Frequently Asked Questions

Part 1 - Overview of Goods and Services Tax (GST) FAQ's

Q 1. What is Goods and Services Tax (GST)?

Ans. - It is a destination based tax on consumption of goods and services. 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.

Q 2. What exactly is the concept of destination based tax on consumption?

Ans. - The tax would accrue to the taxing authority which has jurisdiction over the place of consumption which is also termed as place of supply.

 

Part 2 - Queries relating to GST received from various Sectors have been scrutinised and developed into short FAQs.

Q 1. Does aggregate turnover include value of inward supplies received on which RCM is payable?

Ans. - It is a destination based tax on consumption of goods and services. 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.

Q 2. What exactly is the concept of destination based tax on consumption?

Ans. - The tax would accrue to the taxing authority which has jurisdiction over the place of consumption which is also termed as place of supply.

 

Part 3 - FAQs: Frequently Asked Questions on Composition Levy

Q 1. What is composition levy under GST?

Ans. - The composition levy is an alternative method of levy of tax designed for small taxpayers whose turnover is up to Rs. 75 lakhs ( Rs. 50 lakhs in case of few States). The objective of composition scheme is to bring simplicity and to reduce the compliance cost for the small taxpayers. Moreover, it is optional and the eligible person opting to pay tax under this scheme can pay tax at a prescribed percentage of his turnover every quarter, instead of paying tax at normal rate.

Q 2. What is the specified rate of composition levy?

Ans. -

S. No. Category of Registered person Rate of Tax
1 Manufacturers, other than manufacturers of such goods as may be notified by the Government (Ice cream, Pan Masala, Tobbacco prodcuts etc.) 2% ( 1% Central tax plus 1% State tax) of the turnover
2 Restaurant Services 5% ( 2.5% Central tax plus 2.5% SGST) of the turnover
3 Traders or any other supplier eligible for composition levy 1% ( 0.5% Central tax plus 0.5% State tax) of the turnover
 

Part 4 - List of Exempted Goods under GST

S. No. Classification Description of Goods
1 0101 Live asses, mules and hinnies
2 0102 live bovine animals
3 0103 Live swine
4 0104 Live sheep and goats
5 0105 Live poultry, that is to say, fowls of the species Gallus domesticus, ducks, geese, turkeys and guinea fowls.
6 0106 Other live animal such as Mammals, Birds, Insects
7 0201 Meat of bovine animals, fresh and chilled.
8 0202 Meat of bovine animals frozen [other than frozen and put up in unit container]
 

Part 5 - Queries relating to GST rates received from the various sector have been scrutinized and developed into short FAQs

Q 1. What are the HSN code and GST rate for lac or shellac bangles?

Ans. - Lac or shellac bangles are classifiable under heading 7117 and attract 3% GST.

Q 2. What are the HSN code and GST rate for kulfi?

Ans. - Kulfi is classifiable under heading 2105 and attracts 18% GST.

 
 

Frequently Asked Questions - Sector Wise

GST: Frequently Asked Questions [FAQs] on Drugs & Pharmaceuticals

Q 1. Wheather formulations cleared have to be assessed to GST under transfer price mechanism or on the basis of MRP printed on them?

Ans. - The assessment of drugs and formulations under GST would be on the basis of the transaction value to each level of supply with an end to end ITC chain for neutralizing the GST paid at the procurement level.

Q 2. What are the requirements for clearance of physician samples distributed free of cost?

Ans. - In the case of clearance of physician sample distributed free of cost, the ITC availed on the said samples has to be reversed in view of the provisions of Section 17(5)(h) of the CGST Act, 2017. No tax is payable on clearance of physician samples distributed free of cost as the value to supply is zero and no credit has been availed.

 

GST: Frequently Asked Questions [FAQs] on E-Commerce

Q 1. What is Electronic Commerce?

Ans. - Electronic Commerce has been defined in Sec. 2(44) of the CGST Act, 2017 to mean the supply of goods or services or both, including digital products over a digital or electronic network.

Q 2. Who is an e-commerce operator?

