Transcript Slide 1
Place of Provision of Service Rules
2012
CA Dhruvank P. Parikh
11/12/2013
CA Dhruvank Parikh
Relevance
There shall be levied a tax (herein after referred to as Service
Tax) at the rate of twelve percent on the value of all services,
other than those services specified in the negative list,
provided or agreed to be provided in the taxable territory by
one person to another and collected in such manner as may
be prescribed. (Section 66B of the FA’1994)
In the earlier regime, cross border transactions were
governed by Export/Import Rules which were broadly based
on positive list approach.
Post 01/07/2012, both – Export as well as Import of Service
Rules have been de notified and they have been replaced by
“Place of Provision of Service Rules,2012” notified vide
notification no. 28/2012-ST dated 20/06/2012.
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Person for whom these rules are relevant
Persons who deals in cross border services.
Persons providing services in or receiving
services from the state of Jammu and Kashmir.
Persons operating within India from multiple
locations, without having centralized
registration.
Persons providing services in or receiving
services from Special Economic Zones.
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Rule 2 (h) & (i) : Definition
The location of the service provider or the recipient shall be:
(a) Where the service provider/receiver has obtained a single
registration, whether centralized or otherwise, the premises for
which such registration has been obtained.
(b) If not covered as per (a) above:
The location of his business establishment
If the service is not provided or used at business establishment,
then it will be the location of the fixed establishment where the
services are provided or used.
Where the services are provided/used from/at more than one
establishment, whether business or fixed, the establishment most
directly concerned with the provision of the service.
In absence of such places, the usual place of residence of the
Service Provider/Recipient.
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How to determine Taxability??
Which rule applies to the service provided specifically?
What is the Place of Provision as per the above rules ?
Is the place of provision in taxable territory? If yes, tax will be
payable. If not, tax will not be payable.
Is the ‘provider’ located in the taxable territory? If yes, he will
pay the tax.
If not, the service receiver located in taxable territory? If yes,
he may be liable to pay tax on reverse charge basis.
Is the service receiver an individual or government receiving
services for a non-business purpose, or a charity receiving
services fro a charitable activity? If yes, the same is exempted.
If not, he is liable to pay tax.
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Rule 3 : General Rule or Default Rule or
Residuary Rule
Comes into effect only when a later specific rule
is not applicable.
If the service falls within the ambit of this rule,
the location of the service receiver will be the
place of provision of service.
As per the proviso to Rule 3, in case the location
of the service receiver is not available in the
ordinary course of business, the place of
provision shall be the location of the service
provider.
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Rule 4(a) : Services in respect of Goods
Services are provided in respect of goods that
are required to be made physically available by
the recipient of service to the provider of service,
or to a person acting on behalf of the provider of
service, in order to provide the service.
The place of provision shall be the location where
the services are actually performed.
Repairs, Reconditioning, Storage & Warehousing,
Courier service, Cargo Handling Service, Dry
cleaning, technicaltesting/inspection/certification
etc.
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Examples on Rule 4 (a)
A music troupe
from France
Delhi
M/s. ABC Ltd.
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approached
Mumbai
Mr. X
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Cargo Handling Firm India
Bhopal
Jaipur
Proviso to Rule 4 (a)
1. Services provided from a remote location
by way of electronic means – Place of
provision shall be the location where the
goods are situated at the time of provision of
service.
Vadodara
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USA
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Proviso to Rule 4 (a)
2. As per second proviso to Rule 4, the
provisions contained in Rule 4 (a) shall not
apply to in respect of goods whether
temporarily imported in India for Repairs,
Reconditioning or Reengineering for export
subject to conditions as may be specified.
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Rule 4 (b) : Services
Provided in the
Physical Presence of
Individual :
Services provided to an
individual, represented
either as the recipient
of service or a person
acting on behalf of the
recipient, which
requires the physical
presence of the
receiver or the person
acting on behalf of the
receiver, with the
provider for the
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provision
of the service
• Place where Services are
actually performed.
Mr. A Bhopal
Joins
XYZ llc.
