THE CHAMBER OF TAX CONSULTANTS BASIC CONCEPTS O F G S T 1
Understanding GST Covering 2 Legislations, 174 Sections,3 Schedules
TAXES IN INDIA There are mainly two types of taxes DIRECT TAXES INCOME TAX INDIRECT TAXES SERVICE TAX STATE/VALUE ADDED TAX 4
POWER TO MAKE LAWS STATE LIST UNION LIST CONCURRENT LIST Items on which state government can make law It includes goods Items on which central government can make law It includes services Items on which both (central or state government ) can make law It includes security and law and order issues 5
Present Indirect Taxes Taxes are levied on same transactions under different Indirect Tax Laws. For eg: software, intellectual property, restaurants etc and hence double taxation Cascading effect of taxes :On the excise duty there is levy of vat also Cross Credits are not available For eg: Traders are not eligible for excise duty and service tax credit Service tax payers are not eligible for VAT Credit Manufacture and Traders not eligible for CST Credit Entry tax and Check Post barriers restrict movement of goods across the nation 6
Remedy. Constitutional Amendment empowering both the state and center to levy tax on goods and services. The result of constitution amendment is the base for implementation of the GST law in India. Pursuant to Constitutional Amendment..GST Council was formed consisting of members of all states and center. 7
GST ROADMAP GST Council Draft Laws Approval by Parliament and States Implementatio n by 1 st July 2017 Rate Baskets for Goods/ Services
GST INDIA First mooted by the Vajpayee government in 2000 by setting up committee Budget 2006 FM proposed GST from 01 April, 2010 Concurrent Powers for GST GST Council Compensation to states for 5 years Concept of Dual Model Central GST (CGST) State GST (SGST) Integrated GST (IGST)
GST BENEFITS TO INDIA Beneficial to Manufacturers Upgradation towards Technology Reduction on old disputed issued Minimum interference by authorities and at the same time curb revenue leakage Reduction in inflation over long run Dealing with only one set of authorities Seamless flow of credits Tax is borne by ultimate consumer only Certainty and transparency in taxes
INTRODUCTION A proposed INDIRECT TAX for entire India One Nation One Tax A singular tax on supply of Goods and Service Tax on value addition at each stage with benefit of setoff to achieve seamless credit and absolutely remove cascading effect of taxes. 11
Taxes to be subsumed Central Taxes to Subsumed Central Excise duty (CENVAT) Additional duties of excise Excise duty levied under Medicinal & Toiletries Preparation Act Additional duties of customs (CVD & SAD) Service Tax Surcharges & Cess State Taxes to subsumed State VAT / Sales Tax Central Sales Tax Purchase Tax Entertainment Tax (not levied by the local bodies) Luxury Tax Octroi Taxes on lottery, betting & gambling Surcharges & Cess 12
Taxes to be Retained CENTRAL TAXES: STATE TAXES: Central Excise on: o Tobacco products o Petroleum Products Basic Custom Duty State Excise on Alcohol liquor State VAT on: o Alcohol liquor LOCAL BODY TAXES: Octroi?? LBT? Property Tax Entertainment Tax Gram Panchayat Tax o Petroleum Products Stamp Duty Electricity Duty Profession tax Road tax Taxes on Mineral Rights 13
GST law Unified levy on supply of goods and services A destination based consumption tax Taxes finally to accrue to the state where the consumption will happen termed as Place of Supply GST to be applicable to supplies imported into country Export supplies not to attract GST A Dual tax on all supplies. 14
GST SNAP SHOT Excise Manufactur e of goods GST Across Globe GST India GST Benefits to India Constitutional Amendment Bill VAT Sale of goods GST Service tax Provision of Service Taxes subsumed Destination based consumption tax
PRESENT SCENARIO SITUATIONS MANUFACTURE SALE SERVICE TYPES OF INDIRECT TAX EXCISE DUTY VALUE ADDED TAX SERVICE TAX GST ON SUPPLY 16
SUPPLY The term supply will hold the greatest significance and shall be important in determining the taxability of all transactions, whether commercial or otherwise under GST regime. Manifestly, the term supply has been defined in inclusive manner, despite of being a crucial term and the centric point for determining levy & collection of GST. Supply includes a) all forms of supply of goods and/or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business, b) importation of service, whether or not for a consideration and whether or not in the course or furtherance of business, and c) a supply specified in Schedule I, made or agreed to be made without a consideration. d) 7(2) Government has taken power to notify supply to be treated as neither supply nor services, eg. service provided by employee to employer, service provided by MP, MLAs and funeral or burial services etc. 17
Goods and Services Goods is defined u/s 2 (52) and states that the goods means: Every kind of movable property Other than: Money [Sec. 2(75)] Securities [Sec. 2(101)] But includes Actionable claim [sec 2(1)]; Growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply Software? 18
