DRAFT – THE INTEGRATED GOODS AND SERVICE TAX ACT, 2016 – PART II

[Mr. M. GOVINDARAJAN]

In this part the provisions relating to input tax credit is discussed in detail along with other things except the provisions relating to Settlement Commission.

Payment of tax etc.,

Section 7 provides for the payment of tax, interest, penalty or any other amount to the credit of the Government.  Section 7(1) provides that every deposit made towards tax, interest, penalty, fee or any other amount is payable by a taxable person-

• by internet banking;or
• by using credit/debit cards; or
• by National Electronic Fund Transfer; or
•  by Real Time Gross Settlement; or
• By another mode

 subject to such conditions and restrictions as may be prescribed in this behalf, shall be credited to the electronic cash ledger of such person to be maintained in the manner as may be prescribed. 

The date of credit to the account of the appropriate Government in the authorized bank shall be deemed to be the date of deposit.

Section 7(8) provides that every taxable person shall discharge his tax and other dues under this Act or the rules made there under in the following order-

• self-assessed tax, and other dues related to returns of previous tax periods;
• self-assessed tax, and other dues related to the return of the current tax period;
• any other amount payable under the Act or the rules made there under including the demand determined under section 51 of the CGST Act.

Section 7(9) provides that every person who has paid the tax on goods and/or services under this Act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such tax to the recipient of such goods and/or services.

Interest on delayed payment

Section 29 provides for the payment of interest on delayed payment of tax.  Section 29(1) provides that every person liable to pay tax, who fails to pay the tax or any part thereof to the account of the Central Government within the period prescribed, shall, on his own, for the period for which the tax or any part thereof remains unpaid, pay interest at such rate as may be notified, on the recommendation of the Council, by the Central Government.

Section 29(2) provides that the interest shall be calculated from the first day such tax was due to be paid.  Section 29(3) provides that In case a taxable person makes an undue or excess claim of input tax credit under sub-section (10) of section 29 of the CGST Act, he shall be liable to pay interest on such undue or excess claim at the prescribed rate for the period computed in the manner prescribed.

Input tax credit

Section 2(1) (d) defines the term ‘input tax’ as in relation to a taxable person, means the Integrated Goods and Services Tax, Central Goods and Services Tax or State Goods and Services Tax, as the case may be, charged on any supply of goods and/or services to him which are used, or are intended to be used, in the course or furtherance of his business and includes the tax payable under sub-section (3) of section 4.

Section 2(1) (e) defines the term ‘input tax credit’ as credit of ‘input tax’ as defined in clause (d) of subsection (1) of section 2.

Procedure for utilizing input tax credit

The following is the procedure to utilize input tax credit-

• The input tax credit as self-assessed in the return of a taxable person shall be credited to his electronic credit ledger to be maintained in the manner as may be prescribed;
• The amount available in the electronic cash ledger may be used for making any payment towards tax, interest, penalty, fees or any other amount payable under the provisions of the Act or the rules made there under in such manner and subject to such conditions and within such time as may be prescribed;
• The amount available in the electronic credit ledger may be used for making any payment towards tax payable under the provisions of the Act or the rules made there under in such manner and subject to such conditions and within such time as may be prescribed;
• The amount of input tax credit on account of IGST available in the electronic credit ledger shall first be utilized towards payment of IGST and the amount remaining, if any, may be utilized towards the payment of CGST and SGST, in that order;
• The amount of input tax credit on account of CGST available in the electronic credit ledger shall first be utilized towards payment of CGST and the amount remaining, if any, may be utilized towards the payment of IGST;
• The amount of input tax credit on account of SGST available in the electronic credit ledger shall first be utilized towards payment of SGST and the amount remaining, if any, may be utilized towards the payment of IGST;
• The balance in the cash or credit ledger after payment of tax, interest, penalty, fee or any other amount payable under the Act or the rules made there under may be refunded in accordance with the provisions of section 38 of the CGST Act and the amount collected as IGST shall stand reduced to that extent.

Electronic Ledger

Section 7(7) provides that all liabilities of a taxable person under this Act shall be recorded and maintained in an electronic register as may be prescribed.

Taking of input tax credit

Section 8 (1) provides that every registered taxable person shall, subject to such conditions and restrictions as may be prescribed in this behalf, be entitled to take credit of input tax, as self-assessed, in his return and such amount shall be credited, on a provisional basis, to his electronic credit ledger to be maintained in the manner as may be prescribed.

Section 8(2) provides that the provisions of section 29 of the CGST Act, 2016 relating to matching, reversal and reclaim of input tax credit shall apply mutatis mutandis to the matching, reversal and reclaim of input tax credit under this section.