Modeling
Agency - USA
10
Models of
XYZ llc.
CA Dhruvank Parikh
Contracts
Coaching
class in
Vadodara
A Beauty
Parlour Vadodara
Rule : 5 – Services relating to
Immovable Property
Covers following services:
• Place of Provision is where
the immovable property is
located.
• Services provided directly in
relation to Immovable
Property.
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• Services provided by experts
and estate agents.
• Prov of Hotel Accommodation
by a hotel, inn, guest house,
club etc.
• Grant of right to use
• Architects or Interior
Decorators
• Services for carrying out or
coordination of construction
work.
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Example of Rule 5
Services provided Directly in
relation to Immovable Property
Renting of Immovable
Property
Surveying of Land or Seabed
Services connected with
oil/gas/mineral exploration
relating to specific sites of
Land or Seabed.
Services supplied in course of
Construction, Reconstruction,
alteration, Repair or Mant of
any building or civil eng work.
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Services provided indirectly in
relation to Immovable Property
Advice or information relating to
land prices or property markets
as they do not relate to specific
sites.
Service of a CA in calculating Tax
Return from figures provided by a
bus. In respect of Rental Income
from Commercial Property.
Land or Real Estate Feasibility
Studies
Repairs & Mnt. Of Machinery not
permanently embedded to earth.
Agent Service arranging finance
for property purchase.
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Rule : 6 – Event related Services
• Services provided by way of Admission to,
Organization of, a cultural, artistic, sporting,
scientific, educational, or entertainment
event, or a celebration, conference, fair,
exhibition, or similar events, and of services
ancillary to such admission, shall be the place
where the event is actually held.
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Example of Rule : 6
Example of a Service
ancillary to organization
of an event.
Example of a Service
ancillary to admission
to an event.
Event related as service
that would be treated
as not ancillary to
admission to an event
INDIA
CANADA
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Rule : 7 – Services provided at more
than one location:
• Rule applicable only if Rule 4 , 5 or 6 applies.
• When Service is provided at more than one
location including the location of taxable
territory, the Place of Provision shall be the
location of taxable territory where the greatest
proportion of service is provided.
• Not intended to capture insignificant portion of
service is rendered in any part of taxable
territory.
• Very Dangerous Implication of this Rule.
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Example of Rule – 7:
20 % 25 % 55 %
Gujarat
Rajasthan
7 Days in
Germany
& UK
3 Days
in
India
Colombo
Coaching Institute in
India
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Rule : 8 – Both Service Provider &
Service Receiver are located in India
• Place of Provision would be the location of
service receiver.
Machinery in
London belonging to
B Ltd.
Do Well Machinery Vadodara
Service
Provider
Ask for
Service
B Ltd. - Bangalore
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Rule 9 : Specified Services
Place of Provision shall be the Location of the
Service Provider in following cases:
(a) Services provided by a Banking Company,
or a financial Institution, or a non Banking
Financial Company, to “Account Holders.”
(b) Online Information and Database Access or
retrieval services.
(c) Intermediary Services.
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Examples :
Indian Film
Producer
Uploads
www.films.com
Travel Agent or
Recovery Agent
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Downloads
Mr. Harry in
USA
Mr Sam in France
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Rule 9 (d) : Hiring of means of
Transport up to a period of 1 month
• Very Dangerous
implication of this rule.
• Place of Provision not
dependent on location
of means of transport.
• Depends on the
location of the
service provider.
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Nepal
Mr. Y Nepal
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Mr. X India
Bhutan
Rule 10 : Goods Transportation Service
Other than by way of Mail or
Courier
Goods Transport Agency
DEF Jammu
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XYZ Vadodara
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DEF - Mumbai
GTA - ABC
Rule : 11 – Passenger Transportation
Services
• The Place of Provision is the Place where the
passenger embarks on the conveyance for a
continuous journey.
