Overview of Goods and Services Tax (GST)

Overview of Goods and Services Tax (GST)

Ca. Dhruv SethPartnerSeth & Associates | Chartered Accountantswww.sethspro.com | [email protected]

Coverage of this presentation•What is GST and why is it important to you

•Levy and Exemption from GST

•Meaning, Timing and Scope of “supply”

•Valuation under GST

• Input Tax credit

•Overview of IGST Act

•Place of Supply of Goods and Services

•Getting ready for GST

•Unanswered Questions

Seth & Associates, Chartered Accountants New Delhi | Lucknow | www.sethspro.com

Why is this important to you ?


Tax and Informatio

n Technology Systems

Supply

Chain






Opportunities and Benefits

WHAT is GST ?

What is GST ?

Structure of GST

Dual GST with the Centre and States simultaneously levying it on a common tax base

• IGST – Integrated Goods and Services Tax

•CGST – Central Goods and Services Tax

• SGST – State Goods and Services Tax


What is GST ?


What is GST ?

Migration from Origination based to Destination Based Tax on consumption

It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as setoff. In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer


What is GST ?

Destination Based Tax on consumption

It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as setoff. In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer


What is GST ?

What gets merged in GST


Central Levy State LevyCentral Excise and allied Duties State VAT

Additional Duties of Customs (CVD) Central Sales tax

Service Tax Luxury Tax

Central Surcharges and Cesses so far as they relate to supply of goods and services

Entry tax

Entertainment and Amusement Tax

Purchase Tax

Taxes on Lotteries, betting and gambling

What is GST ?

What will exist after enactment of GST

• Alcohol for human consumption

• Basic Customs Duty

• Petroleum Products

• Electricity

• Aviation Fuel

• Natural Gas


What is GST council ?

• Constituted comprising of Union FM with MOS (Finance)

• Also includes state Finance ministers

•Would decide upon the following• Tax, Cess etc to be levied• Goods and Services which ought to be taxed•Model GST Law, levy, Valuation and taxability• Basic Threshold limit • The rates including floor rates for taxation• Special provisions for J&K and North Eastern states.


What is GST council ?

How will the council vote

• 3/4th of the weighted votes of the members present

• Central Government weightage at 1/3rd

• All states combined to have weightage of 2/3rd

• 50% of the members of the council to be present to make eligible quorum


What is GST?

Scope of composition scheme for small scale

• Defined as those with turnover of less than Rs. 50 lakhs

• Benefit of credit would not be available.

• Applied to the PAN hence combined for all businesses

• Floor rate shall not be less than 1%

• Those doing Inter-state sales shall not be eligible for the scheme


What is GST?Miscellaneous points

• Basic Exemption limit (estimated at Rs. 10 lacs)

• HSN code and Services Accounting Code (SAC)

• Imports into country to be taxed as IGST

• Exports are at nil rate of duty

• GSTN and its importance

• Suitable legislations need to be passed at Central and State level to actually enact GST


Levy and Exemptions

Levy & ExemptionsTaxable Event

The taxable event under GST shall be the supply of

goods and / or services made for consideration in the

course or furtherance of business. The taxable events

under the existing indirect tax laws such as

manufacture, sale, or provision of services shall stand

subsumed in the taxable event known as ‘supply’.


Levy & Exemptions

Taxable EventIn order to constitute a “supply” following required –

• Supply of Goods / Services

• Supply is for a consideration

• Supply in the course or furtherance of business

• Supply is made in the taxable territory

• Supply is a taxable supply

• Supply is made by a taxable person


Levy & ExemptionsDefinition – Supply – Sec 3

INCLUDES All forms of Supply of Goods and / or Services such as• Sale• Transfer• Barter• Exchange• License• Rental and Lease•Disposal• Agreed to be made for a consideration

In the course or furtherance of business


Levy & ExemptionsTaxable Point

At the juncture when both title and possession are transferred…. EXCEPT




Agent transaction

Existing VAT Laws GST Law

Under the existing provisions in the law such transfers in which the Agent is merely acting as a forwarding agent and does not deal on a principal to principal basis was not taxable.

Under GST law all transfers from principals to agents shall be considered to be Supply and hence taxable.

However full credit of the tax paid shall be eligible to the agent upon further supply.



