payable through the electronic cash ledger.

The above recommendations of the Council will be made effective only after the
 necessary amendments in the GST Acts are carried out.

   10.THE DESIGN OF INDIAN GST:

10.1 Concurrent dual model of GST: India has adopted dual GST model because
of its unique federal nature. Under this model, tax is levied concurrently by the
Centre as well as the States on a common base, i.e. supply of goods or services or
both. GST to be levied by the Centre would be called Central GST (Central tax /
CGST) and that to be levied by the States would be called State GST (State Tax /
SGST). State GST (State Tax / SGST) would be called UTGST (Union territory
tax) in Union Territories without legislature. CGST & SGST / UTGST shall be
levied on all taxable intra-State supplies.

10.2 The IGST Model: Inter-State supply of goods or services shall be subjected
to integrated GST (Integrated tax / IGST). The IGST model is a unique contribution
of India in the field of VAT. The IGST Model envisages that Centre would levy
IGST (Integrated Goods and Service Tax) which would be CGST plus SGST on all
inter-State supply of goods or services or both. The inter-State supplier will pay
IGST on value addition after adjusting available credit of IGST, CGST, and SGST
on his purchases. The Exporting State will transfer to the Centre the credit of SGST
used in payment of IGST. The person based in the destination State will claim credit
of IGST while discharging his output tax liability in his own State. The Centre will
transfer to the importing State the credit of IGST used in payment of SGST. The



                                                                                30 | 49
relevant information will also be submitted to the Central Agency which will act as
a clearing house mechanism, verify the claims and inform the respective
governments to transfer the funds. The major advantages of IGST Model are:

  i.   Maintenance of uninterrupted ITC chain on inter-State transactions.

 ii.   No upfront payment of tax or substantial blockage of funds for the inter-State
       supplier or recipient.

iii.   No refund claim in exporting State, as ITC is used up while paying the tax.

iv.    Self-monitoring model.

 v.    Model takes `Business to Business' as well as `Business to Consumer'
       transactions into account.

10.3 Tax Rates: Owing to unique Indian socio-economic milieu, four rates namely
5%, 12%, 18% and 28% have been adopted. Besides, some goods and services are
exempt also. Rate for precious metals is an exception to `four-tax slab-rule' and the
same has been fixed at 3%. In addition, unworked diamonds, precious stones, etc.
attracts a rate of 0.25%. A cess over the peak rate of 28% on certain specified luxury
and demerit goods, like tobacco and tobacco products, pan masala, aerated water,
motor vehicles is imposed to compensate States for any revenue loss on account of
implementation of GST. The list of goods and services in case of which reverse
charge would be applicable has also been notified.

10.4 Compensation to States: The Goods and Services Tax (Compensation to
States) Act, 2017 provides for compensation to the States for the loss of revenue
arising on account of implementation of the goods and services tax. Compensation
will be provided to a State for a period of five years from the date on which the
State brings its SGST Act into force. For the purpose of calculating the
compensation amount in any financial year, year 2015-16 will be assumed to be the


                                                                                31 | 49
base year, for calculating the revenue to be protected. The growth rate of revenue
for a State during the five-year period is assumed be 14% per annum. The base year
tax revenue consists of the states' tax revenues from: (i) State Value Added Tax
(VAT), (ii) central sales tax, (iii) entry tax, octroi, local body tax, (iv) taxes on
luxuries, (v) taxes on advertisements, etc. However, any revenue among these taxes
arising related to supply of alcohol for human consumption, and five specified
petroleum products, will not be accounted as part of the base year revenue. A GST
Compensation Cess is levied on the supply of certain goods and services, as
recommended by the GST Council to finance the compensation cess.

10.5 E-Way Bill System: The introduction of e-way (electronic way) bill is a
monumental shift from the earlier "Departmental Policing Model" to a "Self-
Declaration Model". It envisages one e-way bill for movement of the goods
throughout the country, thereby ensuring a hassle free movement for transporters
throughout the country. The e-way bill system has been introduced nation-wide for
all inter-State movement of goods with effect from 1st April, 2018. As regards intra-
State supplies, option was given to States to choose any date on or before 3 rd June,
2018. All States have notified e-way bill rules for intra-State supplies last being NCT
of Delhi where it was introduced w.e.f. 16th June, 2018.

