TIOL-DDT 2979
28 11 2016
Monday

THE Central Government has finally released the:

1. Revised Model GST Law

2. Draft IGST Law

3. Draft GST (Compensation to the States for Loss of Revenue) Bill, 2016

In Delhi, the government offices leak like a sieve and unconfirmed versions of the Model GST Law (with review markings) found their way into the social media. One Pravin Dhandharia tweeted on 23rd November - GST amendment copy is in circulation dated nov 2016, is it official, pl let us know - to which Revenue Secretary Hasmukh Adhia tweeted on 24th November - We have not officially shared the revised draft of Model GST Law so far. So please do not go by this.

On November 26th, the Revenue Secretary tweeted, Revised Draft Model GST Law, Draft IGST Law, Draft GST Compensation Law are uploaded on our website now; These Laws will be considered by GST Council in its meeting scheduled for 2nd and 3rd Dec and finalised.

GST Draft Laws - Casual and Irresponsible Law Making - Sub-section 0?

I get mad when my junior colleagues in TIOL make simple avoidable mistakes while we upload the tons of law churned out by various authorities. But I feel guilty that when the highly intellectual overpaid pampered babus can make silly mistakes, I am expecting the moon and more from my simple boys and girls.

Look at this Section 47 in the Draft GST Law:

Similar bloomers are also seen at -

143. (in contents)  Test purchase of goods and/or services...................................... Error! Bookmark not defined.

7. [Powers of SGST/CGST officers under the Act (Draft I)

(2) Where any proper officer issues an order or acts under any one or more sections................ of this Act, he shall also issue an order or take action, as he may deem fit, under the corresponding section of the {SGST/CGST} Act as being the proper officer under sub-section Error! Reference source not found. of the SGST/CGST Act as a part of his order or action under this Act, under intimation to the jurisdictional SGST/CGST officer.

85. Offences and penalties

(vi)  fails to collect tax in terms of sub-section Error! Reference source not found. of section 56, or collects an amount which is less than the amount required to be collected under the said sub-section, or where he fails to pay to the credit of the appropriate Government under sub- section 0 thereof, the amount collected as tax;

And what is sub-section 0?

This is a Micro Soft Word error message when a book marked reference is deleted. The point is - it is boring to read the same draft again and again and then these mistakes creep in - fortunately nobody is bothered and you have a licence to make as many mistakes as you want - you always have an option of correcting them anytime you want. I only hope that somebody does the proofreading before the Bills are sent to Parliament and the State Legislatures.

Actually the Model GST Law is a combination of two laws - the Central GST Act and the State GST Act. They could have at least made two copies and separate Bills for the Centre and States. Anyway, this model cannot go to the legislatures; they could have made the copies that go to the legislature.

The very first sentence of the Model Law reads as:

This Act may be called the Central / State Goods and Services Tax Act, 2016.

The second sentence is - It extends to the whole of India / State's name.

And some of the provisions are exclusively for CGST and some for SGST.

'Goods' and 'Services' find new definitions in new Model Laws released by Central Government

AS per Section 2(48) of the Model GST Law released in June 2016,

(48) "goods'' means every kind of movable property other than actionable claim and money but includes securities, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under the contract of supply;

Explanation.- For the purpose of this clause, the term 'moveable property' shall not include any intangible property.

The definition as per Section 2(49) of the Model GST Law released now reads as,

"goods'' means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply;

This means:

1. Goods included 'securities' in the earlier model law, but is now specifically excluded.

2. 'Actionable claim' was not goods earlier, but is now included in the definition of goods.

3. The explanation, the term 'moveable property' shall not include any intangible property is not there now.

As per Section 2(88) of the earlier Model Law,

(88) "services'' means anything other than goods;

Explanation: Services include intangible property and actionable claim but does not include money.

The new definition in Section 2(92)reads as:

"services'' means anything other than goods;

Explanation 1.- Services include transactions in money but does not include money and securities;

Explanation 2.- Services does not include transaction in money other than an activity relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged.