Services is defined u/s 2(102) and it states that services means: Anything other than goods, money and securities or both Explanations to services state that services include Transactions in money including activity relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged. Immovable property.? 19
Taxable person Liable to be Registered u/s 22 or u/s 24 Every supplier liable to register in the state/ union territory from where he makes taxable supply of goods and services if his aggregate turnover in a financial year exceeds 20 lakhs (10 Lakhs in case of North East) Aggregate Turnover includes: Taxable supplies Exempt supplies Export of goods/services Interstate supplies Of a person having same PAN computed on all India basis but excludes: CGST, IGST, SGST and Inward Supplies on which tax is payable on reverse charge basis 20
LEVY OF GST: Tax on Supply of GOODS and SERVICES Intra State Inter State CGST SGST IGST By a Taxable Person 21
Intra State Location of Supplier Place of Supply Same STATE Within India Intra State (CGST/SGST) Exclusions Goods/Services supplied by SEZ Developer and Unit..Zero Rated Goods in course of import brought into India and till they cross the custom frontiers of India. 22
Inter State Place of Supply Location of Supplier Different State Within INDIA Inter State (IGST) Location of Supplier Place of Supply INDIA Outside INDIA Export 23
Location of supplier Place of Supply Outside India India Import (IGST) 24
Point of Taxation for Services GST is payable at the time of supply of Goods Earliest of: The date of issue of invoice by the supplier or last date within which invoice is required to be made as per sec 31(1)) The date on which the supplier receives the payment with respect to supply. The amount received in excess upto Rs. 1,000/- the same time of supply will apply at the option of the supplier. The date on which supplier receives payment means date of credit in bank or date on which entered in books of account, which ever is earlier. Supply shall be deemed be have made to the extent it is covered by invoice or as the case may be payment.. In case of RCM related supply of Goods - Earliest of Receipt of goods Payment is made After 30 days from date of issue of invoice from the supplier. In case of supply of voucher by whatever name called Date of issue of voucher if supply is identifiable Date of redemption of voucher in all other cases. If the goods are sent on ON APPROVAL (JANGAD) - Earliest of Becomes known that the Supply has taken place Six months from date of removal 25
Point of Taxation for Services GST is payable at the time of supply of Services If invoice is issued within prescribed time - Earliest of: Date of invoice or last date on which invoice is required to be issued as per section 31(2) Date of receipt of payment The amount receives in excess upto Rs. 1,000/- the same time of supply will apply at the option of the supplier. The date on which supplier receives payment means date of credit in bank or date on which entered in books of account, which ever is earlier. In case of RCM related supply of Services - Earliest of Payment is made 60 days from the date of issue of invoice by the supplier In case of associate enterprise when supplier located outside India it is earlier of date of payment or date of entry in the books of account. In case of supply of voucher by whatever name called Date of issue of voucher if supply is identifiable Date of redemption of voucher in all other cases. In the event time of supply cannot be identified as above it shall be due date of filing of periodic return in case the return is to be filed, in any other case the date on which CGST/SGST is paid. 26
PLACE OF SUPPLY OF GOODS Place of Supply Goods required to be removed Goods at which the movement of goods terminate for delivery to the recipient Where the goods are delivered by the supplier to a recipient or any other person, on the direction of a third person Place of supply of such goods shall be the principal place of business of such third person Where the supply does not involve movement of goods Location of such goods at the time of the delivery to the recipient Where the goods are assembled or installed at site place of such installation or assembly Where the goods are supplied on board a conveya nce Location at which such goods are taken on board. 27
PLACE OF SUPPLY OF SERVICE Place of supply of service will be the location of services receiver whether receiver is registered or unregistered person Place of supply of restaurants, caterings,wellness, and personal care will be its actual performance Place of supply will be location of service provider if receiver is a unregistered person with unknown address Place of supply of training and personal services will be service receiver (if registered),or place of actual performance of services (if unregistered) Services in relation to Immovable property, place of supply will be location of such immovable property (boat vessel also included 28
