Mar 292017


The Union Cabinet has cleared four bills related to the Goods and Services Tax (GST), ahead of their introduction in Parliament, to enable roll out of the tax reform from July 1.

Approval of the bills by Parliament and a separate one by all state Assemblies will complete the legislative process for roll out of the GST, the one-nation-one-tax system that merges central taxes like excise duty and service tax and state levies like VAT.

What is GST bill?

  • Goods and Services Tax bill is India’s biggest reform in India’s indirect tax structure.
  • The purpose of the bill is to introduce one single tax on supply of goods and services, from the manufacturing stage until its delivery to the final consumer.
  • The final consumer of the goods and/or services will only have to bear the GST charged by the final dealer in the supply chain, and avail set-off benefits at all the previous stages.
  • This means interim tax stages such as excise duties and service tax and state levies like VAT will be absorbed under GST.

What were the four bills approved by the Cabinet ?

  • The Central Goods and Services Tax Bill 2017 (The CGST Bill),
  • The Integrated Goods and Services Tax Bill 2017 (The IGST Bill),
  • The Union Territory Goods and Services Tax Bill 2017 (The UTGST Bill) and
  • The Goods and Services Tax (Compensation to the States) Bill 2017 (The Compensation Bill)

GST Bill peak rate to be 40%, slabs intact for now

 The GST levy may go up to 40 percent after the GST Council proposed raising the peak rate in the Bill to 20 percent, from the current 14 percent, to obviate the need for approaching Parliament for any change in rates in future.

The change in the peak rate will not alter the 4-slab rate structure of 5, 12, 18 and 28 percent agreed upon last year for the moment, In addition, a cess will be levied on demerit goods like luxury cars, aerated drinks and tobacco products.

The CGST Bill sets the tax regime for the levy of GST on intra-state supply of goods or services or both by the central government. IGST Bill deals levy of GST on inter-state supply of goods or services or both by the central government.

Similarly, the UTGST Bill provides for levy of GST on intra-UT supply of goods and services in the Union Territories without legislature. The Compensation Bill provides for compensation to the states for loss of revenue due to GST for a period of five years.

All state assemblies will have to separately approve the state GST legislation before this one-nation one-tax regime can be rolled out.

What are the benefits of GST?

  • The introduction of GST bill will help in simplifying administration as it removes multiple taxation systems at every stage of trade model and removes disturbances in production.
  • It also aims towards providing a uniform tax rate for all goods and services.
  • The manufacturers will be benefited by the tax regime as it will reduce the tax that levied on them.
  • A system of seamless tax-credits will lead to minimal cascading of taxes, thus reducing hidden costs during trade.

Roadblocks for GST bill

  • The state GST bill has to be approved by every state government, before its introduction in Parliament for approval.
  • At the moment, the state GST bill has been sent to all the states by their respective state legislatures for the approval.

Courtesy: Esha Agrawal
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Mar 202017

Why there is a need to differentiate between goods and services?

  1. Different rate of tax and classification rule for goods and services: The goods are to be classified as per HSN codes and services are to be classified as per SAC terminology. These codes are to be mentioned over invoices also. Moreover the rate of taxing goods and/ or services are different and hence, difference in amount of liability to pay tax. Hence, there is a requirement to classify a supply between goods or services as per rules mentioned in sch. II of the revised model GST law.
  2. Different place of supply provisions as to goods / services: GST being destination based tax on consumption and hence tax revenue shall go to the state where goods / services are consumed and hence difference provisions are made under law for place of supply as to goods on one hand and place of supply on the other.
  3. All transaction including composite transactions has been considered either as goods or as services under schedule II of the Revised Model GST Law.

Meaning of terms Goods and Services:

Meaning of Goods Meaning of Services
Art. 366(12) of the constitution:

Good includes all materials, commodities and articles.

