GST Overview

Under the historic indirect Tax reform in India, the Government of India has envisioned Goods and Services Tax which will subsume the following Taxes.

i. Taxes presently levied and collected by the Centre :

  1. Central Excise duty
  2. Duties of Excise (Medicinal and Toilet Preparations)
  3. Additional Duties of Excise (Goods of Special Importance)
  4. Additional Duties of Excise (Textiles and Textile Products)
  5. Additional Duties of Customs (commonly known as CVD)
  6. Special Additional Duties of Customs (SAD)
  7. Service Tax
  8. Central Surcharges and Cesses so far as they relate to supply of goods and services

ii. State taxes that would be subsumed under the GST are:

  1. State VAT
  2. Central Sales Tax
  3. Luxury Tax
  4. Entry Tax (all forms)
  5. Entertainment and Amusement Tax (Except when levied by the local bodies)
  6. Taxes on advertisements
  7. Purchase Tax
  8. Taxes on lotteries, betting and gambling
  9. State Surcharges and Cesses so far as they relate to supply of goods and services.

The Goods and Services Tax (GST) has made commodities slightly cheaper and the rates of GST depend upon whether the commodity is used by a rich person or a common man.

Under the regime of GST, sovereignty has been shared between the Centre and the states

Both the Houses of the Parliament i.e. Lok Sabha and Rajya Sabha passed the following four bills:

  1. Central GST
  2. Integrated GST
  3. Union territories GST
  4. GST Compensation

Hon’ble President of India has assented these four GST bills on 13.4.2017 and thereby, these bills have become Acts as under.

  1. Central Goods and Services Tax Act, 2017 (CGST)
  2. Integrated Goods and Services Tax Act, 2017 (IGST)
  3. Union Territories Goods and Services Tax Act, 2017 (UTGST)
  4. Goods and Services Tax (Compensation to States) Act, 2017 (CTS)

All the aforesaid four Acts have been notified with effect from 1st July, 2017

Amongst these four Acts, the CGST and IGST Act will enable the Centre to levy and collect Taxes across the Country. The Goods and Services Tax (Compensation to States) Act, provides for compensation to the State (s) for the loss of revenue arising on account of implementation of GST. The Union Territory Goods and Services Tax Act, will enable levy and collection of Tax on intra state supply of goods and services or both by the union territories.

The main features of four Acts are briefly listed below:

  1. A State-wise single registration for a taxpayer for filing returns, paying taxes, and to fulfil other compliance requirements. Most of the compliance requirements would be fulfilled online, thus leaving least scope for physical interface between the taxpayer and tax official.
  2. A taxpayer has to file one single return state-wise to report all his supplies, whether made within or outside the State or exported out of the country and pay the applicable taxes on them. Such taxes can be Central Goods and Services Tax (CGST), State Goods and Services Tax (SGST), Union Territory Goods and Services Tax (UTGST) and Integrated Goods and ServicesTax (IGST)
  3. A business entity with an annual turnover of upto Rs. 20 lakhs would not be required to take registration in the GST regime, unless he voluntarily chooses to do so to be a part of the input tax credit (ITC) chain. The Annual turnover threshold in the Special Category States (as enumerated in Article 279A of the Constitution such as Arunachal Pradesh, Sikkim, Uttarakhand, Himachal Pradesh, Assam and other States of the North-East India) for not taking registration is Rs. 10 lakhs.
  4. A business entity with turnover upto Rs.50 lakhs can avail the benefit of a composition scheme under which it has to pay a much lower rate of tax and has to fulfil very minimal compliance requirements. The Composition Scheme is available for all traders, select manufacturing sectors and for restaurants in the services sector.
  5. In order to prevent cascading of taxes, ITC would be admissible on all goods and services used in the course or furtherance of business, except on a few items listed in the law.
  6. In order to ensure that ITC can be used seamlessly for payment of taxes under the Central and the State Law, it has been provided that the ITC entitlement arising out of taxes paid under the Central Law can be cross –utilized for payment of taxes under the laws of the States or Union Territories. For example, a tax payer can use the ITC accruing to him due to payment of IGST to discharge his tax liability of CGST/SGST/UTGST. Conversely, a taxpayer can use the ITC accruing to him on account of payment of CGST/SGST/UTGST, for payment of IGST. Such payments are to be made in a pre –defined order.
  7. In the Services sector, the existing mechanism of Input Service Distributor (ISD) under the Service Tax law has been retained to allow the flow of ITC in respect of input services within a legal entity.
  8. To prevent lock-in of capital of exporters, a provision has been made to refund, within seven days of filing the application for refund by an exporter, ninety percent of the claimed amount on a provisional basis.
  9. In order to ensure a single administrative interface for tax payers, a provision has been made to authorize officers of the tax administrations of the Centre and the States to exercise the powers conferred under all Acts.
  10. To provide certainty in Tax matters, provision has been made for an advanced Ruling Authority.
  11. Exhaustive provision for Appellate mechanism has been made.
  12. Detailed transitional provisions have been provided to ensure migration of existing taxpayers and seamless transfer of unutilized ITC in the GST regime.
  13. An anti-profiteering provision has been incorporated to ensure that the reduction of tax incidence is passed on to the consumers.
  14. In order to mitigate any financial hardship being suffered by taxpayers, Commissioner has been empowered to allow payment of taxes in installments.