10.6 Anti-Profiteering Mechanism: Implementation of GST in many countries was
coupled with increase in inflation and the prices of the commodities. This happened
in spite of the availability of the tax credit. This was happening because the supplier
was not passing on the benefit to the consumer and thereby indulging in illegal
profiteering. Any reduction in rate of tax or the benefit of increased input tax credit
should have been passed on to the recipient by way of commensurate reduction in
prices.




                                                                                 32 | 49
10.6.1 National Anti-profiteering Authority (NAPA) has been constituted under
GST by the Central Government to examine the complaints of non-passing the
benefit of reduced tax incidence. The Authority shall cease to exist after the expiry
of two years from the date on which the Chairman enters upon his office unless the
Council recommends otherwise.

10.6.2 The Authority may determine whether any reduction in the rate of tax or the
benefit of input tax credit has been passed on to the recipient by way of
commensurate reduction in prices. It can order reduction in prices, imposition of
penalty, cancellation of registration and any other decision as may deem fit, after
inquiry into the case.

10.7 Concept of Supply: GST would be applicable on supply of goods or services
as against the present concept of tax on manufacture of goods or on sale of goods
or on provision of services. It includes all sorts of activities like manufacture, sale,
barter, exchange, transfer etc. It also includes supplies made without consideration
when such supplies are made in certain specified situations.

10.8 Threshold Exemption: A common threshold exemption would apply to both
CGST and SGST. Taxpayers with an annual turnover of Rs. 20 lakh (Rs. 10 lakh
for special category States (except J&K) as specified in article 279A of the
Constitution) would be exempt from GST. The GST Act has been amended to raise
threshold exemption limit in case of six more special category States. The
amendment shall be effective from a date to be notified in the future. The benefit
of threshold exemption is not available in inter-State supplies of goods.

10.9 Composition Scheme: An optional composition scheme (i.e. to pay tax at a
flat rate on turnover without credits) is available to small taxpayers (including to
manufacturers other than specified category of manufacturers and service


                                                                                   33 | 49
providers) having an annual turnover of up to Rs. 1 Cr (Rs. 75 lakh for special
category States (except J&K and Uttarakhand) enumerated in article 279A of the
Constitution). This limit has been raised to Rs. 1.5 Cr after necessary amendments
in the GST Acts. The amendment shall be effective from a date to be notified in the
future.

10.10 Zero rated Supplies: Export of goods and services are zero rated. Supplies to
SEZs developers and SEZ units are also zero-rated. The benefit of zero rating can
be taken either with payment of integrated tax, or without payment of integrated tax
under bond or Letter of Undertaking.

10.11 Cross-utilization of ITC: IGST credit can be used for payment of all taxes.
CGST credit can be used only for paying CGST or IGST. SGST credit can be used
only for paying SGST or IGST.

The credit would be permitted to be utilized in the following manner:

     i.   ITC of CGST allowed for payment of CGST & IGST in that order;

    ii.   ITC of SGST allowed for payment of SGST & IGST in that order;

   iii.   ITC of UTGST allowed for payment of UTGST & IGST in that order;

    iv.   ITC of IGST allowed for payment of IGST, CGST & SGST/UTGST in
          that order.

ITC of CGST cannot be used for payment of SGST/UTGST and vice versa.

10.12 Settlement of Government Accounts: Accounts would be settled
periodically between the Centre and the State to ensure that the credit of SGST used
for payment of IGST is transferred by the originating State to the Centre. Similarly,
the IGST used for payment of SGST would be transferred by Centre to the
destination State. Further the SGST portion of IGST collected on B2C supplies



                                                                                34 | 49
would also be transferred by Centre to the destination State. The transfer of funds
would be carried out on the basis of information contained in the returns filed by
the taxpayers.