Sec 2(49) of Revised Model GST Law:

Goods means every kind of movable property and

  • Includes

o    Actionable claim
o    Growing crops
o    Grass

o    Things attached to or forming part of the land which are agreed to be severed before supply or under the contract of supply

Sec 2(92) of the revised Model GST law

Services means anything other than goods and


  • Does not include

o    Securities
o    Money

  • Does not include

o    Money
o    Securities

Case Study:

Trading in securities: Trading in securities is specifically excluded from the definitions of goods (Sec 2(49) and services (Sec 2(92) and hence securities are neither goods not services and hence GST is not payable on trading in securities.

Actionable claims: Actionable claims under revised law are considered to be goods. As per section 2(1) of the Revised Model GST Law – actionable claims shall have the meaning assigned to it under section 3 of the Transfer of property act 1882 (TPA). As per section 3 of TPA, actionable claims comprises two types of claims –

  1. A claim to unsecured debts and
  2. A claim to beneficial interest in movable property which is not in possession, actual or constructive – whether present or future, conditional or contingent

Immovable properties: Goods and service tax can not be levy on sale or purchase of immovable goods. However, transfer of immovable property by way of lease or right of usages therefore would be within the preview of GST law as supply of services.

Intangible goods: As per Article 366(12) of the constitution goods includes all materials, commodities and articles. This definition does not make any distinction between tangible goods and intangible goods. The term good, as observed in TCS v State of AP (2004), used in constitution is very wide. The term all materials, articles and commodities includes both tangibles and intangibles which is capable of abstraction consumption and use and which can be transmitted transferred delivered stored possessed. Thus, intangible goods shall be treated as good and supply of intangible goods shall be supply of goods.

Canned software: To minimize the litigation schedule II is inserted in Revised Model GST law to define the matters to be treated as supply of good or service As per entry no 5(d) of the same development, design programming customization adaption up-gradation enhancement implementation of software shall be treated as supply of services. However, canned software are pre fabricated software and are generally sold through a medium. Hence, such canned services shall be considered as goods and supply of the same may be treated as supply of goods.

Mar 132017

High Seas Sale of goods under GST

Meaning of term High Seas Sale

High Sea Sales (HSS) is a sale carried out by the carrier document consignee to another buyer while the goods are yet on high seas. Goods on high seas means:

  • After their dispatch from the port / airport of origin, AND
  • Before their arrival at the port / airport of destination.

Consequences of HSS:

As mentioned above HSS contract / agreement should be signed after dispatch of goods from origin & prior to their arrival at destination. On concluding the HSS agreement, the bill of lading (B/L) should be endorsed in favour of the HSS buyer.

There is no bar on same goods being sold more than once on high seas. In such cases, the last HSS value is taken by customs for the purpose of levying of duty.

The tile of goods transfers to the HSS buyer prior to entry of goods in territorial jurisdiction of India.

The delivery from customs is, therefore, on account of last HSS buyer. Bill of entry (B/E) is also filed in the name of last HSS buyer.

Imposition of GST on HSS

As per section 3(3) of the IGST Act, supply of goods in the course of import into the territory of India till they cross the customs frontiers of India shall be deemed to be a supply of goods in the course of inter state trade or commerce.

Further, as per proviso to section 4(1) of IGST Act, intra state supply of goods shall not include supply of goods brought into India in the course of import till they cross the customs frontiers of India.

Thus, to conclude, sale in the course of import before customs frontier (i.e. HSS) would be subject to IGST.

Collection of GST on HSS

As per proviso to section 5(1) of IGST, the IGST on the goods imported into India shall be levied and collected in accordance with:

  • The provisions of section 3 of the customs tariff act 1975
  • At the point when duties of customs are levied on the said goods under section 12 of the customs act 1962
  • On the value as determined under the Customs Tariff act.


Thus, the first importer will not charge IGST on sale made by him to the HSS buyer and the later / last HSS buyer (as the case may be) would pay IGST at the time clearing of goods from the customs as per customs act.

Last HSS buyer would be eligible to claim such IGST paid to the customs authorities subject to other provisions of the act. GST paid is this case shall be in addition to Basic Custom Duty paid to custom authorities.

Mar 072017

Impact of GST on Traders

Traders are those taxable person who purchase goods for resale. Here an attempt is made to analyze impact of GST on traders.

