GST to be levied at first point of transaction: model law

Sale of goods and services and all online purchases will attract GST at the first point of transaction with the likely rollout of uniform Goods and Services Tax (GST) regime from April 2017.
The model GST law, approved by the state finance ministers today, pegged threshold annual turnover for levy of the tax at Rs 10 lakh. The limit will be Rs 5 lakh in North East and Sikkim.
The model GST law, which has 162 clauses and 4 schedules, has also suggested a jail terms of up to 5 years and fine for violation of the provisions of the statute.

The law also provides for setting up of an Authority for Advance Ruling, Consumer Welfare Fund, a 'Composition Levy' for entities with turnover of Rs 50 lakh and self assessment by a tax payer.
The GST, which will subsume excise, service tax and local levies, will be imposed at the first point of transaction in case of supply of goods, services or online sale.
This clears the air on applicability of GST in e-commerce in cases where goods are sold in one state but delivered in another state.

The e-commerce companies will be required to file a statement to the tax department providing details of all supplies made through the online platform.

Revenue Secretary Hasmukh Adhia said the Empowered Committee of State Finance Ministers at their meeting today in Kolkata approved the model GST law.
"We request all stakeholders to give their suggestions/ comments to secretariat of Empowered Committee of FMs and or to finance ministry," Adhia tweeted.
The government is hoping to get the Constitution Amendment Bill passed by Parliament in the upcoming monsoon session. It plans to roll out GST from April 1, 2017 that will subsume excise, service tax and all local levies.
The model law, which deals with CGST, SGST and iGST, has
also provided for 'Composition Levy', on the lines of presumptive taxation scheme.

It provides for a GST of not less than 1 per cent on a person whose annual turnover on sale of goods and services in a single state is less than Rs 50 lakh.
While the model law prescribes the procedure for levy of GST, the rate would be decided by the GST Council, which will comprise state finance ministers and headed by the Union Finance Minister.
The law provides for setting up of a Consumer Welfare Fund, which will be utilised by the Centre or states for the welfare of consumers.
"The Central/State Government shall maintain proper and separate account and other relevant records in relation to the Fund in such form as may be prescribed in consultation with the CAG," said the model law.

There is also a provision of Appellate Authority to be formed in each state.
Commenting on the model GST law, PwC India Leader (Indirect Tax) Pratik Jain said the provision of tax collection at source for e-commerce companies will "mean significant compliance burden on e-commerce companies as many of them deal with thousands of vendors".
He further said that all intangibles would be considered as 'service' including software and added "this will hopefully put an end to goods versus service debate".
The model law also provides for elaborate mechanism for availment and utilisation of input tax credit.
The law, said Sachin Menon, Head (Indirect Tax) at KPMG in India, will put an end to the never-ending disputes about taxability of works contracts and lease transactions, as the bill classify the same as service.

"This will make the real estate and leasing industries more efficient as the burden of overlapping taxes will disappear once GST is introduced," Menon said.
The empowered Committee has also cleared the model Integrated GST law which has to be approved by both Centre and states. IGST will apply on inter-state sale of goods and services.
Besides, the CGST law has to be approved by the Centre and each state will pass its own SGST law.