10.13 Modes of Payment: Various modes of payment of tax available to the
taxpayer including internet banking, debit/ credit card and National Electronic Funds
Transfer (NEFT) / Real Time Gross Settlement (RTGS).

10.14 Tax Deduction at Source: Obligation on certain persons including
government departments, local authorities and government agencies, who are
recipients of supply, to deduct tax at the rate of 1% from the payment made or
credited to the supplier where total value of supply, under a contract, exceeds two
lakh and fifty thousand rupees. The provision for TDS has been operationalized wef
01st October 2018. Exemption from the provisions of TDS has been given to certain
authorities under the Ministry of Defence.

10.15 Refunds: Refund of tax to be sought by taxpayer or by any other person who
has borne the incidence of tax within two years from the relevant date. Refund of
unutilized ITC also available in zero rated supplies and inverted tax structure.

10. 16 Tax Collection at Source: Obligation on electronic commerce operators to
collect `tax at source', at such rate not exceeding two per cent of net value of taxable
supplies, out of payments to suppliers supplying goods or services through their
portals. The provision for TCS has not been operationalized wef 01st October 2018.

10.17 Self-assessment: Self-assessment of the taxes payable by the registered person
shall be the norm. Audit of registered persons shall be conducted on selective basis.
Limitation period for raising demand is three (3) years from the due date of filing of
annual return or from the date of erroneous refund for raising demand for short-
payment or non-payment of tax or erroneous refund and its adjudication in normal



                                                                                   35 | 49
cases. Limitation period for raising demand is five (5) years from the due date of
filing of annual return or from the date of erroneous refund for raising demand for
short-payment or non-payment of tax or erroneous refund and its adjudication in
case of fraud, suppression or willful mis-statement.

10.18 Recovery of Arrears: Arrears of tax to be recovered using various modes
including detaining and sale of goods, movable and immovable property of
defaulting taxable person.

10.19 Appellate Tribunal: Goods and Services Tax Appellate Tribunal would be
constituted by the Central Government for hearing appeals against the orders passed
by the Appellate Authority or the Revisional Authority. States would adopt the
provisions relating to Tribunal in respective SGST Act.

10.20 Advance Ruling Authority: Advance Ruling Authority would be constituted
by States in order to enable the taxpayer to seek a binding clarity on taxation matters
from the department. Centre would adopt such authority under CGST Act.

10.21 Transitional Provisions: Elaborate transitional provisions have been provided
for smooth transition of existing taxpayers to GST regime.

10.21 Subsuming of taxes, duties etc.: Among the taxes and duties levied and
collected by the Union, Central Excise duty, Duties of Excise (Medicinal and Toilet
Preparations), Additional Duties of Excise (Goods of Special Importance),
Additional Duties of Excise (Textiles and Textile Products), Additional Duties of
Customs (commonly known as CVD), Special Additional Duty of Customs (SAD),
Service Tax and cesses and surcharges insofar as they related to supply of goods or
services were subsumed. As far as taxes levied and collected by States are concerned,
State VAT, Central Sales Tax, Purchase Tax, Luxury Tax, Entry Tax, Entertainment
Tax (except those levied by the local bodies), Taxes on advertisements, Taxes on



                                                                                 36 | 49
lotteries, betting and gambling, cesses and surcharges insofar as they related to
supply of goods or services were subsumed.

   11. GST LEGISLATIONS:

11.1. Four Laws namely CGST Act, UTGST Act, IGST Act and GST (Compensation to
States) Act were passed by the Parliament and since been notified on 12th April,
2017. All the other States (except J&K) and Union territories with legislature have
passed their respective SGST Acts. The economic integration of India was
completed on 8th July, 2017 when the State of J&K also passed the SGST Act and
the Central Government also subsequently extended the CGST Act to J&K.