• Continuous Journey – A journey for which:
(a) A single ticket has been issued for the entire journey;
or
(b) More than one ticket has been issued, by one service
provider or by an authorized agent, at the same time
And there is no scheduled stopover between any legs
of the journey for which one or more separate tickets
are issued.
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Example of Rule 11
Sr. No.
Journey
Place of Provision
Taxability
1.
Mumbai - Delhi
Mumbai
Yes
2.
Mumbai – Delhi –London – Delhi
- London
Mumbai
Yes
3.
New York - Delhi
New York
No
4.
Delhi – Jammu - Delhi
Delhi
Yes
5.
Jammu – Delhi - Jammu
Jammu
No
6.
(a) Delhi – Bangkok – Delhi
(b) Bangkok – Kuwait - Bangkok
(a) Delhi
(b) Bangkok
(a) Yes
(b) No
7.
(a) Delhi – Jammu
(b) Jammu – Delhi
(a) Delhi
(b) Jammu
(a) Yes
(b) No
8.
(a)
(b)
(c)
(d)
(a)
(b)
(c)
(d)
(a)
(b)
(c)
(d)
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Sydney – Mumbai – Sydney
Mumbai – Delhi
Delhi – Ahmedabad
Ahmedabad - Mumbai
Sydney
Mumbai
Delhi
Ahmedabad
CA Dhruvank Parikh
No
Yes
Yes
Yes
Rule 12 : Services provided on board a Conveyance
• First Scheduled Point of
Departure of that
conveyance for journey
Price is
included
in Fare
Price is
not
included
in Fare
Rule 12 not
applicable
Rule 12 is
applicable
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CA Dhruvank Parikh
Rule 13 : Rule making Power
• This rule empowers the Central Government to
notify any description of service or circumstances
in which the place of provision shall be the place
of effective use and enjoyment of a service.
• Powers are granted to enable the Central
Government to issue notifications to:
(i) Correct injustice on account of double taxation
and
(ii) Curb the tax avoidance practices
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Rule 14 : Order of Application of POPS Rules 2012
Where the provision of a service is, prima facie,
determinable in terms of more than one rule, the rule
that occurs later among the rules that merit equal
consideration will be applicable for determining place of
provision.
Mr. X India
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Mr. Y India
Owner
CA Dhruvank Parikh
Thanking You all
• CA Dhruvank Parimal Parikh
• Naresh & Co
• 9879939469
• [email protected]
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CA Dhruvank Parikh
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CA Dhruvank Parikh
How & Why Point of Taxation?
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Cash
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Accrual
CA Dhruvank Parikh
Issue of Invoice – An important aspect
o Rule 4(A) (as amended) of Service Tax Rules
1994 prescribes the time limit of issue of
invoice as follows:
Banking Company or a Financial Institution,
including a NBFC
45 Days
Service Providers other
than above
30 Days
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Rule – 3 : Determination of Point of Taxation:
Issue of
Invoice
As per Rule
4A of ST
Rules’94
Date of issue
of Invoice
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whichever
is earlier
Date of
Payment
Not as per
Rule 4A of ST
Rules’94
Date of
Completion
of Service
CA Dhruvank Parikh
Example :
Sr No. Date of Provision /
Completion of
Service
Date of issue of
Invoice
Date of
Payment
Point of Taxation
1.
10/04/2013
30/04/2013
15/05/2013
?????????????
2.
10/04/2013
30/04/2013
15/04/2013
?????????????
3.
10/04/2013
12/05/2013
30/04/2013
?????????????
4.
10/04/2013
30/04/2013
Part payment
on 15/04/2013
and remaining
on 10/05/2013
?????????????
5.
10/04/2013
12/05/2013
Part payment
on 05/04/2013
and remaining
on 05/05/2013
?????????????
6.
10/04/2013
30/04/2013
Part payment
on 05/04/2013
and remaining
on 16/04/2013
???????????????
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Continuous Supply of Services???
• Provided or agreed to be provided continuously
or on recurrent basis,
• Under a contract, for a period exceeding 3
months
• With the obligation for payment periodically or
from time to time
• Where the Central Government, by a notification
in Official Gazette, prescribes provision of a
particular service to be a continuous supply of
service, whether or not subject to any condition.
