GST - One Tax for Whole Nation covering International Scenario, Point of Taxation, Place of Supply, ITC and Taxability in GST By Samarpit Shukla



About the title “One”


1.1 GST : One tax for whole nation

It is  GST regime which covers, all ‘supply’ such as sale, transfer, barter, lease, import of services under ONE tax that is GST,while taxable events such as ‘manufacture’, ‘sale’, ‘provision of services’ etc. will lose their relevance. Further, certain supplies, even if made without consideration, such as permanent transfer of business assets on which credit is availed, transaction with related entities, transactions with agent etc will attract GST ,goods and/ or services made for a consideration will attract CGST (to be levied byCentre) and SGST (to be levied by State).
 
GST is different from the current tax structure in many ways. Currently, taxes treat goods and services differently. As mentioned above, ‘goods’ attract Excise at manufacturing level and VAT at the time of sale. In contrast, services attract only one levy i.e. Services tax on provision of taxable services.as GST will be applicable on ‘supply’
 
GST may resolve, not all, but surely, most of the current issues such as the classification, valuation, double taxation disputes etc. On a positive note, most of the credit which is not available will be available in GST regime such as the service provider will be eligible to avail credit of VAT, Luxury tax, Entertainment Tax etc. The compliances are also expected
to reduce drastically.
 
1.2 There would be 33 GST laws in India
 
In GST regime, there will be one CGST law and 31 SGST law for each of the States including two Union Territories and one IGST law governing inter-State supplies of goods and services.
 
1.3 GST - International Scenario
 
Internationally, GST was first introduced in France and now more than 150 countries haveintroduced GST. Most of the countries, depending on their own socio-economic formation,have introduced National level GST or Dual GST. This distinction, in GST regime, would loose its importance as both goods and services would be treated as par for taxing purposes. A transaction in goods and services for a consideration would attract CGST and SGST. Also, the State Government now gets the power to tax services and Central Government gets the power to levy tax at the distribution and retail level.
 
1.4 GST : Point of Taxation
 
The liability to pay CGST / SGST will arise at the time of supply as determined for goods and services. In this regard, separate provisions prescribe what will time of supply for goods and services. The provisions contemplate payment of GST on supply of goods or services at the earliest of date of issuance of invoice or prescribed last day by which invoice is required to be issued or date of receipt of payment.
 
Given that there could be multiple parameters in determining ‘time’ of supply, maintaining reconciliation between revenue as per financials and as per GST could be a major challenge to meet for businesses.
 
1.5 Determining Place of Supply could be the very important Element.
 
At present inter-State supply of goods attract Central Sales Tax. Now, its provides that an inter-State supply of goods and/ or services will attract IGST ((i.e. CGST plus SGST). Thus, it would be crucial to determine whether a transaction is a ‘intra-State’ or ‘Inter- State’ as taxes will be applicable accordingly. In this regard, the draft GST law provides separate provisions which will help an assessedetermine the place of supply for goods and services.
 
Typically for ‘goods’ the place of supply would be location where the good are delivered. Whereas for ‘services’ the place of supply would be location of recipient. However, there are multiple scenarios such as supply of services in relation to immovable property, services to and by SEZ etc wherein this generic principle will not be applicable and specific provisions will determine the place ofsupply. Thus, the business will have to scroll through all the place of supply provisions before determining the place of supply.
 
1.6 Taxability in GST

GST would be payable on the ‘transaction value’. Transaction value is the price actually paid or payable for the said supply of goods and/or services between un-related parties.

The transaction value is also said to include all expenses in relation to sale such as packing,commission etc. Even subsidies linked to supply, excluding Government subsidies will beincludable. However, discounts/ incentives given before or at the time of supply will bepermissible as deduction from transaction value. As regards discounts given after supplyis made, the same will be permissible as deduction subject to fulfillment of prescribedconditions.
The revised law is silent on Valuation Rules which were actually part of earlier June 2016 version of GST Law.
 
1.7 Input tax credit in GST

Current CENVAT Credit regime disallows CENVAT Credit on various services such as motor vehicle related services, catering services, employee insurance, constructionof civil structure etc. Similarly, State VAT laws restrict input tax credit in respect of construction, motor vehicle etc. Current, this denial of credits leads to un-necessary cost burden on assesse.

It was expected that in GST regime, seamless credit will be allowed to business houses without any denial or any restrictions except say goods / services which are availed for personal use than official use (something similar to Unite Kingdom VAT law).

However, surprisingly, inter-alia, aforesaid credit would continue to be not available (in respect of both goods or services). Further, credit is proposed to be denied on goods and/or services used for personal consumption. Also, input tax credit shall not beavailable on goods lost, stolen, destroyed, written off or disposed of by way of giftor free samples. This continuation of denial will lead to substantial tax cascading (as rate of GST will be higher that the current rate of service tax!). Also, another round of litigation as interpretation issues will crop up while determining eligibility or otherwise of  GST paid on personal consumptions such as business lunch with clients.
 
Author
Samarpit Shukla
Email: 1samarpitshukla@gmail.com
 

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