MEMO - MEMORANDUM - Central Goods And Services Tax Act, 2017

MEMORANDUM REGARDING DELEGATED LEGISLATION Clause 164 of the Central Goods and Services Bill, 2017 seeks to empower the Central Government to make rules, inter alia, in the following matters, namely:- (a) collection of taxes under section 9; (b) restrictions and conditions applicable to person opting for composition levy on under section 10; (c) value of the supply of goods or services or both under section 15; (d) conditions and restrictions on availing input tax credit and categories of tax paying documents under section 16; (e) depreciation on capital goods and plant and machinery as specified under section 18; (f) conditions and restrictions to allow input tax credit on inputs sent to a job-worker for job-work under section 19; (g) conditions and restrictions to allow input tax credit on capital goods sent to a job worker for job work under section 19; (h) manner of distribution of input tax credit by input service distributor under section 20; (i) manner and conditions for getting registered under section 25; (j) conditions for getting separate registration for business vertical under section 25; (k) period in which tax invoice is to be issued under section 31; (l) particulars to be declared on a tax invoice and a time in which such invoices are to be issued under section 31; (m) particulars to be declared on a credit or debit note under section 34; (n) particulars required to be maintained by a registered person at his principal place of business under section 35; (o) form and manner in which details of outward supplies are to be declared under section 37; (p) form and manner in which details of inward supplies are to be declared under section 38; (q) form and manner in which a return is to be filed by the registered person under section 39; (r) conditions and restrictions for provisional acceptance and claim of input tax credit under section 41; (s) calculation of interest on delayed payment of tax under section 50; (t) manner in which tax is to be deducted at source under section 51; (u) manner in which tax is to be collected at source under section 52; (v) manner and time for transfer of input tax credit under section 53; (w) form and manner in which application of refund is to be made under section 54; (x) condition and restrictions on refund in certain cases under section 55; (y) manner in which consumer welfare fund is to be constituted under section 57; (z) manner in which consumer welfare fund is to be utilised under section 58; (za) form in which a bond for provisional assessment is to be filed under section 60; (zb) manner in which returns are to be scrutinised under section 61; (zc) frequency and manner in which audit will be taken by tax authorities under section 65; (zd) manner in which advance ruling pronounced is to be certified under section 98; (ze) form, manner and fee for appeal to Appellate Authority under section 100; (zf) manner in which Advance Ruling pronounced by the Appellate Authority is to be certified under section 101;(zg) appeals to Appellate Authority under section 107; (zh) constitution of selection committee and their manner of working for selection of the Technical Member (Centre) and Technical Member (State) of the National Bench and Regional Benches under section 110; (zi) verification of memorandum of cross objection under section 112; (zj) manner in which President exercise his financial and administrative powers under section 114; (zk) time, form and manner in which persons furnish information return under section 150; (zl) form and manner in which statistics is to be collected under section 151; (zm) fee for taking a copy of any order or document under section 163; (zn) powers and discharge such functions under section 171; and (zo) any other matter which is to be, or may be, prescribed, or in respect of which provision is to be made, by rules. 2. Clause 165 of the Bill empowers the Board to make regulations to provide for any matter which is required to be, or may be, specified by regulation or in respect of which provision is to be made by regulations. 3. The matters in respect of which the said rules and regulations may be made are matters of procedure and administrative detail, and as such, it is not practicable to provide for them in the proposed Bill itself. The delegation of legislative power is, therefore, of a normal character. FINANCIAL MEMORANDUM Clause 53 of the Bill provides for apportionment of tax and settlement of funds on account of transfer of utilisation of input tax credit under this Bill for the payment of tax dues under the integrated goods and services tax by the Central Government. 2. Clause 96 of the Bill provides for the establishment of an Authority for Advance Ruling under the State Goods and Services Tax Act or Union Territory Goods and Services Tax Act and adoption of the same under the Central Goods and Services Tax Act. 3. Clause 99 of the Bill provides for the establishment of an Appellate Authority for Advance Ruling under the State Goods and Services Tax Act or Union Territory Goods and Services Tax Act and adoption of the same under the Central Goods and Services Tax Act. 4. Sub- clause (1) of clause 109 of the Bill provides for the establishment of the Goods and Services Tax Appellate Tribunal by the Central Government for hearing appeals against the orders passed by the Appellate Authority or the Revisional Authority. Sub-clause (8) of clause 110 of the Bill provides for the salary and allowances payable to the President and Members of the Appellate Tribunal. 5. Sub- clause (2) of clause 171 of the Bill provides for establishment of an authority for an anti-profiteering clause in order to ensure that business passes on the benefit of reduced tax incidence on goods or services or both to the consumers. 