39 Key Changes in Revised Model GST Law vs Old Model GST Law

By | January 8, 2017
(Last Updated On: January 8, 2017)

39 Key Changes in Revised Model GST Law

Key PointDraft Model GST Law

June 2016

Revised Draft Model GST Law

November 2016

Incentives or concessions to SEZs.No provision in the Model GST LawSupply of goods and/or services to a SEZ developer or an SEZ unit are defined as zero rated supply in Chapter VIII of the IGST Law, as a part of incentives & concessions to them
Threshold limit for registrationSchedule III specifies the threshold limit of agreegate turnover for registration in a financial year as Rs. 9 Lakh for States other than Northeastern States & Rs. 4 Lakh for north-eastern StatesScheduleV specifies the threshold limit of agreegate turnover for registration in a financial year as Rs. 20 Lakh for States other than special category States & Rs. 10 Lakh for special category States
Basic Exemption Limit for Small SuppliersSection 9 states that Taxable person means a person whose aggregate turnover in a financial exceeds Rs. 10 Lakh for States other than Northeastern States and Rs. 5 Lakh for north-eastern StatesSection 10 states that Taxable person means a person who is registered or liable to be registered under Schedule V of the Act. Chapter V provides for an liability to get registered if the aggregate turnover in a financial year exceeds 20 lakh rupees for States other than Special Category States and 10 lakh rupees for Special Category States
Services put to a private or non-business purposeSchedule I includes it as a service to be treated as supply without consideration. Further, no input tax credit was admissible on the same as per section 16(9)

[Note Both provisions reading together leads to double taxation on the one hand since service put to a private or non-business use is made taxable and input tax credit is not admissible on the same. Accordingly, it was suggested to allow Input Tax Credit on it. ]

The term “Services put to a private or non- business purpose” is deleted from Schedule I.

 

Explanation to the definition of aggregate turnoverAggregate turnover does not include the value of supplies on which tax is levied on reverse charge basis and the value of inward suppliesAggregate turnover does not include the value of inward supplies on which tax is payable by a person on reverse charge basis under Section 8(3) and the value of inward supplies.
Definition of Business verticalThe meaning assigned to a ‘business segment’ in Accounting Standard 17 issued by the Institute of Chartered Accountants of IndiaA distinguishable component of an enterprise that is engaged in supplying an individual product or service or a group of related products or services and that is subject to risks and returns that are different from those of other business verticals.
Definition of Export of goodsSection 2(43) of Model CGST/SGST Law defines export of goods as “with its grammatical variations and cognate expressions, means taking out of India to a place outside India.”Section 2(5) of Model IGST Law defines export of goods as “with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India.”
Definition of inputAny goods other than capital goods, subject to exceptions as may be provided under this Act or the rules made thereunder, used or intended to be used by a supplier for making an outward supply in the course or furtherance of business;Any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business.
Definition of Related PersonsThe definition of related person interalia includes “any person directly or indirectly owns, controls or holds five per cent or more of the outstanding voting stock or shares of both of them”The definition of related person interalia includes “any person directly or indirectly owns, controls or holds twenty five per cent or more of the outstanding voting stock or shares of both of them”
Definition of ServicesServices means anything other than goods. It also includes intangible property and actionable claim but does not include moneyInsertion of Explanation 2 – Services does not include transaction in money other than an activity relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged
Levy of Composition SchemeThe proper officer of the Central or a State Government may, on the recommendation of the council, subject to such conditions and restrictions as may be prescribed, permit a registered taxable person, whose aggregate turnover in a financial year does not exceed fifty lakh of rupees, to pay, in lieu of the tax payable by him, an amount calculated at such rate as may be prescribed, but not less than one percent of the turnover during the yearThe proper officer of the Central or a State Government may, on the recommendation of the council, subject to such conditions and restrictions as may be prescribed, permit a registered taxable person, whose aggregate turnover in the preceding financial year does not exceed fifty lakh of rupees, to pay, in lieu of the tax payable by him, an amount calculated at such rate as may be prescribed, but not less than two and a half percent in case of a manufacturer and one percent in any other case, of the turnover in a State during the year.
Time of supply of goodsOne of the four criteria for determining the time of supply of goods as provided in section 12(2) is “the date on which the recipient shows the receipt of the goods in his books of account”Section 12(2) ammended to include only two criteria on which the time of supply would be determined and deleted the clause “the date on which the recipient shows the receipt of the goods in is books of account”
Value of supply which can not be determined under Section 15(1)Section 15(4) provides that the value of such supplies as may be notified by the Central or a State Government on the recommendation of the Council shall be determined in such manner as may be prescribed.Section 15(5) provides that notwithstanding anything contained in sub-section (1) or subsection (4), the value of such supplies as may be notified by the Central or a State Government in this behalf on the recommendation of the Council shall be determined in such manner as may be prescribed
Manner of recovery of credit distributed in excessSection 18(1) provides that where the credit distributed by the Input Service Distributor is in excess of the credit available for distribution by him, the excess credit so distributed shall be recovered from such distributor along with interest, and the provisions of section 51 shall apply mutatis mutandis for effecting such recovery.

