The Finance Ministry released the ‘Model GST Law‘ on June 14, 2016. The model outlines the structure of the GST regime. The draft of ‘Integrated GST Bill, 2016‘ is also released along with it. The document provides the framework for levy and collection of CGST and SGST. ‘CGST’ is the tax levied under the Central Goods and Services Tax Bill, 2016. ‘IGST’ is the tax levied under the Integrated Goods and Services Tax Bill, 2016.
Here are the key features of the Model GST:
1. Eligibility to register and taxable person
If the aggregate turnover of a dealer is over Rs. 9 lakh/annum, it is his/her duty to get registered under this law. The cap for dealers in the Northeast is Rs. 4 lakh. The person registered under this law is only liable to pay tax if his aggregate turnover in a financial year is over Rs. 10 lakh. Such a cap for the Northeast is Rs. 5 lakh.
2. Place of registration
The place of registration should be from where the goods or services are supplied. This helps with virtual marketplaces, mainly e-commerce.
3. Migration of existing taxpayers from GST
Every person already registered under the extant law will be issued a provisional certificate of registration. This certificate shall be valid for a period of six months, hence giving them enough time to make the changes in their model and furnish the required information, before the final certificate is provided.
4. GST compliance rating score
Every taxable person shall be assigned a GST compliance rating score. The GST compliance rating score shall be updated at periodically and intimated to the taxable person. This will be a part of public domain.
Government and local authorities that are involved in activities such as issuance of passport, visa, driving license, birth certificate or death certificate, etc. are exempted from GST.
5. Taxable Event
Supply activities such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for consideration are all taxable events.
6. Point of taxation
CGST/SGST must be paid at the earliest of the following dates:
- Date on which the goods are dispatched for supply to the recipient (in the case of movable goods).
- Date on which the goods are made available to the recipient (in the case of immovable goods).
- Date of issuing invoice by supplier
- Date of receipt of payment by supplier
- Date on which recipient shows the receipt of the goods in his books of account.
7. TCS on online sales of goods & service
All e-commerce establishments should collect tax at the time of credit/payment. The amount should be deposited to the respective state government, within ten days of the end of the month in which the product/service was supplied.
8. Determination of Valuation
In case, the valuation can not be determined by the transaction or supply value, the valuation can be made by supply or transaction value of similar products and services.
9. Utilization of credit
In the case of excess of credit in any of the three taxes in question (after payment of the concerned tax), it can be utilized in one of the other two. The excess of tax credit in CGST can not be used to pay SGST. All other permutations are possible.
The four acceptable methods of payment are the credit card, debit card, NEFT, and RTGS.
When the total value of a contractual supply exceeds Rs. 10 lakh, the individual departments may be required to deduct the taxes at source.
The application of a refund could be made within two years of the relevant date unless the tax was paid under protest. A longer period as deemed necessary/possible can be allowed if the tax was paid by the payer under protest.
The following returns must be filed by all the dealers:
- Monthly returns: The dealer must file one within 20 days after the end of a month.
- Composition scheme returns: Dealers registered under the composition scheme must file returns quarterly, and must do it within 18 days of the end of the period.
- TDS Return: Every dealer who is required to deduct tax at source shall file a return electronically within ten days after the end of the month in which deduction is made.
- Return for Input Service Distributor: Every Input Service Distributor shall file e-return for every calendar month or part thereof, within 13 days after the end of the month.
- First Return: Every registered taxable person paying CGST/SGST on all intra-State supply of goods and services shall have to furnish the first return from the date when he became liable to registration until the end of the month in which the registration has been granted.
- Annual return: Every registered taxable must file an annual return for every financial year electronically on or before the 31st day of December following the end of such financial year.
14. Transitional Provisions
The Model GST law requires a registered taxable person to take credit of the CENVAT and carry it forward to the next period, while filing a return (unless the said amount was acceptable as CENVAT credit under the previous law and as input tax credit under the current Act).