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What is the GST Bill?

A bill is a draft of a proposed law presented to the Parliament for discussion. Once it is passed by the Parliament, it becomes an act. So GST Bill has now become GST Act.

Are There Any Changes to the GST Act?

The Model GST law was first drafted in June 2016 and later revised in November 2016. Lok Sabha has passed the 4 bills with certain amendments. Here is a list of the major changes proposed in GST bill:

Applicability of GST Law in the State of Jammu and Kashmir

J&K Finance Minister Haseeb Drabu has confirmed that J&K will apply GST. However, since J&K has a separate constitution and has special provisions regarding legislature, CGST & IGST will be passed separately. SGST will be passed separately, similar to the other states.

Employer’s Gifts to Employee Will No Longer be Taxed under GST

Earlier the supply of goods or services between related persons (made during the course of business) was treated as ‘supply’ even when there is no consideration. Employer and Employee were covered in the definition of related person. So, it stood that any supply of goods or services by employer to his employees (even if free of cost) would have been covered under the scope of GST.

Proposed change to the Act provides that GST will not apply on gifts upto Rs. 50,000 by an employer to a particular employee. However, gifts above Rs. 50,000 will attract GST.

GST not Applicable on Sale of Land/Building

Earlier, the term ‘goods’ included all movable property including actionable claims. Only money and securities were excluded. “Services” had a vague definition of “anything other than goods”.

Thus, there was an apprehension that the Government may levy GST on supply of immovable property (land/building) apart from levy of Stamp duty.

Now, the government has clearly mentioned in Schedule III that sale of land and/or building will neither be treated as a supply of goods nor a supply of services, i.e., Goods and Service Tax (GST) will not be applicable on this.

So currently it stands that:

• GST will apply on renting, leasing of land and/or building
• GST will NOT apply on sale of land/building (Stamp duty will continue to apply)
• GST will apply on works contract, i.e., constructing a building
• GST will apply on sale of an under-construction building

However, there are discussions of bringing in sale of land and/or building under GST within 1 year from GST implementation date.

Fixing the Upper limits of GST rates- CGST- 20% & IGST- 40%

Earlier, the upper cap fixed was 14% and 25% respectively in both the laws. Now, the upper cap has been fixed at 20% and 40% respectively under CGST and IGST Law to keep a flexibility for rates increase in future. However, the GST slabs remain the same – 5%, 12%, 18% and 28%.

Petroleum Products Will Come under GST

The petroleum products (crude oil, high speed diesel, petrol, natural gas and aviation turbine fuel/ATF) have now been brought under GST.

This will be highly beneficial to Indian businesses as businesses now can take input credit on petrol products purchased. Many industries like the plastic and chemical industries have petroleum products as inputs for manufacture. Besides, machinery, vehicles use petrol/ATF to run. Availability of input credit will help to reduce prices of goods.

Unregistered Seller and registered Buyer – GST is Applicable on Reverse Charge Basis

An unregistered supplier cannot charge GST on sales. The Model law did not mention the tax treatment if an unregistered dealer sold to a registered buyer.

The Act now provides that when a registered buyer buys from an unregistered dealer, then reverse charge is applicable, i.e. the buyer (recipient of  goods/services) is liable to pay GST. This is similar to the current purchase tax on purchase of goods from an unregistered dealer applicable in many states.