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© ASHOK CHANDAK 1sbcngp@gmail.com
BROAD CONCEPTS
&
OVERVIEW OF GST
CA. ASHOK CHANDAK
© ASHOK CHANDAK
ONE NATION ONE TAX
=
GOODS & SERVICE TAX
2sbcngp@gmail.com
3Email: sbcngp@gmail.com
GSTGOODS & SERVICES
TAXOVERVIEW OF BASIC CONCEPTS
&
BROAD ANALYSIS OF
GST LAW
© ASHOK CHANDAK 4sbcngp@gmail.com 4sbcngp@gmail.com 4
DISCLAIMER
1) This presentation is purely based on
(a) the CGST Act and IGST Act passed by the Parliament recently,
(b) FAQ released on 31st March 2017, &
(c) Draft Rules.
2) This presentation is prepared for the purpose of GST Clinic by VIA Taxation
& Corporate Law Forum for the reference of the participants. The
information contained herein is meant for general purpose and is not
exhaustive and accordingly will not constitute any kind of professional advice
or services. The presentation is not intended to be solely relied upon for any
decision which may affect your business. It is advised that you should consult
qualified professional advisor before taking any action that might affect your
personal finances or business. By using any part of this presentation, the user
accepts that the author, presenter or any organisation with which he/she may
be associated shall be liable to the user for any decision made or reliance
placed on this presentation.
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CONTENTS
▪ Present System of Indirect Taxation.
▪ What is GST and how it will work.
▪ Proposed GST Structure and Concepts.
(Important provisions of CGST & IGST Acts)
▪ Taxation System (Taxable Person, Taxable Event, Point of
Taxation, Place of Supply, Valuation).
▪ Administration Process in CGST Act (Registration, Returns,
Tax Payment, Assessments).
▪ Input Tax Credits.
▪ Impact on prices.
▪ Preparatory Steps.
▪ Conclusions.
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• Main Indirect Taxes
➢ By Union• Customs
• Central Excise
• Service Tax etc
➢ By State• VAT
• Central Sales Tax
• State Excise
• Land Revenue etc.
• Entry Tax.
• Electricity Duty
• Tax on Sale of Electricity
• Entertainment Tax
• Luxury Tax
• Stamp Duty
• Motor Vehicles Tax
➢ By Local Govt.• Octroi/LBT
• Taxes on Property
• Taxes on Passengers
• Advertisement etc
PRESENT INDIRECT TAX STRUCTURE IN INDIA
Three Tiers of Government
* Union * State
* Local
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- Goods and Services Tax as name suggests.
- To be levied on supply of goods and services.
- GST is a multistage tax to be imposed at final
consumption.
- Levied as a proportion of value added (like VAT).
- CGST & IGST to go to the Consolidated Fund of
India.
- SGST to go to the Consolidated Fund of the State.
WHAT IS GST ?
7
© ASHOK CHANDAK 8sbcngp@gmail.com 8
• Multiple taxes lead to double taxation and cascading effect.
• Indian indirect tax structure involving multiple taxes. not in sync with global practices.
• High cost of tax compliance and double taxation leads to higher prices of goods & services.
• Lack of uniformity in provisions and rates.
• High cost of tax collection leads to lower tax yield to the Government.
• Procedural simplification for registering and filing ofreturns.
• Reduced record keeping.• Improved tax administration.• Single registration and identification for assessee both
under Central and State GST.• Improved compliance by tax payers.• Reduction in unethical practices.• Improved legal redress system.• Electronic filing of statutory forms and payments.
8
WHY GST ?
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• One taxable event against multiple events at present. A destination based consumption tax on goods and services “ONE NATION ONE TAX”
• Comprehensive value added tax on goods & service; GST to subsume multiple taxes.
• Expected to widen the tax base and lower the effective tax rate on goods ;
• Tax neutrality for business through Input TaxCredit mechanism.
• Objective is to make India a common market
Why GST?
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• Dual GST- Central GST (CGST) and State GST (SGST) to be imposed concurrently on intra state supply of goods and services
• Inter-State transactions subject to Integrated GST (IGST) which will be generally aggregate of CGST and SGST
• Taxable event is ‘supply’ as against manufacture (excise), sale (VAT) and service (service tax)
• Cross utilization of CGST and SGST credit not allowed but permitted in respect of IGST
• Exports & supplies to SEZ developers and SEZ Units to be zero-rated
• Imports would be subjected to IGST and Basic Custom Duty.
• Inter state stock transfers , Branch Transfers, Consignment transfers taxable under IGST even though without Consideration.
• Intra state (within State) Branch Transfers, Stock Transfer not to be taxed only if not made to a Business Vertical separately registered.
Important Dimensions
10
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What is Dual GST
Dual GST signifies that GST will be levied by both, the Central Government
and the State, on supply of goods or services. Under the Constitution, before
122nd amendment the taxing powers were split between the State and the
Central. In case of certain transactions, the power to tax were vested with the
Central and while in certain others, the power were vested with the State.
Under GST, the power to tax on supply of all goods and services will be
vested in the hands of both, the State and the Centre. In certain cases, such as
the inter-State transactions, the power to tax will be vested with the Central
Government, while the revenue will in some appropriate manner, get
distributed to the States. Considering the dual taxation power to tax
transactions under GST, the structure is referred to as Dual GST.
Considering the basic framework of the constitution and keeping its structure
intact, dual GST appears to be practicable solution for Indian scenario.
