Higher share for the Centre in unutilised funds of compensation fund, bi-monthly payment of compensation to states, reduction in threshold for tax collected at source, exemption to agriculturist supplying produce out of cultivation from registration and refund to tourists leaving the country are some of the new features in the four Bills for Goods and Services Tax (GST) introduced in the Lok Sabha on Monday. Some provisions of the draft model GST law, which was unveiled last year, such as an anti-profiteering authority, arrest powers for tax evasion and self-assessment found their place in the final version of the GST Bills.
As per the GST (Compensation to States) Bill, the government has proposed a non-lapsable fund called GST Compensation Fund for compensating states for revenue losses during the transition period of five years after the rollout of the indirect tax regime. A bi-monthly compensation payout will be made to states as against a quarterly payout proposed earlier in the draft version of the GST law. Centre has also decided to retain a higher share from the residual amount of the compensation fund, with 50 per cent of the unutilised funds proposed to be transferred to the Consolidated Fund of India as the Centre’s share. The remaining 50 per cent will be shared between states and Union territories in the ratio of their total revenues from SGST in the last year of the transition period.
As per the earlier draft, any excess amount after the end of the five year tenure in the GST Compensation Fund were to be divided between Centre and states as per the specified formula under which 50 per cent of the excess amount was to be devolved between Centre and states as per statute.
The Central Goods and Services Tax Bill has reduced the threshold for levy of 1 per cent tax collected at source to Rs 2.5 lakh as opposed to Rs 5 lakh in the draft version of the law. “The government may mandate a department or establishment of the central government or state government; or local authority; or governmental agencies; or such persons or category of persons as may be notified by the government on the recommendations of the council, to deduct tax at the rate of 1 per cent from the payment made or credited to the supplier of taxable goods or services or both, where the total value of such supply, under a contract, exceeds two lakh and fifty thousand rupees…” the Bill stated.
For registration, the CGST Bill stated that persons exempt from paying tax and agriculturists, to the extent of supply of produce out of cultivation of land, shall not be liable for GST registration. The earlier definition had exempted agriculturists, for the purpose of agriculture from registration.
The Integrated GST Bill has a new clause providing for refund tax paid on supply of goods to tourist leaving India. Also, the Bill provides for payment of tax by a supplier of online information and database access or retrieval services.
The Compensation Bill also provides for audit of accounts relating to Compensation Fund by CAG along with proposing final adjustment of compensation for states to be done after audit of accounts by the CAG. The GST Council had decided to set up a compensation fund by levying cess on demerit and luxury goods.
The Bill also stipulates that the base year for calculating the revenue of a state would be 2015-16 and a growth rate of 14 per cent would be used for calculating the revenue of each state in the first five years of implementation of GST. In case of 11 special category states, the revenue foregone on account of exemption of taxes granted by states shall be counted towards the definition of revenue for the base year 2015-16. The revenues of states that were not credited to the Consolidated Fund of the states but were directly devolved to “mandi” or “municipalities” would also be included in the definition of ‘revenue subsumed’, the Bill said.
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