Other transactionParticulars GST Law

Any transfer in title of Goods Taxable as GoodsAny Transfer of right to use Taxable as ServiceHire Purchase or Finance Lease Taxable as GoodsLease, License or easement Taxable as ServiceRenting of residential premises Taxable as ServiceJob Working Taxable as ServiceTransfer of Assets upon business close

Taxable as Goods

Construction of premises Taxable as Service



Other transactionParticulars GST Law

Software Taxable as ServiceWorks Contract Taxable as ServiceAgreeing to do an act or to refrain Taxable as ServiceRestaurant Taxable as ServiceFree supplies Taxable as GoodsClub and its members Not TaxableServices put to private or non business

Not Taxable

Levy & ExemptionsDate of Levy – Sec 12

• The date on which goods are removed;

• The date on which goods are made available when removal is not required;

• The date supplier issues invoice where the above two are not required to be done;

• The date when the recipient shows the receipt of the goods in his books of accounts.

• For goods on approval – 6 months or the date of approval


Levy & Exemptions

Miscellaneous points

• Inter state stock transfers liable for IGST whereas Intra state to be exempt

• “Occasional” supplies even if made for consideration would not be liable for GST (E.g. Old car sale)

• Clubs and associations also to be liable for GST


Valuation

ValuationTransaction Value

• Refers to the price actually paid or payable;

• for the supply of goods and or services where the;

• supplier and the recipient are not related;

• price is the sole consideration for the supply;

• Includes any amount which the supplier is liable to pay but which has been incurred by the recipient of the supply

• shall not include refundable deposit, discount allowed before or at the time of supply provided already declared in invoice issued.


ValuationTransaction Value – Special Situations (Sec 15(4))

Reference to valuation rules in case of

•Where consideration payable is not in money terms

• Parties to the transaction are related

• Transaction value declared is not reliable

Methods used to determine in such scenario

• Comparative

• Computation

• Residual


ValuationTransaction Value – What to be include (Sec 15(2))• Any amounts paid by the recipient which were to be paid by the

provider

• Goods or services provided free by the service recipient

• Taxes levied under any other law

• Subsidy realized by the supplier on the supply

• Reimbursements claimed separately by the supplier

• Discount allowed after supply if not documented in original invoice

• Royalties or License fees paid by the recipient as a condition of sale


ValuationPayment of Tax

• Electronically weather through• Cash balance maintained in common ledger• Input credit available

• Every 20th of the succeeding month is the due date to pay

• Composition tax payers to pay quarterly

• Date of credit of amount to Government would be the actual date of payment and not the date on which challan was tendered

• Input Tax credit can only used to set off tax liability and not interest or penalty


Input Credit

Input CreditDefinition – Sec 2(57) of MGL ; 2(1)(d) of IGST

Means

• IGST and CGST in case of CGST law

• IGST and SGST in case of SGST law

• IGST, CGST and SGST in case of IGST law

•Also includes tax paid on reverse charge


Input CreditMandatory conditions for availing Input

• Should be in possession of tax paying document

• Should have received the goods / services

•Tax paid on such supply should have been paid to the government

• Should have filed their return

• In case of “lots” credit shall be available at the receipt of the last installment


Input CreditDenied on

•Motor vehicles unless used in the business of running them on hire

• Expenses incurred on personal expenses of employees

• Those used in construction of immovable property

• Goods bought from those under composition scheme

• Goods / services used for personal consumption


Input CreditMonthly return to be filed by supplier

Based on the following details filed by the supplier the credit shall be available (GSTR-1)

• Outward supplies to registered dealers

• Outward supplies to unregistered dealers

• Details of debit / credit notes

• Zero rates sales (Exports)

• Exempted and non-GST supplies

• Advances received in relation to future sales


Input CreditFields to be filled to enable seamless credit

• HSN or SAC

• Value of Invoice

• Taxable Value

• Recipient can also upload from his end if the supplier has not uploaded the same (though subject to matching). If mismatch still continues then action to be taken against supplier.

• Last chance to avail Input for any year the subsequent September month in which annual return would be filed.


Input CreditMiscellaneous points

• Those registering would be allowed inputs of goods with them as on the date of registration.

• In case of exempted sales / services partial input would be available.

• In case of change in constitution transfer of credit is permissible.