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• CUSTOM DUTIES: Levied by the Central Government under the Customs
Law on all specified goods imported into and exported from India, as per
Customs Tariff Act.
• Other than Basic custom duty all other duties will be subsumed in IGST.
• CENTRAL EXCISE: Levied by the Central Govt. under the Central Excise
Act, 1944 on all specified goods manufactured/produced in India as per the
Central Excise Tariff Act subject to certain exemptions.
• With some exceptions Central Excise will be subsumed in CGST.
• SERVICE TAX : Levied by the Central Government under Finance Act, 1994,
on all services. (Except Negative List/Exempted Services)
• This will be subsumed in CGST additional Tax on services under SGST also.
• VAT (Value Added Tax) : Levied by the State Governments on sale of goods.
• VAT will be subsumed in SGST.
• CST : Levied by State Govt. under Central Sales Tax Act. (This is Revenue of
State Govt.). CST is payable when inter-State sales takes place.
• This will be subsumed in IGST with Central Taxes.
PRE GST TAXES IN INDIA
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GST STRUCTURE
CGST
Service tax
Central Excise Duty
Additional Excise duties
Central cesses
& surcharges on goods &
services
Additional AdditionalDuty of Customs
Special Additional Duty of Customs
TAXES TO BE SUBSUMMED
Around 17 Laws to be Repealed/Subsumed
IMPACT
IGST
to
Replace
CST
State cesses & surcharges on goods & services
Taxes on lottery,
gambling
Taxes on betting
Entry Tax/
Octroi
Entertainment Tax (except by local
bodies)
Purchase Tax
Luxury Tax
Central Sales Tax
VAT
SGST
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GST STRUCTURE
Taxes to Remain post GST
No Clarity about (a) Various cesses & (b) Tax on Sale of Electricity
TAXES TO
REMAIIN
POST GST
Basic Customs
DutyTaxes on
liquors and petroleum products
Stamp duty
Toll tax
Property tax
Export duty
Environment tax
State Electricity
Duty
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GST STRUCTURE
GST would be levied by both the Central Government and the State
Government on the same transaction, making GST a dual transaction
tax structure.(CGST & SGST)
15
GS
T
Intra-State
CGST
SGST
Inter-StateIGST
(CGST+SGST)
Input CGST against –
CGST
IGST
Input SGST against -
SGST
IGST
Input IGST against –
IGST
CGST
SGST
CGST SGST IGST
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GOODS AND SERVICES PROPOSED TO BE
KEPT OUT OF GST
• Alcoholic beverages, tobacco products and certain petroleum
products such as crude, motor spirit including aviation turbine fuel
and high speed diesel. Sales Tax/VAT will continue to be levied on
alcoholic beverages and Petroleum Products as per existing
practices. Excise duty that is levied thereon by States will also not
be affected.
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How does GST work?
Under GST, every specified supply of Goods and/or Services (as ‘covered transaction’)
would be subject to tax and tax paid on inputs/capital goods/services would be available as
input credit.
Supply to include every kind of Supply of Goods and Services for consideration and in
some cases without consideration.
Goods: will not include money & securities. Will include Actionable Claims & News
Papers which are presently not taxed under VAT Act.
Services : Definition provides services means any thing other than goods. All intangible
properties and actionable claims (betting, gambling and lottery) will now be services and
some deemed sales which were earlier taxable by State because of Article 366(29A) of the
Constitution under VAT, will now be services and not to be taxed as sale and purchase of
goods. Presently There is no negative list. Services by State or Centre are only Exempt
(Sch IV)
Impact : News Papers, Actionable Claims (like betting, gambling and lottery) will become
taxable.
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SALIENT FEATURE OF GST
The salient features of GST are given below :
• The basic principle would be that GST would be a consumption based levy.
Destination principle would be applicable in normal course. Exceptions in
service are there wherein other criterion such as performance or location is set
out.
• India would implement a dual GST with the tax structure and powers split
between the State and the Centre. State & Centre both will frame law.
• GST would subsume all major indirect taxes levied by the Central Govt. i.e.
central excise, customs (except Basic Custom Duty) and Service Tax and
majority of the taxes levied by the State Government i.e. VAT, luxury tax,
entertainment tax, etc. However, taxation of alcohol and narcotics intended to be
kept outside GST. Petroleum may be included in GST at later date.
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SALIENT FEATURE OF GST Contd…
• There will be multiple rates i.e. 5%, 12%, 18% & 28% for goods/services. HSN
would form the basis of product classification for both CGST and SGST.
• GST would have a multi rate structures with standard rate, concessional rate,
special rate, exempted/nil rated etc. It is not yet clear whether services and
goods will have the same rate or be subjected to tax at different rates. Further,
the Government is yet to specify the rate of taxes proposed for each of the
category.
• GST will be levied on supply of goods and services and the supplier will be
allowed credit for the GST paid on purchases. The credit would be seamless
except that the credit of CGST paid will not be allowed for set-off against SGST
payable and vice versa.
• If there is any excess credit of un-utilised SGST or CGST it may not be
refundable except in case of exports and supplies to SEZ.
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SALIENT FEATURE OF GST Contd…
• Administered by Three Laws
(a) Central Goods and Services Tax Act
(b) Integrated Goods and Service Tax Act- lot of changes in present concept of CST Act.
(c) State Goods and Services Tax Act ; or
(d) Union Territory Goods and Service Tax
• Local supplies would be subject to Central GST (CGST) and State GST (SGST)/ UTGST
at specified rates, while inter-State supplies would be subject to Integrated GST (IGST).