The Goods and Services Tax (GST) is a comprehensive indirect tax levy on manufacturer, sale and consumption of goods as well as services at National level. GST may be defined as –

  1. Tax on supply of goods and services
  2. Leviable on value addition at each point of sale of goods and services.
  3. Where the seller of goods and provider of services may claim credit of input tax paid at previous stages
  4. Final consumer will bear the burden of GST.

GST is a destination based and consumption based tax. Therefore, GST would accrue to the taxing authority which has jurisdiction over the place of consumption which is also termed as “place of supply”. GST is levied at every stage of production - distribution with applicable set-off in respect of tax levied at previous stages. It is also to be noted that the word used here is “Supply” and not “sale” and hence, any supply including stock transfers, branch transfers, etc will also attract GST.

Every supplier shall be liable to be registered under the GST Act, in the State from where he makes a taxable supply of goods and / or services if the “aggregate turnover” in a financial year exceeds 20 lakhs rupees. However, for special category States (such as Arunachal Pradesh, Assam, J&K, Manipur,s Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, HP and Uttrakhand), the threshold limit is Rs.10 lakhs.

Each Taxpayer would be allotted a PAN – linked taxpayer identification number. This would bring the GST PAN - linked system in line with the prevailing PAN –based system for Income tax, facilitating data exchange and tax payer compliance.

The taxpayer would need to submit periodical returns, in common format as far as possible , to both the Central GST authority and to the concerned State /UT GST authorities.

GOODS AND SERVICES TAX COUNCIL (GSTC)

As per the Constitution (101st Amendment) Act, 2016, GST Council (GSTC) will be created to examine issues relating to goods and services tax and make recommendation to the Union and the States on the parameters like rates, exemption list and threshold limits. The council shall function under the chairmanship of the Union Finance Minister and will have the Union Minister of State in charge of Revenue or Finance as member, along with Minister in-charge of Finance or Taxation or any other Minister nominated by each State Government. It is further provided that every decision of the council shall be taken by a majority of not less than ¾th(i.e.75%) of the weighted votes of the members present and voting in accordance with the following principles:-

  1. The vote of the Central Government shall have a weightage of 1/3rd of the total votes cast. and
  2. The votes of all the State Governments taken together shall have weightage of 2/3rd of the total votes cast in that meeting.

GOODS AND SERVICES TAX NETWORK (GSTN)

For the implementation of GST in the country, the Central and State Governmentsh ave jointly registered Goods and Services Tax Network (GSTN) as a not-for profit, non - Government Company to provide shared IT infrastructure and services to Central and State Governments, taxpayers and other stakeholders. The key objectives of CGST are to provide a standard and uniform interface to the taxpayers, and shared infrastructure and services to Central and Sate / UT governments.

GSTN is working on developing a state – of – the – art comprehensive IT infrastructure including the common GST portal providing frontend services of registration,returns and payments to all taxpayers, as well as the backend IT modules for certain States that include processing of returns, registrations, audits, assessments, appeals, etc.

GSTN is a Section 25 (not for profit), non - Government, private limited company. It was incorporated on 28thMarch 2013. The Government of India holds 24.5%. Equity in GSTN and all States of the Indian Union, including NCT of Delhi and Pondicherry, and the empowered Committee of State Finance Ministers (EC) together hold another 24.5%. The remaining 51% equity is with non – Government financial institutions. The Authorized Capital of company is Rs. 10 Crores only.

