- At present, Most Of indirect Taxes are origin based were as GST is a `destination based’ tax. Thus, concepts such as determining the `place of supply’. Service tax is a central levy, requiring a single registration and a half-yearly filing by the service provider. GST is a dual tax structure and this is where the problems begin.
- Suppose Currently, a Service Provider providing Service in Different States with pan-India operations can discharge its service tax compliances through a single `centralized’ registration. However, under GST, such such service provider would need to obtain a separate registration for each state where the company operates.”
- In addition to registration, compliance burden as regards filing of returns has also increased substantially -in terms of the periodicity of returns, number of return formats and level of details required in these returns. .
“If the service provider, has offices in all six states, it may be required to file 78 returns annually, as compared to only two at present. Further, if back-end operations are not planned well, the taxpayer will run the risk of a credit accumulation in one state and a cash outgo in another.
- Service providers are understandably anxious on many fronts as regards the proposed GST regime. Not only is the tax rate under GST expected to rise from the current 14.5% (which may make their services unattractive to customers), but the level of compliance requirements increases manifold.
- Determining Place Of Supply .As tax has to be paid where the service recipient is located, it throws up many challenges. “India Inc hopes for simple, unambiguous `place of supply’ (POS) rules to ensure that multiple states don’t try to levy tax on the same transaction. It is also essential that the rules should not result in input tax credits getting blocked in any circumstances,
- The draft model GST law, which is widely in circulation, provides some indicators of how `POS’ will be determined under GST. However, government officials say that this document was not released by the government, drafting work is on and a version will be made available for stakeholder discussion in the coming weeks. In case of mobile connections for telecommunication and internet services, provided on `post-paid’ basis, the `POS’ will be determined based on the customer’s billing address. If the mode is `pre-paid’, the POS will be the location where the payment is received or vouchers are sold (in case payment is made electronically, the customer’s address with telecom service provider will determine the POS), says the draft. .
- For sectors such as insurance or telecom, which typically have consumers who may keep moving from one state to another, given the difficulty of keeping track of addresses, the POS should be based on the location of the service provider.” .