1. GOODS AND SERVICES TAX
IMPACT OF REVISED MODEL GST LAW ON TRADING, MANUFACTURING AND SERVICE SECTOR
10th December, 2016

2. GST Levy of GST on supply Dual GST (IGST and CGST/ SGST)
Inter-state supply of goods/ services liable to IGST
Intra-state supply of goods/ service liable to CGST/SGST
Credit of IGST set-off against IGST then CGST then SGST
Credit of CGST set-off against CGST and then IGST
Credit of SGST set-off against SGST and then IGST

3. Place of Supply : Local / Inter State
Situation
Place of Supply
Inter state Supplies ( Leviable to IGST)
Intra State Supplies (Leviable to CGST / SGST)
If location of supplier and place of supply are in different States.
If location of supplier and place of supply are in same State.
Import of services/goods
Export of services/goods
Deemed to be interstate supply of goods and services
Export is zero rated
Concept of deemed export present
Provisions of SEZ brought-in

4. Place of Supply - Relevance
Local Supply
Inter – State Supply
Export
Supplier
IGST (Goods)
Consumer
Consumer
IGST (Services)
Not required
IGST
Import
CGST +
SGST
State Border
International Border
Consumer
Determining Inter-state or Intra-state
Determining Import and Export

5. IMPACT ON SECTORS
Single levy of GST as against multiple levies (such as excise duty, VAT, Entry tax, etc.)
Paradigm shift from origin based taxation to destination based taxation
Cross utilization of Input tax Credit across sector (manufacturers, traders and service providers)
End of classification disputes (transfer of right to use vis a vis right to use, sale or service, etc.)
System generated working

6. IMPACT ON SECTORS Rate structure proposed as 5%, 12%, 18%, 28%
The proposed rate of CGST and SGST has been capped at 14% each.
Taken together this would mean a rate cap of CGST + SGST would be 28%
The IGST rate has been capped at 28%

7. IMPACT ON
SERVICE SECTOR

8. Impact
Service tax
GST
Service tax based on Centralized concept (i.e. Centralized registration)
GST based on De-centralized concept
Single registration for each State
Option given for having more than one registration having separate ‘business vertical’
Each registration a distinct person

9. Impact – Deemed supply (Schedule I)
Service tax
GST
Settled law that Service to self is not liable to Service tax.
Precot Mills Ltd vs CCE 2006 (2) STR 495
Supply of goods / services between related persons, or between distinct persons as specified in section 10, when made in the course or furtherance of business.
Service to self, even if without consideration, deemed as ‘supply’ so long as supply between separate registrations (Schedule I)
Engineers from Unit located in T.N. sent to Unit located in Gujarat for repair works

10. Impact – Deemed supply (Schedule I)
Service tax
GST
Disposal of business assets free of cost not liable to tax.
Transactions/ services provided free of cost not liable to Service tax
Permanent transfer / disposal of business assets where input tax credit has been availed on such assets – treated as supply even if made without consideration
Import of service free of cost/ without consideration not liable to Service tax
Volkswagen India P Ltd vs CCE, Pune 2013 (34) STR 135
Import of services by a taxable person from a related person or from any of his other establishment outside India, in the course or furtherance of business – treated as supply

11. Impact – Deemed supply (Schedule I)
Example
Ex. Holding Co. ‘X Ltd.’ in Japan sends Japanese personnel to ‘Y Ltd’ in India. The said Japanese personnel become employees of Y Ltd. in India.
Y Ltd. pays the salary partly in INR and partly in Japanese Yen.
The Japanese Yen salary paid by X Ltd. directly in the Japanese accounts of the said personnel.
X Ltd. does not charge any amount from Y Ltd. for this activity. Y Ltd. simply reimburses X Ltd. of the amount transferred to the Japanese accounts.
The GST implication between X Ltd. and Y Ltd. ?

12. Impact – ‘Supply of service’ (Schedule II)
Service tax
GST
Labour portion of works contract made part of Service tax w.e.f Works contract being indivisible in nature not liable to tax prior to
CCE vs Larsen and Toubro 2015 (39) STR 913 (SC)
Works contracts treated as ‘supply of services’
[refer Schedule II]
‘works contract including transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract’
‘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;

13. Impact – ‘Supply of service’ (Schedule II)
Renting of immovable property
Construction of complex, building civil structure, including building intended for sale, except where the entire consideration has been received after completion certificate
Temporary transfer/ permitting the use/ enjoyment of any intellectual property right
Development, design, programming, customisation etc. of I.T. Software
Agreeing to the obligation to refrain from an act, or to tolerate an act etc.
Transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration
Supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration.