11.2. In its 28th meeting held in New Delhi on 21.07.2018, the GST Council
recommended certain amendments in the CGST Act, IGST Act, UTGST Act and
the GST (Compensation to States) Act. These amendments have been passed by
Parliament and have been enacted, after receiving the assent of the Hon'ble
President of India on 29.08.2018, as the Central Goods and Services Tax
(Amendment) Act, 2018, the Integrated Goods and Services Tax (Amendment) Act,
2018, the Union Territory Goods and Services Tax (Amendment) Act, 2018 and the
Goods and Services Tax (Compensation to States) Amendment Act, 2018,
respectively. In order to ensure that the above changes in the Centre and the State
GST laws are brought into force simultaneously, these amendments will be made
effective from 01.02.2019.

11.3. On 22nd June, 2017, the first notification was issued for GST and notified
certain sections under CGST. Since then, 154 notifications under CGST Act have
been issued notifying sections, notifying rules, amendment to rules and for waiver
of penalty, etc. 16, 32 and 1 notifications have also been issued under IGST Act,
UTGST Act and GST (Compensation to States) Act respectively. Further 77, 81,
77 and 9 rate related notifications each have been issued under the CGST Act, IGST

                                                                              37 | 49
Act, UTGST Act and GST (Compensation to States) Act respectively. Similar
notifications have been issued by all the States under the respective SGST Act.
Apart from the notifications, 85 circulars, 16 orders and 5 Removal of Difficulty
Orders have also been issued by CBIC on various subjects like proper officers, ease
of exports, and extension of last dates for filling up various forms, etc.

   12.       ROLE OF CBIC:

12.1 CBIC is playing an active role in the drafting of GST law and procedures,
particularly the CGST and IGST law, which will be exclusive domain of the Centre.
This apart, the CBIC has prepared itself for meeting the implementation challenges,
which are quite formidable. The number of taxpayers has gone up significantly. The
existing IT infrastructure of CBIC has been suitably scaled up to handle such large
volumes of data. Based on the legal provisions and procedure for GST, the content
of work-flow software such as ACES (Automated Central Excise & Service Tax)
would require re-engineering. The name of IT project of CBIC under GST is
`SAKSHAM' involving a total project value of Rs. 2,256 Cr.

12.2 Augmentation of human resources would be necessary to handle large
taxpayers' base in GST scattered across the length and breadth of the country.
Capacity building, particularly in the field of Accountancy and Information
Technology for the departmental officers has to be taken up in a big way. A massive
four-tier training programme has been conducted under the leadership of NACIN.
This training project is aimed at imparting training on GST law and procedures to
more than 60,000 officers of CBIC and Commercial Tax officers of State
Governments.

12.3 CBIC would be responsible for administration of the CGST and IGST law. In
addition, excise duty regime would continue to be administered by the CBIC for levy
and collection of central excise duty on five specified petroleum products as well

                                                                              38 | 49
as on tobacco products. CBIC would also continue to handle the work relating
to levy and collection of customs duties.

12.4 Director General of Anti-profiteering, CBIC has been mandated to conduct
detailed enquiry on anti-profiteering cases and should give his recommendation for
consideration of the National Anti-profiteering Authority.

12.5 CBIC has been instrumental in handholding the implementation of GST. It
had set up the Feedback and Action Room which monitored the GST implementation
challenges faced by the taxpayer and act as an active interface between the taxpayer
and the Government.

   13.      GOODS & SERVICES TAX NETWORK:

13.1 Goods and Services Tax Network (GSTN) has been set up by the Government
as a private company under erstwhile Section 25 of the Companies Act, 1956. GSTN
would provide three front end services to the taxpayers namely registration, payment
and return. Besides providing these services to the taxpayers, GSTN would be
developing back-end IT modules for 27 States who have opted for the same. Infosys
has been appointed as Managed Service Provider (MSP). GSTN has selected 73 IT,
ITeS and financial technology companies and 1 Commissioner of Commercial Taxes
(CCT, Karnataka), to be called GST Suvidha Providers (GSPs). GSPs would develop
applications to be used by taxpayers for interacting with the GSTN. The diagram
below shows the work distribution under GST.




