Levy under the revised draft GST Laws

December 05,2016
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Ritesh Kanodia, Partner, Dhruva Advisors LLP
Sachin Sharma, Principal

The Government of India has issued the revised draft Central Goods and Services Tax Act, State Goods and Services Tax Act (cumulatively referred to as the ‘GST Act’) and the Integrated Goods and Services Tax Act (‘IGST Act’) making some noteworthy changes and addressing some evident lacunas which appeared under the erstwhile draft law.

Changes have been made to some of the definitions having a bearing on the taxability of supplies. The definition of ‘aggregate turnover’ has been amended to exclude ‘non-taxable’ supplies, which has a positive bearing on the determination of threshold limit and eligibility for the composition scheme. The definition of ‘consideration’ has been amended to exclude State and Central Government subsidies. There is an ongoing dispute as to whether such subsidies are subject to service tax.

The definition of ‘goods’ has been amended to exclude securities and to include actionable claims.  Consequently, transactions involving securities will not be subject to GST, as they already attract stamp duty and STT. Under the previous draft law, actionable claims were classified as ‘services’, and hence there was no change in the levy per se. The definition of goods has been amended to include intangible property, which was previously excluded. It is expected that the Government will issue a specific list classifying intangibles as goods or services, in order to bring greater clarity. These amendments could have an impact qua the rates, as goods are subjected to tax under a four-tier rate structure, i.e. 5%, 12%, 18% and 28% + cess, whereas services are taxed at 18%.There could also be an impact on import transactions, as customs duty applies to transactions involving goods. However, the deeming fiction created under the draft GST Act may not apply to the Customs law, resulting in double taxation e.g.

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Aggregate turnover includes exempt supplies and exempt supplies include non taxable turnover

Aggregate turnover includes exempt supplies and exempt supplies include non taxable turnover


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