INPUT TAX CREDIT UNDER GST

 INPUT TAX CREDIT UNDER GST  INPUT TAX CREDIT UNDER GST
Jan 242017
 

INPUT TAX CREDIT UNDER GST

What is input tax credit?

Sec 2(56) “input tax credit” means credit of ‘input tax’ as defined in sub-section (55);

Sec 2(55) “input tax” in relation to a taxable person, means the IGST, including that on import of goods, CGST and SGST charged on any supply of goods or services to him and includes the tax payable under sub-section (3) of section 8, but does not include the tax paid under section 9;

In essence a taxable person may take input of following taxes paid under GST:

  • IGST (Integrated goods and service tax) – paid on domestic procurement as wells as overseas procurement
  • CGST (Central goods and service tax)
  • SGST (State goods and service tax)
  • GST paid under reverse charge mechanism

However GST paid under composition scheme is not eligible for input tax. Further, input of GST paid to composition supplier, by mistake or otherwise, is not eligible.

When a registered taxable person is eligible for taking input tax credit?

Following are the eligible criteria for taking input tax credit:

  1. Input tax shall be charged on any supply of goods or services to him
  2. Such goods or services are used or intended to be used in the course or furtherance of his business
  3. He had complied with all conditions precedent to eligibility of input tax.

If the above two conditions are met, the eligible amount shall be credited to the electronic cash ledger (ECL) of such person.

When input tax shall be credited to electronic cash ledger?

The input tax shall be credited to ECL provisionally as provided under sec 36 of act. Every registered taxable person shall, be entitled to take credit of input tax, as self-assessed in his return.

Such amount shall be credited, on a provisional basis, to his electronic credit ledger to be maintained in the manner as may be prescribed.

The credit referred above shall be utilized only for payment of self-assessed output tax liability as per the return. That means input tax may only be utilized only for payment of out tax liability which is assessed by taxable person himself. In any other sum due to pay, e.g., tax liability under any order of department, penalty, fees and any other sum shall be paid by him in cash through online banking.

How to utilized input available in ECL by a taxable person?

Provisions related to utilization of input available in ECL are given in sec 44(5) and summarized in below table:

Input tax credit on account of Priority of utilization
IGST SGST CGST
IGST (1) (3) (2)
SGST (2) (1) x
CGST (2) x (1)

What if, in ECL, there is still left a balance in credit side after setting off the input tax?

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 there under may be refunded in accordance with the provisions of section 48 and the amount collected as CGST/SGST shall stand reduced to that extent.

What are the other requirements which a taxable person must complied with before availing of input tax credit?

  1. He must have a tax invoice / debit note / such other taxpaying document(s) evidencing the payment of tax claimed as input
  2. He must have actually received the goods
  3. Tax claimed as input must have actually been paid to appropriate government. The payment to government may be done in either of the following mode:
    1. In cash, means online transfer through challan
    2. By way of utilization of input tax credit.
  4. He must have furnished the return for the concern period.

Casual Taxable Person under GST

 Casual Taxable Person under GST  Casual Taxable Person under GST
Jan 202017
 

Casual Taxable Person under GST

Who is casual taxable person?

As per sec 2(20) of revised model GST law – A casual taxable person means a person who occasionally undertakes transactions involving supply of goods and/or services in the course or furtherance of business whether as principal, agent or in any other capacity, in a taxable territory where he has no fixed place of business.

The essential elements for being a casual taxable person are:

  • Occasional transactions in a specified state jurisdictions, i.e., he does not do his business in a single place for whole of the year and needs to frequently change his place of business. Eg. Circus business etc.
  • He may have a fixed place of business

Section 24 of revised GST Model law specified some special provision for casual taxable person which are reproduced below:

24. Special provisions relating to casual taxable person and non-resident taxable person

(1) The certificate of registration issued to a casual taxable person or a non-resident taxable person shall be valid for a period specified in the application for registration or ninety days from the effective date of registration, whichever is earlier

and such person shall make taxable supplies only after the issuance of the certificate of registration:

PROVIDED that the proper officer may, at the request of the said taxable person, extend the aforesaid period of ninety days by a further period not exceeding ninety days.

