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Reading Down Model Igst Act (Part-8) (Payment Of Tax)
July, 30th 2016

Chapter V of the Model IGST Act comprises of section 7 which contains provisions for payment of tax, interest, penalty and other amounts. The manner of maintenance of books and procedural requirements shall be prescribed by the Central Government after the legislation is enacted.

Manner of Payment

Section 7 provides for deposit or payment of –

  • tax (i.e.) IGST
  • interest on delayed payment of tax
  • interest
  • fee
  • any other amount

Accordingly, taxable person shall be required to deposit aforementioned amounts by way of / by -

  • Internet banking, or
  • Using debit / credit card, or
  • National Electronic Funds Transfer (NEFT), or
  • Real Time Gross Settlement (RTGS), or
  • Any other mode

which will be credited to the electronic cash ledger of such taxable person maintained under the Act.

The date of deposit in bank shall be deemed to be that date on which amount is credited to the account of the appropriate Government in the authorized bank. The conditions and limitations for such deposit of amounts and how electronic cash ledger shall be maintained will be prescribed by the Government.

Matter to be Prescribed

  • Manner of maintaining electronic cash ledger
  • Manner in which the input tax credit as self-assessed in the return of a taxable person shall be credited to his electronic credit ledger to be maintained
  • Manner, conditions and time within which the amount available in the electronic cash ledger may be used for making any payment towards tax, interest, penalty, fees or any other amount payable under the provisions of the Act or the rules
  • Manner, conditions and the time within which the amount available in the electronic credit ledger may be used for making any payment towards tax payable under the provisions of the Act or the rules
  • Manner in which all liabilities of a taxable person under this Act shall be recorded and maintained in an electronic register

Utilization of Credit

Sub-section (5) provides for the manner in which input tax credit on account of IGST, CGST and SGST could be utilized. Accordingly,

  • The amount of input tax credit on account of IGST available in the electronic credit ledger shall first be utilized towards payment of IGST and the amount remaining, if any, may be utilized towards the payment of CGST and SGST, in that order.
  • The amount of input tax credit on account of CGST available in the electronic credit ledger shall first be utilized towards payment of CGST and the amount remaining, if any, may be utilized towards the payment of IGST.
  • The amount of input tax credit on account of SGST available in the electronic credit ledger shall first be utilized towards payment of SGST and the amount remaining, if any, may be utilized towards the payment of IGST.

This manner of utilization of input tax credit amongst three taxes inter se, can be understood by way of following diagrams –

The following matrix explains the preference to be adopted for utilization of credit-

TAX  TYPE  (INPUT)

TAX  TYPE  (OUTPUT)

WHETHER POSSIBLE

RANKING

CGST

CGST

YES

1

CGST

SGST

NO

N.A

CGST

IGST

YES

2

SGST

CGST

NO

N.A

SGST

SGST

YES

1

SGST

IGST

YES

2

IGST

IGST

YES

1

IGST

CGST

YES

2

IGST

SGST

YES

3

It may be noted that there is no provisions for cross input tax credit utilization between CGST and IGST. Further, order of taking credit will not be allowed to be altered or jumped, i.e., it has to be strictly followed.

Refund of Balance Credit

Sub-section (6) provides that the balance in the cash or credit ledger after payment of tax, interest, penalty, fee or any other amount payable under the Act or the rules made thereunder may be refunded in accordance with the provisions of section 38 of the CGST Act and the amount collected as IGST shall stand reduced to that extent.

Thus, the balances of electronic cash or credit ledgers will be reduced after the payment to taxes etc are made through such ledgers. The refund will be allowed as provided in section 38 of CGST Act as a consequence of which IGST balance will stand reduced.

According to section 38 of CGST Act, any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application in that regard to the proper officer of IGST/CGST/SGST before the expiry of two years from the relevant date in such form and in such manner as may be prescribed. The limitation of two years shall not apply where such tax or interest or the amount referred to above has been paid under protest.

Order of Discharge

Sub-section 8 provides for discharge of dues in the prescribed order and assessee can not appropriate tax demand under any other order of preference. Accordingly, every taxable person is required to discharge his tax and other dues in the following order-

(a) self-assessed tax, and other dues related to returns of previous tax periods;

(b) self-assessed tax, and other dues related to the return of the current tax period;

(c) any other amount payable under the Act or the rules made thereunder including the demand determined under section 51 of the CGST Act.

Section 7(8) provides that every taxable person shall discharge his tax and other dues under IGST Act or the rules framed for this purpose in the following order only -

  • self-assessed tax, and other dues related to returns of previous tax periods,
  • self-assessed tax, and other dues related to the return of the current tax period,
  • any other amount payable under the Act or the rules including the demand determined under section 51 of the CGST Act.

Section 51 of CGST Act provides for determination of tax not paid or short paid or erroneously refunded, akin to present section 73 of the Finance Act, 1994.

Passing of Incidence

According to sub-section (9), there is a deeming provisions for passing of tax incidence.  Every person who has paid the tax on goods and/or service under this Act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such tax to the recipient of such goods and/or services.

This deeming provision shall apply unless the taxpayer is able to prove to the contrary. The onus of proof will lie on the taxpayer. It appears to be a grey area and we can see continuation of disputes arising out of unjust enrichment.

(To be continued…..)

 

By: Dr. Sanjiv Agarwal July 29, 2016

 

Discussions to this article

 

 

OFFHAND

According to own independent perception,- as often canvassed before, -the inherently dubious / patently distortional concept- 'DEEMED' - widely and impulsively employed in legal circles , in general, and mindlessly resorted to in modern- days- legislation, in particular, has most certainly the otherwise avoidable 'grey areas' ; which is potent with scope for controversies galore, and the resulting disputes and litigation.

In the context herein, what calls for a special focus is the very much wanting political will and apathy in such matters; which indisputably have impact on and gravely impairs the lawful rights and interests of mainly the consumers/direct stakeholders. Besides that, it is not the people but it is the government(S) who is going to be the unintended beneficiaries of 'unjust enrichment' made a mention of; and for funding its so called ‘public expenditure’, with no effective in-built checks and balances in place .

Last but not least, to go ahead with any enactment, despite itself being prim facie deficient and replete with lacunae, more so without the procedural rules simultaneously framed and brought in and in place, could only lead to further muddling up the already strained legal system.

As the towering legal legend and renowned humanitarian of our own times used to keep cautioning, for long, and as long back as a couple of decades ago,- “we have now reached the danger point when the laws are made almost entirely by the bureaucracy , and Parliament has only a formal role to play in law –making.”

On the topic of ‘stock exchange’, as he very rightly pointed out, that is one source commonly resorted to for speculation, making more money (gains), without ‘earning’ it. Said, quoting the warning by Lord Keynes:-

“Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill (un !) done.”

(SOURCE: For more inspiring wise thoughts, suggest reading incisively through published speeches/writings of N A Palkhivala - “We, the Nation THE LOST DECADES”)

 
 
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