                                                                              39 | 49
13.2 Central Government holds 24.5 percent stake in GSTN while the state
government holds 24.5 percent. The remaining 51 percent are held by non-
Government financial institutions, HDFC and HDFC Bank hold 20%, ICICI Bank
holds 10%, NSE Strategic Investment holds 10% and LIC Housing Finance holds
10%. The GST Council in its 27th meeting held on 04th May, 2018 has approved the
change in shareholding pattern of GSTN. Considering the nature of `state' function'
performed by GSTN, the GST Council felt that GSTN be converted into a fully
owned Government company. Accordingly, the Council approved acquisition of
entire 51 per cent of equity held by non-Governmental institutions in GSTN
amounting to Rs. 5.1 Cr, equally by the Centre and the State Governments.

13.3 The design of GST systems is based on role based access. The taxpayer can
access his own data through identified applications like registration, return, view
ledger etc. The tax official having jurisdiction, as per GST law, can access the data.


                                                                                40 | 49
Data can be accessed by audit authorities as per law. No other entity can have any
access to data available with GSTN.

   14.       GST: A GAME CHANGER FOR INDIAN ECONOMY:

14.1 GST will have a multiplier effect on the economy with benefits accruing to
various sectors as discussed below.

14.2 Benefits to the exporters: The subsuming of major Central and State taxes in
GST, complete and comprehensive setoff of input goods and services and phasing
out of Central Sales Tax (CST) would reduce the cost of locally manufactured goods
and services. This will increase the competitiveness of Indian goods and services in
the international market and give boost to Indian exports. The uniformity in tax rates
and procedures across the country will also go a long way in reducing the compliance
cost.

14.3 Benefits to small traders and entrepreneurs: GST has increased the threshold
for GST registration for small businesses. Those units having aggregate annual
turnover more than Rs 20 lakh (10 lakh in case of North Eastern States) have be
registered under GST. Unlike multiple registrations under different tax regimes
earlier, a single registration is needed under GST in one State. An additional benefit
under Composition scheme has also been provided for businesses with aggregate
annual turnover upto Rs 1 Cr. With the creation of a seamless national market across
the country, small enterprises will have an opportunity to expand their national
footprint with minimal investment.

14.4 Benefits to agriculture and Industry: GST will give more relief to industry,
trade and agriculture through a more comprehensive and wider coverage of input tax
set-off and service tax set-off, subsuming of several Central and State taxes in the
GST and phasing out of CST. The transparent and complete chain of set-offs which


                                                                                41 | 49
will result in widening of tax base and better tax compliance may also lead to
lowering of tax burden on an average dealer in industry, trade and agriculture.

14.5 Benefits for common consumers: With the introduction of GST, the cascading
effects of CENVAT, State VAT and service tax will be more comprehensively
removed with a continuous chain of set-off from the producer's point to the retailer's
point than what was possible under the prevailing CENVAT and VAT regime.
Certain major Central and State taxes will also be subsumed in GST and CST will
be phased out. Other things remaining the same, the burden of tax on goods would,
in general, fall under GST and that would benefit the consumers.






14.6 Promote "Make in India": GST will help to create a unified common national
market for India, giving a boost to foreign investment and "Make in India"
campaign. It will prevent cascading of taxes and make products cheaper, thus
boosting aggregate demand. It will result in harmonization of laws, procedures and
rates of tax. It will boost export and manufacturing activity, generate more
employment and thus increase GDP with gainful employment leading to substantive
economic growth. Ultimately it will help in poverty eradication by generating more
employment and more financial resources. More efficient neutralization of taxes
especially for exports thereby making our products more competitive in the
international market and give boost to Indian Exports. It will also improve the overall
investment climate in the country which will naturally benefit the development in
the states. Uniform CGST & SGST and IGST rates will reduce the incentive for
evasion by eliminating rate arbitrage between neighboring States and that between
intra and inter-State supplies. Average tax burden on companies is likely to come
down which is expected to reduce prices and lower prices mean more consumption,
which in turn means more production thereby helping in the growth of the industries.
This will create India as a "Manufacturing hub".


