Changes in GST Bills introduced in Lok Sabha

With the introduction of GST Bills in Parliament on 27th March, 2017, it seems that India is not far away from its GST roll out from 01st July, 2017.

The GST Bills that have been put up in Parliament have some changes as compared to draft GST laws released in November 2016. The key changes are as follows:

Applicability of CGST and IGST Laws in the State of Jammu & Kashmir

Earlier the GST Law was proposed to be applicable to J&K as well. However, in the Bill, the applicability of GST Law is extended to whole of India except the state of J&K.

Transaction between related persons made in the course of business without any consideration treated as supply

Exception to gifts not exceeding Rs. 50,000 in value given by an employer to its employee in a financial year

Activities neither to be treated as supply of goods nor supply of services – addition in Schedule III: 

  • Sale of land and sale of building ,except an under-construction building
  • Actionable claims , other than lottery, betting and gambling

Upper cap for rate fixed at 20% under CGST and 40% under IGST law.

New provision of payment of tax under Reverse Charge by the registered person introduced:

  • For taxable supply of goods and/or services from an unregistered supplier to a registered person;
  • Provision in line with the levy of purchase tax under current laws in some states.

Composition rates capped with inclusion of restaurant sector under composition scheme:

  • 1% in case of manufacturer;
  • 2.5% in case of restaurant sector;
  • 0.5% in case of supplier of goods.
  • Requirement to seek permission from proper officer for composition scheme has been dispensed with.

Change in the provision for determining the liability to pay tax in case of Services (Time of Supply of Services):

Earlier, the time of supply of services was the earlier of date of issue of Invoice, or the last date on which the invoice should have been issued or date of receipt of payment by the supplier. Now in the bill, as introduced in the parliament, the provisions of service tax for determining liability to pay service tax has been incorporated in the GST bill. Thus the time of supply of services shall be earlier of the following dates:

  • If the invoice is issued within the period prescribed, the date of issue of invoices or the date of receipt of payment, whichever is earlier;
  • If the invoice is not issued within the period prescribed, the date of provision of services, or the date of receipt of payment, whichever is earlier;
  • The date on which the recipient shows the receipt of services in his books of accounts, in a case where aforesaid clause (a) or (b) does not apply.

Reversal of ITC availed, in case of non-payment of consideration to supplier

  • Extended to supply of goods
  • Period prescribed for payment of value extended to 180 days
  • Provision introduced to re-avail the credit after payment has been made

Credit of Rent-a-cab, life insurance, and health insurance allowed, if used for making an outward taxable supply of same category

Earlier the credit of rent-a-cab, life insurance, and health insurance were fully denied except where the government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force.

The aforesaid provision of denial of credit would have multifold consequences. For example, a life insurance company, in case re-insurance of life insurance, will not be eligible to take credit of GST paid on re-insurance amount.

With a view to avoid the genuine hardships, the credit of aforesaid services will be allowed if used for making an outward taxable supply of same category or as a part of taxable composite or mixed supply

Supplies to SEZ brought on par with physical exports

The earlier GST law versions had proposed that supplies to SEZ be taxed,  and SEZ to then seek a refund of input tax.

This would had created significant working capital burden on the exports.

After much deliberation in the GST Council, supplies to SEZ’s have been given the same status as physical exports.

Written by CA Anusha Sharma