Section 18(2) provides that where the Input Service Distributor distributes the credit in contravention of the provisions contained in section 17 resulting in excess distribution of credit to one or more suppliers, the excess credit so distributed shall be recovered from such supplier(s) along with interest, and the provisions of section 51 shall apply mutatis mutandis for such recovery

Section 18(1) has been deleted, thus removing the confusion in case of overlap of Section 18(1) and 18(2).
Interest on delayed payment of taxIn case a taxable person makes an undue or excess claim of input tax credit under section 29 (10), he shall be liable to pay interest on such undue or excess claim at the prescribed rate for the period computed in the manner prescribed.Section 45(3) provides that in case a taxable person makes an undue or excess claim of input tax credit under section 37(10) [earlier section 29(10)] or undue or excess reduction in output tax liability under section 38(10) [earlier section 29(10)], he shall be liable to pay interest on such undue or excess claim or on such undue or excess reduction, as the case may be, at the prescribed rate for the period computed in the manner prescribed.
Special procedure for removal of goods for certain purposesSection 43A of the Model GST Law prescribes procedures to send taxable goods without payment of tax for job work and receiving or supplying such goods after completion of job work.

The provision covers only situations where the goods sent to the job worker are received ‘after completion of job work’.

The words ‘and may, after completion of job work’ deleted from the re-numbered Section 55(1)
Self-AssessmentAn explanation to Section 44 provides that where goods received in pursuance of an inward supply are returned by the recipient to the supplier within a period of six months from the date of the relevant invoice, the tax payable on such return supply shall be equal to the input tax credit availed of earlier in respect of such inward supply.”The given explanation has been deleted in the re- numbered section 57.
Audit by Tax AuthoritiesSection 49(1) provides that the [Commissioner of CGST/Commissioner of SGST] or any officer authorised by him, by way of a general or a specific order, may undertake audit of the business transactions of any taxable person for such period, at such frequency and in such manner as may be prescribedThe [Commissioner of CGST/Commissioner of SGST] or any officer authorised by him, by way of a general or a specific order, may undertake audit of any taxable person for such period, at such frequency and in such manner as may be prescribed
Assessment of non-filers of returnsAn explanation to the section 46(2) clarifies that nothing in this section shall preclude the payment of interest under section 36 or payment of late fee under section 33. “Explanation to re-numbered section 60 has been redrafted as “Nothing in this section shall preclude the liability for payment of interest under section 45 and/or for payment of late fee under section 42″
Time Limit for issuing show cause noticeNo provision in the Model GST LawSection 66(2) provides that the proper officer shall issue the notice under sub-section (1) at least three months prior to the time limit specified in subsection (8) for issuance of order
Cenvat Credit to Importer, First Stage Dealers & Second Stage DealersThere is no provision to allow Cenvat Credit for Importers, First stage dealers and Second stage dealers for goods held in stock as on the day immediately preceding the appointed day.Importer, First stage Dealers and Second Stage Dealers shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day. Section 145
Transitional provisions for taxability for return of goods from Job workersSection 150 & 151 of the Model GST Law provide that if the inputs/semi-finished goods are removed/dispatched from the factory/place of business to the job worker in accordance with the provisions of the earlier law prior to the appointed day and such inputs/semi-finished goods are returned to the said factory/place of business after the appointed day, then, if such goods are:

a.Returned after a period of 6 months or the extended period of not exceeding two months from the appointed day, then the tax shall be payable by the job worker if such goods are liable to tax under GST

b.Not returned within a period of 6 months or extended period from the appointed day, then the tax shall be payable by the manufacturer, if such goods are liable to tax under GST

The provision of payment of tax by the job worker has been removed from the renumbered section 175 and 176

[ Thus only manufacture is liable to pay tax , Earlier both of them were liable to pay tax]

Tax Treatment of Stock in Transit under GSTNo provision in the Model GST LawA new section 171 has been inserted providing credit of eligible duties and taxes in respect of inputs or input services during transit.
Finished goods not returned within 6 monthsSection 152 provides that where any excisable goods manufactured in a factory had been removed without payment of duty for carrying out tests or any other process not amounting to manufacture, to any other premises, whether registered or not, in accordance with the provisions of earlier law prior to the appointed day and such goods are returned to the said factory on or after the appointed day, no tax shall be payable if the said goods, after undergoing tests or any other process, are returned to the said factory within six months from the appointed daySecond proviso to re-numbered section 177 has been inserted as follows:

PROVIDED FURTHER that if the said goods are not returned within a period of six months or the extended period, as the case may be, from the appointed day, the input tax credit shall be liable to be recovered in terms of section 184:

Refund claim filed after the date of applicability of GSTNo provision in the Model GST LawSection 181 has been inserted providing for the filing of refund claims after the appointed day for payments received and tax deposited before appointed day in respect of services not provided.
Explanation 1 to clause 1 of schedule V (Earlier Schedule III)The taxable threshold shall include all supplies made by the taxable person, whether on his own account or made on behalf of all his principals.”The explanation has been amended and the words “Taxable threshold” has been replaced by “aggregate turnover”.
Place of supply of services in relation to immovable propertySection 6(4)a provides that placed of supply of service in relation to immovable property is location of immovable property.The renumbered section 9(4) has been amended and phrase “in relation to immovable property” has been replaced by the phrase “directly in relation to immovable property…
Supply in case of cessation of services before completion of contractSection 13(6) provides that in a case where the supply of services ceases under a contract before the completion of the supply, such services shall be deemed to have been provided at the time when the supply ceases.Section 28(6) provides that : In a case where the supply of services ceases under a contract before the completion of the supply, the invoice shall be issued at the time when the supply ceases and such invoice shall be issued to the extent of the supply effected before such cessation
Credit of eligible duties & taxes on inputs held in stock & inputs contained in semifinished or finished goods used for supply under works contractNo provision in the Model GST LawSection 169 provides that a registered taxable person who was providing works contract service and was availing of the benefit of notification No. 26/2012-Service Tax, dated 20.06.2012 shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes in respect of inputs held in stock and inputs contained in semifinished or finished goods held in stock on the appointed day subject to certain conditions.
Mandatory pre-deposit in case of appealDifferent provisions of pre-deposit under CGST Law and SGST Law.Pre-deposit provisions in case of appeals under CGST/SGST Law provided in a common section for both CGST/SGST Law , thereby replicating the provisions of CGST under SGST.
Common First Appellate AuthoritySection 79 provides for different First Appellate Authority under CGST Law and SGST Law.Common First Appellate authority established under section 98 for hearing of appeal against the assessment order under CGST and SGST laws and all the provisions would be common.
Detention, seizure and release of conveyanceSection 69 do not provide for the provisional release of detained goods or conveyanceSection 89(3) provides that where the person transporting any goods or, as the case may be, the owner of the goods fails to pay the amount of tax and penalty as provided in sub-section (1) within seven days of such detention, provisions of subsection (6) of section 79, shall apply mutatis mutandis for provisional release of the detained goods or conveyances
Detention, seizure and relaese of conveyanceSection 69 do not provide any relaxation provided with regard to the interest of bonafide purchasersProviso to Section 89(3) provides that where the detained goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the said period of seven days for payment of amount of tax and penalty may be reduced by the proper officer
Alignment of period of refund in different sectionsA period of ” three months” is specified in Section 39 whereas the period of ” within ninety days” provided in Section 38(5) for the purpose of granting refund to the taxable personA uniform period of sixty days is provided in both the re-worded sections 48 and section 50 and thus aligning both the sections
Rectification of returnsSection 27(7) provides that any taxable person shall rectify such omission or incorrect particulars therein, in the return to be filed for the month or quarter, as the case may be, during which such omission or incorrect particulars are noticed, subject to payment of interest, where applicable and as specified in the ActSection 27(7) interalia includes rectification of return by Input Service Distributor , filed for the month or quarter, as the case may be, during which such omission or incorrect particulars are noticed, subject to payment of interest, where applicable and as specified in the Act

[thus the provisions of Section 27(7) be made applicable to Input Service Distributors also and they be allowed to rectify their return owing to omission or incorrect particulars subject to payment of interest as specified.]

Definition of Works ContractSection 2(107) provides that “works contract” means an agreement for carrying out for cash, deferred payment or other valuable consideration, building, construction, fabrication, erection, installation, fitting out, improvement, modification, repair, renovation or commissioning of any moveable or immovable propertySection 2(107) provides that “works contract” means a contract wherein transfer of property in goods is involved in the execution of such contract and includes contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property
Definition of intra-state supplyNo provision in the Model GST LawSection 2 (57) defines “intra-State supply of goods” as the supply of goods in the course of intra-State trade or commerce in terms of subsection (1) of section 4 of IGST Act, 2016 Section 2(58) defines “intra-State supply of services ” as the supply of services in the course of intra-State trade or commerce in terms of subsection (2) of section 4 of IGST Act, 2016
Opportunity of being heard to the owner of conveyanceNo provision in the Model GST LawSection 90(4) provides that no order of confiscation of goods and/or conveyance and/or imposition of penalty shall be issued without serving a notice on such person requiring him to show cause and without giving the person a reasonable opportunity of being heard.

 

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