(2) Notwithstanding anything to the contrary contained in this Act, a casual taxable person or a non-resident taxable person shall, at the time of submission of application for registration under sub-section (1) of section 23, make an advance deposit of tax in an amount equivalent to the estimated tax liability of such person for the period for which the registration is sought:

PROVIDED that where any extension of time is sought under sub-section (1), such taxable person shall deposit an additional amount of tax equivalent to the estimated tax liability of such person for the period for which the extension is sought.

(3) The amount deposited under sub-section (2) shall be credited to the electronic cash ledger of such person and shall be utilized in the manner provided under section 44.

From the above provisions following are broad compliances which a casual taxable person needs to be complied with:

  1. Such person shall be required to obtain registration in each of the state in which he undertakes supplies.
  2. A casual taxable person shall apply for registration at least five days before the commencement of business in a taxable territory where he has no fixed place of business.
  3. Such certificate of registration shall be valid for a period of maximum 90 days subject to validity period in registration certificate.
  4. On request above validity period may be extended for a period not more than 90 days. Under no circumstances registration is allowed for more than 180 days.
  5. Such person shall deposit its estimated tax liability in advance at the time of registration.
  6. Such advance tax shall be utilized in the manner provided under sec 44.
  7. Any excess advance tax paid may only be refunded only when such person has file all returns for the validity period his registration certificate.
  8. Such people need not to file annual return.

However a casual taxable person needs to file annual return in the state where he has fixed place of business.

Refunds of Tax paid under GST

 Refunds of Tax paid under GST  Refunds of Tax paid under GST
Jan 182017
 

Refunds of Tax paid under GST

What is refund under GST?

As per explanation 1 to section 48 of the revised GST model law- “refund” includes refund of tax on goods and/or services:

  • Exported out of India or
  • On inputs or input services used in the goods and/or services which are exported out of India, or
  • Refund of tax on the supply of goods regarded as deemed exports, or
  • Refund of unutilized input tax credit as provided under sub-section (3).

Refund may be allowed on certain specific aspects of taxable turnover and that too subject to certain conditions. This may be analyze from the below table:

Taxable turnover for which refunds shall be allowed:1)    Refund of any balance in the electronic cash ledger.2)    Unutilized input tax credit accumulated due to:

a)    Exports including zero rated supplies

b)    Credit has accumulated on account of difference rate of tax on inputs and output supplies.

3)    Purchases made by Embassies or UN be taxed or exempted – Sec 49 and etc..

 Taxable turnover for which refunds shall be not allowed at all:

1)    Refund amount is less than 1000/- rupees.2)    ITC of goods lying in stock at the end of the financial year. ITC related to such goods can be carry forward.
Conditions subject to which refunds shall be allowed:1.     Refund of unutilized input tax credit may be claim at the end any tax period subject to conditions mentioned in sec 48(10).2.     No refund shall be allowed in cases:

2.1.   Where goods exported out of India are subjected to export duty.

2.2.   Supplier of goods or services claims refund of output tax paid under IGST Act, 2016.

Process to be followed for claiming refunds of GST paid:

Step 1: Any person can make application in prescribed from and manner for refund of following amounts:

  1. GST
  2. Interest, if any, paid on such GST
  3. Any other amount paid by himStep 2: The above application shall be made before the expiry of two years from the relevant date.Step 3: Refund of any balance in the electronic cash ledger may be claimed in refund filled by him. No separate application for this is required.

    Step 4.    Application shall be accompanied by:
    a.    Such documentary evidence to established (In case claim amount is more than rupees five lacs):
    i.     Refund is due to applicant
    ii.    The amount of tax, interest or other amount was collected from or paid by him
    iii.    Incidence of such tax, interest and has not been passed by him.
    b.    In case claim amount is less than rupees 5 lacs, it is sufficient if he file a declaration to the effect that the incidence of tax and interest had not been passed on to any other person.

    Step 5: If proper officer is satisfied the whole or any part of tax / interest / amount as claimed is refundable – he may make an order and the amount so determined shall be credited to the fund.

    Step 6: Order of refund in step 5 shall be made within 60 days from the date of receipt of complete application.

In what situations refundable amount be paid to applicant?

  • Refund of tax on goods and/or services exported out of India or
  • Refund of tax on inputs or input services used in the goods and/or services which are exported out of India;
  • Refund of unutilized input tax credit under sub-section (3)
  • Refund of tax paid on a supply which is not provided, either wholly or partially, and for which invoice has not been issued;
  • Refund of tax in pursuance of section 70, i.e., Tax wrongly collected or deposited with Central or State government
  • The tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the incidence of such tax and interest to any other person
  • Other class of applicants as the Central or a State Government may notify.

