CBEC has released 2nd edition of FAQ clarifying Central Goods and Service Tax (CGST) Bill, Integrated Goods and Service Tax (IGST) Bill, Union Territory Goods and Service Tax (UGST) Bill and the Goods and Service Tax (Compensation to the States) Bill passed in the Lok Sabha. These FAQs would greatly assist in making a smooth transition to the Goods and Services Tax (GST) regime and meeting the proposed deadline of 30 June 2017.
There are around 541 FAQs’ which has been divided 23 Chapters. Some interesting issues that have been clarified in the FAQs are briefly dealt with below.
1. Transitional Provisions Relating to Pending Proceedings
If any recovery to be instituted under the current regime has not been instituted till the date on which GST is made effective (Appointed Date) then recovery shall be made under the GST regime. However, in proceedings which are instituted under the current law after the Appointed Date where refund is payable to the assessee, the refund shall be paid in cash and not as credit, as per the current law. In case of pending refund claims on the date of transition, the claims shall be disposed of, as per the existing law.
2. Composite Supply vs Mixed Supply
In order to reduce classification disputes, it has been clarified that a composite supply consists of a principal supply and supplies (of goods and services) which are dependent on such principal supply, and shall be taxed at the rate applicable to such principal supply. A mixed supply consists of various independent supplies which can be isolated and shall be taxed at the highest rate applicable on any of the underlying supplies.
3. Single Registrations within the State
Single registration shall be given against 1 (one) (PAN) and all the other branches within the state can be registered as additional places of business. This would greatly reduce the compliance burden in several scenarios.
4. Compulsory registration for E-commerce Operators and Suppliers
All e-commerce operators are required to obtain registration irrespective of the threshold exemptions prescribed for turnover. Any supplier which makes a supply through an e-commerce operator will also be required to obtain registration even if the turnover is less than the threshold specified. Separately, the concept of matching returns / statements for the ecommerce operator and the supplier has been introduced.
5. Provisions Relating to Job-Workers
Any processing activity carried out by a person on another person’s goods is deemed to be a “service”. Accordingly, any job-worker who exceeds the prescribed threshold (in terms of turnover) for exemption shall be required to register. The supply of goods made by the principal manufacturer, directly from the job-worker’s premises, shall not be included in the turnover of the job-worker. Such direct supply can only be effected if (i) the job-worker is registered, or (ii) the premise is registered as an additional place of business of the principal manufacturer, or (iii) the permission of the jurisdictional Commissioner has been taken.
6.Import of Service without Consideration
Any import of service without consideration shall not be subject to GST except when such imports are from a related person / related establishment and is in the course of, or in furtherance of business.
7. No refund of Unutilized Credit
There is no mechanism of seeking a refund for the credit that remains unutilized at the end of a financial year. The unutilized credit can be carried forward to the next financial year.
8. Refund of wrongly Paid IGST / CGST / SGST
If an assessee pays CGST & SGST / IGST by wrongly assuming a transaction to be intra-state / inter-state then the wrongly paid tax cannot be adjusted against the CGST & SGST / IGST liability that arises subsequently. However, a refund can be sought for the wrongly paid tax.
9. Proof for Non-applicability of Unjust Enrichment
The proof for non-applicability of the principle of unjust enrichment, when the (i) amount sought to be refunded is less than INR 2 lacs, shall be a self-declaration; and (ii) quantum of refund is more than INR 2 lacs, shall be a certificate from a chartered accountant certifying that the incidence of duty has not been passed on to another person.
10.Binding Value of Advance Rulings
The advance ruling sought shall be binding only on the applicant and the jurisdictional tax authority of the applicant and shall not hold any precedential value. It cannot bind a similarly circumstanced assessee, but the ruling can have persuasive value. The advance ruling shall remain valid when the conditions (law, facts, and circumstances) supporting the ruling do not change. Undoubtedly, the assessee may challenge the advance ruling before the jurisdictional High Courts by invoking its writ jurisdiction.
11. Compensating Mechanism to State and Centre
The exporting state will transfer to the Central Government the credit of SGST used in payment of IGST. The importing dealer will claim the credit of IGST paid while discharging the output tax liability in the importing state. The Central Government will transfer to the importing state, the credit of IGST used in payment of SGST. The relevant information is also submitted to the Central Agency which will act as a clearing house mechanism, verify the claims and inform the respective governments to transfer the funds. The assessees are not to be concerned with such settlements made by the Central Agency.
12. Transitional Provisions Relating to input Credit
The assessee would be entitled to avail credit in respect of only those items on which credit is admissible under the current regime as well as under the GST regime and will not be entitled to avail credit which was restricted in either of the regimes.
13. Sales Returns
In case of return of goods by the buyer within (i) 6 (six) months of the Appointed Date, or (ii) after an additional 2 (two) months (as per the Commissioner’s discretion), such return shall not be treated as a supply. However, if the goods are not returned within the time specified, then GST would be payable on such a transaction.
The board has tried to cover maximum of the disputed points to clarify. It would provide great clarity to the industry and public. It is a major step to achieve deadline to implement the GST by 1st July, 2017