New Delhi : With the Centre releasing the model GST law after evolving broader consensus with states, India Inc hoped that the landmark indirect tax regime will come into effect from April next year.
The government has put up the model Goods and Services Tax (GST) legislation for public consultations and hoped to get the bill passed during the monsoon session of Parliament starting next month.
“We look forward to the positive movement and with these initiatives, it is expected that implementation of GST with effect from April 1, 2017 will become a reality,” said CII Director General Chandrajit Banerjee.
The model GST law, which has 162 clauses and 4 schedule, was released by the government after a meeting of Empowered Committee of state Finance Ministers on the long awaited indirect tax reform.
“Lot of hard work seems to have been put in for arriving at broader consensus with the states…Hectic times ahead for industry. All eyes on the monsoon session now for passage of the constitutional amendment bill,” said Pratik Jain, Leader – Indirect Tax, PwC India.
The model law calls for registration of taxpayer in the state from where “taxable supply of goods and/or services” is made if their annual turnover is above 900,000 rupees, except for supply of goods or services from north eastern states, where the threshold is at 400,000 rupees for registration.
The draft model law also addresses concerns over the location of applicability of tax in case of online transactions through e-commerce platforms. The proposed model law calls upon e-commerce operators to collect GST “at the time of credit of any amount to the account of the supplier of goods and/or services or at the time of payment of any amount in cash or by any other mode, whichever is earlier”.
The GST collected by the e-commerce operators shall be paid to the government within 10 days after the end of the month in which the collection is made, the draft model law said.
Sachin Menon, Partner and Head, Indirect Tax at KPMG, in India said by endorsing the model GST law, the Empowered Committee of Finance Ministers have shown that they are committed to introduce GST in their states irrespective of political affiliations.
“The model GST bill will put an end to the never-ending disputes about taxability of works contracts and lease transactions, as the bill classify the same as service, irrespective of whether the transactions involve goods and services,” he said.
Under the proposed law, a person can be imprisoned for up to five years for evasion of tax. Only senior tax officials will have the powers of search, seize, summons and arrest, the draft law proposes. A “GST compliance rating” will be assigned to every taxable entity based on their record. The score would also be updated and made public at periodic intervals.
The GST bill — which will help create a single national sales tax to replace several state and central levies — has already been approved by the Lok Sabha and is pending in the Rajya Sabha where the government doesn’t have a majority. The main opposition party Congress has demanded certain changes in the bill. In his comment, Mahesh Jaising, Partner, BMR and Associates LLP, said the model GST indeed reflects that the government has been working in full force towards the implementation of the legislation. The government plans to roll out GST from Apr 1, 2017.
