Parliament has passed The Goods and Services Tax (Compensation to States) Act, 2017 (Act No. 15 of 2017). It provides for payment of compensation to the States for loss of revenue arising on account of implementation of the GST for a period of 5 years in accordance with Section 18 of the Constitution (One Hundred and First Amendment) Act, 2016. Financial year 2015-16 is taken as the base year for the purpose of calculating compensation amount payable to States. The projected nominal growth rate of revenue subsumed for a State during the transition period (five years from 1-7-2017) shall be 14% per annum. Cess is levied on such goods and services, as recommended by GST Council, over and above the GST on that item to generate resources to compensate States. No cess shall be leviable on supplies made by a taxable person, who has opted for composition. Cess shall be levied on intra-State supplies of goods or services or both as provided for in Section 9 of the CGST Act and such inter-State supplies of goods or services or both as provided for in Section 5 of the IGST Act, as are specified in column (2) of the Schedule to the Act. Cess on goods imported into India shall be levied and collected in accordance with the provisions of Section 3 of Customs Tariff Act, 1975 at the point when duties of customs are levied on the said goods under Section 12 of the Customs Act, 1962. Procedural Provisions of CGST Act and the Rules made thereunder shall apply. ITC in respect of cess on supply of goods and services leviable under Section 8, shall be utilised, only towards payment of said cess on supply of goods and services leviable under the said section. It means ITC of cess cannot be utilised for payment of CGST or SGST or IGST on outward supply. Cess credit can be used against cess payable by the supplier. CGST provisions shall apply for intra-State supplies and IGST provisions shall apply for inter-State supplies. GST Compensation Cess Rules, 2017 have been notified in Notification No. 2/2017 dated 1-7-2017. The CGST Rules, 2017 shall apply mutatis mutandis, subject to specified modifications. A separate prescribed return has to be filed along with the returns to be filed under the CGST Act (vide Section 9).
Schedule II specifies pan masala (135%), tobacco & manufactured tobacco substitutes, including tobacco products (₹ 4,170 per thousand sticks or 290% ad valorem or a combination thereof but not exceeding ₹ 4,170 per 1000 sticks + 290% ad valorem), coal etc. (₹ 400 per ton), aerated waters (15% ad valorem), motor cars and other motor vehicles principally designed for the transport of persons (other than motor vehicles for the transport of 10 or more persons including the driver), including station wagons and racing cars (15% ad valorem) and any other supplies (15% ad valorem). Maximum rates of cess (within brackets above) have been specified in the Schedule. Subject to such upper limit, Central Government, may on the recommendations of the Council specify the rate of cess through a notification. Accordingly notifications have been issued.
Goods and Services Tax (Compensation to States) Amendment Ordinance 2017 has been promulgated on 2-9-2017 to fix the maximum rate for compensation cess at 25% for certain categories of motor vehicles. The maximum compensation cess for such vehicles was earlier pegged at 15%. A Bill has since been introduced in Parliament to replace the Ordinance.
1. No.1/2017—Goods and Services Tax Compensation dated 28-6-2017 –
Appoints 1-7-2017 as the date on which all the provisions of the GST (C to S) Act, 2017 shall come into force.
2. No.2/2017 – Compensation cess dated 1-7-2017 – Makes the GST Compensation CessRules, 2017. There are only 2 Rules.
1. No.1/2017-Compensation Cess (Rate) dated 28-6-2017 – Notifies the rate of cess on 56 items of goods. All goods other than those mentioned at S. Nos. 1 to 55 are NIL rated.
The following corrigendum is issued to Notification No.1/2017.
Corrigendum dated 30-6-2017 (correcting item 42).
Notification No. 1/2017 is amended by the following notifications:
• No. 3/2017 dated 18-7-2017
• No. 5/2017 dated 11-9-2017
2. No.2/2017 – Compensation Cess (Rate) dated 28-6-2017 – Notifies cess on the supply of specified services. Services of transfer of the right to use any goods for any purpose for cash, deferred payment or other valuable consideration and for the services of transfer of the right in goods or of undivided share in goods without the transfer of title, cess is payable. Rate of cess is the same rate of cess as applicable on similar goods involving transfer of title in goods.
The following corrigendum is issued to Notification No. 2/2017
Corrigendum dated 1-7-2017 – Scheme of classification of services mentioned in Notification No. 2 is in relation to Notification No. 11/2017 – Central Tax (Rate) dated 28-6-2017.