What is refund on provisional basis?

  1. The proper officer may refund on a provisional basis, 90% of the total amount so claimed in the manner and subject to such conditions, limitations and safeguards as may be prescribed
  2. This facility will be available – in the case of any claim for refund on account of export of goods and/or services made by registered taxable persons, other than such category of registered taxable persons as may be notified in this behalf,
  3. Thereafter make final settlement of the refund claim after due verification of documents furnished by the applicant.

TDS Procedure under GST act

 TDS Procedure under GST act  TDS Procedure under GST act
Jan 162017
 

TDS Procedure under GST Act

GST Payment regime:

In the GST regime, for any intra-state supply, taxes to be paid are the Central GST (CGST, going into the account of the Central Government) and the State GST (SGST, going into the account of the concerned State Government). For any inter-state supply, tax to be paid is Integrated GST (IGST) which will have components of both CGST and SGST. In addition, certain categories of registered persons will be required to pay to the government account Tax Deducted at Source (TDS). Here, we will try to understand procedures related to TDS under revised model law.

What is TDS?

Sec 46 of revised GST law: (1) notwithstanding anything contained to the contrary in this Act, the Central or a State Government may mandate, –

(a) a department or establishment of the Central or State Government, or

(b) Local authority, or

(c) Governmental agencies, or

(d) such persons or category of persons as may be notified, by the Central or a State Government on the recommendations of the Council,

[hereinafter referred to in this section as “the deductor”], to deduct tax at the rate of one percent from the payment made or credited to the supplier [hereinafter referred to in this section as “the deductee”] of taxable goods and/or services, notified by the Central or a State Government on the recommendations of the Council, where the total value of such supply, under a contract, exceeds five lakh rupees.

This provision is meant for Government and Government undertakings and other notified entities making contractual payments in excess of Rs.5 Lakhs to suppliers. While making such payment, the concerned Government/authority shall deduct 1% of the total payable amount and remit it into the appropriate GST account (either of central government or state government as may be applicable to deductor).

Value of supply on which TDS shall be deducted:

The value of supply shall be taken as the amount excluding the tax indicated in the invoice. This means TDS shall not be deducted on the CGST, SGST or IGST component of invoice.

To whom TDS shall be paid:

TDS shall be paid within 10 days from the end of the month in which tax is deducted. The payment shall be made to appropriate government. As per sec 2(11) of revised GST model law appropriate Government means the Central Government in case of the IGST and the CGST, and the State government in case of the SGST. Further following procedural compliances shall be done by deductor:

  1. Such deductors needs to get compulsorily registered under section 23 read with Schedule IV of revised Model GST Law.
  2. Such deductor shall have TAN issued under income tax act to get registered under the act.
  3. They need to remit such TDS collected by the 10th day of the month succeeding the month in which TDS was collected and reported in GSTR 7.
  4. The amount deposited as TDS will be reflected in the electronic cash ledger of the supplier.
  5. They need to issue certificate of such TDS to the deductee within 5 days of deducting TDS mentioning therein the contract value, rate of deduction, amount deducted, amount paid to the appropriate Government and such particulars as may be prescribed.
  6. Non deduction / short deduction / non payment or short payment of TDS is on offence under the act for which a minimum penalty of Rs 10000/- is prescribed under the act.

How deductee can claim benefit of TDS:

The deductee shall claim credit, in his electronic cash ledger, of the tax deducted and reflected in the return of the deductor furnished under sub-section (3) of section 34, in the manner prescribed. Any amount deducted as TDS and reported in GSTR – 7 will automatically reflected in electronic cash ledger.

Refund of excess amount deducted:

  1. In case amount is claim by deductee in electronic cash ledger:

Refund to deductor is not possible such case. However, deductee can claim refund of tax subject to refund provisions of the act. Practically it is not possible to claim any erroneous deduction of TDS by deductor.

  1. In case amount is not so claimed by deductee.

Refund of erroneous excess TDS deducted is possible to deductor subject to refund provision and procedure of the act.

e–Commerce under GST

 e–Commerce under GST  e–Commerce under GST
Jan 132017
 

e–Commerce under GST

What is e-Commerce under GST?