Ans. - Electronic Commerce Operator has been defined in Sec. 2(45) of the CGST Act, 2017 to mean any person who owns, operates or manages the digital or electronic facility or platform for electronic commerce.

 

GST: Frequently Asked Questions [FAQs] on Export

Q 1. How are exports treated under the GST Law?

Ans. - Under the Gst Law, export of goods or services has been treated as:

  1. Inter-Sate supply and covered under the IGST Act.
  2. 'Zero rated supply' i.e, the goods or services exported shall be relieved of GST levied upon them either at the input stage or at the final product stage.

Q 2. What will be the impact of GST on zero rating of export of goods?

Ans. - This will make Indian exports competitive in the international market.

 

GST: Frequently Asked Questions for Traders

Q 1. How will GST benefit the Trading Community?

Ans. - Under GST, a trader would be entitled to avail input tax credit paid on his domestic procurements of goods and services, unlike the present indirect tax regime. Presently, a significant portion of indirect taxes namely Central Excise and Service Tax form part of the cost component for a trader. This will not be the case under GST. He will now be able to take credit of all taxes paid by him.

In respect of imports, the landed cost is expected to reduce significantly under GST. Hence, the traders will gain significantly in terms of input tax credit on their operating expenses thereby decreasing their operating costs.

CST which was non-creditable has been subsumed in GST. This will be a huge benefit for the traders. Entry tax has also been subsumed in GST. Removal of CST and entry tax shall immensely benefit the traders. Traders will be able to sell their goods to farthest areas.

Q 2. Will all traders necessarily have to register under GST?

Ans. - A trader dealing only in exempted goods or where his turnover is below Rs. 20 lakh in the financial year (but not engaged in inter-State supplies) is not required to register under GST.

 

GST: Frequently Asked Questions [FAQs] on Textiles

Q 1. As per Chapter 53 heading 5303 of the GST rate schedule, raw jute has been kept at the NIL rate slab. Thus, it is presumed that suppliers dealing only in raw jute are not required to register themselves under GST. But Jute Mills are asking their raw jute suppliers to mandatorily register themselves else their supplies would not be accepted. Please clarify whether raw jute suppliers are liable for registration?

Ans. - Raw jute has been kept at NIL rate of GST i.e. there would be no tax on raw jute. Therefore, as per Section 23 (1)
(a) of the CGST Act, 2017 the suppliers dealing only in raw jute are not required to register. Jute mills are not required to pay tax under Reverse Charge Mechanism (RCM) as mentioned under Section 9(4) of the CGST Act, 2017 because both the goods have been kept at NIL rate of duty. Similarly, Raw Silk has also been kept at NIL rate of GST i.e. there would be no tax on raw silk. Therefore, the suppliers dealing only in raw silk are also not required to register.

Q 2. Cotton under chapter heading 5201 and 5203 has been kept in 5% rate slab. Does this mean that cotton farmer is required to register under GST?

Ans. - No. As per Section 23 (1)(b) of the CGST Act, 2017 an Agriculturist, to the extent of supply of produce out of cultivation of land is not liable to registration.

 

GST: Frequently Asked Questions [FAQs] on Handicrafts

Q 1. How will imports be taxed under GST?

Ans. - All imports will be deemed as inter-State supplies for the purpose of levy of GST. IGST is leviable on imports in addition to other duties of customs. Full set-off will be available as ITC of the IGST paid on import of goods and services.

Q 2. How will exports be treated under GST?

Ans. - All exports will be deemed as inter-State supplies. Exports of goods and services will be treated as zero-rated supplies. The exporter has the option either to export under bond/Letter of Undertaking without payment of tax and claim refund of ITC or pay IGST by utilizing ITC or in cash at the time of export and claim refund of IGST paid.

 

GST: Frequently Asked Questions [FAQs] on Mining

Q 1. Can small mining leaseholders with a turnover less than Rs.75 lacs operate under composition scheme?

Ans. - As per Sec. 10(1) of the CGST Act, 2017, a registered person whose aggregate turnover in the preceding FY did not exceed Rs.75 lakhs, would be eligible for paying GST under the composition scheme.

