Much awaited draft of the model GST Law have been placed on the Central Govt., Site on 14th June, 2016. The measure is one of the major steps in the proper direction for the March ahead. The measure when brought into force will play a decisive role in the international trade. The basic dominant object of introducing one uniform indirect tax throughout the country is to herald one common market all throughout the nation. It would make the international trade much easier and inculcate greater confidence amongst the entrepreneurs who would be encouraged by a better pro-business environment and thereby “Make in India” a success.
The Empowered Committee of the State Finance Ministers met a few days back and discussed the format of the new law but no unanimity could be achieved. They will be having another meeting sometime in July to take a final look at the important indirect measure.
In the meanwhile, the copy of Model G.S.T. law is placed for suggestions from all quarters. Let us respond positively by offering our contribution towards the development of new law, by suggesting required changes for better compliance with ease.
The first and foremost result that will follow on implementation of the GST Law is the abolition of all the check posts and barriers which were found to be time consuming affair for inter-State trade. While travelling by road, it is a normal site for us to witness a big queue of transport carriers, at such check posts and octroi collection centres. Thus there will be free flow of movement of goods throughout the country as enshrined in Article 246 read with entries 92A and 92B of List I of the Schedule VII appended to the Constitution.
It is reported through an article by Shri Srivatsa Krishna in the Mumbai Edition of The Indian Express of 16th June, 2016 that India has overtaken China for the first time with the largest inflow of foreign direct investment making it one of the most attractive global destinations for capital market. Private equity investment are an all-time high.
Under the above favourable scenario, implementation of the Goods and Services Tax Act, 2016 would be most appropriate for an overall development of the country.
While a detailed comment on the model GST Law will require the study thereof in entirety, we propose to deal with some of the important aspects of the model law. We may recall here that the measure in question can be enforced only after passing of the Constitution (One Hundred and Twenty Second Amendment) Bill, 2014 presently pending before Rajya Sabha. Let us hope that the wiser counsel will prevail amongst the opposition parties for a smooth sailing of the much needed indirect tax reform. Thereafter more than fifty per cent State will have to pass the same.
With the introduction of the new levy, large number of Central and State indirect taxes will get merged into a one levy thereby remove cascading effect of multiple levies. It is claimed that the administration of such a levy would be easier and a transparent one, however we have our doubts about such a version.
The first and foremost advantage to the taxpayers in general would be that each of them will be able to adjust the output tax payable by them against credit of the input tax paid while receiving the services or purchasing goods in questions, irrespective of the place and the location of such service provider or the seller concerned.
The meaning and scope of the term ‘supply’ given in section 3 is all inclusive so as to cover all forms of supply of goods and services in the course of business for a consideration. The proposed enactment contain four Schedules out of which Schedule 1 describe matters to be treated as supply without consideration e.g. permanent transfer of business assets, temporary use of business assets for a non-business purpose etc., the supply by a registered taxable person to a job worker and return thereof after completion of the work provided however that the principal declare the address of the job worker as his additional place of business. The ultimate responsibility of paying tax will however be that of the principal (section 43A).
The heartbeat of the entire measure of Indirect tax is the Council that may be constituted under the proposed Article 279A.
As far as the Tax Practitioners, as a class of profession, are concerned, this is a new enactment affording new avenues for the younger generation to switch over to the practice of GST which will have a very wide scope for them. It should be remembered that there is always a vacancy at the top and crowd in the middle; therefore we would beseech one and all to strive for the best from now onwards.
The usual provisions of registration, submission of monthly return, assessment, audit etc., are also covered under the new enactment however the periodical returns would include the details of inward and outward supplies in such a manner that the same can be matched with the another connected party. In addition to monthly returns there would be annual return for the financial year to be submitted before 31st December.
Like the income tax provisions; section 34 provide for tax return preparers who would be bound by the duties that may be prescribed under the Rules.
The Act provide for audit and special audit by the tax authorities, in addition to the audit by a Chartered Accountant or a Cost Accountant.
As far as the hierarchy of proceedings are concerned; apart from the appeal before the First Appellate Authority there would be appellate tribunal then High Court and Supreme Court as at present. On the top there would be National Goods and Services Tax Appellate Tribunal to be headed by a National President. Such Tribunal shall have branches in all the States under the name of State GST Tribunal which will be headed by the respective State President. The Tribunal apart from judicial member, will also consist of one technical member for CGST and another for SGST. The qualifications, conditions of their appointment have still to be worked out however we strongly commend that the independence of judiciary as propounded by the Supreme Court in the case of
Madras Bar Association v. Union of India Transferred Case (Civil) No. 150 of 2006 decided on 11th May 2010 and another in the case of
State of Gujarat & Ors v. Gujarat Co-op. Bar Association SLP No. 34602 of 2015 decided on 5th Sept, 2011 will be kept in mind. As far as independence of judiciary is concerned, the latest observations about the attributes required to be fulfilled, have been very succinctly stated by Hon’ble Justice Lokur J. in the Constitution Bench Judgment upholding the collegium system for appointment of judges at higher level
[Supreme Court Advocate on record Assn. v. Union of India (In HN – Per Lokur, J.) (2016) 5 SCC]. It is well said that the quality of the tribunal much depend on the personnel manning such Tribunals. It is therefore appropriate time for all concerned, to bear such principles in mind while constituting the proposed tribunals without any iota of doubts about political interference in the administration of justice as well as while appointing any member of the Tribunal. Such independent limb of judiciary will yield better confidence amongst the taxpayers as well as the tax administrators. The tribunals have to hear and decide the appeal within one year from the date on which the appeal was filed [Section 83(4)].
One of the key proposals provide for collection of tax at source on E-business operators at the time of credit of any amount to the account of the supplier of goods and/or services or at the time of payment of any amount towards such taxable events, whichever is earlier; at a rate that may be notified in accordance with the recommendation of the council (section 43C).
We once again request all our readers to apply their own independent mind to the proposed Model GST Law and transmit the benefits of their experience and knowledge for the benefit of taxpayers in general and the Tax Practitioners in particular, by suggesting such improvements as are required to be made before commencement of the GST regime.
P. C. Joshi
Member, Editorial Board
Date : 17th June, 2016.