Export of goods and services/ supplies to SEZ units & developers would be zero rated.
• Either of the Central Government or the State Government will have the authority and
control over the assessee. Accordingly, the assessee would be required to pay GST into
the specified account of the State/Central and file periodic online returns.
Concerns :
* Number of Returns
* Assessment and Appeals
* Other Compliances.
* Shifting of Authorities from Central to State or vice a versa
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How GST is different from the current system?
• In the current system, there is plethora of taxes, while GST seeks
to subsume majority of them into a few legislations.
• Further, in the current system, the supplier is restricted on taking
credit of the taxes so paid against the output tax payable by him.
GST seeks to eliminate / reduce the effect of cascading of tax by
providing seamless credit through the entire chain.
• The current scenario would be different in the context of
manufacturer, trader and service provider.
• GST will allow seamless flow of credit eliminating or reducing the
effect of cascading and seeks to do away with plethora of taxes in
the supply chain.
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CGST/SGST/IGST
CGST would be levied by the Central Government and will be on value of goods and services.
Will subsume Excise Duty/Service Tax/CVD/SAD/Surcharge/Cesses.
Basic custom duty will continue.
SGST would be levied by the State Government and will be on value of goods and services.
Will subsume VAT/Entertainment Tax/Luxury Tax/Surcharges/Cesses/ Entry Tax (including
in lieu of octroi) Octroi. Similarly Purchase Tax in some cases will also be subsumed.
Stamp Duty, Municipal Levies, Royalties, Electricity Duty may continue. The position of
Special Sales Tax Payable in some cases like sale of Electricity. No clarity- should be
subsumed.
IGST would be total of CGST and SGST and will be levied on inter-State transaction of
sales and services. If SGST rates differ in various States then IGST rate will be as notified
under IGST Act. In such cases importing State will get credit of SGST at Standard Rate.
CGST rate being Standard, Credit will be available.
Will replace Central Sales Tax (CST).
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GST RATES
Report on Revenue Neutral Rate and recommended GST Rates
Revenue neutral rate: 18%
Standard rate: 18%
Expected Rate on precious metals: 2-5%
Lower rate: 5% & 12%
Sin/demerit rate on luxury cars, aerated beverages, tobacco and
tobacco products: 28%
+ Cess
CGST + IGST = to be collected by
Central Government
SGST = to be collected by Each
State Government.
It was suggested in FAQ that SGST Rate
would be same.
?? How far it could be applied
To be seen!!!!
States have Band for Fiscal Flexibility
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Revenue Neutral Rate (an Example)
1st Stage Final Stage
Present GST Present GST
Price 10,000/- 10,000/- 20,000/- 20,000/-
Excise @12.36%/ CGST @9%
1,236/- 900/- 1,236/- 1,800/-
VAT @ 12.5% / SGST @9%
1,405/- 900/- 2,655/- 1,800/-
TOTAL 12,641/- 11,800/- 23,891/- 23,600/-
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Local Supply (within the State)
Local transaction of supply of goods and/or services dual GST i.e. CGST
and SGST will be payable. For example :
Basic value charged for supply of goods or services 10,000
Add : CGST @ 9% 900
Add : SGST @ 9% 900
Total price charged for local supply of goods or services 11,800
Note : In the above illustration, the rate of CGST & SGST is assumed to be 9% each.
The CGST & SGST charged on the customer for supply of goods or services will be
remitted by the seller into the appropriate account of the State/Central Government.
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Inter-State Supply (from one State to another State)
When SUPPLY of Goods and/or Services is from One State to
Another, the transaction is Inter State Supply and “ IGST ” will be
leviable.
Inter-State transaction of supply of goods and/or services a single
IGST which will be prescribed under IGST law and likely to be
equivalent to CGST and SGST. For example :
Basic value charged for supply of goods or services 10,000
Add : IGST @ 18% 1,800
Total price charged for inter-State supply of goods or services 11,800
Note : In the above illustration, the rate of CGST & SGST is
assumed to be 9% each.
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Inter-State Supply Contd…
Total IGST will be remitted by the seller into the appropriate account
of the Central Government.
The CGST component will go to Central Government and SGST
component will be refunded by Central Government to the
purchasing State.
The inter-State purchaser will be eligible for credit of IGST.
The exporting State would therefore loose the tax which is being
compensated by way of allowing tax on services and compensation
from the Centre.
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EXPORTS
Export out of India of goods and/or services would be zero rated.
In other words, the supplier will be allowed to export the goods
and/or services without charging any tax. For example:
Basic value charged for supply of goods or services 10,000
Add : GST @ 0% NIL
Total price charged for export of goods or services 10,000
However, penultimate export of goods and/or services would attract
applicable tax on local/inter-State sale and actual exporter will get
set-off of CGST/SGST/IGST.
This may result in requirement of more Working Capital as it may
take nearly 3 months to take refund and will increase transaction
cost.
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How would imports be taxed under GST?
In the current scenario, imports are subject to basic customs duty, countervailing
duty, customs cess and special additional duty in the hands of importer. In the GST
regime, imports would be subject to basic customs duty IGST. Again in the hands
of Importer IGST would be allowed as set off. Thus effective rate of tax may
come down.
