Pradeep Jain - Chartered Accountant

LEVY OF CGST UNDER REVISED CGST BILL, 2017

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LEVY OF CGST UNDER REVISED CGST BILL, 2017:-

As we all are aware that the final CGST Bill, 2017 has been passed in the Parliament and it is very certain that GST will be implemented by July, 2017. There are certain amendments in the CGST Bill, 2017 as compared to Revised Model GST Law released in June, 2016. This update seeks to discuss the changes made and the new provisions introduced in the CGST Bill, 2017.

First and foremost, the maximum rate of CGST has been enhanced. As per the GST law released in November, 2016, the maximum rate of CGST was specified as 14% but the CGST Bill, 2017 specifies the maximum rate of CGST as 20%. The reason for increase in maximum cap for CGST is the flexibility for changing the rate of GST by the government as it is not possible to amend constitution for change in GST rate. Moreover, it is also specifically stated in the CGST Bill, 2017 that no CGST will be leviable on the supply of alcoholic liquor for human consumption. Furthermore, the central tax on the supply of petroleum, crude, high speed diesel, motor sprit, natural gas and aviation turbine fuel shall be levied with effect from such date as may be notified by the government on the recommendations of the GST Council.

It is pertinent to note that the provision as regards payment of CGST on reverse charge basis on certain categories of goods or services notified by the government on recommendation of the Council was proposed in the earlier GST law released in November, 2016 also but a new provision that has far reaching impact has been introduced in the CGST Bill, 2017. It is provided that the central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. In simple words, in case of supply of taxable goods or services by unregistered supplier to registered person, the CGST will be paid by the registered receiver of such goods or services under reverse charge mechanism.

This provision will create havoc as it is not restricted to certain notified goods or services and has been made applicable to supply of taxable goods or services by unregistered supplier to registered receiver thereby meaning that all the purchases by the registered receiver will suffer CGST. This provision seeks to levy CGST on the goods or services supplied by unregistered supplier who is not registered due to his turnover below the threshold limit as reverse charge is made applicable only for taxable supply of goods or services. Consequently, the unregistered suppliers making non-taxable or exempted supplies will not be hit by the provision. In nutshell, the registered assessee will have to procure goods or services on which CGST has been paid and if the purchases have been made from unregistered suppliers, CGST is required to be paid under reverse charge mechanism.

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LEVY OF CGST UNDER REVISED CGST BILL, 2017

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