                                                                                 42 | 49
14.7 Ease of Doing Business: Simpler tax regime with fewer exemptions along
with reduction in multiplicity of taxes that are at present governing our indirect tax
system will lead to simplification and uniformity. Reduction in compliance costs as
multiple record-keeping for a variety of taxes will not be needed, therefore, lesser
investment of resources and manpower in maintaining records. It will result in
simplified and automated procedures for various processes such as registration,
returns, refunds, tax payments. All interaction shall be through the common GSTN
portal, therefore, less public interface between the taxpayer and the tax
administration. It will improve environment of compliance as all returns to be filed
online, input credits to be verified online, encouraging more paper trail of
transactions. Common procedures for registration of taxpayers, refund of taxes,
uniform formats of tax return, common tax base, common system of classification
of goods and services will lend greater certainty to taxation system.

   15.    EXPERIENCE OF REGISTRATION, RETURN FILING &
      REVNUE:

15.1   Registration & Returns Snapshot:

 S.                                                             As on 1st January,
                               Details
 No.                                                                  2019



    1. No. of transited (migrated) taxpayers                         66,24,439


       Total No. of new applications received for                    69,67,275
    2. registration

                                                                     59,45,816
    3. No. of applications approved



                                                                                 43 | 49
S.                                                    As on 1st January,
                           Details
No.                                                         2019

                                                          9,54,735
 4. No. of applications rejected

                                                         1,25,70,255
 5. Total No. of taxpayers; new + migrated (1 + 3)

    No. of taxpayers who have opted for composition
 6. scheme                                                17,74,379


 7. No. of 3 (B) returns filed for July, 2017             65,26,282

 8. No. of 3(B) returns filed for August, 2017            70,81,816

 9. No. of 3(B) returns filed for September, 2017         74,07,507

 10. No. of 3(B) returns filed for October, 2017          71,44,420

 11. No. of 3(B) returns filed for November, 2017         71,78,519


 12. No. of 3(B) returns filed for December, 2017         72,36,629


 13. No. of 3(B) returns filed for January, 2018          73,21,061

 14. No. of 3(B) returns filed for February, 2018         74,11,534

 15. No. of 3(B) returns filed for March, 2018            74,76,932

 16. No. of 3(B) returns filed for April, 2018            74,56,043




                                                                      44 | 49
S.                                                     As on 1st January,
                           Details
No.                                                          2019


 17. No. of 3(B) returns filed for May, 2018               75,49,005

 18. No. of 3(B) returns filed for June, 2018              75,93,689

 19. No. of 3(B) returns filed for July, 2018              76,08,860

 20. No. of 3(B) returns filed for August, 2018            76,14,309


 21. No. of 3(B) returns filed for September, 2018         75,63,914


 22. No. of 3(B) returns filed for October, 2018           74,61,667

 23. No. of 3(B) returns filed for November, 2018          70,16,199

 24. No. of GSTR 1 returns filed for July, 2017            59,57,094


 25. No. of GSTR 1 returns filed for August, 2017          24,74,287


 26. No. of GSTR 1 returns filed for September, 2017       66,62,414

 27. No. of GSTR 1 returns filed for October, 2017         25,43,415

 28. No. of GSTR 1 returns filed for November, 2017        25,73,512

 29. No. of GSTR 1 returns filed for December, 2017        67,00,075

 30. No. of GSTR 1 returns filed for January, 2018         25,58,477

 31. No. of GSTR 1 returns filed for February, 2018        25,54,257




                                                                       45 | 49
S.                                                         As on 1st January,
                          Details
No.                                                              2019