Pre-GST GST
Basic Customs duty 10.00% Basic Customs duty
(Assumed rate)
10.00%
Countervailing duty 12.36% IGST (Assumed rate)
[CGST 9% +
SGST 9%]
18.00%
Customs Cess 3.00%
Special Additional Duty 4.00%
Total duty (Pre GST) 29.36% Total duty (GST) 28.0%
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INPUT TAX CREDIT
Input Tax Credit refers to credit of IGST/CGST/SGST paid on
supply of goods/services for use in course or furtherance of
business
The supplier of goods or services will be allowed credit of GST paid on purchases for set-
off against the GST payable on sales.
ITC available only to the extent used for business purposes
ITC available only to the extent used for taxable supplies (in case
used for taxable/non-taxable/exempt supplies)
Meaning
Reversal
Requirements
Eligibility of credits could significantly increase on account ofchanges in taxability of output as compared to the present regime
For service providers and traders credit of GST paid on goods and services respectively could significantly increase the credit pool
Availment and utilization of credit of state wise GST would require appropriate vendor communication and recording of credit
Impacts
Concerns Matching with Tax paid by supplier
Nexus with output supply
Transitional provision for Inventory on first day and position of presently non
refundable tax component.
Taxes Paid in other states on Local supplies in that state.
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INPUT TAX CREDIT UNDER GST
The assessee/dealer will be entitled to avail credit of GST paid on purchases. In
this regard, the dealer may purchase the goods or services locally or inter-State or
as imported. The following taxes paid on purchases when made locally, inter-State
or imported, would be available as credit in the hands of purchases.
The assessee is required to account for CGST, SGST and IGST separately, because cross
utilisation is not permitted.
Type of purchase Local Inter-State Imported
GST incidence on purchase
(taxes payable)
CGST
SGST
IGST BCD
IGST
Credit entitled on
(with respect to taxes paid)
CGST
SGST
IGST IGST
ITC ON CAPITAL GOODS UNDER GST: Full and immediate input credit
would be allowed for tax paid both CGST and SGST on all purchases of capital
goods in the year of acquisition of capital goods. Similarly any transfer of capital
goods later would also attract GST liability like all other goods and services.
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Availability of ITC
ITC available only to the extent used for business
purposes
ITC available only to the extent used for taxable supplies (in case used
for taxable/non-taxable/exempt
supplies)
Concern: ITC on Goods & Services Procured in other states like (1)
Advertisements (2) Business Promotion (3) Employees Business Travel Cost on
other state etc.
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Non Admissibility of Input Tax Credit
ITC on Motor Vehicles othwerwise than if used in the course of business.
ITC on foods and beverage, outdoor catering, beauty treatment, health service,
cosmetic and plastic surgery, club membership, health and fitness center, life
insurance, health insurance, travel benefits extended to employees for personal
use.
ITC on purchases from a composition dealer.
If a dealer has claimed depreciation on the tax component of capital asset
under the Income Tax Act, input tax credit will not be allowed on the said tax
component.
ITC on Goods/services in the execution of works contract if it results in
construction of immovable property otherwise than as a part of Plant &
Machinery.
To non Registered Person.
Concept of Proportionate Input Tax Credit in certain cases
Concept of Input Tax Credit in case of Jobwork
© ASHOK CHANDAK
Input Tax Credit - Change in Constitution
On sale, merger, demerger, transfer of business the unutilized ITC in the books of business can be transferred if the transfer is with specific provision for transfer of liabilities.
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CROSS UTILISATION OF CREDITS UNDER GST
The assessee may have paid CGST, SGST or IGST on its purchases which he can
adjust against output CGST and SGST on local supplies and IGST on inter-State
supplies. The following table provides credit utilisation towards output tax
payable:
Nature of tax paid on purchase Can be utilised for
payment of
CGST CGST
IGST
SGST SGST
IGST
IGST IGST
CGST
SGST
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IMPACT ON PURCHASE OF GOODS UNDER GST
GST
Note : The corollary to the above would be the impact on sales.
Full credit of SGST &
CGST No retention
Local purchases
(CGST 10%)
(SGST 10%)
Full credit of IGST even if
purchased from any
registered dealer
Interstate Purchase
(IGST 20%)
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ITC TO BE ALLOWED AS PER GSTN
WHAT IS
GSTN ?Goods And Service Tax Network
developed for the first time to
establish a uniform interface for
the tax payer and a common and
shared IT infrastructure between
the Centre and States
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IMPACT ON PROCUREMENT OF SERVICE
UNDER GST
In the current scenario, procurement of taxable services would be
subject to Service Tax. Considering that Service Tax is levied by the
Central Government, the tax would be the same, whether procured
locally or inter-State. Current rate is 15%. Similarly Import of
services, attract tax @15% under reverse charge which is available
for credit. However, in the GST regime, services procured from
outside the State / Country would be subject to IGST and services
procured from within the State, would be subject to CGST and
SGST. The total tax would be available for credit. Total rate of
service tax is likely to be 18-20%. Thus B to C will become costlier.
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STOCK TRANSFERS UNDER GST
In the current scenario, stock transfer of goods or services
is not subject to VAT/CST or Service Tax so also in some
cases Excise. However, in the GST regime, Out of State
stock transfers will become taxable. In case subsequent to
stock transfer, the goods are exported out of India, this
would lead to a case of blocking of working capital.
Factory Export
Factory Export
NIL
Export Port Branch
Other State/ Business Vertical
GST NIL
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THRESHOLD LIMIT UNDER GST
Uniform threshold of INR 20 Lakhs for both goods and
services and Rs. 10 Lakhs for North Eastern States.
This is consolidated limit of any person throughout the country.
