Taxability in GST Law: Charging Provisions
Levy of GST
CGST and SGST will be levied and collected on all ‘intra-state supplies’ of goods and/ or services at the specified rate. CGST/ SGST will be paid by the ‘taxable person’. For certain notified categories of goods/ services, per the recommendation of the GST Council, the tax will be payable on reverse charge basis. The provisions for determination of whether a supply is inter-State or intra-State are in Sections 3 and 3A of the IGST Act, 2016. Supply of goods/services shall be inter-State if location of supplier and place of supply are in different States. Otherwise the supply will be intra-State.
Taxable person has been defined to mean a person carrying on any business at any place in India/ State of India who is registered or required to be registered for CGST/ SGST, subject to the following exclusions:
- Person with an aggregate turnover equal to or less than INR 10,00,000 in a financial year (INR 5,00,000 for NE States including Sikkim).
- Government or local authorities to be considered a ‘taxable person’ qua activities or transactions carried out by them as public authorities subject to specified exceptions under Schedule IV.
- Services provided by an employee to the employer in the course of/ in relation to employment, or by any other ties creating a relationship of employer and employee as regards working conditions, remunerations and employer’s liability.
- Persons engaged in the business of exclusively supplying goods and/or services that are not liable to CGST/ SGST.
- Persons receiving services of value not exceeding an annual threshold (to be specified) for personal use, other than for use in the course of furtherance of business.
Imports of both goods and services have been deemed as inter-State supplies leviable to IGST. Export is zero-rated.
Separate provisions have been made in Sections 5 and 6 for determination of place of supply of goods and services respectively.
Specific provisions have been introduced for bill-to-ship-to and intransit supplies in POS.
Certain transactions involving both supply of goods and services such as works contract, restaurant service, etc. have been deemed as supply of service under Section 3 read with Schedule II of the Model Law.
Various declared services of the current service tax law have also been deemed as supply of service. Transfer of Right to Use Goods has also been deemed to be a service.
Powers to grant exemptions, absolutely or conditional, by notification or by special order, have been given to the Central and State Governments, on the recommendation of the GST Council.
There are provisions for reverse charge payments in respect of both goods and services.
Time of Supply
In case of supply of services, the provisions relating to time of supply are broadly aligned with the Point of Taxation Rules, 2011 of the service tax law.
The concept of time of supply has been introduced for goods which are also based on similar principles as in respect of supply of services. The time of supply of goods is also dependent on removal or non-removal of goods.
Extracts From Model GST Law
- Levy and Collection of Central/State Goods and Services Tax
(1) There shall be levied a tax called the Central/State Goods and Services Tax (CGST/SGST) on all intra-State supplies of goods and/or services at the rate specified in the Schedule . . . to this Act and collected in such manner as may be prescribed.
(2) The CGST/SGST shall be paid by every taxable person in accordance with the provisions of this Act.
(3) Notwithstanding anything contained in sub-section (2), the Central or a State Government may, on the recommendation of the Council, by notification, specify categories of supply of goods and/or services the tax on which is payable on reverse charge basis and the tax thereon shall be paid by the person receiving such goods and/or services and all the provisions of this Act shall apply to such person as if he is the person liable for paying the tax in relation to such goods and/or services.
- Composition Levy
(1) Notwithstanding anything to the contrary contained in the Act but subject to subsection (3) of section 7, on the recommendation of the Council, the proper officer of the Central or a State Government may, subject to such conditions and restrictions as may be prescribed, permit a registered taxable person, whose aggregate turnover in a financial year does not exceed [fifty lakh of rupees], to pay, in lieu of the tax payable by him, an amount calculated at such rate as may be prescribed, but not less than one percent of the turnover during the year:
Provided that no such permission shall be granted to a taxable person who effects any inter-State supplies of goods and/or services.
Provided further that no such permission shall be granted to a taxable person unless all the registered taxable persons, having the same PAN as held by the said taxable person, also opt to pay tax under the provisions of this sub-section.