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Defined Continuous Supply of Service
Service portion in execution of
Works Contract
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Telecommunication Services
CA Dhruvank Parikh
POT in case of CSS:
• In case of Continuous supply of service (CSS):
Where the provision of whole or part of service is
determined periodically, on completion of an
event in terms of a contract, and
The service receiver is required to make the
payment to the service provider on completion of
such an event,
• The date of completion of each such event as
specified in the contract shall be deemed to be
the date of completion of provision of service.
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Example :
Stage
Expected
Date
Date of
issue of
Invoice
Initial /
Booking
02/07/2013
Amount
(Rs.Lacs)
Deemed
Date of
Completion
of Service
Point of
Taxation
02/07/2013 02/07/2013
45
02/07/2013
02/07/2013
50% comp 15/03/2013
of building
22/03/2013 29/03/2013
180
15/03/2013
22/03/2013
75% comp 20/06/2013
of building
21/07/2013 25/07/2013
105
20/06/2013
20/06/2013
100%
comp of
building
20/10/2013 07/10/2013
120
30/09/2013
07/10/2013
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30/09/2013
Date of
Payment
CA Dhruvank Parikh
Important Notes to Rule 3:
Completion of Service – Covers all auxiliary
activities but doesn’t cover irrelevant grounds.
Circular No. 144/13/2011-ST dated
18/07/2011
Small Advances up to Rs. 1,000/- not to
change POT
Reminders issued by Insurance Companies –
not regarded as issuance of Invoices. Circular
No. 166/01/2013-ST dated 01/01/2013
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Rule 2A : Date of Payment
Date of
accounting
of payment
in the
books
Date of
actual
credit in
the bank
account
Credit in
the bank
account is
after 4
working
days
Whichever is earlier
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Change in
effective
rate of Tax
or Service is
taxed for
the first
time.
CA Dhruvank Parikh
Date of
credit in
the
Bank
Account
Example :
• An invoice of Rs. 15,00,000/- is issued for services
on 01/06/2013
• A cheque for the same is received and accounted
for in the books on 15/06/2013
• The amount of cheque was credited in the bank
on 06/07/2013
• Meanwhile on 01/07/2013, the aforesaid service
was brought in the ambit of taxable service. What
will be the date of Payment?????
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Rule 4 : Change in Effective Rate of Tax
Sr
No.
Services
Provided
Issue of
Invoice
Receipt of
Payment
Point of Taxation
1.
Before
After
After
Earlier of Date of Receipt of
Payment or Date of Invoice
2.
Before
Before
After
Date of Invoice
3.
Before
After
Before
Date of Receipt of Payment
4.
After
Before
Before
Earlier of Date of Receipt of
Payment or Date of Invoice
5.
After
Before
After
Date of Receipt of Payment
6.
After
After
Before
Date of Invoice
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CA Dhruvank Parikh
Rule 4 : Change in Effective Rate of Tax
In a nut shell, there are 3 following possible events in
any transaction that one needs to find out/chart out to
decide POT:
1. Completion of Provision of Service
2. Date of Invoice
3. Date of Payment
Out of the above 3, happening / occurring of any 2
events before or after the change in effective rate of
tax would be the deciding factor for POT.
Hence this rule is also popularly known as “2 by 3
Rule.”
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CA Dhruvank Parikh
Example : Change in effective rate of tax wef
01/04/2013
Sr.
No.
Date of Provision of Date of Invoice
Service
Date of Payment
Point of
Taxation
1.
25/03/2013
05/04/2013
08/04/2013
???????????
2.
25/03/2013
25/03/2013
08/04/2013
???????????
3.
25/03/2013
08/04/2013
30/03/2013
???????????
4.
04/04/2013
28/03/2013
31/03/2013
???????????
5.
04/04/2013
04/04/2013
31/03/2013
???????????
6.
04/04/2013
31/03/2013
08/04/2013
???????????
