EY Tax Alert - Rules about GST

1. 6 J une 2017 EY Tax Alert CBEC releases final return rules, GST rate schedule for certain goods and IGST exemption list as approved by GST Council Executive summary Tax Alerts cover significant tax news, developments and changes in legislation that affect Indian businesses. They act as technical summaries to keep you on top of the latest tax issues. For more information, please contact your EY advisor. The GST Council, in its 15th meeting held on 3 J une 2017, has approved GST return rules and formats along with formats for GST practitioners and mismatch. The Council has also fixed the GST rate on various goods such as gold, textile and biscuits. Further, it has decided to set up a committee for addressing anti-profiteering issues. The Central Board of Excise & Customs (CBEC) has released final return rules and formats approved by the Council. It has also released the rates schedule for goods covered under various chapters, further amendments to the earlier rates of goods and list of exemptions for import of goods under IGST. The Council is scheduled to meet again on 11 J une 2017 and is expected to take up pending matters, including certain representations received on the current schedule of rates. According to media reports, transition and other six draft rules are expected to be released in public domain in the next few days.

2. payment of tax under section 9 in FORM GSTR-4 till the due date of furnishing the return for the quarter ending September of the succeeding financial year or furnishing of annual return, whichever is earlier. Background • The Goods and Services Tax (GST) Council, in its meeting on 18-19 May 2017, had approved seven GST rules, GST rates for goods and services, list of exempt services and those attracting tax under reverse charge. Form and manner of submission of return by person providing OIDAR services • The Council, during its meeting held on 3 J une 2017, has approved GST return rules and formats along with formats for GST practitioners and mismatch. The draft amended return rules was released in the public domain on 31 March 2017. • Every registered person providing OIDAR services from a place outside India to a non-taxable person in India shall file a return in FORM GSTR-5A on or before 20th day of the succeeding month. Matching of claim for reduction in the output tax liability • The Council has also fixed the GST rate on various goods including gold, textile and biscuits. Further, it has also decided to set up a committee for addressing anti-profiteering issues. • Matching of taxable value is removed from list of details to be matched for reduction in output tax liability. • The claim of reduction in the output tax liability shall be considered as matched where the amount of reduced output tax liability is equal to or more than the claim of reduced ITC. • The rules and formats are released by CBEC on their website. CBEC has also released rate schedule for goods covered under various chapters, further amendments to earlier rate of goods and list of exemption for import of goods under IGST1. Earlier, the claim was to be considered as matched when the amount of reduction claimed is equal to or less than the claim of reduction in ITC. Return Rules Matching of details furnished by the e- commerce operator with the details furnished by the supplier The following are the significant changes in the final return rules: • Only the state of place of supply and net taxable value shall be matched. Form and manner of furnishing details of inward supplies Details such as GSTIN of supplier and recipient, invoice number, invoice date and tax amount which were earlier prescribed to be matched are now removed. • Part C of GSTR-2A will now reflect credit of both tax deducted and tax collected at source. Earlier, credit of TDS was covered under Part C and credit of TCS was covered under Part D of GSTR-2A. Annual Return • Every e-commerce operator required to collect tax at source will have to furnish annual statement in FORM GSTR-9B. • Details of invoices furnished by a non-resident taxable person in his return in FORM GSTR-5 under Rule 5 shall be made available to the recipient of credit in Part A of FORM GSTR-2. • Turnover limit for requirement of audit is extended to INR 2 crore from INR 1 crore earlier. Form and manner of submission of quarterly return by the composition supplier GST Rates for Goods • In addition to the rate schedule of GST on goods released on 18 May 2017, Government has issued rate schedule for certain goods on 3 J une 2017. Item-wise rates are broadly specified as under: • A person shall not be eligible to avail input tax credit on receipt of invoices or debit notes from the supplier for the period prior to his opting for composition scheme. • A registered person opting to withdraw from the composition scheme needs to furnish the details relating to the period prior to his opting for 1 Integrated Goods and Services Tax