Q 2. What is the GST rate for minerals and ores in Composition Scheme?

Ans. - In a case where the process amounts to manufacture, the rate of tax will be 1% (CGST) and 1% (SGST/UTGST). In any other case, the rate will be ½% (CGST) and ½% (SGST/UTGST).

 

GST: Frequently Aaked Questions [FAQs] on Food Processing

Q 1. If I have multiple manufacturing units in a State/UT, do I have to register all my companies separately or as a group?

Ans. - You granted a single registration in the State/UT. However, you have the option to take separate registration for each of your business vertical [as defined in Section 2(18) of the Central Goods & Services Tax Act, 2017 (CGST Act, 2017)] in the State/UT.

Q 2. A registered person is sending semi-cooked food from his manufacturing unit at Gurugram to his branch in Delhi. Is he required to pay any tax?

Ans. - In a dance with the provisions of Section 25(4) of the CGST Act, 2017, branches in different States are considered as distinct persons. Further, as per Schedule I, this constitutes supply made in the course or furtherance of business between distinct person even if made without consideration. As it is an inter-States supply, the registered person is required to pay IGST.

 

GST: Frequently Asked Questions [FAQs] on MSME

Q 1. Whether a registered person will have to approach two authorities - Centre as well as State for various permissions, audit etc. under the Act?

Ans. - No, a registered person will have to approach only one tax authority for all practical purposes. Each registered person would have one tax administration office, either of the Centre or of the State. Legal provisions (called cross empowerment) have been made to ensure that one officer can discharge all functions under CGST, SGST, and IGST Act. The registered person would be informed of the tax administration concerned with him. A single registration is granted for the purposes of CGST, SGST/UTGST, and IGST.

Q 2. What is input tax credit?

Ans. - A person doing business will be purchasing goods/ availing services for making further supplies in the course of furtherance of business. When such purchases are made by him, the tax would have been charged by his supplier and collected from him. Since the tax is collected from him, he can avail credit of the tax paid by him to his supplier (that is to say, he can use this amount for making payment of tax due from him on a further supply made by him). This is known as input tax credit to the recipient.

 

GST: Frequently Aaked Questions [FAQs] on Food Jewellery

Q 1. Whether advertising and communication material (banners/hoardings/posters) provided to distributors would be treated as supply in the case of business by the company thereby not requiring any reversal of ITC.

Ans. -

  1. Where the material is provided free of cost:
    This would not amount to a supply and hence no tax is payable on such transaction and in such a case credit availed by the company would need to be reversed in accordance with section 17(5) of the CGST Act, 2017.
  2. Where the material is provided for a consideration.

Q 2. Currently Bank does not pay any VST on import of precious metals. Banks/nominated agencies pay only customs duty on imports. In the new regime of GST, will the Banks have to pay IGST while importing?

Ans. - Yes, 3% IGST is payable on all imports of precious metals in addition to the basic customs duty. IGST paid can be taken as input tax credit by the banks.

 

GST: Frequently Asked Questions [FAQs] on IT/ITES

Q 1. Whether software is regarded as goods or services in GST?

Ans. - In terms of Schedule II of the CGST Act 2017, development, design, programming, customization, adaptation, up gradation, enhancement, implementation of information technology software and temporary transfer or permitting the use or enjoyment of any intellectual property right is treated as services. But, if a pre-developed or pre-designed software is supplied in any medium/storage (commonly bought off-the-shelf) or made available through the use of encryption keys, the same is treated as a supply of goods classifiable under heading 8523.

Q 2. What are the implications of recognizing the development, design, programming, customization, adaptation, up gradation, enhancement, and implementation of information technology software as a service?

Ans. - The primary implication is that the place of supply rules applicable to services would apply in determining the taxability of the supply of software services. The same would be applicable in situations of supply of services involving a temporary transfer or permitting the use or enjoyment of any intellectual property right. The other implication is that the supplier of software services would not be eligible for the composition scheme.