FAQs on Goods and Services Tax – Is India Inc. Prepared?

Opinion

On September 21, 2016, Central Board of Excise and Customs (CBEC) with the inputs from National Academy of Customs, Excise and Narcotics came out with a compilation of more than 500 Frequently Asked Questions (FAQs) divided into 24 topics, including registration, valuation and payment, scope and time of supply, refunds, seizure and arrest. As the hard part of political consensus and constitutional amendments is completed, the tough part of spreading awareness has now begun.  Thanks to CBEC, the said compilation is definitely a useful tool to disseminate knowledge on the model GST bill to tax professionals and the public, as it details the scope of different provisions and stakeholders mentioned in the Model GST Law.

The following are the key aspects which are discussed in the compilation:

Registration

Chapter 3 of the compilation discusses the businesses which are ought to be registered and those which are granted exemptions, and the timeline for obtaining the registration under GST.  It is given that those businesses which are exempted or do not fall under the threshold for registration could register voluntarily under GST, and then those businesses can also avail the benefits under the Act. Threshold exemption is not available to e-commerce operators and they would be liable to be registered irrespective of the value of supply made by them.

For the business owners who are not tech savvy, it is given that facilitation centres and tax return preparers are established, and these officers and centres shall assist the businesses in the registration process. This is indeed a welcome initiative.

Scope and Time of Supply

As the taxable events existing in the current indirect taxes are subsumed in the taxable event known as ‘supply’, understanding the scope of ‘supply/taxable’ is fundamental.  Though there are many unanswered questions, the following were clarified:

  •   Inter-state self-supplies without consideration such as stock transfers will be taxable. Would this imply that intra-state stock supplies would not be subject to GST?
  •  A business test is listed in compilation to determine whether a ‘supply’ has been made in the course or furtherance of business.
  •   Transfer of right to use goods/services without transfer of title shall be treated as transfer of supplies and is a taxable event.
  •  The time of supply shall be the due date of payment, if ascertainable from the contract. If not ascertainable, it will be the earliest of date of receipt of payment or the date of issue of invoice or completion of event where payment is linked to completion of event.
  •  Goods sent by a taxable person to a job-worker (a person undertaking any treatment or process on goods belonging to another registered taxable person) will not be treated as supply.

Miscellaneous

The compilation has clarified regarding refunds and disputes also, and the  following are a few notable points mentioned in the compilation:

  •   The tax that is passed on to the consumer, if applied for a refund, shall be credited to the Consumer Welfare Fund.
  •   Tax payers shall be allowed to take credit of taxes paid on inputs (input tax credit) and utilize the same for payment of output tax. However, no input tax credit on account of Central GST (CGST) shall be utilized towards payment of State GST (SGST) and vice versa. The credit of Integrated GST (IGST) would be permitted to be utilised for payment of IGST, CGST and SGST in that order.
  •   Refunds shall be sanctioned within 90 days of the application. This is indeed welcome.
  •   A person providing any information or any other services incidental to or in connection with such supply of goods and services through electronic platform would be considered as an operator. A person supplying goods/services on his own account, however, would not be considered as an operator.
  •  Exports shall be treated as zero-rated supply. No tax is payable on export of goods or services but credit of the input tax related to the supply shall be admissible to exporters and the same can be claimed as refund by them.
  •   Settlement commission is established to provide speedy and alternate remedy to disputes of the taxpayer, though no person can avail the facility of settlement commission more than twice.

Conclusion

Introduction of GST is a watershed moment in the field of indirect tax reforms in India. The biggest gain would be in terms of reduction in the overall tax burden on goods, which will, in turn, make our products competitive in the domestic and international markets. With these clarifications, the e-commerce players and online aggregators will have to seek registration under the Goods and Services Tax (GST) regime irrespective of the value of supply made by them, as the scope of taxation of these businesses were always ambiguous. One would hope that the CBEC would release few more compilations from time to time for the greater good of all the stakeholders.