Intra state sale of goods and / or services

Like in existing vat acts all sales shall be taxable on its transaction value.

Post sale discounts will also be taxable unless these are allowed in compliance with an existing agreement at the time of sale and other prescribed conditions.

Interstate sale of goods and / or services

With the partial phase out of the CST Act, in respect of those goods which are within the scope of GST, no sale or purchase could take place against Form C. Interstate purchase against Form C presently cost @ 2% of the purchase price and same is not refundable / adjustable. However, after GST same is taxable @ IGST which is equal to CGST and SGST and fully adjustable against sale GST tax. Thus, under GST a person would get credit of the entire amount.

In CST a taxable person could get exemption if he shown Form E –I / II against the sale of goods to another state. Dealer selling the goods has to issue a certificate in prescribed form to the purchasing dealer (Prescribed forms are E1 form if its first sale and E2 form if subsequent sales). Subsequent purchaser has to issue certificate in prescribed form (This is C form) to his seller. Such certificates are to be produced before assessing authorities within prescribed time. The certificates in C, E1 and E2 forms are to be issued on quarterly basis. Such exemption under section 6(2) would be withdrawn and such sales are also taxable at full rate of IGST.

Stock Transfers

In the present regime, in case of stock transfers, the dealers are required to reverse certain percentage of input tax credit. However, no such reversal would be required under the GST.

On the other hand, presently, stock transfers does not attract any tax since these are transferred against Form F. Under GST, however, the person shall pay tax on such transfer on the transaction value.

Impact on business investment

The dealers will have to pay full IGST on all interstate transaction at the time of sale and all stock transfers. Hence, traders will require an additional working capital for investment in tax.

Input tax credit

Traders will also get input tax credit (ITC) for taxes paid on input services. To this extent traders will be benefited which they can pass it on to customer and thus, making their goods cheaper.

List of non creditable goods will also have major impact on the dealers. Shorter the list higher would be the gain.

ITC would not be available on free supplies under the GST even if these are used for furtherance of business. [Section 17(4) (g)].

ITC on capital goods: furniture, fixtures and AC

Definition of capital goods have undergone a dramatic change in the revised Model GST law. Now, capital goods, defined in section 2(19) of the revised model GST, means goods, the value of which is capitalised in the books of accounts of the person claiming the credit and which are used or intended to be used in the course or furtherance of business. Therefore, they would get the tax credit on furniture, AC etc used for business.

Presently, if a trader wants to pass on the excise duty to the purchaser, he needs dealer registrations in central excise. No such separate registration is required under GST. He can pass on the GST credit to the purchaser freely.

Dual control

Since the dealer will be covered under CGST and SGST, they might be under control of the union government as well as the state government. However, the government is trying its best to avoid dual control.

Mar 062017

Due dates for the Month of March 2017
Service Tax
– Service Tax payments by Companies for February
Central Excise#
– Duty Payment for all Assessees other than SSI Units for February
Income Tax
– TDS Payment for February
Central Excise
– Monthly Return in Form ER-1 (Ann-12) for other than units availing SSI exemption for February
– Monthly Return in Form ER-2 (Ann-13) by 100% EOUs for February
– Exports – Procurement of specified goods from EOU for use in manufacture of Export goods in Form Ann-17B for DTA units, procuring specified goods from EOU for manufacture of export goods.
– Proof of Exports in Form Ann.-19, once in a month for all exporters, exporting goods under Bond
– Export details in Form Ann.-20, for Manufacturing following simplified export procedure.
– Removal of excisable goods at concessional rate in Form Ann. -46 for Manufacturers receiving the excisable goods for specified use at concessional rate of duty in terms of Rules described in Col. 4.
Income Tax
– Advance Income Tax – Final Instalment all assessees
Providend Fund
– PF Payment for February
– ESIC Payment for February
– MVAT Monthly Payment & Return for February
Service Tax
– Service Tax Payment by other than companies for January to March
– Service Tax Payment by companies for March
Profession Tax
– Monthly Return (covering salary paid for the preceding month) (Tax Rs. 50,000 or more)
– Annual Return (for Salary paid for the month from 1st March to 28th February < Rs. 50,000)
Central Excise
– Duty Payments for all assessees other than SSI Units for March
– Duty Payments for SSI Units in respect of goods cleared during January to March
– Particulars relating to clearances, electricity load etc., in Form Ann.-4 exceeding the limit of Rs. 90 lakhs of exempted clearances for small scale units availing exemption and whose turnover exceeds or has exceeded Rs. 90 lakhs in a financial year, as the case may be.
# If Excise duy / Service tax paid electronically through internet banking, the date is to be reconed as 6th instead of 5th
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Mar 022017