PLACE OF SUPPLY OF SERVICE Place of supply of service provided by way of admission to a social or educational events shall be the place where the event is held. Place of supply of service of Organizing a Social, cultural, aritistic sporting, scientific,education or entertainment event to a registered person shall be the place of location of service receiver Place of supply of Passenger Transportation shall be location of service receiver (if registered)or location of embarkation (if unregistered) Place of supply of services on board a conveyance shall be first scheduled point of departure of such conveyance 29
Input tax 2(62) Definition "input tax" in relation to a registered taxable person, means the {IGST, CGST,SGST or UTGST} charged on any supply of goods and/or services and /or both to him and includes: IGST on Imports Tax payable by recipient on Reverse Charge basis. (Including IGST & SGST & UTGST) Tax payable by recipient on supply received from URTP(Including IGST & SGST& UTGST) But Excludes : Tax paid under composition levy. Input Tax Credit input tax credit means credit of input tax. 30
INPUT TAX CREDIT Used or Intended to be Used Return has been furnished Input tax Credit In the course or furtherance of Business Has received the goods or services Possession of a tax invoice, D/N etc 31
Input Tax Credit Credit Mechanism Matching of Outward and Inward supplies will be done. Matched Credit will be reflecting in Electronic ledger account which can be claimed. Credit will not be available after one year from the date of Invoice, however claim of credit has to be made by due date of filing September return of next year or filing of Annual return, which ever is earlier. In the event Supplier of Service is not paid (Net+Tax) within 180 days of issue of invoice Credit to be reversed will be allowed if and when paid. 32
Negative List Credit sought to be denied on Motor Vehicles except when they are used to supply In the usual course of business or are used for providing the following taxable services Further supply of such vehicles Transportation of passengers, or Transportation of goods, or Imparting training on driving, flying, navigating such vehicles or goods. goods and / or services provided in relation to food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as leave or home travel concession, when such goods and/or services are used primarily for personal use or consumption of any employee; ITC available if the same is used for making outward supply of the same category of goods or services or both. 33
Negative List goods and/or services acquired by the principal in the execution of works contract when such contract results in construction of immovable property, other than plant and machinery as defined except when it is input service for further supply of works contract service Similar to Rule 54G of the MVAT law. However, the term service also included along with goods. Currently input service credit allowable if the construction service is used for rendering specified services which is now missing therefore huge cascading effect. goods and services received by a taxable person for construction of an immovable property on his own account other than plant and machinery; Goods and/or services on which tax has been paid under composition Goods and/or services used for personal consumption Goods lost/stolen/destroyed/written off or disposed off by way of gift or free samples Tax collected but not deposited with government, tax paid persuant to SCN issued as per sec 74 No Input Tax Credit if registered taxable person claims depreciation under Income Tax Act on the tax component of the cost of capital goods. 34
ADJUSTMENT OF CREDIT AGAINST LIABILITY. Credit of IGST IGST Credit of CGST CGST Credit of SGST SGST CGST IGST IGST SGST SGST CGST 35
Levy of GST GST will be applicable on all intra state as well as inter state supplies of goods and services at specified rates (not exceeding 20% SGST) on the value as determined as per sec 15 ( IGST on Inter state Sale Max. 40%) GST on Reverse Charge Mechanism for specified categories of supply of goods and services and on purchase from URD Govt takes power to notify services on which E commerce operators shall be liable to pay tax on services supplied through them Person having turnover less than Rs 50 lacs can pay GST under Composition rate. Rate to be notified cannot be below 2.5% of SGST for Manufacturers so total 5% and 1% for others so total 2% Cannot collect tax from customer, Can Restrict goods on which Composition available No Input Credit will be available, Composition not available to supply of Services No inter state supplies of goods/service permissible, and for Supply through E commerce Operator. Permission to be Obtained other rules. 36
Returns 37
GST LAW APRIL 2017 THANK VIKRAM MEHTA D.R.MEHTA & ASSOCIATES, CHARTERED ACCOUNTANTS, H-2, EVEREST APARTMENTS, 156/ TARDEO ROAD, MUMBAI 400034. PHONE 23520330, 23513758 YOU 38