14. Impact – Club and Members
Service tax
GST
Transaction between club and its members not liable to Service tax.
Indian Bank Association vs CST 2016 (44) STR 304
Ranchi Club Ltd vs CC 2012 (26) STR 601 (Jhar)
Sports Club of Gujarat Ltd. vs 2013 (31) STR 645 (Guj.)
The definition of ‘business’ includes provision by a club, association, society or any such body corporate (for a subscription or any other consideration) of the facilities or the benefits to its members as the case may be;
Services provided by Clubs/ Associations, etc. ?
Services provided by Society to its members?

15. SCHEDULE III– ACTIVITIES NEITHER AS SUPPLY OF GOODS NOR SUPPLY OF SERVICES
Services by an employee to the employer in the course of or in relation to his employment.
Services by an Court or Tribunal established under any law for the time being in force
Functions performed by the Member of Parliament, MLA, Member of Panchayat, Member of Municipalities, and Members of other local authorities
Duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity
Duties performed by any person as Chairperson or Member or Director in a body established by the Central Government/ State Government, who is not deemed as an employee
Services by a foreign diplomatic mission located in India
Services of funeral, burial, crematorium or mortuary including transportation of the deceased.

16. Electronic Commerce transactions
Deletion of deemed supplies by aggregators: The concept of aggregators and deemed supplies of branded services by an aggregator under his own brand name or trade name deleted.
Electronic Commerce Operator liable for specified services: Electronic Commerce Operator has been made liable to pay tax on certain specified categories of services, as may be notified. In case Electronic Commerce Operator does not have physical presence in the taxable territory, his representative in taxable territory shall be liable to pay tax. Further in case he does not even have a representative in taxable territory, he shall appoint a person in taxable territory for the purpose of paying tax.
TCS on net value of taxable supplies: Electronic Commerce Operator will be liable to collect tax at source on the net value of taxable value of supplies made through its portal. “Net value of taxable supplies” shall mean the aggregate value of taxable supplies of goods or services, other than services for which Electronic Commerce Operator is itself liable to pay tax made during a month by all registered taxable persons reduced by the aggregate value of taxable supplies returned to the suppliers during the said month.

17. Impact - Valuation Service tax GST
Interest and late payment fee/ fine were not included in the value of taxable service for the purpose of payment of Service tax.
Circular No. 32/3/2000-CX dated (delayed payment on telephone bills, surcharge)
Interest/ late payment included in the value for the purposes of GST
‘consideration’ includes –
Any amount that is payable for the taxable services provided or to be provided …
‘consideration’ in relation to supply of goods or services includes –
Any payment made or to be made whether in money or otherwise, in respect of, in response to, or for the inducement of supply of goods or services, whether by the recipient or by any other person…

18. IMPACT ON
MANUFACTURERS

19. Impact Excise GST Excise was Unit Based registration
Unit engaged in manufacturing activity was required to obtain registration
Single registration to be take in a Single State.
Option given to have multiple registration in case having multiple business verticals
‘Business vertical’ means a distinguishable component of an enterprise that is engaged in supplying an individual product or service or group of related products or services and that is subject to risks and returns that are different from those of other business verticals;

20. Impact
Excise
GST
The definition of ‘goods’ read every kind of movable property other than actionable claims…
The definition of ‘goods’ under the Draft GST Law has been amended to include ‘actionable claims’ and exclude ‘securities’ from its ambit
The Supreme Court in the case of UOI vs Martin Lottery Agencies Ltd 2009 (14) STR 593 was dealing with the question of whether sale, marketing of lottery tickets would be liable to Service tax under Business auxiliary service.
The relevant entry was ‘promotion or marketing or sale of goods produced or provided or belonging to the client’.
It was held that lottery tickets being actionable claims could not be said to be covered in the definition of ‘goods’.

21. Impact Composite supply/ Mixed supply
Provisions regarding determination of tax liability in case of mixed and composite
supply have been provided.
A composite supply comprising two or more supplies of goods or services (one of
which is a principal supply), shall be treated as a supply of such principal supply
which plays the dominant role.
A mixed supply comprising two or more supplies (where such supply does not
constitute a composite supply) shall be treated as supply of that particular supply
which attracts the highest rate of tax.

22. Composite supply/ Mixed supply
Supreme Court in the case of Nokia India 2015 (315) ELT 162(SC) held that charger is not integral part of mobile phone and will be chargeable to VAT at the residuary rate uninfluenced by the VAT rate on mobile phone
‘Mixed supply’ means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply
‘Composite supply’ means a supply made by a taxable person to a recipient comprising two or more supplies of goods or services, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is principal supply;

23. Issues-Composite supply/ Mixed supply
Mobile phone along with charger in a single pack ?
Hamper of goods – aerated drinks, chips, biscuits, cakes, etc. supplied at a single price ?
Supply of popcorn along with aerated beverage for a single price?

