GST-Concepts

GST-Concepts

Subject: Economy

Section: Fiscal Policy

Context:

The GST Council on the first of its two-day meet in Chandigarh saw a general consensus among states on rate rationalisation, which includes correcting inverted duty structures and expanding the tax base.

Concept:

GST Council:

• It is a constitutional body under Article 279A.
• It makes recommendations to the Union and State Government on issues related to Goods and Service Tax and was introduced by the Constitution (One Hundred and First Amendment) Act, 2016.
• As per Article 279A of the amended Constitution, the GST Council which will be a joint forum of the Centre and the States, shall consist of the following members: –
  • Union Finance Minister – Chairperson
  • The Union Minister of State, in-charge of Revenue of finance – Member
  • The Minister In-charge of finance or taxation or any other Minister nominated by each State Government – Members
• As per Article 279A (4), the Council will make recommendations to the Union and the States on important issues related to GST, like the goods and services that may be subjected or exempted from GST, model GST Laws, principles that govern Place of Supply, threshold limits, GST rates including the floor rates with bands, special rates for raising additional resources during natural calamities/disasters, special provisions for certain States, etc.
• Every decision of the Goods and Services Tax Council shall be taken at a meeting by a majority of not less than three-fourths of the weighted votes of the members present and voting, in accordance with the following principles, namely:
  • the vote of the Central Government shall have a weightage of one third of the total votes cast, and
  • the votes of all the State Governments taken together shall have a weightage of two-thirds of the total votes cast, in that meeting.

GST Compensation:

Under GST, as per the Goods and Services Tax (Compensation to States) Act, 2017, the states were guaranteed compensation at the compounded rate of 14 per cent from the base year 2015-16 for losses arising due to implementation of the taxation regime for five years since its rollout. The compensation regime will end in June.

Revenue Neutral rate:

In the context of Goods and Services Tax in India, the Revenue Neutral Rate is a rate of GST at which the amount of taxes currently collected by the government and the amount expected to be collected after GST remains the same.

Inverted Tax Duty

The term ‘Inverted Tax Structure’ refers to a situation where the rate of tax on inputs purchased (i.e.GST rate paid on inputs received) is more than the rate of tax on outward supplies (i.e. GST rate payable on sales).

Thus, IDS refers to higher duty on inputs and lower levy on finished products, which leads to refunds burdening the exchequer.

Refund in case of Inverted Tax Structure under GST:

A registered person may claim a refund of unutilised Input Tax Credit (ITC). The ITC on account of inverted tax structure can be claimed at the end of any tax period where the credit has accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies. A tax period is a period for which a return is required to be furnished.

Exceptions where the refund of the unutilised input tax credit cannot be claimed, are as follows:

• Output supplies are nil rated or fully exempt supplies except for supplies of goods or services or both as may be notified by the Government on the recommendations of the GST Council.
• If the goods exported out of India are subject to export duty.
• If supplier claims refund of output tax paid under IGST Act.
• If the supplier avails duty drawback or refund of IGST on such supplies.

E-Way bill system:

E-Way bill system is for GST registered person / enrolled transporter for generating the way bill (a document to be carried by the person in charge of conveyance) electronically on commencement of movement of goods exceeding the value of Rs. 50,000 in relation to supply or for reasons other than supply or due to inward supply from an unregistered person.

E-Way Bill is a compliance mechanism wherein by way of a digital interface the person causing the movement of goods uploads the relevant information prior to the commencement of movement of goods and generates an e-way bill on the GST portal.

An electronic way bill or ‘e-way bill’ system offers the technological framework to track intra-state as well as inter-state movements of goods of value exceeding Rs 50,000, for sales beyond 10 km in the Goods and Services Tax (GST) regime. When an eway bill is generated, a unique E-way Bill Number (EBN) is allocated and is available to the supplier, recipient, and the transporter.

It was launched to:

• Facilitate faster movement of goods.
• Improve the turnaround time of vehicles.
• Help the logistics industry by increasing the average distances travelled and reducing the travel time as well as costs.

E-Way Bill Rules

According to notified e-way bill rules, every supplier requires prior online registration on the e-way bill portal for the movement of goods. Tax officials have the power to scrutinise the e-way bill at any point during transit to check tax evasion.

Validity:

• The rules also specify that the permits for conventional cargo (other than over-dimensional carve) are valid for one day for the movement of goods for 100 km, and in the same proportion for the following days.
• In general, validity of the e-way bill cannot be extended but a commissioner may extend the validity period only through issuing notification for certain categories of goods.

Penalty for goods moved without generating a valid e-way bill:

• A fine of Rs 10,000 or amount of tax sought to be evaded, whichever is higher, may be imposed by tax authorities.
• In such a situation, goods, and the vehicle transporting them, can be detained or seized.
• An e-way bill can be regenerated by the transporter before expiry, but, if the e-way bill has expired, the system won’t allow regeneration linked to the same invoice.

Specific goods that are exempt from e-way bill rules are:

• Liquefied petroleum gas for supply to household and non-domestic exempted category customers
• Kerosene oil sold under Public Distribution System (PDS)
• Postal baggage transported by Department of Posts
• Natural or cultured pearls and precious or semi-precious stones; precious metals and metals clad with precious metal
• Jewellery, goldsmiths’ and silversmiths’ wares and other articles
• Currency
• Used personal and household effects
• Unworked and worked coral
• Goods transported are alcoholic liquor for human consumption, petroleum crude, high-speed diesel, petrol, natural gas or aviation turbine fuel.
• Goods being transported are not treated as supply under Schedule III of the Act. Schedule III consists of activities that would neither be a supply of goods nor service like service of an employee to an employer in his employment, functions performed by MP, MLA etc.
• Goods transported are empty cargo containers

Other transactional cases where e-way bill is not required are:

• e-Way Bill is optional for doods of value less than Rs. 50,000 (except in cases of mandatory e-way bill provisions like the movement of Handicraft goods and movement of goods for Interstate Job work)
• If goods are being transported by a non-motorised conveyance (Ex. Horse carts or manual carts)
• If goods are being transported:
• From the port, airport, air cargo complex and land customs station to an inland container depot (ICD) or a container freight station (CFS) for clearance by Customs
• From ICD or CFS to a customs port, airport, air cargo etc under customs bond
• From one customs port/station to another one under customs bond
• Goods transported under the customs supervision or customs seal
• Goods transported within the notified area
• Goods transported are transit from/ to Nepal/ Bhutan
• If goods are transported to a weighbridge within 20kms and back to the place of business covered under a Delivery Challan (DC)
• Where Government or local authorities transport goods by rail as a consignor
• Goods transported to/from the Ministry of Defence