Notification No. 2 is amended by Notification No. 6/2017 dated 13-10-2017
• No.6/2017 dated 13-10-2017. (leasing of motor vehicles purchased and leased prior to 1-7-2017)
3. No. 4/2017 – Compensation Cess (Rate) dated 20-7-2017—Exempts intra State supplies of second hand goods received by a registered person, dealing in buying and selling of second hand goods, subject to certain conditions.
4. No. 7/2017 – Compensation Cess (Rate) dated 13-10-2017 – Notifies special rates of Cess in respect of motor vehicles given on lease before 1-7-2017 and on supply of motor vehicles purchased prior to 1-7-2017 without availing input tax credit of Central Excise duty, VAT or any other taxes paid on such vehicles.
Example given by CBEC for levying Cess on imported goods
Suppose the assessable value of an article imported into India is ₹ 100/-. Basic Customs Duty is 10% ad valorem, Education Cess is 3%, Integrated tax rate is 18% and Compensation Cess is 15%. The taxes will be calculated as under:
|(B)||Basic Customs Duty @10%||10.00|
|(C)||Education Cess @ 3%||0.30|
|(D)||Value for Integrated Tax||110.30|
|(E)||Integrated Tax @ 18%||19.85|
|(F)||Value for Compensation Cess||110.30|
|(G)||Compensation Cess @ 15%||16.55|
|(H)||Total Duty ( B+C+E+G)||46.70|
Wherever the goods are also leviable to cess under the Goods and Services Tax (Compensation to States) Cess Act, 2017, the same will be collected on the value taken for levying integrated tax. Thus, in the above example, in case cess is leviable, the same would be levied on ₹ 110.30/-. In cases where imported goods are liable to Anti-Dumping Duty or Safeguard Duty, value for calculation of IGST as well as Compensation Cess shall also include Anti-Dumping Duty amount and Safeguard duty amount.
BRIEF NOTE ON THE ‘INTEGRATED TAX (RATE)’ NOTIFICATIONS ISSUED UNDER THE IGST ACT, 2017.
(Status as on 16-1-2018)
Section 5 of the IGST Act, 2017 provides for levy of tax on all inter-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 of the CGST Act and at such rates, not exceeding forty per cent., as may be notified by the Government on the recommendations of the Council. Accordingly Central Government has issued notifications specifying the rates of tax under the caption ‘Integrated Tax (Rate).’ Section 6(1) empowers the Government to exempt goods or services or both, subject to any conditions.
1. Notification No. 1/2017 – Integrated tax (Rate) dated 28-6-2017 – Through this notification, rates of tax on interstate supplies of GOODS have been notified. Schedule I goods are taxable @ 5%, Schedule II goods are taxable @ 12%, Schedule III goods are taxable @ 18%, Schedule IV goods are taxable @ 28%, Schedule V goods are taxable @ 3% and Schedule VI goods are taxable @ 0.25%.
Notification No. 1 has been amended by the following Notifications:-
• 16/2017 dt. 30-6-2017
• 19/2017 dt. 18-8-2017
• 27/2017 dt. 22-9-2017
• 35/2017 dt. 13-10-2017
• 38/2017 dt. 13-10-2017 (rates modified for motor vehicles)
• 43/2017 dt. 14-11-2017
2. Notification No. 2/2017 – Integrated tax (Rate) dated 28-06-2017 – Through this notification, exemption in respect of inter-state supplies of GOODS has been notified
Notification No.2 has been amended by the following Notifications:-
• 28/2017 dt. 20-9-2017
• 36/2017 dt. 13-10-2017
• 44/2017 dt. 14-11-2017
3. Notification No.3/2017 – Integrated tax (Rate) dated 28-6-2017 – Concessional rate of tax of 5% has been notified by exempting the amount in excess of 5% in respect of specified transactions like petroleum operations, coal bed methane operations, etc.
4. Notification No.4/2017 – Integrated tax (Rate) dated 28-6-2017 – Specifies the supply of goods in respect of which tax is payable on reverse charge basis (RCM) under section 5(3) of IGST Act.
Notification No. 4 has been amended by the following Notifications:
• 37/2017 dt. 13-10-2017
• 45/2017 dt. 14-11-2017
5. Notification No. 5/2017 – Integrated tax (Rate) dated 28-6-2017 – Clause (ii) of the proviso under section 54(3) of the CGST Act read with section 20 of the IGST Act restricts the refund of unutilised input tax credit on the notified goods, where credit is accumulated on account of rate of tax on inputs is higher than rate of tax on outputs. In respect of the goods mentioned in this notification, no refund of unutilised ITC shall be allowed.