Custom Nil
Excise 1.5 Crore
Service Tax 10 Lakhs
VAT By and large 10 Lakhs
* Compulsory Registration : Without any Threshold.
Present
Limits
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COMPOSITION SCHEMES WHETHER
CONTINUE UNDER GST
The model law provides for upper ceiling of gross annual
turnover of INR 50 Lakhs with a floor tax rate of 1%
across the States for composition scheme. The scheme
would also allow option for GST registration for dealers
below the compounding cut-off. This limit also needs
enhancement.
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BURDEN OF TAX INCREASE WITH GST
GST seeks to consolidate different transaction taxes into a
single legislation and reduce transaction cost. The effective
tax burden may increase in some of segments, while in
some cases it will reduce.
© ASHOK CHANDAK
e-Commerce
Every Assessee Selling goods on e-platform need to be registered compulsorily without any threshold.
Every electronic commerce operator shall, at the time of credit of any amount to the account of supplier of goods and/or services or at the time of payment of any amount in cash or any other mode , which ever is earlier, collect an amount as TCS.
Amount collected as TCS should be deposited with government within 10 days after end of month.
Details of such TCS should be uploaded within 10 days of succeeding month.
The data provided by operator will be cross checked by the supplier and discrepancies if any will be communicated .
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Tax Deduction at Source (TDS)
➢ Government may require
o A department or establishment of CentralGovt/State Govt
o Local Authority
o Governmental Agencies
o Other notified person
o To Deduct tax @1% from payment made orcredited to supplier of taxable goods and/or services
o Where value of such supply under a contract exceedTEN LAKHS.
o The deductee will get the credit of such deduction.
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Integrated Goods and Services Tax IGST
To Govern the supply of goods and services in the course ofinterstate trade and commerce. This will replace Central SalesTax. The major issue what is interstate transactions of supplyof goods and services which is covered by the law.
All the interstate supplies will attract IGST and services
IGST rate will be on specified.
A supply of goods and /or services in the course of importinto the territory of India shall be deemed to be a supply ofgoods and /or services in the course of inter-State trade orcommerce and will attract Tax on Reverse charge basis.
An export of goods and/or services shall be deemed to be asupply of goods and/or services in the course of inter-Statetrade or commerce attracting Zero rate.
Any supply of goods and services where the location of thesupplier and the place of supply are in different state then thesupply will be called as Interstate supply of goods.
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TRANSITIONAL PROVISIONS
Full chapter Section 139 to 142
GST registration of existing Tax payer
Carry forward of credit of Cenvat & VAT
Utilization of un availed Cenvat Credit on Capital Goods
Switchover to composition scheme
Return of Goods duty paid/exempted goods – inputs sent to job worker
Semi finished Goods received from job worker
Return of Finished Goods removed for certain process
Price revision under negotiation
Refund claim and Cenvat Credit claims
Penalty proceedings and litigation
Recovery of duty or amount of wrong credit.
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ADMINISTRATION OF GST
India would implement dual GST. With a dual structure in place, the
SGST will be administered by each of the State and CGST will be
administered by the Centre. Consequent to the dual structure, the
benefit of Large Tax Payer’s Unit (LTU) and centralised registration
under Service Tax may be lost. Industry may represent that for units
operating under multiple jurisdictional presence, LTU/centralised
registration concept be continued for CGST/SGST.
GST COUNCIL to comprise up of
Chair person :- Union Finance Minister
Vice Chairman :- To be chosen amongst themselves
Members :- MOS in Finance Ministry (Revenue)
Finance Ministers of States or any other nominated by the State
Ex-officio Secretary :- Revenue Secretary of the Govt. of India.
Permanent Invitee:- CBEC chairman who will not be allowed to vote
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NON-TAXABLE PERSON
Aggregate turnover below specified limit
Not taxable-Employer Employee
relationshipon liable under RCM receiving services for personal use
PERSON LIABLE TO PAY TAX (i.e. Taxable Person)
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TAXABLE EVENT IN GST IS SUPPLY
Sale, transfer, barter, exchange, license, rental, lease or disposal
made for a consideration (with a few exception)
made in furtherance of business (with few exception)
Importation of service, whether or not for a
consideration /in course of furtherance of business is a
supply
SUPPLY
to include
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• Goods and services supplied without consideration for furtherance of business.
• Business Assets put to non-business use, even without consideration.
• Barter/exchange transaction.
• Branch transfer.
Scope of ‘taxable event’ expanded
Supply includes……
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TIME OF SUPPLY OF GOODS (LIABILITY TO PAY TAX ARISES)
Earliest of the following :-
(a)(i) If the goods are physically required to be removed the date of removal by the supplier for supply.
(a)(ii) If the goods are NOT physically required to be removed the date on whichgoods are made available to the recipient.
Means i) Where goods are physically not capable of being moved.ii) Goods are supplied in assembled or installed form.
iii) Goods are supplied by the supplier to his agent or his principal.
‘Made available to the recipient’ means when goods are placed at the disposal of therecipient.
(b) The date on which supplier issues invoice with respect to the supply.The supply shall be deemed to have been made to the extent it is covered by the
invoice.
(c) The date on which the supplier receives the payment with respectto the supply.
The supply shall be deemed to have been made to the extent it is covered by the payment.
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‘The date on which the supplier receives the payment’ means the date onwhich payment is entered in his books of account or the date on whichpayment is credited to his bank account, whichever is earlier.
(d) The date on which the recipient shows the receipt of goods in hisbooks of account.