6. The total financial implications in terms of recurring and non-recurring expenditure involved in carrying out the various functions under the proposed Legislation would be borne by the Central Government. Most of the existing officers and staff of the Central Board of Excise and Customs would be used for carrying out the various functions under the Bill. However, it is not possible to estimate the exact recurring and non-recurring expenditure from the Consolidated Fund of India at this stage. STATEMENT OF OBJECTS AND REASONS Presently, the Central Government levies tax on, manufacture of certain goods in the form of Central Excise duty, provision of certain services in the form of service tax, inter-State sale of goods in the form of Central Sales tax. Similarly, the State Governments levy tax on and on retail sales in the form of value added tax, entry of goods in the State in the form of entry tax, luxury tax and purchase tax, etc. Accordingly, there is multiplicity of taxes which are being levied on the same supply chain. 2. The present tax system on goods and services is facing certain difficulties as under- (i) there is cascading of taxes as taxes levied by the Central Government are not available as set off against the taxes being levied by the State Governments; (ii) certain taxes levied by State Governments are not allowed as set off for payment of other taxes being levied by them; (iii) the variety of Value Added Tax Laws in the country with disparate tax rates and dissimilar tax practices divides the country into separate economic spheres; and (iv) the creation of tariff and non-tariff barriers such as octroi, entry tax, check posts, etc., hinder the free flow of trade throughout the country. Besides that, the large number of taxes create high compliance cost for the taxpayers in the form of number of returns, payments, etc. 3. In view of the aforesaid difficulties, all the above mentioned taxes are proposed to be subsumed in a single tax called the goods and services tax which will be levied on supply of goods or services or both at each stage of supply chain starting from manufacture or import and till the last retail level. So, any tax that is presently being levied by the Central Government or the State Governments on the supply of goods or services is going to be converged in goods and services tax which is proposed to be a dual levy where the Central Government will levy and collect tax in the form of central goods and services tax and the State Government will levy and collect tax in the form of state goods and services tax on intra-State supply of goods or services or both. 4. In view of the above, it has become necessary to have a Central legislation, namely the Central Goods and Services Tax Bill, 2017. The proposed legislation will confer power upon the Central Government for levying goods and services tax on the supply of goods or services or both which takes place within a State. The proposed legislation will simplify and harmonise the indirect tax regime in the country. It is expected to reduce cost of production and inflation in the economy, thereby making the Indian trade and industry more competitive, domestically as well as internationally. Due to the seamless transfer of input tax credit from one stage to another in the chain of value addition, there is an in-built mechanism in the design of goods and services tax that would incentivise tax compliance by taxpayers. The proposed goods and services tax will broaden the tax base, and result in better tax compliance due to a robust information technology infrastructure. 5. The Central Goods and Services Tax Bill, 2017, inter alia, provides for the following, namely:- (a) to levy tax on all intra-State supplies of goods or services or both except supply of alcoholic liquor for human consumption at a rate to be notified, not exceeding twenty per cent. as recommended by the Goods and Services Tax Council (the Council); (b) to broad base the input tax credit by making it available in respect of taxes paid on any supply of goods or services or both used or intended to be used in the course or furtherance of business; (c) to impose obligation on electronic commerce operators to collect tax at source, at such rate not exceeding one per cent. of net value of taxable supplies, out of payments to suppliers supplying goods or services through their portals; (d) to provide for self-assessment of the taxes payable by the registered person; (e) to provide for conduct of audit of registered persons in order to verify compliance with the provisions of the Act; (f) to provide for recovery of arrears of tax using various modes including detaining and sale of goods, movable and immovable property of defaulting taxable person; (g) to provide for powers of inspection, search, seizure and arrest to the officers; (h) to establish the Goods and Services Tax Appellate Tribunal by the Central Government for hearing appeals against the orders passed by the Appellate Authority or the Revisional Authority; (i) to make provision for penalties for contravention of the provisions of the proposed Legislation; (j) to provide for an anti-profiteering clause in order to ensure that business passes on the benefit of reduced tax incidence on goods or services or both to the consumers; and (k) to provide for elaborate transitional provisions for smooth transition of existing taxpayers to goods and services tax regime. 6. The Notes on clauses explain in detail the various provisions contained in the Central Goods and Services Tax Bill, 2017. 7. The Bill seeks to achieve the above objectives.