India is on the expressway in implementing the biggest reform ever in its indirect tax system. Till July, possibility of implementation of Goods & Services Tax (GST) was perceived as riddled with uncertainty but the Indian political parties have come together and ensured that the Indian Constitution stands amended to pave the way for bringing GST. The extremely fast paced subsequent developments by way of notification of effective date for various provisions of the Constitution Amendment Act on GST, constitution of GST Council and the decisions taken on threshold limit and dual control in the first meeting of GST Council, reinforce the government’s commitment to the deadline of 1st April, 2017 though the industry is pleading for more time to get prepared. The tax administration is releasing draft rules and forms almost daily. This article seeks to take a cursory look at the draft rules on registration and invoices and the forms or formats floated by the CBEC for comments just a few days before and the same are set to be approved by the GST Council in its meeting on 30 September.
Section 19 of Model GST Law talks about registration and it says registration shall be obtained in the manner as prescribed. The draft rules now made public prescribe the various forms and conditions. GST is a tax of the electronic age and therefore, everywhere there is a great push on IT front and automation of processes. The initial provisions of draft registration rules mandate the aspiring registrant to get PAN verified which happens automatically by connecting to Income Tax Portal and mobile number and e-mail id through OTP. Application for registration under GST is required to be made online either directly on GSTN Portal or through Facilitation Centres and the draft rules state that these centres will be notified separately. It is not clear whether these centres are GST Suvidha Providers (GSPs) or will be different entities.
GST law makes a major departure from the existing indirect tax laws in that even a person who is not ‘engaged’ in a particular business activity i.e. even if the activity is not performed on routine basis, registration would be required in certain cases. Therefore, the model law provides for registration of casual taxable person and non-resident taxable person who undertake transactions in India occasionally or for limited period without having fixed place of business. Those falling under this category, will be required to deposit GST in advance on estimated basis and the application form seeks specific details in this regard. Existing excise and service tax assessees who obtain services of independent technical personnel or consultants from abroad who visit India for such purpose, may need to take note of such provisions.
The 26 forms released by CBEC for registration and all registration related processes including format of show cause notice when GST RC is proposed to be cancelled and order that may be passed in such cases, makes one think whether GST is all that simple, as it is stated. Provisions relating to registration in the Model Law eloquently talk about issuance of notice and hearing the person concerned at every stage when adverse action is proposed like rejection of application, rejection of request for amendment, etc. The draft rules prescribe various time-limits like three days for issuance of GST RC, seven days for applicant to provide clarification or document sought by officers and another seven days for the officer to grant RC. The draft rules also contain provisions whereby registration will be deemed as granted if there is any inaction on the part of the Department to act within the above time-lines.
As GST is system-driven, the applicant has to upload the prescribed documents. While no fee is payable for filing application for registration, it is not clear whether user fee will be payable in future for filing returns, etc., or there will be some other mechanism to defray such expenses of GST-N (the company maintaining front-end IT infrastructure). As GST Model Law has unique provisions like TDS registrants and TCS registrants, the present set of draft forms include such categories of persons also.
The strict side of GST law can be seen from the provisions on suo motu registration and field visits by officers. As per Rule 10 of the draft rules, if a person is liable for registration but has not obtained the same and such liability is found out during investigation, survey, etc., by the department, then the department will issue a temporary registration. Unless appeal is filed against such temporary registration, the person concerned is required to register normally within 30 days. Rule 17 of draft rules empowers departmental officers to conduct physical verification of business premises after grant of registration and the details of verification shall be uploaded. Such verification is subject to satisfaction of the officer thus leaving the same open-ended and discretionary.
GST is all about seamless credit – taxes paid in input supplies to be taken as credit and to be set off against the liability on output supplies subject to conditions and restrictions. For passing such credit, the all-important document is the tax invoice. An elaborate list of information, numbering around 20, has been mentioned in Rule 2 of the Draft Invoice Rules. While providing general business related information may not be an issue, the draft rule also mandates mention of place of supply along with State name in the case of inter-State supplies and place of delivery if the same is different from place of supply. For effective compliance with this provision, one needs to master provisions to determine place of supply in various situations as provided under IGST Law. The form ARE-1 may continue, with modifications, as the draft rule requires mention of the number and date of ARE-1 on the invoices if the supplies are made for export on payment of IGST or under bond. Time limit of 30 days is being prescribed for issuance of invoice to be calculated from the date of supply and this provision is applicable to services only as Section 23 of Model Law requires raising of invoice at the time of supply in respect of taxable goods.
All along in the excise regime, goods removed from factory needed to be accompanied by invoice and therefore, transporter’s copy became an important document. Keeping in line with IT driven system of GST, such transporter’s copy is not required if the invoice reference number has been obtained by the taxable person. For taxable services, two copies of invoice will be sufficient in the GST regime. The draft rules also prescribe a new document viz., Bill of Supply which needs to be issued by suppliers when non-taxable goods or services are supplied or when supplies are made under Composition Scheme. A consolidated bill of supply for all such supplies during the day, can also be prepared. This bill of supply is in lieu of tax invoice and is fairly simple in terms of information requirements.
The draft rules on returns, payment and refunds can also be discussed. But, owing to space constraint, the same have not been covered in this article. Once the GST Council finalises or approves the draft rules, we may discuss about them also.
[The author is a Joint Partner, Tax Practice, Lakshmikumaran & Sridharan, New Delhi]