24. Impact – Deemed supply (Schedule I)
Matters treated as supply even if made without consideration
Permanent transfer / disposal of business assets where input tax credit has been availed on such assets.
Supply of goods / services between related persons, or between distinct persons as specified in section 10, when made in the course or furtherance of business.
Supply of goods-
By a principal to his agent where agent undertakes to supply such goods on behalf of principal, or
By an agent to his principal where the agent undertakes to receive such goods on behalf of principal

25. Deemed supply
ISSUE : Supply of goods through commission agents
a) Direct supply to agent
Principal
Agent
Transaction between Principal and Agent deemed as a supply, even if without consideration

26. Deemed supply ISSUE: Supply of goods through commission agent•
Delivery of the goods directly to the dealer on the direction of the agent shall be deemed as supply to the agent
Place of supply: Principal
Place of business of agent
b) Indirect supply to agent Ag
ent e
Principal
Dealer

27. REGD. JOB WORK- RELEVANT DEFINITIONS
“Job work” means undertaking any treatment or process by a person on goods belonging to another registered taxable person and the expression “job worker” shall be construed accordingly;
Principal
“Principal” means a person on whose behalf an agent carries on the business of supply or receipt of goods and/or services;

28. JOB WORK – SECT. 55 Job worker performs job work activity
Principal pays duty and clears domestically / exports from premises of j/w
Principal sends goods
J/w is reg. as ABOP; or
J/w is reg. u/s.19; or
Goods sent back to Principal after processing
& principal pays duty and clears domestically
/ exports from own premises
Notified supplies
Final responsibility for accounting of goods and payment of tax on principal in all cases

29. Impact-Valuation Excise GST Transaction value and MRP based assessment
Transaction value method
Subsidy given by the Central Government or a State Government will not be included in the value of taxable supply
Not includable earlier
Interest or late fee or penalty for delayed payment of any consideration will be included in the taxable value
Stock transfers not taxable
Stock transfers liable to GST

30. Impact
Excise
GST
Cess cannot be taken as Credit for discharging Excise duty liability
Seamless flow of Credit
CST cost
ITC reversal on stock transfers
Non adjustable Entry tax in some States

31. IMPACT
TRADING

32. Impact
Supply of goods in the course of import into the territory of India till they cross the customs frontier of India shall be deemed to be a supply of goods in the course of inter-state trade or commerce;
High sea sales ?

33. PROCEDURAL ASPECTS Forms To continue in the GST regime Form C Form H
Form F
No longer relevant under GST regime.
Transit Pass
Check
Posts
Road
Permit

34. IMPACT
PLACE OF SUPPLY OF GOODS AND SERVICES

35. CONCEPT OF PLACE OF SUPPLY
Attempt to synchronize with POPS for Services
Determines nature of supply
Determines where GST is payable

36. Place of Supply Place of Supply for Services
Place of supply (POS) of services have been categorised as under:
(i) Where the location of supplier of service and the location of the recipient of
service is in India
(ii) Where the location of supplier of service or the location of the recipient of
service is outside India
Place of supply of goods
(i) Imported goods-POS is location of importer
(ii) Exported goods-POS is location outside India

37. Under category (i) place of supply of specific services have been modified as under:
S. No.
Type of Service
Model GST Law
Revised Model GST Law
Impact 1
Supply of
services in
relation to
immovable
property
Location at which
the immovable
In case immovable
property is located
outside India, POS
shall be the location of
recipient
Services in relation to
immovable property will be taxable in India whether the immovable property is located
within or outside India. 2
services by way
of organization
of event
B2B- Location of
registered person
receiving the
service
B2C- Place where
the event is actually
held
In case event is held outside India, POS shall be the location of recipient
Services by way of
organisation of event will be taxable in India whether the event is held within or outside India.

38. POS of services for category (ii) are as under:
S. No.
Type of Service
Model GST Law
Revised Model GST Law
Impact 1
General Services
B2B- Location of recipient
registered person
B2C- Location of the
recipient where the address
on record exists, and
the location of the supplier of
services in other cases.
Location of recipient
Location of supplier
if above is not
available - 2
Supply of
services relating
to actual
performance in
respect of goods
B2C- Location of the recipient where the address
on record exists, and the location of the supplier of services in other cases.
Location where the
services are actually
performed
Services performed in
India will be taxable in India
and services performed outside
India will not be taxable.

