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GST – Should implementation scheduled on July 1, 2017, be postponed?

The question uppermost in the minds of all stakeholders is whether GST would be implemented on July 1, 2017 or postponed to maybe August 1 or September 1, 2017.

While we would know for certain on June 3, 2017 when the GST Council meets, preparedness of Trade and Industry is a matter of concern which we hope the GST Council would also review.

The legislative agenda for the GST Council on June 3, 2017 is to decide on rate of tax for certain Goods and Services and approve the GST Transition and Return Rules, respective formats and also review the preparedness of the IT infrastructure of GSTN.

The concerns are:-

Ř  Readiness of GSP / ASP

One of the concerns expressed is that the time required for GSP / ASP to prepare the software for the revised format of returns which is expected to be approved on June 3, 2017. GSTN would make available the API thereafter and it would take 3-4 weeks to get ready the software for filing of returns.

Though the first Returns are required to be filed only in August, 2017, small dealers most of whom may not use the services of ASP and would be using excel based utility need time to understand and configure reporting formats.

It is expected that Excel Utility would be made available by GSTN to upload data to populate the returns.

Ř  Transition Credit Entitlement

Transition Rules and Formats are expected to be finalized on June 3,2017. With less than 4 week available after approval of Transition Rules and Formats, trade and industry would have very little time to configure their software to prepare details for filing the returns to claim transition tax credit.

The short time to prepare details to claim transition credit would disable claiming of transition credit in the first return period itself creating cash flow issues.

Ř  E Way Bill

E Way Bill is another concern. The E Way Bill Rules are not yet approved and it is not sure if this would be taken up in the GST Council Meeting on June 3,2017.

Besides the time constraint on Trade and Industry to put in place necessary software to generate E way Bills, the Tax Administration also needs to put in place the software for uploading of E way Bills and monitoring. As on date there is no information on the preparedness of the Tax Administration.

It is therefore likely that implementation of E Way Bill Rules may have to be delayed.

Ř  SGST Acts / Notifications

Many States are yet to pass the SGST Act. States that have passed the SGST law have not yet made available the SGST Act in the public domain. (we checked the State VAT websites).

Though details of Goods and Services exempt from GST and list of services liable to service tax is announced, Notifications to give effect to this and several other notifications, issuing of which is specified in the GST Acts, have to be issued by the Central Government as well as the State Governments. All these notifications after they are issued are to be understood. This would be a great effort for SMEs and small traders, which requires time.

Ř  Mapping HSN with description of Goods as in present VAT Schedules

Traders who hitherto were liable to pay VAT only are familiar only with the simple and commercial description of the Goods listed in the Schedules to the VAT Acts of the respective States.

Though HSN is noted against description of Goods in the Schedule to the VAT Act of most of the States, the traders would mostly go by the description of the Goods only.

Since under GST, the schedule of goods is listed Chapter wise with description of Goods as in the HSN, traders would find it very difficult to understand.

It is therefore important that as in the present schedule to the VAT Acts, Goods liable to tax at different rates under GST is made available with the simple and commercial description ( as in present VAT Schedule of Goods) appropriately mapped to HSN. This is essential for easy adoption of GST by traders.

This can be made available with the disclaimer that it is only for guidance and description as in the GST Schedule of tax rates of Goods will prevail.

It is surprising that the concerns on roll out of GST from July 1,2017 have not been publicly aired by the Stakeholders except perhaps Sri Amit Mitra, Finance Minister, West Bengal and Chairman of the empowered committee of State Finance Ministers. Here is what he is reported to have stated in his letter to Sri Jaitley, Union Finance Minister:

"My particular concern relates to the small and medium enterprises of India who are nowhere close to being ready to comply with this major fiscal reform. It is noteworthy that these MSMEs produce around 40 per cent of India's GDP and provide employment to nearly 100 million people."

"By introducing GST before the due preparedness of all links in the production chain, a domino effect could be let loose on the economy, undermining all sectors of the economy and particularly adversely affecting the states."

"I am concerned that while larger industries may be better prepared, their vendors at tier II and III levels are still struggling to create the wherewithal to cope with the GST mechanism. You would agree that if tier II and III vendors are not ready to operationalise GST, it would simply mean that larger industries, even if ready on their own, will not be able to seek input tax credit from the production chain. A fractured production chain would create huge problems,"

In most countries where GST was implemented, the time between the publication of Draft Laws and date of implementation was one to two years.

Undoubtedly lot of ground work has been done meticulously by the GST Council, Finance Ministry and Officials and the team deserves all praise for what is accomplished.

Though details of the GST Act and Rules have been in the public domain for quite some time now, the larger entities with expert professional assistance would be better prepared than the SMEs and smaller entities.

While the law is broadly in line with the present tax system, it is the compliance that the smaller entities are yet to understand. There is a need for intensive training programmes on the compliances particularly filing of returns, for GST transition to be smooth.

