MEMO - MEMORANDUM REGARDING DELEGATED LEGISLATION - Union Territory Goods And Services Tax Act, 2017

MEMORANDUM REGARDING DELEGATED LEGISLATION Clause 22 of the Union territory Goods and Services Tax Bill, 2017 seeks to empower the Government to make rules, inter-alia, in the following- (a) collection of taxes under section 7; (b) manner and time in which input tax credit will be transferred under section 10; (c) manner in which tax wrongfully collected and paid to Central Government or Union territory Government is to be refunded under section 19; (d) qualifications, the method of appointment of the members and the terms and conditions of their service for Authority of Advance Ruling under section 15; (e) form and manner in which certification of registration on provisional basis is to be issued under section 17; (f) manner in which input tax credit is to be carried forward under section 18; (g) form, manner and time in which the job worker declares inputs held in stock on behalf of the manufacturer under section 19; (h) manner in which credit will be calculated on tax paid under existing law under section 20; and (i) 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 23 of the Bill empowers the Board to make regulations to provide for anymatter 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 arematters 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 10 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. Sub-clause (1) of clause 15 of the Bill provides for the establishment of an Authority for Advance Ruling. 3. Sub-clause (1) of clause 16 of the Bill provides for the establishment of an Appellate Authority for Advance Ruling. 4. Sub-clause (1) of clause 21 of the Bill provides for application of provisions of the Central Goods and Services Tax Bill, 2017 relating to appeals, advance ruling and anti-profiteering. So authorities established under Central Goods and Services Tax Act will be utilised for the purposes of this Bill. Thus there will be no extra financial expenditure under this Bill. 5. The total financial implications in terms of recurring and non-recurring expenditure involved in carrying out the various functions under the Bill would be borne by the Central Government. Most of the existing officers and staff of the Central Board of Excise and Customs and Union territories 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 Constitution empowers the Central Government to levy excise duty on manufacturing and service tax on the supply of services. Similarly, it empowers the State Governments and Union territories to levy sales tax or value added tax on the sale of goods. In addition, many States also levy an entry tax on the entry of goods in local areas. This exclusive division of fiscal powers has led to a multiplicity of indirect taxes in the country. 2. The present tax system on goods and services in the Union territories is facing certain difficulties which are as under- (a) the multiplicity of taxes at the Central and State levels has resulted in a complex indirect tax structure in the country that is ridden with hidden costs for the trade and industry; (b) there is no uniformity of tax rates and structure across the States and there is cascading of taxes due to tax on tax ; and (c) the credit of excise duty and service tax paid at the stage of manufacture is not available to the traders while paying the State level sales tax or value added tax, and vice-versa. Further, the credit of State taxes paid in one State cannot be availed in other States. Hence, the prices of goods and services get artificially inflated to the extent of this tax on tax . 3. In view of the above, it has become necessary to have a Central Legislation, namely, the Union Territory 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 Union territory without Legislature. 4. The proposed Legislation will simplify and harmonise the indirect tax regime in the country. It is expected to reduce the cost of production and inflation in the economy, thereby making the Indian trade and industry more competitive, domestically as well as internationally. It is also expected that introduction of goods and services tax will foster a common or seamless Indian market and contribute significantly to the growth of the economy. 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 Union Territory 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 empower the Central Government to grant exemptions, by notification or by special order, on the recommendations of the Council; (c) to provide for apportionment of tax and settlement of funds on account of transfer of input tax credit between the Central Government, State Government and Union territory; (d) to provide for assistance by officers of Police, Railways, Customs, and those engaged in the collection of land revenue, including village officers, and officers of central tax and officers of the State tax to proper officers in the implementation of the proposed Legislation; (e) to provide for recovery of tax, interest or penalty payable by a person to the Government which remains unpaid, by the proper officer of central tax; (f) to establish an Authority for Advance Ruling in order to enable the taxpayer to seek a binding clarity on taxation matters from the department; (g) to provide for elaborate transitional provisions for smooth transition of existing taxpayers to goods and services tax regime; (h) to provide for application of certain provisions of the Central Goods and Services Tax Act, 2017, inter alia, relating to definitions, time and value of supply, input tax credit, registration, returns other than late fee, payment of tax, assessment, refunds, audit, inspection, search, seizure and arrest, demands and recovery, appeals and revision, offences and penalties and transitional provisions in the proposed Legislation; and (i) to empower the Commissioner to issue orders, instructions or directions to the Union territory tax officers. 6. The Notes on clauses explain in detail the various provisions contained in the Union Territory Goods and Services Tax Bill, 2017. 7. The Bill seeks to achieve the above objectives.