Notification No. 5 has been amended by the following notifications:-
• 29/2017 dt. 22-9-2017
• 46/2017 dt. 14-11-2017
6. Notification No. 6/2017 – Integrated tax (Rate) dated 28-6-2017 – Allows refund of fifty per cent of tax paid on inward supplies of goods received by Canteen Stores Department (CSD) in accordance with section 20 of the IGST Act read with section 55 of the CGST Act for the purposes of subsequent supply of such goods to the Unit Run canteens of the CSD or to the authorised customers of the CSD.
7. Notification No. 7/2017 – Integrated tax (Rate) dated 28-06-2017 – Exempts supply of GOODS by CSD to the Unit Run Canteens etc,.
8. Notification No. 8/2017 – Integrated tax (Rate) dated 28-6-2017 – Through this Notification, rates of taxes on Interstate supplies of
SERVICES have been notified
Notification No.8 has been amended by the following notifications:-
• 20/2017 dt. 22-8-2017
• 24/2017 dt. 21-9-2017
• 39/2017 dt. 13-10-2017
• 48/2017 dt. 14-11-2017
9. Notification No. 9/2017 – Integrated tax (Rate) dated 28-6-2017 – Through this notification, exemption in respect of interstate supplies of services has been notified.
Notification No. 9 has been amended by the following Notifications:-
• 21/2017 dt. 22-8-2017
• 25/2017 dt. 21-9-2017
• 31/2017 dt. 29-9-2017
• 33/2017 dt. 13-10-2017
• 42/2017 dt. 27-10-2017
• 49/2017 dt. 14-11-2017
10. Notification No. 10/2017 – Integrated tax (Rate) dated 28-6-2017 – Specifies the supply of goods in respect of which tax is payable on reverse charge basis (RCM) under section 5(3) of the IGST Act.
Notification No.10 has been amended by the following Notifications:-
• 22/2017 dt. 22-8-2017
• 34/2017 dt. 13-10-2017
11. Notification No. 11/2017 – Integrated tax (Rate) dated 28-6-2017 – Activities/transactions undertaken by State Government /Central Government /Local Authority in relation to functions entrusted to a Panchayat under Article 243G of the Constitution shall not be treated either supply of goods or supply of services.
12. Notification No. 12/2017 – Integrated tax (Rate) dated 28-6-2017 – Provides for no refund of unutilized input tax credit under section 54 (3) of the CGST Act read with section 20 (xiii) of the IGST Act, in case of supply of services specified in item 5 (b) of Schedule II to the CGST Act (construction of a complex etc).
13. Notification No. 13/2017 – Integrated tax (Rate) dated 28-6-2017 – Specifies UNO, Foreign diplomatic mission etc., for the purpose of section 20 of the IGST Act read with Section 55 of the CGST Act.
14. Notification No. 14/2017 – Integrated tax (Rate) dated 28-6-2017 – Under Section 5 (5) of the IGST Act, notifies certain services in respect of which integrated tax shall be paid by the electronic commerce operator (Cab services, accommodation in hotels) (Example – OLA & OYO)
Notification No.14 has been amended by the following Notifications:
• 23/2017 dt. 22-8-2017
15. Notification No. 15/2017 – Integrated tax (Rate) dated 30-6-2017 – Exempts from whole of IGST leviable under section 3 (7) of the Customs Tariff Act, 1975 on import of goods/services or both by
SEZ unit/developer in SEZ for authorized operations.
This notification is rescinded by Notification No. 17/2017 dated 5-7-2017.
16. Notification No. 18/2017 – Integrated tax (Rate) dated 5-7-2017 – Exempts from whole of IGST leviable under section 5 of the IGST Act, the import of services by SEZ unit/Developer for authorized operations.
17. Notification No. 26/2017 – Integrated tax (Rate) dated 21-9-2017 – Exempts interstate supply of heavy water and nuclear fuels by the Department of Atomic Energy to Nuclear Power Corporation of India limited
18. Notification No. 30/2017 – Integrated tax (Rate) dated 22-9-2017 – Exempts interstate supply of Skimmed milk powder or concentrated milk, subject to specified conditions.
