Roadmap for GST laws

Ranjeet Mahtani & Sweta Rajan

The Central Government is in the process of vetting the drafts of the Model GST laws. The game plan is for the revision of the drafts to conclude during the next meeting of the Goods and Services Tax Council on February 18, 2017, to ensure that they can be tabled before the Parliament in the second leg of the Budget Session commencing on March 9, 2017. 

GST Rates

The classification of goods across the 5-tier rate slabs (0%, 5%, 12%, 18% and 28%) is expected to be decided in May-June, 2017. Meanwhile, the Revenue Secretary has indicated that the applicable tax slab can be estimated based on a simplistic formula – the rate slab closest to the existing incidence of tax (i.e. excise duty + VAT or service tax + VAT) would apply. It would have to be seen as to which slab goods of importance to States will fall, such as essentials and durables. 

As regards GST rates for services, the Revenue Department has provided its recommendations to the Central Government: telecom, banking, financial services, aviation, DTH and restaurant dinning etc. are proposed to be taxed at 18%, while education, healthcare and construction of affordable housing are proposed to be at 12%. It needs to be seen as to how abatements presently allowed, will be worked out under the GST regime. 

E-commerce sector highlights

Under the Model GST Law, e-commerce firms have to withhold tax payable by sellers on every transaction and deposit it with the government on their behalf. The e-commerce industry (specifically Amazon, Flipkart and Snapdeal) is opposing these provisions pertaining to tax collection at source (TCS), and has sought modifications to the Model Law since collection and remission of taxes on behalf of sellers: (i) will block substantial working capital for sellers and cause them to move offline, (ii) will be tedious to comply with, and (ii) is discriminatory inasmuch as the TCS provision is applicable only to e-commerce marketplaces and not offline retailers following the inventory model. 

While all these efforts made by the Government, there are still some industry-specific concerns. For instance, whether real estate and land should be kept within the ambit of GST? More clarity may be expected on these aspects by the end of the month.