Customer Care No.

91-1145562222

Model GST law - Feast

after a decade long fast

www.taxmann.com

Indian Indirect tax payers have been greeted with a bouquet of

complexities from the time immemorial. These taxpayers were
in need of a single flower as antidote, which they now see
budding in form of Model GST law released by the Union
Government. The proposed scheme of GST aims to reduce the
existing intricacies in administration of multiple indirect taxes.
The much debated beauty and barriers of GST as a unified tax
on goods and services has finally come to the rescue of
taxpayers in the form of model GST law, framed by the
Empowered Committee of State Finance Ministers.
The model law is designed in a manner that it can also be used
by the states as blue print for state GST. At the outset, the
model law proposes its applicability to whole of India and
provides that different dates may be appointed for different
provisions of the Act. The draft law appears to be largely
premised on the existing state VAT laws and an attempt has
been made to reconcile the philosophies of existing Central
Excise, VAT and Service tax laws.
Customer Care No. 91-11-

www.taxmann.com

The scheme of taxation under GST would be on supply of goods, thus the draft (i.e. GST Act and IGST Act)is
accompanied with the Valuation of Supply of Goods and Services Rules and there exists a predominant
emphasis on determination of time, value and place of supply in the model law. By far and large, the
definitions under the model law are more precise and clear even when they borrow reference from different
bye laws. The definition of 'services' has been kept same as proposed in the Constitution (122nd
Amendment) Bill, services to mean anything other than goods. Such a definition would enlarge the scope of
taxability on services. The model law has distinctly outlined the concepts of works contract, job work and
tax on right to use of goods.
The draft does not talk about the rate of taxes but clears that rate of taxes on various goods and services is
to be appended as Schedule to the Act. Further, in so far as a 'taxable person' and 'registration' is
concerned, the threshold for determination in North East states have been kept half as the business
transactions are correspondingly also lower than rest of India. Thus the registered persons would be
required to levy tax if the aggregate turnover exceeds Rs. 10 lacs in a financial year, and Rs. 5 lacs in north
east states. This proposal also aims at expansion of tax base and uniforms the existing threshold as under
the different indirect tax laws.
The draftsmen have made a proposal in the model law that the transactions would now be put to tax under
GST on 'transaction value' basis and this value can be challenged by a proper officer in case he has reason
to doubt the truth or accuracy of the value declared.

Customer Care No. 91-11-

www.taxmann.com

4
This concept has been borrowed from the Customs laws and would certainly pregnant the
industry with difficulties on valuation of supply in proposed GST. Unlike present scheme, the
model law also proposes a compliance rating score of taxable persons to be updated on
periodic basis and placed in public domain.
India's proposed GST is more of self-disciplined tax module, as conceded by CBEC officers in
various forums, thus one can see the compliance orientation in the model law which carves out
explicit provisions for requirement and manner of registration, payment of taxes, filing of
returns, issuance of tax invoices, bill of supply, credit, debit notes and availment and transfer
of credits. Model law has also introduced the concepts of civil lawse.g. presumption as to truth
and admissibility of 'documents', 'mental state', 'burden of proof' etc. which one do not find
place in many of existing tax laws.
The model law empowers the officers to do audit and special audit of taxable persons, to
demand and recover tax, to inspect, search, seize, summon and arrest in identified cases,
which is largely based on present provisions. Further the model law is little more stringent on
penal provisions to prevent the escape or promotion of tax leakages, it also casts a penalty on
persons who aids, abets the offences provided in law. On the other side, keeping in mind the
interest of taxpayers the draft also provides non-imposition of substantial penalties for minor
Customer
Care
breaches
of No.
tax91-11regulations or procedural requirements. There appears www.taxmann.com
to be absence of

5
Another good news is on the limitation to file refund claims, where the model law provides that
refund claim application may be made within two years from the relevant date. Today we have
maximum of one year to file refund claims, in service tax and a lesser period under other tax
laws.
A machinery for dispute resolution is required for every tax scheme, the model law list downs
the provisions against such requirement under the chapters on settlement of cases,
compounding of offences, appeals and revisions. One can see the need of constitution of
national GST appellate tribunal, as referred in the model law and the coram of bench must have
one judicial member, one member technical (CGST) and one member technical (SGST) for
matters exceeding ten lakhs rupees. Three member bench would help in overcoming the cases
of dissecting opinions as we see in case of a division bench. Matters before three member bench
to be decided by majority. The tribunal would have one branch for each state known as SGST
Tribunal. Today we have CESTAT benches for customs, central excise, service tax matters but not
one in each state. The appeal to national GST Appellate tribunal may be preferred for any
amount in dispute but the Tribunal in its discretion may dismiss the appeal if the amount in
dispute is less than 1 lac rupees.

Customer Care No. 91-11-

www.taxmann.com

To read more, please click here

Customer Care No. 91-11-

www.taxmann.com