1. GST Cess/Tax Rates/Other Miscellaneous Provisions
CA Dr Arpit Haldia
FCA, CS, CWA, Ph.D., LL.B. DISA, DIRM (ICAI)

2. GOODS AND SERVICES TAX (COMPENSATION TO THE STATES FOR LOSS OF REVENUE) BILL, 2016

3. Key Terminology Purpose of Levy of GST Compensation Cess: Section 8
Provide compensation to States for loss of revenue arising on implementation of GST Act for a period of five years, w.e.f. date from which the CGST Act is brought into force.
Base Year -Section 4:
Financial Year Ending 31st March 2016
Input Tax : Section 2(8)
GST Compensation Cess charged on
Any supply of goods and/or services to him,
On import of goods, and includes
Payable on reverse charge basis.

4. Key Terminology Projected Growth Rate : Section 3
14% Per Annum for revenue subsumed for a State
Transition Period: Section 2(16)
Period of Five Years from the Transition Date
Transition Date: Section 2(15)
Date on which the Goods and Services Tax Act of the concerned state comes into force
Compensation Payable to States:
Projected revenue for any financial year Less actual revenue collected by a State

5. Base Year Revenue-Taxes Included
VAT, sales tax, purchase tax, tax collected on works contract, or any other tax levied by the concerned State under the erstwhile Entry 54 of List-II (State List)
Central Sales Tax (CST) levied by the Central Sales Tax Act, 1956;
Entry tax, octroi, local body tax or any other tax levied by the concerned State under the erstwhile Entry 52 of List-II (State List)

6. Base Year Revenue-Taxes Included
Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling or any other tax levied by the concerned State under the erstwhile Entry 62 of List-II (State List)
Taxes on advertisement or any other tax levied by the concerned State under the erstwhile Entry 55 of List-II (State List)

7. Base Year Revenue-Taxes Included
Duties of excise on medicinal and toilet preparations levied by the Union but collected and retained by the concerned State Government under the erstwhile Article 268 of the Constitution
Any cess or surcharge levied by the State Government under any Act which is included in the definition of ‘earlier laws’ as per section 2(39) of the State Goods and Services Act of the concerned State

8. Base Year Revenue-Taxes Included
Taxes and Cess levied by the State and taxes levied under the CST Act, 1956 (74 of 1956)
Sale or purchase of petroleum crude,
High speed diesel,
Motor spirit (commonly known as petrol),
Natural gas,
Aviation turbine fuel and
alcoholic liquor for human consumption;
Entertainment tax levied by the State but collected by local bodies,

9. Projected Revenue in a Year
The projected revenue for any year in a State shall be calculated by applying the projected growth rate over the base year revenue of that State.
Illustration: If the base year revenue for for a concerned State, calculated as per section 5, is Rs. 100, then the projected revenue for, say, financial year shall be as follows:
=100(1+14/100)3

10. LEVY AND COLLECTION OF GST Compensation Cess
Levy: Supplies of goods and services, including
Imports of goods and services, and
Supplies on which tax is payable on reverse charge basis under CGST Act,
Not leviable section on supplies made by a taxable person permitted to opt for composition levy under CGST Act.
Prescribed on the recommendations of GST Council.
Value : Value determined under section 15 of CGST Act, 2016
Rate : To be Notified

11. Returns under GST Cess Who is Liable to File Returns:
Every taxable person registered under CGST Act, 2016
Making a taxable supply of goods and/or services,
How Return is to be Filed:
Return to be furnished in formats, as may be prescribed,
Along with the returns to be filed under the CGST Act
How Tax is to be Paid or refund is to be applied:
In the manner as may be prescribed
Whether Returns & Refunds Format would be same in CGST
Separate Formats would be prescribed.

12. Utilization of proceeds to GST Compensation Fund
Proceeds to be credited to a non-lapsable fund known as the GST Compensation Fund
The proceeds shall be utilized for payment of compensation to the States.
Amount Remaining Unutilized at the end of the Transition Period :
Fifty percent of the amount remaining unutilized shall be transferred to the Consolidated Fund of India, and shall be distributed between the Centre and the States and amongst the States as per provisions of clause (2) of article 270 of the Constitution;
Balance fifty percent shall be distributed amongst the States in the ratio of their total revenues from SGST in the last year of the transition period.

13. Utilization of ITC of GST Compensation Cess
Input Tax Credit in respect of GST Compensation Cess on supply of goods and services leviable under section 8, can be utilised only towards payment of GST Compensation Cess on supply of goods and services leviable under section 8.