New Capital Goods: The previous model law had a strange definition for capital goods. Section 2(20) defined it as:

(20) "capital goods" means: -

(A) the following goods, namely:-

(i) all goods falling within Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading 6805, grinding wheels and the like, and parts thereof falling under heading 6804 of the Schedule to this Act;

(ii) pollution control equipment;

(iii) components, spares and accessories of the goods specified at (i) and (ii);

(iv) moulds and dies, jigs and fixtures;

(v) refractories and refractory materials;

(vi) tubes and pipes and fittings thereof;

(vii) storage tank; and

(viii) motor vehicles other than those falling under tariff headings 8702, 8703, 8704, 8711 and their chassis but including dumpers and tippers used- (1) at the place of business for supply of goods; or (2) outside the place of business for generation of electricity for captive use at the place of business; or (3) for supply of services,

(B) motor vehicle designed for transportation of goods including their chassis registered in the name of the supplier of service, when used for -

(i) supplying the service of renting of such motor vehicle; or

(ii) transportation of inputs and capital goods used for supply of service; or

(iii) supply of courier agency service;

(C) motor vehicle designed to carry passengers including their chassis, registered in the name of the supplier of service, when used for supplying the service of-

(i) transportation of passengers; or

(ii) renting of such motor vehicle; or

(iii) imparting motor driving skills;

(D) Components, spares and accessories of motor vehicles which are capital goods for the taxable person.

Now there is a less complicated and more relevant definition. Section 2(19) reads as:

(19) "capital goods" means goods, the value of which is capitalised in the books of accounts of the person claiming the credit and which are used or intended to be used in the course or furtherance of business;

GST CESS - Credit to be Allowed

THERE was an opinion circulating that there will be no input credit of GST Cess and that the Cess will be levied at only the first stage, but the draft GST (Compensation to the States for Loss of Revenue) Bill, 2016 has clarified this position that the input tax credit in respect of GST Compensation Cess on supply of goods and services leviable, shall be utilised only towards payment of GST Compensation Cess on supply of goods and services.

GST Cess to be in a Compensation Fund

THE proceeds of the GST Compensation Cess leviable shall be credited to a non-lapsable fund known as the GST Compensation Fund in the Public Account, and shall be utilized for purpose of providing compensation to the States for loss of revenue arising on account of implementation of the goods and services tax for a period of five years, w.e.f. the date from which the CGST Act is brought into force.

All amounts payable to the States shall be paid from the Goods and Tax Compensation Fund.

Fifty percent of the amount remaining unutilized in the GST Compensation Fund at the end of the transition period shall be transferred to the Consolidated Fund of India, and shall be distributed between the Centre and the States and amongst the States as per provisions of clause(2) of article 270 of the Constitution; and the balance fifty percent shall be distributed amongst the States in the ratio of their total revenues from SGST in the last year of the transition period.

Draft GST (Compensation to the States for Loss of Revenue) Bill, 2016

GST - Inspector Raj on the Way

THE new Model Law, in Section 163 provides for constituting an Authority to examine whether input tax credits availed by any registered taxable person or the reduction in the price on account of any reduction in the tax rate have actually resulted in a commensurate reduction in the price of the said goods and/or services supplied by him.

After all, the officers should have some productive work!

Reduce Corporate Tax and Withdraw All Incentives - CII

THE CII President in a meeting with the Finance minister suggested:

Corporate tax be brought down to 18% including all surcharges and cess. In return we can remove all tax incentives, concession and need no grand fathering of previous incentives.

Our calculations of PBT and tax foregone in 2014-15 indicate an effective rate of 19.8% without any tax incentives/ concessions. We believe that in the past when corporate tax has been lowered, corporate tax collection has gone up. An 18% corporate tax should therefore not lead to revenue loss to the Government and at a stroke move us away from a high tax, high concession regime.

This will bring India in line with the most attractive international investment destinations such as Singapore, Sri Lanka, UK and Turkey. 

It will send a powerful message to Indian industry and global investors that India is an attractive investment destination and a huge enabler for Make in India.

Customs - Government Rescinds 'Publication of Daily Lists of Imports and Exports Rules'

THE Government has rescinded the Publication of Daily Lists of Imports and Exports Rules'.

Daily List of Exports Imports is published by Indian Customs as a Trade Facilitation Measure since 1951.