In case of continuous supply of goods
where successive statement of account or successive payments areinvolved, the time of supply shall be the date of expiry of the period towhich such successive statement of account or successive paymentrelate. If there is no successive statement of account, the date of issueof the invoice (or any other document) or the date of receipt ofpayment, whichever is earlier, shall be the time of supply.
Continuous supply of goods shall be specified, by notification, by theCentral/State Government on the recommendation of GST Council.
TIME OF SUPPLY OF GOODS (LIABILITY TO PAY TAX ARISES) Contd…
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DIFFERENT PROVISIONS IN SUPPLY
Time of Supply When
1) Goods Sent on Approval
2) Supply of Services
3) Continuous Supply of Service
4) Reverse Charge for Supply
5) Time of Supply of Service :Change in rate of
Tax
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Place of supply (specified transactions)
In relation to immovable Property including architect, interior decorator,
estate agent
Lodging, accommodation by a hotel, Inn, guest house
Accommodation in any immovable property for organizing marriage etc
Any service incidental to above
Restaurant, Catering service, Personal grooming, fitness, beauty parlours
Service in relation to training & performance appraisal
Service in relation to Organizing of a cultural, artistic, sporting, scientific,
educational or entertainment Event, conference, fair exhibition etc.
Admission to cultural, artistic, Sporting, scientific event, Amusement park
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Place of supply (specified transactions)
Service of transportation of Goods including by mail or courier
Passenger transportation
Passenger transportation
Supply of service on board of A conveyance
Telecommunication service by fixed telecommunication line
In case of mobile communication Internet - Pre paid
In case of mobile communication Internet - Post paid
Banking and other financial Services, stock broking
Insurance services
Advertisement to a govt./ local authority for identifiable state
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To a registered
person
•Location of
•service receiver
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Place of supply (other than specified transactions) : Services
SERVICE
To a non registered person
*Location of the service
receiver available on the
records of service provider or
*Location of the service
provider
• For determining the
appropriate levy-
CGST & SGST vs
IGST vs export
• Like present POPS,
2012 Rules, various
specified categories
of supply of
services provided
• New concept for
goods
56
© ASHOK CHANDAK
Movement of goods
*Location at which
movement of
goods terminates
for delivery
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Place of supply (other than specified transactions) :Goods
GOODS
No Movement of goods
Location of goods at
the time of delivery
to the receiver
Goods are delivered
at the direction of third
Person
Principal place of
business of third person
Goods assembled or
installed at site
Place of such installation
or assembly
Goods supplied on board
of a conveyance i.e. vessel,
aircraft, train
Location at which such
goods are taken on board
Other cases
By law made by
the parliament
• For determining the
appropriate levy-
CGST & SGST vs
IGST vs export
• Like present POPS,
2012 Rules, various
specified categories
of supply of
services provided
• New concept for
goods
57
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ExistingSituation
Excise
- MRP Based Valuation in certain cases
-Transaction Value
Tariff Value
VAT
No specific rules except certain inclusions and exclusions
Service Tax
Specific rules for certain sectors
Post GST Situation (Specified Situations)
GST
- Determination by comparison
- Computed Value Method
- Residual Method
- Rejection of declared value
- Valuation in case of pure agent and money changer
• Relationship between parties need to be considered for determining value of supply• Concept of MRP based valuation is not part of Model Law • For transactions of supply of services without consideration, determination of of
services could pose challenges
Supply of goods and services will
be valued as per transaction value.
Valuation Rules must be referred
in following situations
• Supplier and recipient are related
• Reason or doubt about truth and
accuracy of transaction value
• Consideration is not in money,
wholly, or partly
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RETURNS
➢ TYPES OF RETURNS :-
a) OUTWARD SUPPLIES
b) INWARD SUPPLIES
c) INWARD/OUTWARD SUPPLIES & ITC,TAX PAYMENT
d) TDS RETURNS
e) INPUT SERVICE DISTRIBUTORS
f) COMPOSITION RETURNS
NOTE: NO REVISED RETURNS
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PAYMENT OF TAX, INTEREST, PENALTY:
Tax has to be paid on or before filing of relevant return.
(Generally on 20th of the Succeeding Month)
Every deposit towards tax, interest, penalty will be made by internet banking/ credit/ debit card/ NEFT/ RTGS or any other mode will be credited to taxable person’s electronic cash ledger.
The ITC self assessed in the return will be credited to taxable person’s electronic credit ledger.
The amount available in electronic cash ledger/ electronic credit ledger may be used for making payment towards tax payable subject to conditions
Appropriate Amount be disclosed in relevant column (like Tax, Interest Fees etc.)while making payment.
Anti Profiteering Measures.
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ACCOUNTS & RECORDS
EVERY REGISTERED PERSON SHALL KEEP & MAINTAIN AT HIS PRINCIPAL
PLACE OF BUSINESS AS MENTIONED IN CERTIFICATE OF REGISTRATION,
A TRUE & CORRECT ACCOUNTS UNTIL THE EXPIRY OF SIXTY MONTHS
FROM THE LAST DATE OF FILING OF ANNUAL RETURN OF THE YEAR
PERTAINING TO SUCH ACCOUNTS AND RECORDS.
➢ TAX INVOICE ISSUED BY TAXABLE PERSON SHOUL CONTAINSDESCRIPTION , QUANTITY , VALUE OF GOODS, TAX CHARGED ; and
OTHER PARTICULARS AS MAY BE PRESCRIBED.