As per section 2(41) of revised GST model law electronic commerce means supply of goods and/or services including digital products over digital or electronic network. This means all kind of supplies which completed over digital network is covered under GST regime. This may include transaction done digital network on prepayment basis such as flipkart, first-try etc.

Under GST regime e-Commerce operator is classified under two head:

  • e-Commerce operator as an taxable entity
  • e-Commerce operator as on tax collection entity

Class 1. As taxable entity:

Central government or state government, as the case may be, may specify categories of services under this class. If such services are provided by e-Commerce operator by digital means, whether on its own account or as an agent of other supplier, it is always presumed that same are supplied by e-Commerce operator.

Now the consequences of e-Commerce operator supplying such specified services are below:

  1. The turnover of such supplies shall be included in the turnover of e-commerce operator and not in the turnover of the actual supplier.
  2. E commerce operator is liable to pay tax on such supplies.
  3. No threshold limit is specified for such e-Commerce business. Such e-Commerce supplier has to obtain GST registration for every rupee of transaction.
  4. e-Commerce business has to apply for registration in each of the state where it affects its supplies.
  5. The original supplier, who supplies the services to e-Commerce operator, shall apply for registration in case his aggregate turnover exceeds Rs 25 lacs.

Class 2. As tax collection entity:

  1. Every electronic commerce operator, not being an agent, shall collect an amount calculated at the rate of one percent of the net value of taxable supplies made through it where the consideration with respect to such supplies is to be collected by the E-commerce operator.
  2. Calculation of net value of taxable supplies:
  3. e-Commerce operator need not to collect tax in case where it is working as an agent.
  4. In such case, e-Commerce operator, which deducting its service charges from the amount payable to supplier, shall also collects 1% of value of taxable supplies and deposited it to appropriate government.
  5. The above collection shall be deposited by e-Commerce operator to appropriate government within 10 days from the end of the month in which collection is made.
  6. No threshold limit is specified for such e-Commerce operator.
  7. The actual supplier which filling GST return shall submit supply to tax and claim the credit of tax collected by e-Commerce operator.
  8. e-Commerce operator shall be taxed on its service charge collected from supplier separately if its supply of services falls in terms of levy under the act.

Thus, in essence, every e-Commerce operator has to apply for registration in every state from where it affects its supplies. Every e commerce operator needs to collect 1% of taxable supplies from the actual supplier and deposited the same to appropriate government. This is done to broaden the tax base and transparency in GST compliance.

HSN Code / SAC under GST

 HSN Code / SAC under GST  HSN Code / SAC under GST
Jan 122017
 

HSN Code / SAC under GST

 What is HSN?

HSN stands for harmonised System of nomenclature. The HSN is the codification of all tradable commodities into 20 broad sections with each chapter containing commodity of similar nature.

As we know that same commodity when traded across the geographical boundaries, are known by different names due to lingual differences. Now in IT enabled multi national trade a unique code is given to each class of tradable commodity based on its nature and usages. This classification and codification is known as HSN code a that commodity.

What is SAC?

Similarly in case of services, for each class when traded across different lingual unified code is given for recognition, measurement and taxation of each class of services.

Role of HSN / SAC under GST:

  1. Classification:

HSN (Harmonised System of Nomenclature) code shall be used for classifying the goods under the GST regime.

Taxpayers whose turnover is above Rs. 1.5 crores but below Rs. 5 crores shall use 2 digit code.

The taxpayers whose turnover is Rs. 5 crores and above shall use 4 digit code.

Taxpayers whose turnover is below Rs. 1.5 crores are not required to mention HSN Code in their invoices.

Services will be classified as per the Services Accounting Code (SAC).

  1. Use as description of items in invoices in the online return of GST network:

In fact description of goods sole will not be added on invoice and uploaded in the returns. Only HSN code in respect of supply of goods and Accounting code in respect of supply of services will have to be fed.

The minimum number of digits that the filer will have to upload would depend on his turnover in the last year.

  1. Use as UID of each transaction of each line item:

GSTN will not generate any new identification. The combination of Supplier’s GSTIN, Invoice no and Financial year with HSN/SAC Code will make each line unique.

Few points to be consider while classifying article in HSN code list:

Rule 1: Classification shall always be done based on the reference given in heading. The section, chapter name or sub chapter names are always irrelevant.

Rule 2: If term of heading is not conclusive, classification shall be done on the basis of section note and chapter notes.