Wide Publicity through online as well as offline Training Programmes

There are various procedural and technical complexities involved in administration of Goods and Service Tax Act, 2017 and also, in ensuring proper compliance of the requirements of the said Act. All such matters / issues require serious examination and interpretation of the provisions of the Goods and Service Tax Act, 2017, Therefore, nine modules have been prepared by the team of Experts on different aspects / major areas as contained in the aforesaid Act. The Company, M./s Vision IT Consultants Pvt Ltd in association with M/s Builtuff has developed the site viz www.munimgst.com which provides ‘online for self study’ as well as ‘offline by attending classes’ training programmes to the students, tax professionals, entrepreneurs and other stakeholders so as to familiarize them aboutthe provisions contained in the Goods and Service tax Act, procedural requirements, filing of returns, claim of refunds, composition, advance ruling etc. To obtain access to the technical modules, it is essential to get registration and then, pay the fees of Rs. 1500/- for availing the facility of viewing the chapters for three months on the portal and raise queries for specific answers free of charge. In case of offline training, training programme for two days has been devised and the details of the same can be watched by clicking the option “training” on home page. We can provide training by organizing classes with the batch of 15 to 18 participants at Vaishali as well as Connaught Place to undergo this offline training and the participants are required to pay Rs.2500/- at the time of registration. The participants will be free to raise queries and seek answer(s) / clarification(s) during the interactions with the Experts.

GST Tax Slab

Single tax to bring down prices of most household items

81% of items to fall below/in 18% GST slab.

Exempted from GST

Exempted from GST

Unpacked foodgrains , Gur, Milk, Eggs, Curd, Lassi, Unpacked Paneer, Unbranded Natural Honey, Fresh Vegetables, Unbranded Atta, Unbranded Maida, Unbranded Besan, Prasad, Palmyra, Jaggery, Salt, Kajal, Phool Bhari Jhadoo, Children’s Drawing and Colouring Books, Education Services and Health Services

 

Only 5% GST

Only 5% GST

Sugar, Tea, Roasted Coffee Beans, Edible Oils, Skimmed Milk Powder, Milk Food For Babies, Packed Paneer, PDS Kerosene, Domestic LPG, Fabric, Footwear (up to ₹ 500), Apparels (up to ₹ 1,000), Cashew Nuts, Matting and Floor Covering.

 

12% GST

12% GST

Butter, Ghee, Almonds, Fruit Juice, Packed Coconut Water, Preparations of Vegetables, Fruits, Nuts (including Pickle, Murabba, Chutney, Jam, Jelly), Umbrella and Mobiles.

 

18% GST

18% GST

Hair Oil, Toothpaste, Soap, Pasta, Corn Flakes, Soups, Ice-cream, Toiletries, Computers and Printers

 

28% GST

28% GST

Automobiles, Motorcycles, Bidis, Chocolate not containing cocoa, Pan masala, Aerated water, Paint, Deodorants, Shaving creams, After shave, Hair shampoo, Dye, sunscreen, Ceramic tiles, Water heater, Dishwasher, Washing machine, ATM, Vending machines, Vacuum cleaner

GST Rate of Composition

Manufacturer/Service Provider/Trader whose annual turnover is below Rs. 20 Lakhs need not pay any GST and need not register. However, this limit of Rs. 20 Lakhs, is Rs 10 Lakhs for 11 States namely Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Tripura, Sikkim, Uttarakhand, Himachal Pradesh and Jammu & Kashmir.

Those with annual turnover upto Rs. 75 Lakhs (Rs. 50 Lakhs for 11 States namely Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Tripura, Sikkim, Uttarakhand, Himachal Pradesh and Jammu & Kashmir) may opt for composition scheme in which case, the tax rates will be as follows:

GST Rate of Composition
  Traders - 1%   Manufacturers - 2%   Restaurants - 5%

 

  • In service sector, Composition Scheme is available only for one sector - restaurants.
  • In case of certain industries such as ice-cream making, the composition scheme may not be available.
  • The dealers who opt for composition scheme have to file only one quarterly return with details of total turnover. Invoice with details are not necessary, bill of supply will suffice.
  • Small taxpayers are not required to give HSN code in their returns.
  • However, in this option, no input tax credit can be taken or passed on.
  • With online registration, return, payment, refund & other processes, delays and discretions would be reduced.
  • Reduced compliance burden.
  • Special dispensation for job-work to help job workers in GST regime.

Invoice

There are some apprehensions in the trade circles that GST invoices have to be issued as per prescribed format and that issuing invoice is to be burdensome process. This is not correct. Some important facts about GST provisions relating to invoice are highlighted for information of all stakeholders.