DEBIT & CREDIT NOTES CAN BE ISSUED BY REGISTERED TAXABLEPERSON WHERE TAX INVOICE ALREADY ISSUED IS FOUND TO EXCEED/LESS THAN THE TAXABLE VALUE AND/OR TAX PAYABLE IN RESPECT OFSUCH SUPPLY ON OR BEFORE SEPTEMBER, 30 OF SUCCEEDINGFINANCIAL YEAR.
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ASSESSMENT
❖ SELF ASSESSMENT
EVERY DEALER SHALL HIMSELF ASSESS TAX PAYABLE & FURNISH RETURN FOR EACH TAX PERIOD.
❖ PROVISIONAL ASSESSMENT
WHERE ANY TAXABLE PERSON IS UNABLE TO DETERMINE VALUE OF GOODS AND/OR SEVICES , OR RATE OF TAX
APPLICABLE THERE TO, HE MAY REQUEST THE OFFICER IN WRITING GIVING REASONS FOR PAYMENT OF
TAX ON PROVISIONAL BASIS AT SUCH RATE OR ON SUCH VALUE AS MAY BE SPECIFIED BY HIM.
PROPER OFFICER SHALL PASS FINAL ORDER WITHIN 6 MONTHS FROM DATE OF COMMUNICATION OF ORDER.
❖ SCRUTINY OF RETURNS MAY BE EITHER OF TWO AUTHORITIES
❖ BY CENTER OR BY STATE
PROPER OFFICER MAY SCRUTINIZE THE RETURN AND RELATED PARTICULARS.
❖ ASSESSMENT OF NON-FILERS OF RETURNS : PROPER OFFICER MAY AFTER GIVING NOTICE OF 15 DAYS PROCEED TO ACCESS THE TAX LIABILITY OF DEALER TO BEST OF JUDGEMENT, TAKING INTO ACCOUNT RELEVANT MATERIAL WHICH IS AVAILABLE. IF DEALER FURNISHES A VALID RETURN WITHIN 30 DAYS OF SRERVICE OF THE ASSESSMENT ORDER, THE SAID ASSESSMENT ORDER SHALL BE DEEMED TO HAVE BEEN WITHDRAWN.
CONCERN: DIVISION OF DUTIES BETWEEN CENTRE & STATE63
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ASSESSMENT
❖ ASSESSMENT OF UNREGISTERED PERSONS
IF TAXABLE PERSON FAILS TO OBTAIN REGISTRATION EVEN IF LIABLE TO DO SO,
THE PROPER OFFICER MAY PROCEED TO ASSESS THE TAX LIABILITY OF SUCH
PERSON TO THE BEST OF JUDGEMENT FOR RELEVANT TAX PERIODS AND ISSUE
ASSESSMENT ORDER WITHIN THE PERIOD OF 5 YEARS FROM DUE DATE FOR FILING
OF THE ANNUAL RETURN FOR THE YEAR TO WHICH THE TAX NOT PAID RELATES.
❖ SUMMARY ASSESSMENT IN CERTAIN SPECIAL CASES PROPER OFFCIER MAY, ON ANY EVIDENCE
SHOWING A TAX LIABILITY OF A PERSON COMING TO HIS NOTICE, WITH PREVIOUS PERMISSION OF ADDITIONAL/JOINT COMMISSIONER, PROCEED TO ASSESS TAX LIABILITY OF
SUCH PERSON TO PROTECT THE INTEREST OF REVENUE AND ISSUE AND ASSESSMENT ORDER ,
▪ IF HE HAS SUFFICIENT GROUND TO BELIEVE THAT ANY DELAY IN DOING SOWILL ADVERSELY
▪ EFFECT THE INTEREST OF REVENUE.
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AUDIT BY TAX AUTHORITIES
➢ DEPARTMENTAL AUTHORITIES MAY UNDER TAKE AUDIT OF THE BUSINESSTRANSACTION OF ANY TAXABLE PERSON FOR SUCH PERIOD, AT SUCH FREQUENCY, &
IN SUCH MANNER AS MAY BE PRESCRIBED.
➢ AUDIT SHALL BE CONDUCTED IN TRANSPARENT MANNER , & COMPLETED WITHIN 3MONTHS FROM THE DATE OF AOMMENCEMENTOF AUDIT.
➢ THE PERIOD OF 3 MONTHS MAY BE EXTENDED BY FURTHER PERIOD NOT EXCEEDING6 MONTHS FOR THE REASON RECORDED IN WRITING.
➢ SPECIAL AUDIT : OFFCIER HAVING REGARD TO THE NATURE & COMPLEXITY OFTHE CASE & THE INTEREST OF REVENUE OFFICER MAY WITH PRIOR APPROVAL OFCOMMISSIONER,DIRECT SUCH TAXABLE PERSON IN WRITING TO GET HIS RECORDSAND BOOKS OF ACCOUNTS
➢ EXAMINED AND AUDITED BY A CHARTERED ACCOUNTANT OR A COST ACCOUNTANTAS MAY BE NOMINATED BY COMMISSIONER IN THIS BAHALF.
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APPEALS
ADVANCE RUING
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APPEALS
➢ FIRST APPEAL TO PRESCRIBED FIRST APPELLATTE AUTHORITY EITHER STATE ORCENTRAL
➢ PROVISION OF APPEAL BY DEPARTMENT
➢ TIME OF APPEAL – WITHIN 3 MONTHS OF DATE OF COMMUNICATION OF ORDER.