Rule 3: An article shall include that article in un-complete, un-finished form. Similarly, A material or substance shall also include a mixture or a combination of that material.

Rule 4: Specific description shall always prevail over general heading.

Rules 5: Packing material shall be classified with the article / material for which they are made.

GIST OF GST

 GIST OF GST  Uncategorized
Aug 232016
 

GIST OF GST

Firstly GST will not reduce the amount of tax you pay, but it will make it less tiresome to pay and collect. GST is about fewer taxes, at unified rate, as we all know that the taxes are levied both by central and state government in indirect taxes in different level like vat , service tax, excise duty etc, what GST will do is to sweep (‘subsume’) many indirect taxes into a single label.

As things stand, the Centre has agreed to sweep excise duty and additional excise duty, service tax, countervailing duty, surcharge and cess and central sales tax into the waiting arms of GST. The States have obligingly agreed to give up VAT (sales tax), entertainment tax, luxury tax, taxes on gambling, octroi and entry taxes, cess and purchase tax. GST will thus replace all of these taxes.

 When goods are shipped from one State to another, then it is called inter state , the Centre will collect an integrated GST retained its part of share and give state part of share to state government like if goods are moved from Uttar Pradesh to Haryana then it is called inter state, centre will collect GST and give state share to Haryana govt, When the goods are moved within a state then it is called intra state like from Uttar Pradesh to Uttar Pradesh then Central GST and State GST will be levied.

As  we all  know currently we are working on ‘value added’ tax regime where taxes paid on inputs are deducted from taxes due on final product, but this exists in name only because so many taxes like central sales tax, additional excise and customs duty, luxury tax, to name a few — are not eligible for such set-offs, As a result, both producers and sellers end up paying taxes on the same inputs over and over again.

It should be thanks that in case of GST there is no concept of input tax credit all taxes are summed up and GST is you pay just once for.

Now here is the meaning of some basic terms in GST like What does the word GOODS means in GST

Goods means all kinds of movable properties (which can be moved as such without any dismantling) (only tangible) eg:- visualize, marker, exercise machine, fan etc

INCLUDING securities, growing crops & grass, things attached to or forming art of the land e.g. electricity pole etc

EXCLUDING money, Actionable claim

What does the word SERVICES means in GST

ANYTHING OTHER THAN GOODS i.e. Do something or not to do something (like non competence contract, cancellation charges of hotel/ aircraft etc.)

INCLUDING intangible property (which cannot be touched like copyright, patent etc)

EXCLUDING   Money

What does the word SUPPLY means in supply of goods/ services

If supply is for a consideration–

  • All form of supply of goods/SERVICE :- exchange, transfer, barter, lease etc IN THE COURSE of business
  • AGENCY SERVICES for supply or receiving goods/ services e.g. consignment agent
  • Aggregator service e.g. meru cab/ uber/ Ola etc

In GST even if NO CONSIDERATION is there then also supply exists  like-

  • Stock transfer, supply of goods between two registered units/ branch
  • Transfer of business assets:- PERMANENT transfer, temporary transfer, retained on De- registration
  • Service put to pvt-use
  • Import of service( business use or personal use)

Some clarification regarding supply of Goods v/s supply of services

In case of Movable Property (Goods)

  • If there is sale of goods i.e. transfer of ownership then it is called supply of goods but
  • if only “ RIGHT TO USE” is transferred then it is called supply of service

In case of business assets

  • if it is permanent transfer then it is called supply of goods,
  • but if temporary transfer then it is called supply of services  ,
  • if sold by third party (bank) then supply of goods by the person

In case of Immovable Property

  • If there is Renting/ Leasing of immovable property then it is supply of service
  • If sale of under construction property then also it is supply of service

In case of Intangible Property (IPR)

  • Intangible property is either temporary or permanent transfer in both the cases it is supply of service

In case of software

  • If the software is customised then it is supply of service
  • But if the software is readymade then it is supply of goods

Goods on which 100% Exemption is there in GST

ROTI :- flour, pulse, rice, milk, cereals, poultry etc

KAPDA:- textile

MAKAN:- renting for residential/ construction for one family

SHIKSHA:- playway to XII- approved degree, diploma

SWASTHYA:- health care- diagnose, treatment , care etc

  • THRESHOLD EXEMPTION OF GST IS RS 10 LAKHS means now all the small traders also covered under GST.

Courtesy: Eshaa Agarwal

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