39. POS of services for category (ii) are as under:
S. No.
Type of Service
Model GST Law
Revised Model GST Law
Impact 3
Supply of services to
individual requiring
their physical
presence
Location where the
services are actually
performed - 4
Supply of services in relation to immovable property
Location at which the immovable property
Place where the event is actually held 5
Supply of services relation to admission to event or amusement park or any other place 6
Supply of services by way of organization of event
B2B-Location of registered person receiving the service
B2C-Place where the event is actually held
Event organised by supplier located outside India will not be taxable in India

40. POS of services for category (ii) are as under:
S. No.
Type of Service
Model GST Law
Revised Model GST Law
Impact 7
Supply of banking and other financial services
Location of the recipient of services on the records of the supplier of services
Location of supplier of service
Banking services to recipient located outside India will also be taxable in India 8
Supply of intermediary services and hiring of means of transport
B2B-Location of recipient registered person
B2C-Location of recipient where the address on records exists, and the location of the supplier of services in other cases
Such services provided to recipient located outside India will be taxable in India
Such services provided by provider outside India will not be taxable in India 9
Supply of services by way of transportation of goods, including by mail or courier
B2B-Location of registered person receiving the service
B2C- Location at which such goods are handed over for their transportation
Location of destination of goods
Transportation services to recipient located outside India for export of goods will not be taxable in India

41. Under category (i) place of supply of specific services have been modified as under:
S. No.
Type of Service
Model GST Law
Revised
Impact 10
Supply of passenger transportation service
B2B-Location of registered person receiving the service
B2C-Place where the passenger embarks on the conveyance for a continuous journey
Place where the passenger embarks on the conveyance for a continuous journey
Such services will not be taxable in India where passenger embarks outside India for continuous journey 11
Supply of online information and database access or retrieval services
B2B-Location of recipient registered person
B2C-Location of recipient where the address on record exists, and location of the supplier of services in other cases
Location of recipient -

42. OTHER
IMPACT AREAS

43. Input tax Credit
Changes related to Capital goods: The definition of capital goods has been amended and the said expression now covers all goods which are capitalised in the books of accounts of the person claiming the credit and these goods are used or intended to be used in the course or
furtherance of business.
Under the proposed law, the credit in respect of capital goods and plant & machinery shall be available for utilisation only to the extent of one-third of the credit amount in the year of receipt and two-third in the year subsequent to the year of receipt.
The credit of motor vehicle has been extended for situations where such motor vehicle itself is being supplied and also in situations where the same is used for transportation of goods.

44. Input tax Credit
Changes related to Input services: A new proviso has been inserted to disable the supplier of such goods/ services on which tax is payable on reverse charge basis from taking input tax credit.
A provision similar to the present Rule 4(7) of the CENVAT Credit Rules, 2004 has been introduced providing that payment of the amount towards value of input services and tax payable thereon must be paid to the supplier of services within three (3) months failing which the credit amount shall be required to be paid as an output tax liability along with interest.
The credit on activities relating to employee welfare like life insurance, etc. have been allowed subject to the condition that the such benefits are notified by the Government as obligatory for employer to provide to employees under a law for the time being in force.
Like the present CENVAT Credit Rules, 2004, the credit of works contract service and supplies received from construction of immovable property has been restricted.

45. Supply to/ by SEZ
Provisions with regard to supplies made by/to a SEZ developer or an SEZ unit have been incorporated in the revised draft laws.
Supply of goods and/ or services to or by a SEZ developer or an SEZ unit has been proposed to be deemed as inter-State supply.
Supply of goods and/ or services to or by a SEZ developer or an SEZ unit shall be treated as zero rated supply.
The SEZ developer or SEZ unit receiving zero rated supply shall be eligible to claim refund of IGST paid by the registered taxable person on such supply.

46. Goods and Services Tax Compensation Cess
For the purpose of providing compensation to the States for loss of revenue arising on account of implementation of GST for the period of five years, proposal has been made for levy and collection of GST Compensation Cess.
This cess will be leviable on the supplies (including imports and those on which tax is payable on reverse charge basis) which may be prescribed on the
recommendations of the GST Council.
Input tax credit of the said cess will be available which can be further utilized only towards payment of such cess chargeable on outward supplies.
Applicable rate of this cess will be notified separately.
Separate format of return and form for claiming refund of this cess will be prescribed.

47. Anti-profiteering measures
The revised model law also proposes anti-profiteering measure to ensure that the businesses pass on the tax benefits derived from implementation of GST, in the form of increased availability of input tax credit, reduction in tax rate, etc., by way of reduction in prices of their supplies to the consumers.
For implementation of this measure, the Central Government may constitute an
Authority or may entrust the work to an existing Authority constituted under any law.
Such Authority will exercise its powers (including those for imposition of penalty) in the cases in which it finds that the price being charged has not been reduced on account of tax benefits derived from implementation of GST.

48. Power of CAG to call for information
The Comptroller & Auditor General (CAG) or officers authorized by him are
proposed to be empowered to seek information and returns which are furnished under the GST Act and required by them for conduct of audit under the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act.

49. Joint and several liability for payment of tax
An agent and his principal are proposed to be made jointly and severally liable for payment of tax payable on such goods which are supplied or received by the agent on behalf of his principal.
Every person who was a director in a private company during the period for which any tax due in respect of any supply of goods or services cannot be recovered is proposed to be made jointly and severally liable for the payment of such tax unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company.

50. Thank you