On Thursday, the GST Council approved all eight rules, clearing the ground for the rollout of the Goods & Service Tax (GST). A preliminary reading of these rules reveals three significant changes.
First, the final rules have clarified on the valuation of goods between related parties. Under the new indirect tax regime, transactions between related parties, for example two companies belonging to the same group, will now be valued at 90 per cent of the market value.
“This is a simple method of valuation and provides much-needed clarity to the industry,” said Pratik Jain, national leader-indirect tax, PwC India.
Second, clarity has also been provided on how to arrive at the value of assets repossessed by banks on which the GST rates will be levied. Earlier, it was not clear as to whether GST would apply on the entire sale proceeds of such assets. But the rules have clarified that under GST, banks will now be allowed to deduct five per cent every quarter, or 20 per cent each year from the purchase value of the asset to arrive at the price at which GST is applicable.
“The effective incidence of GST in such cases would reduce, providing relief to banks and financial institutions,” Jain said.
Third, the rules have also clarified on how to deal with cases where input tax credit has been claimed but later reversed due to non-payment to the vendor.
Now, it has been provided that in such cases the credit can be reclaimed on payment to the vendor without prescribing any time limit.
#CA Amit Shah & Co.