14. Anti-Profiteering Measure – Section 163

15. Anti Profiteering Measures
3 C’s OF Business –Relevant for Pricing in Business
Company
Customer
Competitor
Anti-Profiteering Measures Adding the Fourth
Compliance

16. Anti-Profiteering Measure -163
Who would Monitor APM:
Authority Constituted by Central Government by law constitute or an existing Authority constituted under any law
What would be Relevant Factor under APM:
Input tax credits availed by any registered taxable person or
Reduction in the tax rate

17. Anti-Profiteering Measure -163
What would be Examined in APM:
Whether availment of ITC or reduction in Tax Rate has actually resulted in a commensurate reduction in the price of the said goods and/or services supplied by him.
What are the powers of the Authority:
Authority would have powers, including those for imposition of penalty, where it finds that the price being charged has not been reduced as aforesaid.

18. GST and Uncertainty
Uncertainty and Ambiguity Surrounding Implementation of GST
Cost of Compliance in GST
Effect of GST on Liquidity
Whether GST would result in Increase of Prices of Product or Reduction

19. Points for Consideration
Transitional period is required for the Business for the date of Implementation for assessing the impact on Pricing.
The Law proposes to levy the Penalty if the benefit of the Input Tax Credit has not resulted in commensurate reduction in the price of the said goods/services supplied by him.
What about credit available and not availed by him.
What about credit availed but lying unutilized in his Input Tax Credit Account.
What about the factor of time wherein the Input Tax Credit remained unavailed with the taxable person.

20. Points for Consideration
One to one marking of the Input Tax Credit availed and Corresponding reduction how possible in case of Multiple Products
The Rules regarding the same needs to be made public early so that the businesses may plan accordingly.

21. Assessment Self Assessment: Section 57
Provisions Assessment: Section 58
Where the taxable person is unable to determine the value of goods and/or services or
Determine the rate of tax applicable thereto,
Scrutiny of returns-Section 59
Verify the Correctness of the Returns and Particulars
Inform the Taxable Person of the Discrepancies
Proceedings would be dropped if explanation found acceptable
No Explanation Furnished within Thirty Days/Taxable Person after accepting discrepancy does not take corrective action, proper officer may initiate appropriate action

22. Assessment Assessment of Non-Filer of Returns-Section 60
Registered Taxable Person fails to Furnish Return under Section 34/Section 40 after service of notice U/Sec 41
If the Return submitted within thirty days of the submission of the Assessment Order, The Assessment order shall be deemed to be Withdrawn
Five Years from the Due Date of Filing of Annual Return for the year to which such non-filing of return pertains
Assessment Of Unregistered Persons-Section 61
Where a person fails to take Registration even though liable to do so
Time Limit for Assessment: Five Years from the Due Date for filing of the Annual Return

23. Summary Assessment in Special Cases
Why Summary Assessment:
To Protect the Interest of Revenue, if he has sufficient ground to believe that any delay in doing so will adversely affect the interest of revenue
Permission Required
Permission of Additional/Joint Commissioner
Power to withdraw order passed in Summary Assessment
Erroneous order may be withdrawn and procedure laid down in Section 66/67 may be followed
Power to Withdraw the Order rests with Additional/Joint Commissioner on an application made by taxable person within thirty days from date of receipt of order or on his own motion

24. Audit By Tax Authorities
Who can Conduct the Audit:
Commissioner or any officer authorised by him by general or specific order
Where Audit would be Conducted:
Audit can be conducted at the business place or in their office
Time Limit for Completion of Audit:
Audit to be completed within three months from the date of commencement of Audit
Period of three month can be further extended the period by a period not exceeding six months
Time Limit for Passing of Order:
Order should be issued within thirty days from the conclusion of Audit.

25. Special Audit When can Special Audit be Ordered:
Special Audit can be ordered at any stage of scrutiny, enquiry, investigation or any other proceedings before officer not below the rank of Deputy/Assistant Commissioner
Who can order Special Audit
Deputy/Assistant Commissioner with the prior approval of the Commissioner,
Why Special Audit:
Special Audit can be conducted where having regard to the nature and complexity of the case and interest of revenue is of the opinion,
that the value has not been correctly declared or
the credit availed is not within the normal limits,

26. Special Audit Who can conduct a Special Audit Time Limit:
Special Audit has to be conducted by a chartered accountant or a cost accountant as may be nominated by the Commissioner in this behalf.
Time Limit:
Ninety Days and can be further extended by Ninety Days
Consequences of Any Detection in Special Audit:
If any detection of Tax Not Paid or short paid or erroneously refunded, or input tax credit wrongly availed, action may be initiated under section 66, or 67

27. Tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized
Order can be issued within Three years from the due date for filing of Annual Return for the relevant year or date of erroneous refund
Notice has to be issued at least Three months prior to the time limit for issuance of Order
If tax and Interest deposited suo-moto, before service of Notice, No Notice shall be served for levy of penalty
Order can be issued within Five years from the due date for filing of Annual Return for the relevant year or date of erroneous refund
Notice has to be issued at least Six months prior to the time limit for issuance of Order.
If tax, Interest and 15% of Tax deposited suo-moto, before service of Notice, No Notice shall be served for levy of penalty
Reason other than Fraud Willful Mis-Statement or Suppression of Facts to evade Tax
Reason of Fraud Willful Mis- Statement or Suppression of Facts to evade Tax

28. Tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized
If tax and Interest deposited within thirty days of issue of Notice, No Notice shall be served for levy of penalty
On considering representation, Proper Officer shall pass an order for tax, interest and a penalty equivalent to ten percent of tax or ten thousand rupees whichever is higher.
No Such condition exists under section 66 and maximum penalty to be levied in such cases is 10% of the tax or Ten Thousand Rupees,
If tax, Interest and 25% of Tax deposited within thirty days of issue of Notice, No Notice shall be served for levy of penalty
On considering representation of the person chargeable to tax, Proper Officer shall pass an order for tax, interest and penalty.
If tax, Interest and 50% of Tax deposited within thirty days of communication of order, All proceedings shall be deemed to be concluded
Reason other than Fraud Willful Mis-Statement or Suppression of Facts to evade Tax
Reason of Fraud Willful Mis- Statement or Suppression of Facts to evade Tax

29. Rectification of Mistake
Who can rectify the mistake
Any authority who has passed or issued ay decision or order or summons or notice or certificate or any other document
How can an officer rectify his mistake
Either on his own motion or
Where a mistake is brought to the knowledge of the proper officer within Three Months from the date issue of such order
through an application from the affected person or
by any CGST/SGST Officer

30. Rectification of Mistake
Which mistake can be rectified
Mistake which is apparent from record
Time Limit for Rectification
Six months from the date of issue of such decision.
Extended Time limit not applicable for rectifications purely in the nature correction of a clerical, arithmetical error or mistake arising from any accidental slip or omission.

31. Appeals to First Appellate Authority
Time Limit for Filing Appeal for a person: Three Months from the date on which the said decision or order is communicated
Time limit for filing of Appeal by the Department: Six Months from the date on which the said decision or order is communicated
Delay Condonation in Filing of Appeal: One month from the time limit prescribed above.
Pre-Deposit for filing of appeal: Admitted Tax, Interest, Fine, Fees and Penalty and 10% of remaining amount of tax in dispute

32. Appeals to First Appellate Authority
Departmental Authorities may ask the First Appellate Commissioner for Deposit of an higher amount not exceeding Twenty Five Percent of the amount of tax in dispute in “Serious Case”.
Serious Case is order passed under section 67 involving a disputed tax liability of not less than Rupees Twenty Five Crores
Maximum three adjournment can be given to a party during appeal.
First Appellate Authority can Confirm, Modify or Annul the order but shall not refer case back to the authority who passed the order.
Appeal wherever possible be heard and decided within a period of one year from the date on which it is filed.

33. Appeals to the Appellate Tribunal
Time Limit for Filing Appeal for a person: Three Months from the date on which the said decision or order is communicated
Time limit for filing of Appeal by the Department: Six Months from the date on which the said decision or order is communicated
Appeal Fee: There would be appeal fees which would have to be deposited before filing appeal before the Tax Tribunal
Delay Condonation in Filing of Appeal: Delay in filing appeal or memorandum of cross objections can be condoned on sufficient cause for not presenting within time.
Pre-Deposit for filing of appeal: Admitted Tax, Interest, Fine, Fees and Penalty and 10% of remaining amount of tax in dispute in addition to the amount deposited for appeal to the First Appellate Authority

34. Appeals to Appellate Tribunal
Appellate Tribunal may refuse to admit an appeal where tax, ITC, fine, fees or penalty determined does not exceed One Lakh Rupees
Forty Five days time limit for submission of Memorandum of Cross Objections by the party against whom appeal has been preferred
Departmental Authorities may ask the First Appellate Commissioner for Deposit of an higher amount not exceeding Twenty Five Percent of the amount of tax in dispute in “Serious Case” after taking int0 account amount deposited in the first appeal.
Serious Case is order passed under section 67 involving a disputed tax liability of not less than Rupees Twenty Five Crores

35. Appeals to Appellate Tribunal
First Appellate Authority can Confirm, Modify, Annul, refer the case back to the First Appellate Authority, Revisional Authority or tge original adjudicating authority.
Appeal wherever possible be heard and decided within a period of one year from the date on which it is filed.
Maximum three adjournment can be given to a party during appeal.