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Poser
• ABC Airlines has issued a ticket on 25/03/2013
for travel to USA by executive class at Rs.
30000/-. The passenger Mr. P undertakes the
journey on 05/04/2013. Rate of Service Tax is
10.30% up to 31/03/2013 and 12.36%
thereafter. POT????
• Circular No. 155/06/2012-ST dated
09/04/2012.
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Rule 5 : Service becomes taxable for the first Time
Invoice issued Before
Payment
received - Before
OR
Payment
received - Before
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Issue of invoice –
After but within
14 days
Example : Service becomes taxable w.e.f 01/07/2013
Sr. No.
Date of
provision of
service
Date of invoice
Date of Receipt of
Payment as per
Rule 2A
Taxable
1.
01/06/2013
25/06/2013
30/06/2013
No
2.
01/06/2013
30/06/2013
05/07/2013
Yes
3.
30/06/2013
14/07/2013
30/06/2013
No
4.
01/07/2013
30/07/2013
15/07/2013
Yes
5.
15/06/2013
15/06/2013
30/06/2013 – part
15/07/2013 – part
No
Yes
6.
30/06/2013
16/07/2013
30/06/2013
Yes
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Application of Rule 2A and Rule 5
• A Service provider provided service on
20/06/2013 for a value of Rs. 25,00,000/-. He
issued invoice for the same and received
payment by an account payee cheque on
30/06/2013 and the same was entered in the
books on the same date i.e 30/06/2013. The
cheque was deposited in the bank on 04/07/2013
and the same was credited in his bank account on
06/07/2013. The said service was leviable to tax
wef 01/07/2013. Whether he is liable to pay
tax??????
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Rule 7 : Reverse Charge Mechanism
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Rule 7 : Associated Enterprise
• Person providing service is located outside
India, the Point of Taxation shall be:
Date of Debit in
the books of
accounts of the
person receiving
the service
OR Date of making
the Payment
Whichever
is earlier
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CA Dhruvank Parikh
POT ???
• A person imported/received some services
into India from a foreign vendor to whom
$10000/- is paid and the following are the
worth noting events in that connection:
Services received in India – 31/12/2012
Date of Invoice – 31/03/2013
50 % Payment made – 30/09/2013
Rest payment made – 31/10/2013
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Rule 8 : Copyrights, Trademarks, Designs,
Patents etc.
• Whole Amount of consideration is not ascertainable at the
time of performance of Service and subsequently the use of
these service gives rise to any payment of consideration:
• Service shall be treated as having been provided each time
when:
An invoice is
issued by the
provider
OR
Payment is
received by the
provider
Whichever
is earlier
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CA Dhruvank Parikh
Example:
• M-series ltd. is having a copy right of classical songs of Yo Yo
Honeysingh.
• M-series ltd. gave these rights to Z-series ltd on 20/04/2011.
• The consideration payable by Z-series ltd. for acquiring the
copyright has been fixed @ Rs. 10 per CD sold by it.
FY
CD’s sold
Consideration
Date of Invoice
Date of
Payment
2011-12
8 Lacs
Rs. 80 Lacs
29/07/2012
16/08/2012
2012-13
6 Lacs
Rs. 60 Lacs
03/06/2013
23/05/2013
2013-14
7 Lacs
Rs. 70 Lacs
16/06/2014
16/06/2014
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Rule 8A : Best Judgment Assessment
• If the relevant POT cannot be determined due
to non availability of invoice or Date of
Payment, than the CEO shall:
Call of such documents as deemed necessary
Give an opportunity of being heard
Determine the POT vide an order in writing to
the best of his judgment.
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CENVAT Credit vis-à-vis POT:
• Till 01/04/2011, ST was payable on receipt
basis. Hence even the ST credit was available
on Payment basis.
• But what should be after introduction of
POT???
• Rule 4 (7) of CCR amended.
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A foremost challenge
• No similar conditions under all the Indirect
Taxes.
• A challenge to the Central Government to
bring all the indirect taxes under a single
umbrella of GST.
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