With the goal to implement good and services tax in India from 1 July, the government has released 14 sets of GST rules for public consultation. The GST Council will meet on 18 and 19 May to finalize the rules and fix GST rates. There is fervent activity aimed at setting rates for goods and services that will be acceptable to both the centre and the states.
The GST rules released pertain to: registration; invoice; returns; payment; refund; valuation; transition; e-way bills; accounts and records; input tax credit; composition; advance ruling; appeals and revision; and assessment and audit.
The major aspects of the first 11 sets of draft rules are outlined below.
Revised registration rules: These provide procedures for obtaining registration by a taxable person in various situations. The revised rules also contemplate registration for non-resident suppliers in specific situations.
Revised invoice rules: These provide the information that needs to be mentioned on invoices, time limit and manner for issuance of tax invoice, issue of bill of supply in the case of exempted supplies, supplementary tax invoice, credit/debit notes, and issue of invoice by input service distributor (ISD), goods transport agency, banking/insurance company and supplier of passenger transportation service. The new aspects to be captured have also been added in the revised rules.
Revised return rules: These set out the form and manner of furnishing various returns by various persons, matching and acceptance of claim of input tax credit and provisions relating to GST.
Revised payment rules: These contain the provisions relating to electronic tax liability register, credit ledger, cash ledger and the corresponding payment in cash ledger. A challan (form) will be generated for entering the details of amount to be deposited, which will be valid for 15 days. Also, a unique identification number will be generated for each debit/credit to the cash/credit ledger.
Revised refund rules: These set out the procedure for filing an application to claim refund of tax, interest, penalty, fee, etc., and the list of documentary evidence to be furnished. As the provisions relating to special economic zones have been amended, supplies to such zones will be treated as zero-rated supply in GST with consequent refund opportunities. The revised rules also provide for provisional grant of refund subject to certain conditions within not more than seven days from the date of acknowledgement.
Valuation rules: These provide the mechanism for determining the value of supply of goods/services. The prescribed valuation methods are open-market value, value of like kind and quality of goods/services, cost-plus method and residuary method. The invoice value is deemed as open market value in the case of distinct/related persons if full credit is available to the recipient.
Transition rules: These prescribe the procedure of obtaining transitional credit under existing law for use under GST law.
E-way bill rules: These require generating e-way bills where the consignment value exceeds ₹50,000 for supply, other than outward or inward supply from unregistered persons. The rules provide that where the registered supplier causing movement or the recipient fails to generate e-way bills, the liability falls on the transporters for the supplies.
Accounts and records rules: These specify the manner in which accounts are required to be maintained by registered persons. Different requirements are specified for manufacturers, service providers, agents, works contractors, warehouse owners/operators, transporters, and clearing and forwarding agents. Various obligations are proposed, which require separate records for each activity (manufacturing, trading, provision of service); detailed accounts of stock including goods lost, destroyed, stolen or gifted; and maintenance of records of suppliers and recipients.
Input tax credit rules: These provide the documents and conditions for obtaining input tax credit, manner of distribution of credit by ISD, and determination of credit attributable to exempt supplies and non-business use. The rules also cover scenarios such as exempt supplies becoming taxable, cancellation of registration, etc.
Composition rules: These specify the rates of tax payable under composition scheme (small business) by manufacturers (1%), restaurants (2.5%) and other eligible suppliers (0.5%).
In addition to the above, rules relating to advance rulings, appeals and revision, and assessment and audit have also been placed in the public domain to seek comments from stakeholders. The GST act and the rules, once finalized, will provide a comprehensive framework for the implementation of GST.
L Badri Narayanan is a partner and Asish Philip Abraham is a principal associate at Lakshmikumaran & Sridharan.
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