Important facts about Tax invoice
  1. All GST taxpayers are free to design their own invoice format.
  2. GST Law only requires that certain fields must mandatorily be in the invoice.
  3. The time period prescribed for issuing invoice is different for goods & services – for goods, it is any time before its delivery and for services; it is within 30 days from the date of supply of service.
  4. Small taxpayers, like small retailers, doing a large number of small transactions for upto a value of Rs. 200 per transaction to unregistered customers need not issue invoice for every such transaction. They can issue one consolidated invoice at the end of each day for all transactions done during the day. However, they should issue the invoice where the customer so demands.
  5. In normal circumstances, one copy of invoice is required to be carried by the transporter. However, FSTN provides a facility to obtain an invoice reference number and if a taxpayer has generated this number, his goods need not be accompanied by paper invoice during transportation. This mechanism helps to address frequently reported problems like paper invoices getting misplaced, mutilated, torn or lost in course of transportation of goods.
  6. Keeping in view the large number of transactions in the banking, insurance and passenger transport sector, taxpayers need not mention the address of the customer and the serial number in their invoices.
  7. Where the goods are transported for delivery but quantity to be supplied is not known at the time of removal, the good may be removed on delivery challan and invoice may be issued after delivery.
  8. No need to issue separate Bill of supply if VAT invoice is issued for non-taxable supplies.

Transition

Transition provisions under the GST law involve three key issues:-

Transition of Registration
  • Any dealer who is registered under State Vat, Central Excise, Service Tax etc having a valid PAN shall be given provisional registration.
  • Dealers who have been given provisional registration would be given final registration on submission of prescribed documents.

Transition of Credit of Central Taxes paid on Goods in Stock
  • A manufacturer having an existing registration, can carry forward his Cenvat credit as CGST credit. He is also entitled to take balance of Cenvat Credit on capital goods.
  • A dealer who was not registered earlier or a first stage or a second stage dealer can take Cenvat credit paid on inputs, if he has invoice or any other document such as Credit Transfer Document evidencing payment of Central Excise duty of the stock.
  • Credit Transfer Document can be issued by manufacturer for goods having value of more than Rs. 25,000/- per item, bearing the brand name of the manufacturer, if verifiable inventory and supply chain records are maintained.
  • A dealer, who was not registered earlier, can take input tax credit of 60% of CGST paid where the CGST rate is 9% or more and 40% of CGST paid in other cases for a period of six months, on stock which were not unconditionally exempted earlier but no Cenvat paying document is available.

Transition of Credit of State Taxes paid on Goods in Stock
  • A dealer can claim balance input credit of VAT reflected in the return subject to submission of prescribed information. He is also entitled to take balance of VAT Credit on capital Goods.
  • A dealer who was not registered earlier can claim credit of VAT paid or stock at hand on the basis of purchase invoice of Goods in stock.
  • Credit in relation to stock received in inter-State sale is subject to submission of information regarding value and serial number of Forms No. E, H etc.

Credit on Goods in Transit
  • Credit of both Central and State taxes paid on goods in transit on the day of the transition i.e. 01-07-2017 is available on the basis of duty paying documents.

Transition Without Double Taxation
  • No tax is payable on supply of goods and services under GST to the extent the tax was paid on such supply under the earlier law.
  • No tax is required to be paid on return of goods within six months where taxes were paid and goods removed prior to 01-07-2017.
  • No tax shall be payable on return of goods from job-worker to the principal within six months, where the goods were sent for job work before 01-07-2017.

Transition

GST to Make Return filing Easy & Online

Keeping in mind the mantra that, “ease of tax compliance and ease of doing business” go hand in hand, the process of filing of return under GST law is simple and easy. One simple return with auto-populated components not only makes the process smooth but also makes the experience stress free. The ease of compliance is even more for small tax payers.

Myth and Reality Myth and Reality
Myth 1: Every taxpayer has to file invoice wise details in the return.
Reality: Only suppliers to re-sellers (i.e. B2B suppliers) not under composition scheme have to file invoice wise details
Myth 2: There are 3 returns to be filed every month.
Reality: There is only one return to be filed by the taxpayer with other components getting auto-populated.

Return filing details

Category of taxpayers Details to be given Form to be used Periodicity / Last date
Aggregate turnover less than Rs. 20 lakhs Nil Nil Nil
Aggregate turnover up to Rs 75 lakhs and availing the Composition Scheme • Consolidated details of outward supplies made by you during the quarter including that of advances received.
• Details of supplies received (auto-populated form the GSTR-1 of the supplier)
FORM GSTR-4 Quarterly / 18th of the month following the quarter
Aggregate turnover more than Rs. 20 lakhs and not availing Composition Scheme but supplying to consumers (Only B2C supplies)
Tax-rate wise summary of all intra-state supplies made
Supplies received
Final return
FORM GSTR-1
FORM GSTR-2
FORM GSTR-3
Monthly / 10th of the following month
Auto-populated by the computer and only needs to be verified and submitted by 15th of the following month.
Auto-populated by the computer and only needs to be verified and submitted by 20th of the following month.
All other suppliers including suppliers to re-sellers and / or consumers (both B2B and/or B2C supplies)
• Invoice-wise details of all B2B supplies and Inter-state B2C supplies of value above Rs. 2.5 lakh
• Tax-rate wise summary of b2C intra-state supplies
• State-wise and tax-rate wise summary of B2C inter-state supplies of value below Rs. 2.5 Lakh
Supplies received
Final return
FORM GSTR-1
FORM GSTR-2
FORM GSTR-3
Monthly / 10th of the following month
Auto-populated by the computer and only needs to be verified and submitted by 15th of the following month.
Auto-populated by the computer and only needs to be verified and submitted by 20th of the following month.
 

