Telecommunication towers, land, buildings & other civil structures as well as pipelines laid outside factory premises have been excluded from the list of plant and machinery eligible for tax credit under the proposed Goods and Services Tax (GST) regime. Services by a foreign diplomatic mission located in India along with services provided by the government towards diplomatic or consular activities, citizenship, emigration and expulsion from India, currency, coinage and legal tender, foreign exchange and trade and commerce with foreign countries have been brought under the ambit of GST as per the revised version of Central GST (CGST) Bill as introduced in Lok Sabha on Monday. The CGST Bill has also introduced a ‘reverse charge’ to be paid by the recipient of a taxable good or service in case the supplier is unregistered. “The Central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both,” the CGST Bill said. “Since in the case of an unregistered retailer, the entire liability to pay tax will end up with the recipient, this step may encourage to deal only with smaller players,” Abhishek Jain, partner, indirect tax, EY India, said. The CGST Bill also makes an exception for Jammu & Kashmir for its applicability unlike the draft version where there was no such exception. Tax experts said that this may pose a problem in future because if J&K does not implement GST in the state at the same time as rest of the country, then taxpayers will have to pay double taxes for inter-state supplies such as State GST of the other state along with sales tax and VAT in J&K. The definition of a works contract has also been modified in the revised version of the CGST Bill. “The definition of works contract earlier included transfer of movable goods involved in the execution of a works contract, but now does not find a place in the revised version,” Deloitte Haskins Sells LLP senior director M S Mani said. Leasing of land, renting of buildings as well as EMIs paid for purchase of under-construction houses will also be under the ambit of GST. Sale of land and buildings along with electricity will be, however, out of the purview of GST. As per the CGST Bill, any lease, tenancy, easement, licence to occupy land will be considered as supply of service. Any lease or letting out of the building, including a commercial, industrial or residential complex for business or commerce, either wholly or partly, will also be a supply of services. The GST Bills provide that sale of land and, sale of building except the sale of under construction building will neither be treated as a supply of goods not a supply of services. Thus GST can’t be levied in those supplies. ‘Goods’ in earlier drafts of the Bills were defined as every kind of movable property other than money and securities but includes actionable claim. ‘Services’ were defined as anything other than goods. There were apprehensions that the GST may be levied on supply of immovable property such as land or building apart from levy of stamp duty, but the Bills presented in Parliament have now clarified this position. The government intends to roll out the indirect tax regime from July 1, 2017. GST will subsume central excise, service tax and state VAT among other indirect levies on manufactured goods and services.
