By now, most of the people are clear on the Goods and Service Tax concept and the proposed components of GST. We all understand that the GST will have the Centre (CGST), the state (SGST) and interstate (IGST) transaction forms. These three components will subsume most of the taxes that are charged by the centre and state governments on the sale of goods and services. This will do away with the different VAT rates, CST and Octroi charges that varied from state to state. Also, the dual taxation on certain services attracting central service tax and VAT by states is likely to merge into one GST.
GST Model: The emerging sectors like e-commerce, IT, and IT-enabled services, which were seeking clarity on the taxation; finally have something to look at. The current taxation system is resulting in the harassment of the e-commerce players, who at times are not aware of the information that they are required to provide. The GST model which is released by the Ministry of Finance is a welcome change for the e-commerce players and other stakeholders of the GST. The GST model which is based on the draft GST Bill needs a careful scrutiny by the stakeholders. Their suggestions and feedback can set the ball rolling in the right direction.
Clarity of definition: The Model GST addresses the clarity on goods and services through a clause where the central and state governments will state whether a taxable commodity is in the service or goods category. The renting of goods, the sale of software online and e-commerce transactions clarity will emerge from the model GST. In fact, the GST law has brought in the concepts of “e-commerce” and “e-commerce operator” to improve transparency. The Model GST will help remove the ambiguity surrounding the registration of sellers and service providers on the electronic commerce portals.
Some of the important definition of model Law is as under:
“agriculture” with all its grammatical variations and cognate expressions, includes floriculture, horticulture, sericulture, the raising of crops, grass or garden produce and also grazing, but does not include dairy farming, poultry farming, stock breeding, the mere cutting of wood or grass, gathering of fruit, raising of man-made forest or rearing of seedlings or plants;
“aggregate turnover” means the aggregate value of all taxable and non-taxable supplies, exempt supplies and exports of goods and/or services of a person having the same PAN, to be computed on all India basis and excludes taxes, if any, charged under the CGST Act, SGST Act and the IGST Act, as the case may be; Explanation.- Aggregate turnover does not include the value of supplies on which tax is levied on reverse charge basis and the value of inward supplies.
“continuous supply of goods” means a supply of goods which is provided, or agreed to be provided, continuously or on recurrent basis, under a contract, whether or Page 16 of 190 not by means of a wire, cable, pipeline or other conduit, and for which the supplier invoices the recipient on a regular or periodic basis;
“continuous supply of services” means a supply of services which is provided, or agreed to be provided, continuously or on recurrent basis, under a contract, for a period exceeding three months with periodic payment obligations and includes supply of such service as the Central or a State Government may, whether or not subject to any condition, by notification, specify;
“goods’’ means every kind of movable property other than actionable claim and money but includes securities, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under the contract of supply;
“services’’ means anything other than goods; Explanation: Services include intangible property and actionable claim but does not include money.
Meaning and scope of supply: As per the Section 3 of the Model Law, the definition of Supply includes all forms of supply of goods and/or services, whether or not for a consideration and whether or not in the course or furtherance of business,. Further certain cases have been specified in Schedule I & II, shall apply for determining what is is to be treated as a supply of goods or a supply of services.
Where a person acting as an agent who, for an agreed commission or brokerage, either supplies or receives any goods and/or services on behalf of any principal, the transaction between such principal and agent shall also be deemed to be a supply.
E-commerce transactions are defined in section 43B of the Model Law. The supply of any branded service by an aggregator, under a brand name or trade name owned by him shall be deemed to be a supply of the said service by the said aggregator.
Adherence to GST: The introduction to the GST regime will require the businesses to comply with the draft guidelines. The e-commerce operators will find that most of the online businesses and services are covered in the law. Also, they have not been given the threshold turnover to classify as a small service provider. Hence, all the electronic service providers and online goods suppliers are required to register themselves with the GST and adhere to the laws right from the beginning.
Aggregate value taxation: Earlier the services like brokerage, commissions, bank charges etc. were subject to the service tax. The new GST law has brought the aggregators into its ambit and they will be taxed for the entire service value. Similarly, the “securities” have been brought under the definition of goods. That means the entire value of the “security” and not the brokerage or associated commission becomes taxable. The definition of goods, however, excludes money and actionable claims. It is quite possible that the government may include the “securities” in the exempt list of goods when the GST becomes finally applicable.
With these provisions, the model GST has been put into the public domain. How the people who are going to pay the taxes react to it, remains to be seen. This is the right time to read the fine print of the model law and provide the suggestions and feedback to the concerned authorities. This will help in removing the ambiguities and bringing out The GST in an acceptable framework.