 32. No. of GSTR 1 returns filed for March, 2018               67,52,855


 33. No. of GSTR 1 returns filed for April, 2018               26,38,841

 34. No. of GSTR 1 returns filed for May, 2018                 26,50,296

 35. No. of GSTR 1 returns filed for June, 2018                67,34,092

 36. No. of GSTR 1 returns filed for July, 2018                26,17,221

 37. No. of GSTR 1 returns filed for August, 2018              25,63,839

 38. No. of GSTR 1 returns filed for September, 2018           64,44,883

 39. No. of GSTR 1 returns filed for October, 2018             23,28,532

 40. No. of GSTR 1 returns filed for November, 2018            20,12,199

 41. No. of GSTR 2 returns filed for July, 2017                25,72,552

     No. of GSTR 4 returns filed for quarter July-
 42. September, 2017                                            9,69,966

     No. of GSTR 4 returns filed for quarter October-
 43. December, 2017                                            14,49,970

     No. of GSTR 4 returns filed for quarter January-
 44. March, 2018                                               14,85,075


 45. No. of GSTR 4 returns filed for quarter April-June,       14,26,080



                                                                           46 | 49
 S.                                                      As on 1st January,
                            Details
 No.                                                           2019

       2018

       No. of GSTR 4 returns filed for quarter July-
   46. September, 2018                                        13,24,216



15.2   Revenue Collection Snapshot:
          S. No. Revenue Collected in the          Amount
                         Month of           (in Rs. Thousand crore)
              1.          July, 17                  21,572
              2.        August, 17                  95,633
              3.       September, 17                94,064
              4.        October, 17                 93,333
              5.       November, 17                 83,780
              6.       December, 17                 84,314
              7.        January, 18                 89,825
              8.        February, 18                85,962
              9.         March, 18                  92,167
              10.        April, 18                 1,03,459
              11.         May, 18                   94,016
              12.         June, 18                  95,610
              13.         July, 18                  96,483
              14.       August, 18                  93,960



                                                                          47 | 49
           S. No. Revenue Collected in the                Amount
                            Month of             (in Rs. Thousand crore)
              15.         September, 18                    94,442
              16.          October, 18                    1,00,710
              17.         November, 18                     97,637
              18.         December, 18                     94,725
              19.             Total                      16,11,691


   16. CHALLENGES & FUTURE AHEAD:

16.1 Any new change is accompanied by difficulties and problems at the outset. A
change as comprehensive as GST is bound to pose certain challenges not only for
the government but also for business community, tax administration and even
common citizens of the country. Some of these challenges relate to the unfamiliarity
with the new regime and IT systems, legal challenges, return filing and
reconciliations, passing on transition credit. Lack of robust IT infrastructure and
system delays makes compliance difficult for the taxpayers. Many of the processes
in the GST are new for small and medium enterprises in particular, who were not
used to regular and online filing of returns and other formalities.

16.2 Based on the feedback received from businesses, consumers and taxpayers
from across the country, attempt has been made to incorporate suggestions and
reduce problems through short-term as well as long-term solutions. After rectifying
system glitches, E-way bill for inter-State movement of goods has been successfully
implemented from 1st April 2018. As regards intra-State supplies, option was given
to States to choose any date on or before 3rd June, 2018. All States have notified e-




                                                                               48 | 49
way bill rules for intra-State supplies last being NCT of Delhi where it was
introduced w.e.f. 16.06.2018.

16.3 NAPA has initiated investigation into various complaints of anti-profiteering
and has passed orders in some cases to protect consumer interest.

16.4 To expedite sanction of refund, electronic filing of refunds, along with all
supporting documents/invoices, has been enabled on the common portal.
Clarificatory Circulars and notifications have been issued to guide field formations
of CBIC and States in this regard. The government has put in place an IT grievance
redressal mechanism to address the difficulties faced by taxpayers owing to technical
glitches on the GST portal.

16.5 The introduction of GST is truly a game changer for Indian economy as it has
replaced multi-layered, complex indirect tax structure with a simple, transparent and
technology­driven tax regime. It will integrate India into a single, common market
by breaking barriers to inter-State trade and commerce. By eliminating cascading of
taxes and reducing transaction costs, it will enhance ease of doing business in the
country and provide an impetus to "Make in India" campaign. GST will result in
"ONE NATION, ONE TAX, ONE MARKET".

                                       *****
                Note: This write-up is for education purposes only




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