Revised Draft GST laws address concerns on credit

By | November 28, 2016

Draft GST laws address concerns on credit

The finance ministry on Saturday released three draft laws for the proposed Goods and Service Tax (GST), addressing most of the industry’s concerns on the efficiency of input tax credit mechanism, but said the final settlement of compensation for states would be subject to CAG vetting the states’ claims of revenue loss. While quarterly payment of compensation to states is envisaged, the Centre has also laid claim to any excess amount that might accrue to the GST Compensation Fund, while the earlier idea was to disburse such surplus solely among the states.

[ Editor Note : New The Draft Model GST Law, Draft IGST Law and Draft Compensation Law which would be considered by the GST Council for approval are placed in the public domain for information of trade, industry and other stake holders. on 25.11.2016 :-

Draft Model GST Law,

Draft IGST Law and

Draft Compensation Law ]

Earlier, the Draft Model GST Law was put in public domain in the month of June, 2016 for comments. Download  Old Draft Model GST Law -june 2016 ]

Half of the excess amount would go to the consolidated fund of India and would form part of the overall tax kitty, which as per statute, is divided in a fixed proportion between the Centre and states, according to the draft compensation Bill. The remaining 50% would be disbursed among the states in the ratio of their total revenues from state GST (SGST) in the last year of the five-year transition period. Any compensation paid to a state found to be in excess of the amount actually due to them after the CAG audit would be adjusted against next year’s compensation, the draft law said.

Also, the proposed cess to be imposed on certain luxury items and sin goods like tobacco to create the compensation fund would apply at all stages of value addition with credits.

This would ensure that the cess would not cause cascading of taxes in the GST regime. Apart from the compensation Bill, the model GST law (the central and state GST laws will be framed on the basis of this) and the integrated GST bill for levy of tax on imports and inter-state trade are the other two draft laws released by the ministry. “The revised draft Model GST Law in public domain is a welcome move. Industry had raised several issues; key amongst them was need for an efficient credit mechanism, easy to implement valuation provisions, protection of tax or duty credits embedded in goods and services during GST transition, centralised registration for services sector etc. While devil lies in details, a quick perusal suggests that input credit mechanism envisaged is broad and efficient and will remove cascading,” said Harishanker Subramaniam, national leader (indirect tax), EY India.

ttp://www.financialexpress.com/27.11.2016

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