➢ APPELLANT SHALL DEPOSIT 10 % OF AMOUNT IN DISPUTE FROM SAID ORDER.
➢ NO ADJOURNMENT FOR MORE THAN 3 TIMES DURING THE HEARING OF APPEAL.
➢ CENTRAL GOVERNMENT ON RECOMMENDATIOHN OF GST COUNCIL TO CONSTITUTENATIONAL APPELLATE TRIBUNAL (NAT) FOR SECOND APPEALS.
➢ APPEAL AGAINST ORDER OF NAT CAN BE FILED BEFORE HIGH COURT.
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ADVANCE RULING
➢ AUTHORITY SHALL BE LOCATED IN EACH STATE.
➢ APPLICATION FOR ADVANCE RULING CAN BE MADE ON CERTAIN QUESTIONSRELATING TO CALSSIFICATION, APPLICABILITY OF NOTIFICATION, ADMISSIBILITYOF ITC ETC.
➢ APPEAL AGAINST DECISION OF ADVANCE RULING AUTHORITY CAN BE FILED BEFOREAPPLETTE AUTHORITY CONSTITUTED FRO SUCH PURPOSE.
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INPUT SERVICE DISTRIBUTOR (Manner of Distribution)
1) Credit of CSGT as IGST / IGST as IGST
2) Credit of SGST as IGST (State Act to Provide)
If the ISD and recipient of Credit are in two
different states
1) Credit of CGST & IGST as CGST
2) Credit of SGST & IGST as SGST
If the ISD and the recipient (business
vertical are in the same state)
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REFUNDS Under GST: No refund of unutilised credit
Refund allowed in case of exports which are not subject to export duty and where rate of tax on input is higher than the rate of tax on output.
Refund other than in above cases is allowed in case of payment of excess tax by Mistake.
Unutilised credit carried forward to unlimited period.
Presently Central Excise/Service Tax no refund in VAT refund is after end of the year.
Refund allowed only on making an application on or before two years from the relevant date.
Limit of two years will not apply if tax or interest was paid under protest.
The application should accompany document/ other evidence to establish that payment of tax and interest was not passed to any other person.
Exception: If the refund is less than FIVE LACS no documentary evidence will be needed only a declaration is sufficient.
In case of export of goods/ services made by notified persons 80% of the refund will be granted on provisional basis and 20% on verification of documents.
The order granting refund should be issued from the date of receipt of complete application containing all prescribed information.
Refund other than above two cases (i.e. in case of Exports)
Provisions for Withholding the refund are also found in GST Law.
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INTEREST ON DELAYED REFUND:
If tax refundable is not refunded within three months from the date of receipt of application
Interest at specified rate shall be granted.
There should not be disparity in rate of interest payable and receivable.
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© ASHOK CHANDAK
REVERSE CHARGE UNDER GST
Reverse charge means the liability to pay tax is by the recipient of goods/services instead of the supplier.
Reverse charge may be applicable for both services as well as goods.
Situations where reverse charge will apply
1. Unregistered dealer selling to a registered dealer
In such a case, the registered dealer has to pay GST on the supply.
2. Services through an e-commerce operator
If an e-commerce operator supplies services then
reverse charge will apply on the e-commerce operator.
He will be liable to pay GST.
3. Other categories of supplies applicable for reverse
charge will be notified by the Centre or State
Government.
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© ASHOK CHANDAK
E WAY BILL UNDER GST (DRAFT RULES ISSUED)
E-way bill is an electronic way bill for movement of goods which can be generated on the GSTN (common portal). A ‘movement’ of goods of more than Rs 50,000 in value cannot be made by a registered person without an eway bill.
E-way bill will be generated when there is movement of goods –
1) In relation to a ‘supply’
2) For reasons other than a ‘supply’ ( say a return)
3) Due to inward ‘supply’ from an unregistered person
E-way bill will be issued with Validity.
E- way bill to be carried alongwith the invoice/ bill of
supply/ delivery challan, as the case may be.
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GST COMPLIANCE RATING
The GST compliance rating is a score given by the government to a business soas to see how compliant they are with the tax department. This score will becalculated based on parameters such as timely filing of monthly and annualreturns, furnishing details of input credits used, taxes paid, etc.
Why Compliance Rating?
➢ According to the GST law, refund claims under the GST
regime will also be processed on merit basis, i.e on the
GST compliance rating of the registered taxpayer.
➢ Can be used by the other business to see that how
compliant the particular assesse is with the tax department.
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PREPARATION FOR GST
o Registration and Migration from Existing Laws.
o Obtain Excise Invoices for all purchases.
o Keep closing stock as on 30.06.2017 as minimum as possible.
o Avoid CST purchases nearer to 30.06.2017.
o Design accounting procedure.
o Assess impact of GST on the products till the stage of final consumer.
o System Designing.
o Stationery Printing.
o Registration.
o Consult your Advisor before taking any initial decision.
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WILL GST BENEFIT THE INDUSTRY
AND TRADE ????
GST would be beneficial to and is in the larger interest of industry
and trade by providing a simple, more comprehensive and wider
coverage of input tax credits and by subsuming majority of the
indirect taxes within its ambit. Consequent to elimination or
reduction in the cascading effect of taxes, the system would become
more transparent and self-policing. Further, to the exchequer, it will
widen their tax base, provide better tax compliance and may lead to
reduction in the tax burden on all dealers at large in the industry and
trade, provided tax compliance is made simplified.
CONCLUSION
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Any Questions ?
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