We are sure the GST Council would take a considered decision on the date of implementation of GST.

GST – Migration of Registration

For those of you who missed the earlier timeline to migrate your registration under the present law to GST, the window to migrate would be open from June 1 to 15,2017.

Date: 29/05/2017

GST Council – Meeting on 19/05/2017

Fitment of Services in Tax Slab Rates

The GST Council has in the meeting on May 19, 2017 finalized the rate structure for Services in 4 slabs - 5, 12, 18 and 28% in line with those applicable to goods.

Here are the highlights of the rate structure for services

Luxury services taxed @28% - covers Cinemas, 5 star Hotels & Restaurants, Hotels charging rent more than Rs.5,000/- per day, betting.

  Services under 18% - Banking , Financial Services, A/C Restaurants serving liquor, Hotels and lodges with tariff of Rs 2,500-5,000

 Services under 12 % - Non A/C restaurants not serving liquor, business class Economy class air travel, Hotels and lodges with tariff of Rs 1,500-2,500

 Services under 5% - Transport services (Railways, air transport), cab aggregators Economy class air travel

 Health care and Education services, Hotels and lodges with tariff below Rs 1,000 are exempted from tax

The next meeting of the GST Council is scheduled on 03/06/2017 to deliberate and decide on remaining issues i.e rate fitment for undecided category of goods / services and finalising rules on return and transition after legal vetting.

GST Rate Schedule for Services

CBEC has made available the following

Ř  Classification Scheme for Services under GST

Ř  List of Services under reverse charge

Ř  Schedule of GST rates for services and list services exempted

It is stated that the fitment of rates of services were discussed on 19 May 2017 during the 14th GST Council meeting held at Srinagar, Jammu & Kashmir. The Council has broadly approved the GST rates for services at Nil, 5%, 12%, 18% and 28% as listed below.

The information is being uploaded immediately after the GST Council’s decision and it will be subject to further vetting during which the list may undergo some changes. The decisions of the GST Council are being communicated for general information and will be given effect to through gazette notifications which shall have force of law.

Click to download  Classification Scheme for Services under GST , List of Services under reverse charge,   Schedule of GST rates for services and list services exempted.

Date : May 20, 2017

GST Council – Meeting on 18/05/2017

GST Rate Schedule for Goods

CBEC has made available HSN Chapter wise GST Rate Schedule for Goods and also the list of goods on which Cess would be levied.

It is noted that the information is being uploaded immediately after the GST Council’s decision and it will be subject to further vetting during which the list may undergo some changes.

GST rates for the following goods would be decided on 19th May 2017.

1) Biri wrapper leaves (tendu patta) Ch. 14
2) Biscuits Ch.19


Biris Ch. 24
4) Textiles Ch. 50 to 63
5) Footwear Ch. 64
6) Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad with precious metal, and articles thereof; imitation jewellery; coin Ch. 71
7) Power driven Agricultural, horticultural, forestry, poultry keeping or bee-keeping machinery, Harvesting or threshing machinery, machines for cleaning, sorting or grading, machinery used in milling industry and parts thereof 8432, 8433, 8436 and 8437

Click to download GST Rate Schedule for Goods and List of Goods liable for cess

7 GST Rules approved

GST Final Rules (18/05/2017)

   GST Composition Rules

   GST Invoice Rules

   GST Input Tax Credit Rules

   GST Payment Rules

  GST Refund Rules

   GST Registration Rules

   GST Valuation Rules

GST Final Formats (18/05/2017)

   GST Composition Formats

   GST Registration Formats

   GST Input Tax Credit Formats

   GST Payment Formats

  GST Refund Formats

Date : May 19, 2017

Fitment of Goods in Tax Slab Rates

The GST Council has in the meeting on May 18, 2017 approved seven Rules except the Transition Rules and Return Rules. It is stated that the legal Committee of the GST Council requires time to vet the Rules.


Briefing the press, the Finance Minister Sri.Jaitely stated that the discussions focused on rate of tax on goods and the categorization of the goods. Rate of tax on Services would be discussed tomorrow.


Here are the snippets from the press briefing


   List of Exempted Goods expected to be finalized tomorrow. Cereals and Milk would be exempt.


   Broadly 14% of the goods fitted into 5% slab, 17% under 12% slab, 43% under 18% slab and 19% under 28%. This means 7% of the goods would be exempted.


   Fitment done for 1211 items barring 6 categories.


   Rates of tax on Gold and Beedi to be discussed tomorrow.


   Edible Oil, Sugar, Coffee and Tea (except instant coffee and tea) classified at 5%.


   Coal to be taxed at 5%


   Food grains to be cheaper under GST.


It is expected that the schedule of Goods and Services would be finalized tomorrow.


In the absence of the complete details of fitment of Goods and Services in different slabs, it is difficult hazard a guess on whether it would be Revenue Neutral to the consumers


Date : May 18, 2017