Overview of 10 recent changes in GST

  • Actionable Claims

The Model GST law enclosed “Actionable claims” within the definition of “Goods”, i.e., GST would apply on actionable claims. The Lok Sabha amendments to the GST act in Schedule III clarify that actionable claims, apart from lottery, indulgent and gambling can neither be treated as a offer of products and not as a offer of services. Thus, GST will be applicable on lottery, betting, gambling however not on other actionable claims.

  • Composition Scheme

Now a remunerator, whose turnover was less than fifty lakhs in the last fiscal year, can opt to pay under composition theme. He doesn’t have await the permission of the proper officer. He will directly register himself under composition theme.

  • Reduction in Composition Rates

Reduction in composition rates could be a welcome move for the MSME sector. Composition scheme has several restrictions like non-availability of ITC, not eligible for inter-state transactions. Reduction in composition rates can attract a lot of taxpayers to register. However, service suppliers are still not eligible for composition scheme therefore burdening the assorted professionals and freelancers.

  • Unregistered Seller and registered Buyer

An unregistered supplier cannot charge GST on sales. The Model law didn’t mention the tax treatment if AN unregistered dealer sold to a registered client. The Act currently provides that once a registered client buys from an unregistered dealer, then reverse charge is applicable, i.e. the client (recipient of goods/services) is prone to pay GST. This can be just like the current purchase tax on purchase of products from an unregistered dealer applicable in many states.

  • Petroleum Products

The fossil fuel product (crude oil, high speed diesel, petrol, gas and aviation rotary engine fuel/ATF) have currently been brought under GST. This will be extremely useful to Indian businesses as businesses currently can take input credit on fossil fuel product purchased

  • Fixing the Upper limits of GST rates-

Earlier, the upper cap fixed was 14% and 25% respectively in both the laws. Now, the upper cap has been fixed at 20% and 40% respectively under CGST and IGST Law to keep a flexibility for rates increase in future. However, the GST slabs remain the same – 5%, 12%, 18% and 28%

  • Sale of Land/Building

Earlier, the term ‘goods’ included all movable property as well as actionable claims. Solely cash and securities were excluded. “Services” had a obscure definition of “anything aside from goods”. Thus, there was an apprehension that the government could levy GST on supply of immoveable property (land/building) excluding stamp duty.

Now, the government has clearly mentioned in Schedule III that sale of land and/or building can neither be treated as a supply of products nor a services, i.e., goods and service Tax (GST) won’t be applicable on this.

  • Employer’s Gifts to Employee

Earlier the provision of goods or services between connected persons (made throughout the course of business) was treated as ‘supply’ even once there’s no consideration. Employer and employee were coated within the definition of connected person. So, it stood that any supply of goods or services by employer to his employees (even if freed from cost) would have been coated under the scope of GST.

Proposed amendment to the Act provides that GST won’t apply on gifts upto Rs. 50,000 by an employer to a specific employee. However, gifts higher than Rs. 50,000 can attract GST.

  • Applicability of GST Law in the State of Jammu and Kashmir.

J&K minister of finance Haseeb Drabu has confirmed that J&K will apply GST. However, since J&K encompasses a separate constitution and has special provisions concerning legislature, CGST & IGST will be passed separately. SGST will be passed one by one, similar to the other states

  • Change in Conditions for Disallowing ITC

According to the earlier provisions of GST Law, if the recipient/buyer did not pay the service provider within three months, then the input credit tax (ITC) availed by the client would be disallowed. He would be needed to pay the amount of ITC availed together with interest. This was just for services. there have been no provisions of re-allowing the ITC if the client paid after three months.

Now, within the amended act, this provision includes goods also. Further, the period of time for payment is extended to one hundred eighty days rather than three months before ITC is disallowed. Now, if payment is made even after one hundred eighty days then the ITC will be re-allowed.

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