Introduction
After decades of positive
deliberation, India has finally accepted the idea of a common indirect
tax regime- Goods and Services Tax (GST). Battered with multiplicity of
Indirect taxes in the current regime, India Inc has more than welcomed
the GST as it brings within its ambit the flavor of ‘
ease of doing business’ in India, seamless credit flow and a vision of common market across India. The draft
Indian Model GST Law
[1] (‘Model GST Law’) which was made public on 3
rd December
2015, underlines an overview of the Final GST Act. In this article, we
have outlined the key compliance proposed in the Model GST Law and
ascertain the ground reality of GST’s claim on considerable ease in
doing business in India.
Returns in GST regime
Every
registered assessee will be required to file returns (including NIL
returns). It is pertinent to note that there could be as many as 8
returns as under:
| Type of Return as per return report | Description | Due date of filing2 |
| GSTR 1 | Outward supplies made by taxpayer | 10th of the succeeding month |
| GSTR 2 | Inward supplies made by taxpayer | 15th of the succeeding month |
| GSTR 3 | Monthly return (inward supplies + outward supplies) | 20th of the succeeding month |
| GSTR 4 | Quarterly return for compounding Taxpayer | 18th of next month from end of quarter |
| GSTR 5 | Periodic Return by Non-Resident Taxpayer | Last day of registration |
| GSTR 6 | Return for Input Service Distributor (ISD) | 15th of succeeding month |
| GSTR 7 | Return for Tax Deducted at Source | 10th of succeeding month |
| GSTR 8 | Annual Return | By 31st December of next FY |
The
return (including NIL return) filing formalities may increase by
manifolds as far as periodicity, number of forms and multiplicity of
compliances are concerned. Compliance requirement may further become
cumbersome as invoice level details are expected to be provided in the
returns. For example, a service taxpayer, covered by the Central Service
Tax legislation, is currently required to file half yearly return and
within the GST regime, same Service Tax assessee might be required to
file as many as 61 returns (5 returns per month i.e. GSTR 1, 2,3,6,7 and
GSTR 8 annual return).
Rectification of Errors in return
Rectification
of errors for any omission or incorrect particulars (other than as a
result of audit, inspection or enforcement activity by the tax
authorities) would be allowed in the return period in which such
omission/incorrect particulars to specific restriction such as
rectification / omission may not be allowed after filing of the return
for the month of November following the end of the FY etc.
Given
the aforesaid restrictions, it would be advisable that the taxpayers
would need to have a robust mechanism to capture correctly the details
of invoices, revenue, input invoices and other data in the original
return itself. Thus, the taxpayers will have to strengthen their
reporting processes and controls.
Registration in GST regime
GST
law on registration provides that a taxable person in the GST regime
will be required to take State specific registration. Further, multiple
registrations in a State for business verticals would also be permitted.
As per
Schedule III of the GST law,
every person who is registered or holds a license under an earlier law
(i.e. current indirect tax regime) would be liable to be registered
under GST regime. For new assessee (who is not registered under current
indirect tax regime) a threshold (to be calculated on all India basis)
of Turnover (as per section 2 (73) of the model GST law) including
exports and exempted supplies below which any person engaged in supply
of Goods or Services or both will not be required to take registration.
Given this, there could be an ambiguity if a person already registered
under earlier law if falls under threshold of turnover under GST then
whether he is liable for registration under GST law?
As regards
registrations, one can also apply voluntarily for GST registration.
However, in case of person engaged in inter-state supplies, casual
taxable persons or a person liable to GST under reverse charge,
irrespective of turnover, registration would be compulsory.
Payments in GST regime
GST
law provides that the taxable person will be required to make payment
of tax (i.e. CGST, SGST, IGST and Additional Tax) including interest,
penalty or fee through electronic cash/credit ledger.
It is
worthwhile to know that cross utilisation of electronic cash/credit
under IGST for CGST and SGST payment, electronic cash/credit under CGST
for IGST payment and electronic cash/credit under SGST for IGST payment
will be allowed. However, cross utilisation of cash/credit under CGST
for payment of SGST and vice versa will not be allowed.
Further,
as per section 47(6) of the Model GST law, where the amount available in
the electronic cash or the credit ledger falls short of aggregate of
tax, interest, penalty fee or any other amount due the said amount would
be liable to be debited in following order:
- Interest liability related to returns of previous tax periods
- Tax liability related to returns of previous tax periods
- Tax liability of current tax periods
- Any other amount
Tax deduction at source
The
Central or State government may mandate Central or State government
department, Local authority, Governmental Agency, any category of
entities as may be notified by the Central or a State government to
deduct tax at the rate of 1% from the payment made or credited to the
supplier of taxable goods and / or services as notified by the Central
or a State government, where total value of such supply, under the
contract, exceeds ₹ 10 lacs. The value of supply for TDS would be
excluding the tax indicated on the invoice.
The tax deducted would
be paid by the deductor within 10 days after the end of the month in
which such deduction is made in the manner prescribed. The deductor
would be furnish a certificate to the deductee within 5 days from
crediting such tax at source to the appropriate government and default
in furnishing of such certificate would be liable to late fee as
prescribed under the Act.
Every deductor would be liable to take
registration within specified period as prescribed and furnish the
return in the form within due date as prescribed, failing which he would
be liable to pay late fee of as prescribed under the Act.
Conclusion
Although
the compliances under multiple indirect tax levies such as Excise, VAT
etc would cease and grant a relief to the taxpayer (especially
manufacturer), the main pain point of reduction in compliances and
achieving the objective of “Ease of doing business in India” does not
appear to fully achieved given the manifold increase in compliances.
Thus
given the drastic change and increase in number of compliances, it is
advisable to work towards analysing the impact of the GST on business
operations to ascertain the impact on tax, finance, working capital,
contracts, operations and compliances to anticipate the changes in
advance and gear up accordingly.
The Report of Sub-Committee
released in the public domain outlines the various facets of the Model
GST Law. Though recently the Ministry of Finance confirmed that the said
report is not the Draft GST law and Draft GST law may take one more
month before it is released on public domain. The said report acts as a
base document from which a cue can be taken about ideology of the Indian
Government in formulation of the framework of the GST Law. Considering
the same we have expressed views in this article on the report / draft
available on public domain.)
[1] Based
on documents available in the public domain on 4 December 2015 which
were circulated by an official government website and thereafter by some
private tax portals.