It started with Bombay, Madras and Calcutta ports and later few more ports were added. As the Name suggests, Daily List was published on a Daily Basis, and a member of trade can subscribe to it on payment of a nominal subscription charge.

This List is used extensively by Indian and Overseas Exporters Importers, Trade Journals, Market Research companies, Trade Bodies, Chambers to network with each other and to keep track of market and plan the future course of action.

Notification No. 140/2016-Customs (N.T.)., Dated: November 25, 2016

Anti Dumping Duty on 'Low Ash Metallurgical Coke'

GOVERNMENT has imposed anti dumping duty on "Low Ash Metallurgical Coke" originating in, or exported from, Australia and People's Republic of China, for a period of five years.

Notification No. 53/2016-Customs (ADD)., Dated: November 25, 2016

How to Make Mob Miserable - Cash Connection?

IN 1976, the American Economist, James S. Henry wrote:

Who are the users of big cash? The logical suspects-people who need a highly liquid, anonymous form of wealth, something one could slip into an unmarked envelope, or stuff easily inside an ordinary suitcase. They include tax evaders, drug traffickers, illegal gamblers, loan sharks, fencers of stolen goods, and corrupt politicians, among others.

There are only two kinds of activity in the U. S. which depend almost exclusively upon large, untraceable, non-credit transactions. The first is profit-motivated crime: illegal gambling, drugs, prostitution, loan sharking, protection, the fencing of stolen merchandise, etc. The second is tax evasion by people who arrange to receive cash income and don't report it.

A surprise currency recall: On any given Sunday, the Federal Reserve would announce that existing "big bills"-s and 0s - would no longer be accepted as legal tender, and would have to be exchanged at banks for new bills within a short period of time. When the tax cheats, Mafiosi, and other pillars of the criminal community rushed to their banks to exchange their precious notes, the IRS would be there to ask those with the most peculiar bundles some embarrassing questions.

Imagine the panic that would strike our criminal community if, all at once, it had to liquidate its enormous hoards of big bills, or else explain where they came from. Any single criminal, acting alone, might be able to dispose of his cash without much trouble. But when all criminals tried to convert their cash at once, they would bump into each other at every turn, competing for the scarce alternatives to cash, trying to unload their bills through innocent-looking outlets, and generally calling attention to themselves. The recalls could be repeated, at random, every few years or so, raising the "transaction costs" of doing illegal business-or else most big bills could be taken out of circulation completely.

The immediate effect of this scheme would be to strike a sharp blow at tax evaders, dope dealers, racketeers, purveyors of vice, and corrupt officials. These denizens of the criminal deep would have to surface with the large cash balances which they carry on hand, and the tax authorities could begin to ask questions.

Naturally, many criminals would search hard for ways to escape these consequences. Unless the reform was carefully implemented they might, for example, convert large bundles by selling them piecemeal at a discount. (Participating in such discounting might be made a criminal offense. In any case this discounting would have an equalizing effect on the income distribution.) Or they might run from bank to bank, cashing in small amounts at each one. (Old bills might be redeemable only at a bank in the city where one is register to vote, with cross-checking between banks in each city.)

In general, these escape routes would not be difficult to check, assuming that the reform were introduced with the appropriate degree of surprise and cunning. In the longer run, cutting down on large denominations in circulation would increase the transaction costs of illegal activity (by, for example, reducing the amount of money that can be contained in any given suitcase). The liquidity crisis which would ensue for tax evaders and other criminals might to some extent be averted by the substitution of other currencies, or other exchange mediums such as precious metals. But these are much less convenient, especially for consumer-oriented criminal enterprise. In any case the substitution would be expensive and time-consuming.

Cash in Coffee Can

HENRY recounted a story:

Tax investigators recently closed in on a Dallas area dentist who stashed ,000 of unreported income in a coffee can. He arrived home one day to discover his wife had thrown the can into the trash. After finding that neighbourhood trash had already been collected, he hired a bulldozer for ,000 and carefully sifted the city dump. By the time the frantic dentist finally located the coffee can, the whole town as well as interested government agents knew about its contents.

Until Tomorrow with more DDT

Have a nice day.

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