36. Appeal Before the High Court
No Appeal shall lie in the High Court against the order passed by the Tribunal wherein the order pertains to a matter where two or more States, or a State and Centre have difference In views regarding
Treatment of Transaction being Inter State or Intra State
Having difference of views regarding place of Supply
Time Limit for Filing of Appeal: 180 days from the date on which order appealed against is received
The Appeal shall be accompanied with such fees as may be prescribed.
High Court may condone the delay in filing of the Appeal.

37. Appeal to the Supreme Court
Appeal shall lie before the Supreme Court from any judgement or order passed by the High Court
On its Own Motion
On an oral application made by or on behalf of the party aggrieved
Time Limit: No specific Time Limit provided. The oral application has to be made immediately after passing of the judgement or order, which the High Court certifies fit to be appealed to Supreme Court.

38. GST Compliance Rating
Every taxable person to be assigned GST compliance rating.
The rating score based would be based on his record of compliance with the provisions of this Act.
The basis of parameters would be prescribed in this behalf.
GST compliance rating score would be updated at periodic intervals.
The rating would be intimated to the taxable person and also placed in the public domain in the manner prescribed.

39. Use of GST Compliance Rating (As per Draft Business Process)
Any fall in the rating below a prescribed level will have impact of blacklisting a dealer.(As per Business Process)
Blacklisted GSTINs cannot be uploaded in purchase details. Corresponding denial of ITC to be supported by suitable provision in the law. (No such provision till date in Law)
Would act as Trigger for Blacklisting
Continuous default for 3 months in paying ITC that has been reversed.
Continuous default of 3 months or any 3 month-period over duration of 12 months in uploading sales details leading to reversal of ITC for others.
Continuous short reporting of sales beyond a prescribed limit of 5% (of total sales) for a period of 6 months.

40. Effect of Blacklisting (As per Draft Business Process)
Only for regulating ITC by others.
Will be based on dealer rating. A dealer will be blacklisted if dealer rating falls below the prescribed limit.
To be put in public domain.
To be notified (auto-SMS) to all dealers who have pre-registered this dealer (black listed now) as their supplier.
To be prospective only (from month next to blacklisting)

41. Effect of Blacklisting (As per Draft Business Process)
Blacklisted GSTINs cannot be uploaded in purchase details. Corresponding denial of ITC to be supported by suitable provision in the law.
ITC reversal in hands of the buyer should take place for disowning of any tax invoice.
Once blacklisting is lifted, buyers can avail unclaimed ITC subject to this dealer uploading sales details along with tax and interest.

42. Rate of Tax
Average Tax Rate in GST Lower than 18% and Consumer Goods i.e. Food Grains, Agri Porducts and Mass Consumption goods to be taxed at lower rate
The 4 tier rate structure as finalized is different than the one earlier proposed in the GST Council Meeting i.e. 6%, 12%, 18% and 26%. There seems to have been a view to bring the lower rate of GST to a more reasonable level so as to take along the public as all the common use goods would be under the tax net at the rate of 5%.

43. Rate of Tax
The detailed tax structure is yet to be specified, the lower tax rate structure was reduced from 6% to 5% and to accommodate the reduction, the higher tax rate slab has been increased from 26% to 28%.
Food being an essential item has been kept in zero rated category. These items are not exempt but are under zero rated category thereby meaning that the goods would be taxes at zero rate. This would mean that there would be no cascading effect on the cost of such items. These items also constitute 50% of the Consumer Price Index, therefore such zero tax rate would keep inflation in check.

44. Rate of Tax
Lower rate of 5% would be prescribed for mass consumption items which are used buy common public.
There would be two standard rates in GST i.e. 12% and 18%. How the two standard rates would be used is yet to be clarified.
Tax Rate of 28% would be levied on the White Goods and Luxury Goods along with the other demerit goods. White goods are generally termed as large electrical goods used domestically such as refrigerators and washing machines etc. These goods are being presently taxed at 30-31% i.e. Excise, VAT and CST and their cascading effect.

45. Rate of Tax
Luxury Cars, Tobacco and Aerated drinks which would be taxable at the rate of 28% would also bear an additional cess. This revenue generated from additional cess would be used for the purpose of compensating the states from the revenue loss from implementation of GST and removal of CST. This cess would be applicable for first five year and would then lapse.
Tax Rate on Gold items is yet to be announced. This seems to be the most contentious issue as the rate has been put on hold for further discussion with the Industry.