GST Valuation (Determination of value of supply of Goods and services) Rules 2016

Valuation norms under GST under normal circumstances:

The value taken for calculation of GST is the price actually paid by recipient of goods / service to the supplier. This shall be taken if and only if:

  1. The supplier and the recipient of the supply are not related
  2. The price is the sole consideration for the supply

The value thus identified with above formula is popularly known as transaction value under section 15(1) of the model GST law. There are specific inclusions to be made in calculating transaction value as provided under section 15(2) and some exclusions provided under section 15(3) of the act. Section 15(4) provides that where the value of the supply of goods or services cannot be determined under sub-section (1), the same shall be determined in such manner as may be prescribed.

Hence, GST valuation rules 2016 are come on the way to provide when valuation under 15(1) shall be disregarded and how value shall be calculated under such circumstances.

When value under section 15(1) shall be disregarded

When the proper officer has reason to doubt the truth or accuracy of the value declared in relation to any goods and/or services, he may ask the supplier to furnish further information, including documents or other evidence and if, after receiving such further information, or in the absence of any response from such supplier, the proper officer still has reasonable doubt about the truth or accuracy of the value so declared, it shall be deemed that the transaction value of such goods and/or services cannot be determined under the provisions of sub-rule (1) of rule 3. [Rule 7(1)]

Thus, only reasons to doubt on truth or accuracy of the value are sufficient to reject the transaction value. The existence of following ingredients is sufficient to arouse existence of reasons of doubt on proper officer to reject transaction value and consider the valuation rules:

  1. The significantly higher value at which goods and/or service of the like kind or quantity are supplied
  2. The significantly lower or higher value of the supply of goods and/or services compared to the marker value
  3. Mis-declaration of parameters such as description, quantity, quality, year of manufacture or production

Goods or services of like kind and quantity

Goods of like kind and quantity means :- Services of like kind and quantity means
Goods which are identical or similar in1.     Physical characteristics,2.     Quality and3.     Reputation as the goods being valued, and4.     perform the same functions or5.     Are commercially interchangeable with the goods being valued6.     And supplied by the same person or by a different person services which are:1.     Identical or similar in nature,2.     Quality and3.     Reputation as the services being valued and4.     supplied by the same person or by a different person

If value can not be determine and/or in case value is determine but proper officer rejected the value, then, value shall be determine by proceeding sequentially through rules 4 to 6.

Step 1: Determination of value by comparison:

Rule 4 : Where transaction value of supply of goods or services can not be determine, value shall be determine in following manner:

  1. Transaction value of goods and/or services of like kind and quality
  2. Supplied at or about the same time to other customers,
  3. Adjusted in accordance with the provisions of sub-rule (2) which are given below:
    1. Difference in dates of supply
    2. Difference in commercial level
    3. Difference in quantity levels
    4. Difference in composition
    5. Difference in quality and design
    6. Difference in freight and insurance charges depending on the place of supply

When value can not be determine under rule 4:

  1. Goods and/or services of like kind and value are not available
  2. If they are available, but adjustments as required in point no 3 above can not be made

Step 2: Computed value method

If value can not be determined under rule 4 value shall be calculated under computed value method which shall be determined as below:

  1. The cost of production, manufacture or processing of the goods or, the cost of provision of the services;
  2. Charges, if any, for the design or brand;
  3. An amount towards profit and general expenses equal to that usually reflected in supply of goods and/or services of the same class or kind as the goods and/or services being valued which are made by other suppliers.