This Notification has been amended by
• Notification No.50/2017 dt. 14-11-2017.
19. Notification No. 32/2017 – Integrated tax (Rate) dated 13-10-2017 – Exempts inter State supplies of goods/services or both received from unregistered person from whole of IGST leviable under section 5 (4) (RCM). This exemption shall be applicable till 31 March 2018.
20. Notification No. 38/2017 – Integrated tax (Rate) dated 13-10-2017 – Notifies special rates of tax in respect of motor vehicles given on lease before 1-7-2017 and on supply of motor vehicles purchased prior to 1-7-2017 without availing input tax credit.
21. Notification No. 40/2017 – Integrated tax (Rate) dated 18-10-2017 – Notifies the tax rate @ 5% in respect of interstate supplies of food preparations put up in unit containers and intended for free distribution to economically weaker sections of the society etc., subject to conditions.
22. Notification No. 41/2017 – Integrated tax (Rate) dated 23-10-2017 – Exempts interstate supply of taxable goods by a registered supplier to a registered recipient for export from tax, which is in excess of the amount calculated @ 0.1% subject to specified conditions. (Net rate is 0.1% IGST) (merchant exports).
23. Notification No. 47/2017 – Integrated tax (Rate) dated 14-11-2017 – Exempts interstate supply of specified goods to the specified institutions, subject to certain conditions from tax, which is in excess of the amount calculated @ 5%. (net rate is 5%)
NOTIFICATIONS ISSUED UNDER THE IGST ACT, 2017
Central Board of Excise and Customs issued Integrated Tax Notifications. They are explained hereunder:
1. Notification No. 1/2017 dated 19-6-2017 – Appoints 22-6-2017 as the date on which the provisions of Sections 1, 2, 3, 14, 20 and 22 of the IGST Act shall come into force.
2. Notification No. 2/2017 dated 19-6-2017 – – Notifies the Principal Commissioner of Central Tax, Bengaluru West and all the officers subordinate to him as the officers empowered to grant registration in case of online information and database access or retrieval services.
3. Notification No. 3/2017 dated 28-6-2017 – Appoints 1-7-2017 as the date on which the provisions of Sections 4 to 13, 16 to 19, 21, 23 to 25 of the IGST Act shall come into force.
4. Notification No. 4/2017 dated 28-6-2017 – Makes the IGST Rules, 2017. For carrying out the provisions specified in Section 20 of the IGST Act, the CGST Rules, 2017 shall, so far as may be, apply in relation to Integrated tax as they apply in relation to central tax. (There are only 2 Rules. CGST Rules apply mutatis mutandis).
This has been amended by Notification No.12/2017 dated 15-11-2017.
5. Notification No. 5/2017 dated 28-6-2017 – Notifies HSN codes as follows for the purpose of mentioning on the tax invoices issued by a registered person.
• Up to 1.5 cr Rupees – nil
• More than 1.5 cr & up to 5 cr – 2 digits
• More than 5 cr – 4 digits
6. Notification No. 6/2017 dated 28-6-2017 – Fixes the rate of interestperannum for the purposes of Section 20 of the IGST Act read with Sections 50(1), 50(3), 54(12), 56 and Proviso to Section 56 of CGST Act, 2017.
7. Notification No. 7/2017 dated 14-9-2017 – Specifies the job workers engaged in making inter-state supply of services to a registered persons as the category of persons exempted from obtaining registration subject to certain conditions.
8. Notification No. 8/2017 dated 14-9-2017 – Specifies persons making supplies of specified handicraft goods as exempted from obtaining registration, provided the aggregate value of supplies does not exceed ₹ 20 lakhs on all India basis.
This notification has been amended by Notification No. 9/2017 dated 13-10-2017.
9. Notification No. 10/2017 dated 13-10-2017 – Specifies the persons making taxable services and having aggregate turnover on all India basis, not exceeding an amount of ₹ 20 lakhs in a financial year as the persons exempted from obtaining registration.
10. Notification No. 11/2017 dated 13-10-2017 –Specifies that the officers appointed under the respective SGST Act or the UTGST Act, who are authorized to be the proper officers for the purposes of Section 54/55 of the said Acts, shall act as proper officers for the purpose of sanction of refund under Section 20 of the IGST Act, 2017.
11. Notification No. 12/2017 dated 15-11-2017 – Amends the IGST Rules, 2017 in relation to advertisements. New Rule 3 has been inserted.