Remarks: Even in case where the details of invoice has to be provided, an offline free software utility provided by GSTN can be used during the month, which can automatically convert into return on uploading.

Provisions for first two months of transition

Return filing process has been simplified and a simplified FORM GSTR-3B, containing only summary details, has been provided by all classes of tax payers for acclimatization of the taxpayers with the new GST tax regime. The details are as follows:-

Return for the month of GSTR-1 GSTR-2 GSTR-3B
July 2017 5th September instead of 10th August 10th September instead of 15th August 20th August
August 2017 20th September instead of 10th September 25th September instead of 15th September 20th September

Provisions for low compliance burden

Law has provided for a low compliance burden on the taxpayers and the government is committed to further lessen the burden by creating:

  • Facilitation Centres
  • GST Practitioners
  • GST Suvidha Providers
  • Offline utility for return filing
  • Application interfaces

GST Tax Slab

 

   IGST, GST Compensation Cess, Bill of Entry, Shipping Bill and Courier forms

GST Compensation Cess
  1. With effect from 01-07-2017 integrated Goods and Services Tax (IGST) and GST Compensation Act would come into force.
  2. IGST and GST compensation Cess, wherever applicable, would be levied on cargo arriving on 1st July, 2017. It would be effective from midnight of 30th June, 2017.
  3. Cargo arrived up to 30th June, 2017 would not attract IGST and GST Compensation Cess even though the clearance may happen after 1st July, 2017.
  4. Additional duty of Customs would continue to be levied for imports of Petroleum and Tobacco products.
  5. Importers may familiarize themselves with IGST and GST Compensation Cess rate schedule and exemptions that are available on CBEC Website (http://www.cbec.gov.in).
  6. Customer duty calculator inclusive of IGST and GST Compensation Cess would be available on CBEC Website (http://www.cbec.gov.in) and ICEGATE Website (http://www.icegate.gov.in) after rates are notified.
  7. New bill of entry, Shipping Bill and Courier import and export forms – both electronic and manual – are available on CBEC Website (http://www.cbec.gov.in).
 

   Imports and Input Tax Credit

Imports and Input Tax Credit
  1. All Importers/Exporters have to mandatorily declare GST Registration number (GSTIN) along with Import Export Code (IEC) in the Bills of entry, Shipping bills and Courier forms.
  2. Provisional IDs issued by GSTN can be declared during the transition period. However, Importers and exporters are advised to complete their registration process for GSTIN.
  3. Input Tax Credit of IGST would be available based on GSTIN declared in the bill of entry.
  4. Customs EDI system would be GST ready by 1st July, 2017 and all out efforts are being made for smooth transition.
  5. Customs EDI system would be interconnected with GSTN for validation of Input Tax Credit.
  6. Bill of entry data in non-EDI locations would be digitized and used for validation of Input Tax Credit data provided by GSTN.
 

   Exports, Refunds, Drawback, Export Promotion Schemes, SEZ and EOUs

Promotion Schemes
  1. Exports are zero-rated supplies under GST law. Exporter would be entitled to refund of IGST paid on exports or refund of accumulated input tax credit on inputs used towards exports. Refund of IGST for exports would be based on GSTIN declared in the shipping bill.
  2. Drawback scheme would continue. New Drawback Schedule would be released before 1st July, 2017.
  3. Extant duty drawback scheme shall continue for three months form date of introduction of GST as part of transition to GST.
  4. Imports from SEZ to domestic tariff area would attract IGST from 1st July, 2017.
  5. 100% Export Oriented Units would attract IGST on imports from 1st July, 2017.
  6. EXIM Script cannot be used for payment of IGST Compensation Cess in imports and CGST, IGST and GST Compensation Cess for domestic procurement.
  7. Imports under Advance Licenses and Export promotion Capital Goods scheme (EPCG) are not exempted from payment of IGST and GST Compensation Cess.