Transfer of input tax credit

Section 9(1) provides on utilization of input tax credit availed under this Act for payment of tax dues under the CGST Act as per sub-section (5) of section 7, the amount collected as IGST shall stand reduced by an amount equal to the credit so utilized and the Central Government shall transfer an amount equal to the amount so reduced from the IGST account to the CGST account in the manner and time as may be prescribed.

Section 9(2) provides that on utilization of input tax credit availed under this Act for payment of tax dues under the SGST Act as per sub-section (5) of section 7, the amount collected as IGST shall stand reduced by an amount equal to the credit so utilized and the Central Government shall transfer an amount equal to the amount so reduced from the IGST account to the SGST account of the appropriate State Government in the manner and time as may be prescribed.

Apportionment of Tax

Section 10 provides the procedure for apportionment of IGST, interest, penalty and other amount collected to the Central Government and to the State Government. 

The following is the procedure for apportionment to the Central Government-

1. Out of the IGST paid to the Central Government in respect of inter-State supply of goods and/or services to an unregistered person or to a taxable person paying tax under section 8 of the CGST Act, the amount of tax calculated at the rate equivalent to the CGST on similar intra-state supply shall be apportioned to the Central Government;
2. Out of the IGST paid to the Central Government in respect of inter-State supply of goods and/or services made in a year to a registered taxable person, where such taxable person is either not eligible for input tax credit or where he does not avail of the said credit within the specified period and thus remains in the IGST account after expiry of the due date for filing of annual return for such year in which the supply was made, the amount of tax calculated at the rate equivalent to the CGST on similar intra-state supply shall be apportioned to the Central Government;
3. Out of the IGST paid to the Central Government in respect of import of goods and / or services by an unregistered person or by a taxable person paying tax under section 8 of the CGST Act, the amount of tax calculated at the rate equivalent to the CGST on similar intra-state supply shall be apportioned to the Central Government;
4. Out of the IGST paid to the Central Government in respect of import of goods and / or services made in a year by a registered taxable person, where the such taxable person is either not eligible for input tax credit or where he does not avail of the said credit within the specified period and thus remains in the IGST account after expiry of the due date for filing of annual return for such year in which the supply was received, the amount of tax calculated at the rate equivalent to the CGST on similar intra-state supply shall be apportioned to the Central Government.

The following is the procedure for appointment to the State Government-

5. The balance amount of tax remaining in the IGST account in respect of the supply for which an apportionment to the Central Government has been done under para (1), (20 or (3) above shall be apportioned to the State where such supply takes place as per Section 5 or 6, in the manner and time as may be prescribed.

For the apportionment of interest and penalty the provisions of (1), (2), (3), (4) and (5) paras above relating to apportionment of tax shall mutatis mutandis apply to the apportionment of interest and penalty realized in connection with the tax so apportioned.

Section 10(7) provides that where an amount has been apportioned to the Central Government or a State Government under paras (1), (2), (3), (4), (5) and (6) above, the amount collected as IGST shall stand reduced by an amount equal to the amount so apportioned and the Central Government shall transfer to the CGST account an amount equal to an amount apportioned to the Central Government and shall transfer to the SGST account of the State an amount equal to an amount apportioned to that State, in the manner and time as may be prescribed.

Refund of wrongly paid tax

Section 30 provides that a taxable person who has paid IGST on a transaction considered by him to be an interstate supply, but which is subsequently held to be an intra-state supply, shall, upon payment of CGST and SGST in the appropriate State, be allowed to take the amount of IGST so paid as refund subject to the provisions of section 38 of the CGST Act, 2016 and such other conditions as may be prescribed.

Officers under the Act

Section 32 of the Act provides for the appointment of the following officers for the purposes of this Act-

• Principal Chief Commissioners of IGST or Principal Directors General of IGST;
• Chief Commissioners of IGST or Directors General of IGST;
• Principal Commissioners of IGST or Principal Additional Directors General of IGST;
• Commissioners of IGST or Additional Directors General of IGST;
• First Appellate Authority;
• Additional Commissioners of IGST or Additional Directors of IGST;
• Joint Commissioners of IGST or Joint Directors of IGST;
• Deputy Commissioners of IGST or Deputy Directors of IGST;
• Assistant Commissioners of IGST or Assistant Directors of IGST and
• Such other class of officers as may be appointed for the purposes of this Act.

The Board may appoint such persons as it may think fit to be officers under the Integrated Goods and Services Tax Act, 2016.  the Board may authorize a Principal Chief Commissioner/Chief Commissioner of Central Goods and Services Tax or a Principal Commissioner/Commissioner of Central Goods and Services Tax or an Additional/Joint or Deputy/Assistant Commissioner of Central Goods and Service Tax to appoint officers of Integrated Goods and Services Tax below the rank of Assistant Commissioner of Integrated Goods and Services Tax Act, 2016.