Compliance barriers on the road to GST- An Analysis of Model GST Law

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Customer Care No. 91-11-45562222
Compliance barriers on the road to GST- An
Analysis of Model GST Law
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• 1. Introduction
• "Will you walk into my parlour?" said the Spider
  to the Fly, '
• Tis the prettiest little parlour that ever you
  did spy
• The way into my parlour is up a winding stair,
• And I've a many curious things to show when you
  are there."
• Oh no, no," said the little Fly," to ask me is in
  vain,
• For who goes up your winding stair can ne'er come
  down again."
• (an extract of the poem 'The spider the fly',
  by Mary Botham Howitt)

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• With the advent of Goods and Services Tax (GST)
  in India, the above extract appears to be a
  fitting interesting one. While there have been
  several discussions of how the GST regime would
  be beneficial to the Indian Economy, the aspect
  of compliances was never on the agenda. Recently
  released Model GST Law, throws light on this
  aspect. While the assessees should revamp their
  IT systems to be compliant with the new regime,
  it is also of utmost importance to understand how
  complying with the statutory timelines could have
  an impact on their cash flows and credit
  mechanism. Is tax becoming one of the key factors
  to drive a business or are we still in an era
  where business drives the tax. This article
  attempts to examine whether the compliance
  aspects under the model GST law are flight's of
  winding stairs to the spider's parlour or
  otherwise.
• 2. Registration of suppliers under the GST regime
• Every supplier would be liable for registration
  under the GST regime, in the State from where he
  makes a taxable supply of goods and/or services
  if his aggregate turnover in a financial year
  exceeds rupees nine lakhs. While some might
  compare this threshold to the existing Service
  tax regime, it would be interesting to note the
  definition of 'aggregate turnover', which would
  be the aggregate value of
• all taxable and non-taxable supplies,
• exempt supplies and exports of goods and/or
  services of a person having the same PAN, which
  is to be computed on an all India basis, and
• excludes taxes, under the Central GST Act,
  State GST Act and the Integrated GST Act.

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• The term 'supply' featuring in the above
  definition includes all forms of supply of goods
  and/or services such as sale, transfer, barter,
  exchange, license, rentals, lease or disposal
  made or agreed to be made for a consideration by
  a person in the course (or furtherance) of
  business. The same also includes importation of
  service, whether or not for a consideration and
  whether or not in the course of or furtherance of
  business. Besides the above, there are also some
  specified transactions which would be categorized
  as a supply, even though undertaken sans
  consideration. Judging from the ambit of the
  above definitions, it appears that the framers of
  the model GST law have ensured to spread the tax
  net wide enough to increase the assessee base.
  The model GST law also provides for a
  transitional shift into the new regime for the
  existing taxpayers. For the said purpose, on the
  appointed day, i.e., the day when the
  Central/State Goods and Service Tax Act comes
  into effect, every person registered under the
  earlier laws would be issued a certificate of
  registration on a provisional basis, which after
  submission of the prescribed details would be
  granted registration on a final basis.
• To sweeten the deal, a benefit has been provided
  in the model GST Law where a supplier would not
  be liable to registration if his aggregate
  turnover consists of only goods and/or services
  which are not liable to tax. Does this mean that
  even a single taxable transaction (irrespective
  of its value) would warrant registration and
  would subject an assessee to the prescribed
  statutory compliances? Would the assessee be
  better off if the definition of turnover would
  include only taxable goods/services, as under the
  existing regime?

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• 3. Invoices Debit and Credit Notes
• At a broad level, the provisions pertaining to
  issuance of invoices are similar to those under
  the existing tax regime. Relevant provisions are
  also proposed to be enacted for issuance of debit
  and credit notes for instances where the tax
  invoice is found to exceed the taxable value
  and/or tax payable in respect of such a supply.
  The details of debit/credit notes are required to
  be incorporated in the returns for the month of
  issuance/receipt or in the return for any
  subsequent month but not later than September
  following the end of the financial year in which
  such supply was made, or the date of filing the
  relevant annual return, whichever is earlier.
• Under the model GST law, it appears that
  instances for issuance of a debit/credit note
  would only arise where the taxable value or the
  tax exceeds what was actually payable. The said
  legislation does not mention the treatment
  required where goods are returned on account of
  any defects/deficiencies. Did the framers of the
  model GST law intentionally exclude such
  instances and intended to treat each leg (i.e.,
  the sale and the subsequent return) as an
  independent transaction ? Can the tax costs of
  such transactions be set off by the applicable
  credits? It would be interesting to see the
  developments on this front.

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