(2) A taxable person to whom the provisions of sub-section (1) apply shall not collect any tax from the recipient on supplies made by him nor shall he be entitled to any credit of input tax.
(3) If the proper officer has reasons to believe that a taxable person was not eligible to pay tax under sub-section (1), such person shall, in addition to any tax that may be payable by him under other provisions of this Act, be liable to a penalty equivalent to the amount of tax payable as aforesaid:
Provided that no penalty shall be imposed without giving a notice to show cause and without affording a reasonable opportunity of being heard to the person proceeded against.
- Taxable person
(1) Taxable Person means a person who carries on any business at any place in India /State of ____ and who is registered or required to be registered under Schedule III of this Act:
Provided that an agriculturist shall not be considered as a taxable person.
Provided further that a person who is required to be registered under paragraph 1 of Schedule III of this Act shall not be considered as a taxable person until his aggregate turnover in a financial year exceeds [Rs ten lakh]
Provided further that a person who is required to be registered under paragraph 1 of Schedule III of this Act shall not be considered as a taxable person until his aggregate turnover in a financial year exceeds [Rs five lakh]
[This threshold of 5 lacs will apply only if a taxable person conducts his business in any of the NE States including Sikkim.]
(2) The Central Government, a State Government or any local authority shall be regarded as a taxable person in respect of activities or transactions in which they are engaged as public authorities other than the activities or transactions as specified in Schedule IV to this Act.
(3) The following persons shall not be considered as taxable persons for the purposes of this Act –
(a) any person who provides services as an employee to his employer in the course of, or in relation to his employment, or by any other legal ties creating the relationship of employer and employee as regards working conditions, remunerations and employer’s liability;
(b) any person engaged in the business of exclusively supplying goods and/or services that are not liable to tax under this Act;
(c) any person, liable to pay tax under sub-section (3) of section 7, receiving services of value not exceeding ______ rupees in a year for personal use, other than for use in the course or furtherance of his business.
- Power to grant exemption from tax
(1) If the Central or a State Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendation of the Council, by notification, exempt generally either absolutely or subject to such conditions as may be specified in the notification, goods and/or services of any specified description from the whole or any part of the tax leviable thereon.
Explanation.- Where an exemption under sub-section (1) in respect of any goods and/or services from the whole of the tax leviable thereon has been granted absolutely, the taxable person providing such goods and/or services shall not pay the tax on such goods and/or services.
(2) If the Central or a State Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendation of the Council, by special order in each case, exempt from payment of tax, under circumstances of an exceptional nature to be stated in such order, any goods and/or services on which tax is leviable.
(3) The Central or a State Government may, if it considers necessary or expedient so to do for the purpose of clarifying the scope or applicability of any notification issued under sub-section (1) or order issued under sub-section (2), insert an explanation in such notification or order, as the case may be, by notification at any time within one year of issue of the notification under sub-section (1) or order under sub-section (2), and every such explanation shall have effect as if it had always been the part of the first such notification or order, as the case may be.
(4) Every notification issued under sub-section (1) or sub-section (3)and every order issued under sub-section (2) shall (a) unless otherwise provided, come into force on the date of its issue by the Central or a State Government for publication in the Official Gazette; and (b) be made available on the official website of the department of the Central or a State Government.
- Remission of tax on supplies found deficient in quantity
(1) The Central or a State Government may, by rules made under this sub-section, provide for remission of tax on such supplies which are found to be deficient in quantity due to any natural causes.
(2) Any rules made under sub-section (1) may, having regard to the nature of the supply, fix the limit or limits of percentage beyond which no such remission shall be allowed.
So let us know what is your view on Upcoming GST Law.
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- Whether this law will overcome the difficulties of present indirect tax structure??
- Whether expectation of assessee and Government will fulfill.
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[Disclaimer: The view expressed in above article are of Editorial Team of TaxIndiaUpdates and should not be treated as legal advice in any manner]