July 1, 2017, at the stroke of the midnight hour, India woke to see its new tryst with destiny – The Goods & Services Tax, better known as GST. Touted as one of the biggest tax reform, GST in India is expected to kindle, the socio-economic growth of the nation, by moderating prices and plunging the parallel economy.
Whenever a new law is incorporated, it customarily entails a number of changes to, gear up for – pertaining to the efforts, being charged from both, a law makers as well as industry’s point of view. On the canvas of indirect taxes, in addition to being a key factor for supply chain modeling of Indian businesses, GST India Services are a complete refurbishment of the previous taxation structure and, are anticipated to impact the entire transaction system.
GST, while would undoubtedly, unleash a sizeable quantum of positive impulses, will also be required to tackle a plethora of challenges – especially in the short term, on account of various obscurities.
While the GST India law and, related Regulations/ Notifications have addressed various concerns and demands to a significant extent, opacities still prevail; some essentially being on account of the core federal structure and, others on the cosmic intensity of the reform.
The biggest challenge for GST India Services, is deciphering, the taxability of supplies to Jammu and Kashmir. The GST law in its current form applies to entire India, except the state of Jammu & Kashmir. A brief study of the said provision seems to recommend that GST would be restricted to the sales/stock transfers, made to businesses/branch offices respectively in J&K.
However, if businesses/branch offices, wish to further supply to consumers/other businesses in J&K, local taxes would apply vis-à-vis GST, causing GST, levied on the inputs for such supplies, emerging out to be an additional cost in the supply chain.
Another troublesome characteristic under GST India Services is exports for automobile sector/ other sectors on, which return cess is chargeable under the rebate route. Aligned to the government’s objective of, promoting exports and, earning of related foreign exchange, GST in India, inherits the current zero rating for exports i.e. non-payment of GST on exports.
Alternatively, the Government has also proposed a mechanism, for payment of IGST with respect to, claiming of corresponding reimbursement of the same – the shipping bill that has been filed is deemed as an application for such refund.
On the basis of the latest format of the shipping bill, which facilitates the exporters to include the information of the IGST paid on exports, there appears to be no such field, for the inclusion of the compensation cess, paid.
Along the same lines, the outward supply return, to be filed under GST i.e., GSTR-1 as well, does not have a separate field to include details of cess paid on exports. This intentional/ unintentional mistake has prompted apprehensions especially for automobile exporters, as to whether compensation cess is required to be paid on exports, or not!
In conclusion –
With the Government’s positive outlook, on addressing industry apprehensions, coupled with clarities, being issued periodically, in the recent weeks, we expect most of the above issues, along with various other issues, not highlighted above, to be rectified soon, in order to avoid any public backlash!