3. Nature of goods and Chapter No. GST Rates rescheduled From 18% Description of Goods Chapter –10 - Cereals Goods i.e. Wheat and meslin, Rye, Barley, Oats, Maize (Corn), Rice, Grain sorghum, Buckwheat, Millet and canary seed and other cereals such as J awar, Bajra, Ragi., put up in unit containers and bearing a registered brand name. Chapter –11 - Flour, Aata, Maida, Besan etc. put up in unit container and bearing a registered brand name. Chapter –19 Biscuits –Sweet biscuits and other biscuits Chapter –24 - Biris (Bidi) Chapter –36 - Handmade safety matches Chapter –52 - Cotton, Cotton waste, Cotton sewing thread, Cotton yarn (other than khadi yarn), Cotton fabrics (with no refund of ITC accumulations) Chapter –57 - Carpets and other textile floor coverings, knotted, Woven, tufted, not tufted or flocked, mats and mattings including bath mats Chapter –64 - Footwears having a Retail Sale Price not exceeding INR 500 per pair Other foot wears Chapter –71 - Pearls, Diamonds, precious stones, synthetic stones, dust and powder of precious stones, silver, gold, platinum, articles of jewellery and parts thereof, articles of goldsmiths or silversmiths etc. Rough diamonds Supplies made by Canteen Stores Department (CSD) to Unit Run Canteens and on supplies to final consumers 50% Concession from applicable GST rate on supplies to CSD Rate 5% To 5% Mixture of two or more varieties of edible vegetable oils [1517] Erasers [4016] Glass beads [7018] Photo voltaic cells, whether or not assembled in modules or made up into panels [8541] Other sports (including table-tennis or outdoor games, swimming pools and paddling pools [9506] 18% 18% 18% 12% 5% 5% 5% 18% 28% 12% 28% 5% 5% • Goods which were not incorporated in the original schedule have been now incorporated as under: 12% Nature of goods and Chapter No. Organic chemicals, being intermediaries [2939, 2940, 2941 and 2942] Organic manure put up in unit containers and bearing a brand name [3101] Machinery for cleaning or drying bottles or other containers, machinery for filling, closing, sealing or labelling bottles, cans, boxes, bags or other containers; machinery for capsuling bottles, jars, tubes and similar containers; other packing or wrapping machinery (including heat- shrink wrapping machinery); machinery for aerating beverages [8422 20 00, 8422 30 00, 8422 40, 8522 90] LED Lamps [8539] GST rate 18% 5% 5% 18% 3% 18% 0.25% 0% 12% Addendum to GST Rates for Goods Other Key Amendments • Government has issued Addendum to the GST rates schedule for goods whereby some products have been reclassified under different rate category, some products are omitted or incorporated newly. Amendment has been intended to omit obvious errors and also considering industry representations. • Artificial waxes and prepared waxes covered under 28% rate have been omitted as the same have already been covered under 18% rate. • Typographical errors have also been corrected. E.g. in Chapter 38, in 18% rate column, for entry no. 18, the entry containing “3823 Industrial monobolic fatty acids” has been substituted by “3823 Industrial monocarboxylic fatty acids”. • Government has reclassified various types of goods from rates perspective. Key changes are as under: • “Other aseptic packaging paper” covered under Chapter 4811 and classified under18% rate column has been reworded as “Other than

4. aseptic packaging paper” as “Aseptic packaging paper [4811]” has already been covered under 12% rate category. • Goods imported by a passenger or a member of a crew in his baggage. It does not apply to motor vehicles, alcoholic beverages, tobacco and tobacco products. • Entry under Chapter 6903 for other refractory ceramic goods covered under 28% rate category has been omitted as the same entry has already been covered under 18% rate category. • Goods imported by a person of India origin on his return to India. • One laptop imported by a passenger of 18 years or above. IGST Exemptions/ Concessions under GST Comments • Various exemptions and concessions provided under Customs for import of goods by privileged persons, organizations, authorities and foreigners have been extended to IGST law. It inter-alia includes: a. The effort put in by the Council to clear the pending GST rates on certain goods and to finalize balance rules and formats, mainly involving return and transition, is creditable considering the targeted implementation of GST. • Goods imported by Diplomatic missions in India and their families, their personal and household effects, etc. are exempted from import duties. • Goods imported for display or use at specified event (fair, exhibition) subject to re-export within 6 months from date of clearance of imported goods. b. The increase in the turnover limit for audit requirement to INR2 crore is in line with income tax provisions and may benefit small and medium enterprises. • Goods which were manufactured in India and where exported for carrying out further manufacturing process, when re-imported in India after completion of said processes, custom duty is leviable on the value of the fair cost of the said processes carried out abroad (whether such cost is actually incurred or not), insurance and freight, both ways and not on the value of goods exported. c. Early release of the final transition rules in the public domain addressing various concerns of trade and industry should be crucial. • Exemption for goods in transit to and from Nepal or Bhutan • Goods imported from foreign country for purpose of exports to Bhutan or Nepal • Goods imported from Bhutan or Nepal into India for exports to foreign country • Exemption is provided for few items in line with Customs Exemption Notification No. 12/2012- Customs. Few of them are as follows: • Television equipment, cameras and other equipment for taking films, imported by a foreign film unit or television team • Goods imported for being tested in specified test centers. • Goods imported through postal parcels, packets and letters, the CIF value of which is not more than one thousand rupees per consignment. • Exemption is provided on imports by a SEZ unit or SEZ developer for authorized operations. • Exemption to bonafide passenger baggage and transfer of residence.

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