Goods and Services Tax – Go live on July 1, 2017

By Ranjeet Mahtani & Sweta Rajan

The 16th and 17th meetings of the GST Council took place on June 11 and 18 respectively. During these meetings, various decisions were taken, the key aspects of which are summarised below. Most importantly, it was unanimously decided that the GST regime will be introduced with effect from July 1, 2017.

Key decisions taken by the GST Council over the last ten days:

• Composition scheme: The threshold of annual turnover for availing the composition scheme has been fixed at Rs 75 lakhs for traders, manufacturers and restaurant service providers in all states except in the case of nine special category states (north-eastern states) where the threshold is fixed at Rs 50 lakhs. The turnover limit for the composition levy for Jammu & Kashmir is yet to be decided. The composition scheme will not be available to manufacturers of ice cream, pan masala and tobacco and tobacco manufactures substitutes across the country.
• Rules approved: The GST Council has approved the rules pertaining to Accounts and Records, Advance Ruling, Appeals and Revision and Assessment and Audit.

• Rules pertaining to E-way bills are yet to be finalised. It is expected that the present way bill system followed in some states will continue to the E-way bill rules are finalised and approved. Clarity in this regard is yet awaited.

• Anti-profiteering Rules: The Anti-profiteering Rules were approved by the GST Council. It is expected that a 5-member authority headed by a retired secretary-level officer will be constituted for a period of two years to decide on penalty to be levied in cases of profiteering. The authority is expected to be empowered to take suo motu action as also act on complaints of profiteering and direct that a price reduction is allowed to customers. Where customers are not identifiable, the amount would be credited to the consumer welfare fund.

• Tax rates decided for certain services: (i) Transport of goods by a vessel will be liable to GST at 5% with availability of full input tax credit, (ii) accommodation in hotels, inns, guest houses, clubs, etc. where room tariff is between INR 2,500 and INR 7,500 will be liable to GST at 18%, with full input tax credit, and such accommodation where room tariff is over INR 7,500 will be liable to GST at 28%, with full input tax credit.

• Tax rates revised for 69 supplies including: (i) Cinema tickets below Rs. 100 will attract 18% GST rate instead of 28% GST, (ii) Packaged food items including fruit and vegetable products, earlier falling under 18%, now would be taxed at 12%.

• IGST exemption has been extended for temporary import/re-import of diamonds and inter-state movement of conveyance between distinct persons carrying goods or passengers or both.

The GSTN has proposed to introduce a free of cost offline tool as an excel sheet, for the purpose of uploading details in GSTR-1 (outward supply return). Presently, the GST portal is closed and will reopen on June 25, 2017 for enrolment of assessees registered under present indirect tax regime.

Change in Import Export Code (IEC) GST

With the implementation of the GST, GST Identification Number (GSTIN) will have to be used for the purposes of credit flow of IGST on imports, and refund / rebate of IGST related to export of goods. In view of this, the Ministry of Commerce and Industry has issued a public notice declaring that all importers and exporters would need to declare their GSTIN on the relevant documents at the time of imports or exports.

With only 12 days to go for the introduction of GST in India, nine states and union territories (including Kerala, West Bengal, Tamil Nadu and Punjab) are yet to pass the SGST legislation. While it is not certain that India will see the launch of the new indirect tax regime on July 1, 2017, the moot question is, ‘Will trade and industry in India be ready to embrace GST on July 1, 2017?’