• Credit is available for a maximum period of 1 year

• In case of electronic mismatch of credit the supplier needs to rectify within 2 months else credit lapses


Input CreditFields to be filled to enable seamless credit

• HSN or SAC

• Value of Invoice

• Taxable Value

• Recipient can also upload from his end if the supplier has not uploaded the same (though subject to matching). If mismatch still continues then action to be taken against supplier.

• Last chance to avail Input for any year the subsequent September month in which annual return would be filed.


Registrations and Returns

Registrations and ReturnsRegistrations

Any supplier who carried on business in India and whose aggregate turnover exceeds basic exemption limit (as may be prescribed) is liable to get registered under the act apart from those m in Sch III of the MGL –

a.) Person making Inter-State sales

b.) Casual taxable person

c.) Persons who are required to pay under reverse charge

d.) Non Resident taxable persons

e.) Persons liable to deduct TDS


Registrations and ReturnsAggregate Turnover

Includes combined value of below services provided across India -

a.) All taxable and non taxable supplies

b.) Exempt supplies

c.) Export of Goods

Does not include those values on which tax is paid on reverse charge basis and value of inward supplies


Registrations and ReturnsRegistration – Miscellaneous

• Every person who is liable to take a registration will have to get separately registered for each of the state.

• If the dealer wishes then for each business vertical also different registration can be obtained.

• PAN under Income tax Act is mandatory for registration

• There exists no mechanism of centralized registration as was in Excise / Service tax

• Input Service distributor required to be registered


Registrations and ReturnsReturns

• Regular dealer to file monthly returns by 20th of following month

• Dealers under composition scheme to file within 18 days of quarter end

•WCT/TDS returns to be filed 10 days of month end

• Annual return to be filed by 30th Sept of the following year


Overview of IGST

IGSTWhat is IGST

“Integrated Goods and Services Tax” (IGST) means tax levied under the IGST Act on the supply of any goods and/or services in the course of inter-State trade or commerce.

What are inter-state supplies?

A supply of goods and/or services in the course of inter-State trade or commerce means any supply where the location of the supplier and the place of supply are in different States. (Section 3(1) and 3(2) of the IGST Act)


IGSTHow to determine place of supply of goods

In case of Supply of goods –• Place where the movement of goods is terminated

In case there is no movement of goods –• Location of the goods at the time of delivery to the recipient

In case there assembling or installation –• Place of such assembly or installation


IGST

• All imports/exports will be deemed to be IGST sales

• Borrows significant amount of sections from CGST act

• IGST to be paid using IGST/CGST/SGST/Cash in that order

• The exporting state would transfer the ITC of SGST used by the supplier to the center. In turn Center would pay to the importing state the credit of IGST used by the state.


Place of Supply of Goods and Services• The place of supply determines whether a transaction is intra-state

or inter-state. In other words, the place of Supply of Goods is required to determine whether a supply is subject to SGST plus CGST in a given State or else would attract IGST if it is an inter-state supply.

• Set of rules predominately needed for services provided rather than for goods since there is no tangible space where services are located.

• In case location of unregistered recipient is not known then location of the supplier shall be the place of provision.

• In case of courier if the recipient is registered then that shall be the place of provision else the place where the goods are handed over to the transportation agency.


Getting ready for GST

Getting Ready for GST

• Start preparing from today

• Streamline purchases during Jan-Mar ‘17

• Re-engineer entire supply chain

• Unnecessary depots to be closed down

• Obtain Digital signatures

• Correcting any mistakes in PAN


Getting ready for GST


• Domestic Supplies v. Imports• Intra v. Inter state

procurement• Service Locations

Transactions

• Treatment of Accumulated credit

• Mechanism between CGST/SGST

• Taxable v. Exempt

Input Tax Credit

• Accounting and IT systems• Books of Accounts & Stock

record• Input Tax credit accounting

Compliance

Unanswered questions

Unanswered Questions

• Sales made during current VAT laws and returns in GST

• Transitions entries in books of accounts and its impact on Income tax

• Pending Refund claims under VAT

• Filing of Annual VAT returns of FY 2016-17

• Completion of pending VAT Assessments

• Treatment of supplies to SEZ/STP

• Transition for those already availing incentives in states

• Free Supplies


Thank YouCa. Dhruv SethPartnerSeth & Associates | Chartered Accountantswww.sethspro.com | [email protected]