1. Model GST law - Feast after a decade long fast Customer Care No. 91-11-45562222 www.taxmann.com

2. Indian Indirect tax payers have been greeted with a bouquet of complexities from the time immemorial. These taxpayers were in need of a single flower as antidote, which they now see budding in form of Model GST law released by the Union Government. The proposed scheme of GST aims to reduce the existing intricacies in administration of multiple indirect taxes. The much debated beauty and barriers of GST as a unified tax on goods and services has finally come to the rescue of taxpayers in the form of model GST law, framed by the Empowered Committee of State Finance Ministers. The model law is designed in a manner that it can also be used by the states as blue print for state GST. At the outset, the model law proposes its applicability to whole of India and provides that different dates may be appointed for different provisions of the Act. The draft law appears to be largely premised on the existing state VAT laws and an attempt has been made to reconcile the philosophies of existing Central Excise, VAT and Service tax laws. 2 Customer Care No. 91-11-45562222 www.taxmann.com

3. The scheme of taxation under GST would be on supply of goods, thus the draft (i.e. GST Act and IGST Act)is accompanied with the Valuation of Supply of Goods and Services Rules and there exists a predominant emphasis on determination of time, value and place of supply in the model law. By far and large, the definitions under the model law are more precise and clear even when they borrow reference from different bye laws. The definition of 'services' has been kept same as proposed in the Constitution (122nd Amendment) Bill, services to mean anything other than goods. Such a definition would enlarge the scope of taxability on services. The model law has distinctly outlined the concepts of works contract, job work and tax on right to use of goods. The draft does not talk about the rate of taxes but clears that rate of taxes on various goods and services is to be appended as Schedule to the Act. Further, in so far as a 'taxable person' and 'registration' is concerned, the threshold for determination in North East states have been kept half as the business transactions are correspondingly also lower than rest of India. Thus the registered persons would be required to levy tax if the aggregate turnover exceeds Rs. 10 lacs in a financial year, and Rs. 5 lacs in north east states. This proposal also aims at expansion of tax base and uniforms the existing threshold as under the different indirect tax laws. The draftsmen have made a proposal in the model law that the transactions would now be put to tax under GST on 'transaction value' basis and this value can be challenged by a proper officer in case he has reason to doubt the truth or accuracy of the value declared. Customer Care No. 91-11-45562222 www.taxmann.com

4. This concept has been borrowed from the Customs laws and would certainly pregnant the industry with difficulties on valuation of supply in proposed GST. Unlike present scheme, the model law also proposes a compliance rating score of taxable persons to be updated on periodic basis and placed in public domain. India's proposed GST is more of self-disciplined tax module, as conceded by CBEC officers in various forums, thus one can see the compliance orientation in the model law which carves out explicit provisions for requirement and manner of registration, payment of taxes, filing of returns, issuance of tax invoices, bill of supply, credit, debit notes and availment and transfer of credits. Model law has also introduced the concepts of civil lawse.g. presumption as to truth and admissibility of 'documents', 'mental state', 'burden of proof' etc. which one do not find place in many of existing tax laws. The model law empowers the officers to do audit and special audit of taxable persons, to demand and recover tax, to inspect, search, seize, summon and arrest in identified cases, which is largely based on present provisions. Further the model law is little more stringent on penal provisions to prevent the escape or promotion of tax leakages, it also casts a penalty on persons who aids, abets the offences provided in law. On the other side, keeping in mind the interest of taxpayers the draft also provides non-imposition of substantial penalties for minor breaches of tax regulations or procedural requirements. There appears to be absence of personal penalty on the officers/directors of the companies, as it exists today. 4 www.taxmann.com Customer Care No. 91-11-45562222

5. Another good news is on the limitation to file refund claims, where the model law provides that refund claim application may be made within two years from the relevant date. Today we have maximum of one year to file refund claims, in service tax and a lesser period under other tax laws. A machinery for dispute resolution is required for every tax scheme, the model law list downs the provisions against such requirement under the chapters on settlement of cases, compounding of offences, appeals and revisions. One can see the need of constitution of national GST appellate tribunal, as referred in the model law and the coram of bench must have one judicial member, one member technical (CGST) and one member technical (SGST) for matters exceeding ten lakhs rupees. Three member bench would help in overcoming the cases of dissecting opinions as we see in case of a division bench. Matters before three member bench to be decided by majority. The tribunal would have one branch for each state known as SGST Tribunal. Today we have CESTAT benches for customs, central excise, service tax matters but not one in each state. The appeal to national GST Appellate tribunal may be preferred for any amount in dispute but the Tribunal in its discretion may dismiss the appeal if the amount in dispute is less than 1 lac rupees. 5 Customer Care No. 91-11-45562222 www.taxmann.com

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