Daily Dose of GST update on FAQ in seminar with Industries

GST Update on Industry wants to know-Part-I

Daily Dose of GST update on FAQ in seminar with Industries:-

These FAQs are a step forward in the series of updates on GST prepared by us on this page. These have been prepared on the basis of questions asked from us in the seminars conducted by us with various industries and feedback received by us. Various queries and questions have been raised by the industries which may or may not be thoroughly answered in the model GST law and the rules. Presenting the 1st part of the series:

Question 1: it was asked constantly that whether dual system of taxation is a necessity of the new regime and is there any way to have a single GST system throughout the country?

Answer: GST is an imported concept and it is a well known fact that India is a federal system. In such a scenario, it seems a distant probability to have a single taxation all over the country. Dual taxation is a necessity which can’t be avoided. Moreover the constitutional amendments have been carried out incorporating dual taxation and to undo it, another constitutional amendment will have to be introduced which would only take the whole process back to square one.

Question 2: Isn’t the dual jurisdiction concept only a repetition of the current system and isn’t it against the motive of GST?

Answer: yet again the current system of taxation is the major reason of dual jurisdiction. Currently the excise and service tax are under the control of the centre and the VAT is being controlled by the state government. Even now there is conflict evident on the distribution of assessees between state and centre. Even the trade associations have represented against the dual control. In the first meeting of the GST council also, it was decided that the traders below the limit of Rs. 1.5 crore will be controlled by state authorities only whereas the service tax assessees will be managed by Centre only as they are already doing it. But the conflicts arose between the centre and state over the same in the next GST council meeting. Even the associations of central Government employees and state government employees respectively have represented against the same. Hence the dual control is indispensable in current situation and so is provided in GST law also.

Question 3: What will be the rate of tax under GST?

Answer: It has not been decided yet and GST council will take a decision on the same. In the third GST council meeting, after a lot of conflict and discussion, indication were that there will not be a single GST rate but there will be multiple GST rates. The slab would comprise of 0, 6, 12, 18 and 26% as rates and 18% would be the merit rate wherein most of the items will fall. Probably the agricultural and food items will be kept exempted and majority of the goods will fall under the rate slab of 18%. However, consensus cannot be reached between state and centre and they will decide about the same in next meeting. However, multiple tax rates goes against the very principle of GST of "ONE TAX, ONE NATION."

Question 4: Will import at concessional rate of duty rules and procedure continue under the new regime?

Answer: There is no specific mention of these rules under the new regime. As the procedure is covered under the custom laws, it may remain intact but predicting anything on the new procedure and its applicability may prove to be a far-fetched imagination at this time.

Question 5: Will there be any change in the tax structure on imports of goods?

Answer: The custom duties will be applicable as it is because the customs will not be covered by the GST. Although with introduction of IGST, the excise duties and cess may get subsume in it. In place of CVD and SAD, the IGST will be applicable. There may also be a new levy in form of cess by which the centre intends to compensate the states. Hence, all existing cess like educaiton cess and Secondary and Higher education cess will go away. But a new cess will come in its place.

Question 6: What will be the treatment of difference of rates of tax on input goods and finished goods?

Answer: As of now under Central Excise and service tax, no mechanism of refund or adjustment of excess cenvat has been prescribed in cases where the rate of duty on finished goods is less than the rate of duty on inputs. But this has been prescribed in GST which is welcome step for the trade and industry. Now the refund will be granted when the rate of tax on finished goods is less than rate of tax on inputs. The refund of CGST and SGST will be granted by respective authorities.

Question 7: What will happen of the cenvat availed on the common inputs and services under the new regime and used in taxable and exempted goods.

Answer: The regime disallows the cenvat of the goods and services used in exclusively exempted goods and services. Although there is yet no prescription of the treatment of common input goods and services. It is written in draft GST law that mechanism will be prescribed for the same. It is highly probable that such mechanism will be provided in the final law.

Question 8: Will the export of goods under bond and LUT will continue under the GST?

Answer: Yes, the export under bond and LUT will continue under the new regime also. Even the refund of unutilised credit will be allowed under GST law.

Question 9: Will the rates of duty drawback be re-declared under GST?

Answer: Although there is no such statement in the model law, but it is highly probable and in a way necessary too because currently the rates comprise only excise and service tax portion but does not comprise any VAT component. To attain relevance in the changing law, the rates must be revised to keep them up to date.

Question 10: what are the new provisions regarding payment of GST on receipt of advance and its taxation?

Answer: Two most asked questions on advance are that will the asseessee have to raise the invoice on receipt of advance and whether cenvat of the tax paid on such advance will be admissible to the recipient of invoice. It is clear that tax has to be paid on the receipt of the advance but the rest two questions are yet to be answered. However, as per our opinion, the invoice can be raised when goods are supplied. For advance, no goods are supplied, hence the invoice cannot be raised. Secondly, the credit is admissible when the goods are received. But credit of GST paid on advance payment cannot be taken by recipient as he has not received the goods. Hence, there will be tax paid on advance but the credit of the same will be allowed when the goods are received by buyer.

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GST Update on Industry wants to know-Part-I

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