Taxation
GST
Dr. Anil Gor
GST
• What is GST?
• Comprehensive indirect Tax
• GST on manufacture, sale and consumption of Goods and services.
• GST is ultimately borne by final consumer and it is consumer base
multi-point sales Tax.
• GST is value added tax :When goods are sold, what is taxed is the
value addition at each stage only, ie, Tax is payable on the difference
between sale value and purchase value and not on entire sale value.
• Tariff Rates: O%, 0.25%,1.5%, 3% , 5%. 7.5%,12%, 18% AND 28%
GST
• Supplies referred to in GST classified as under:
• Intra state Supplies : within the state
• Interstate Supplies : Between two or more states
• Zero rated supplies : Export and SEZ supplies
• Nil Rated / Exempt supplies
• Input Credit:
• GST is charged by giving set off of the tax suffered by purchases ( called
input TAX Credit) against the tax payable on the sales.
• Registration of supplier who make a supplies of goods and services or both
where aggregate turnover exceeds Rs 20 lakhs.
Taxation -GST
• Taxable event under GST : Supply of Goods & Services:
• Supply includes:
• A) Supply of goods or services or both such as sale, transfer, barter,
exchange, licence, rental, lease or disposal made or agreed to be made
for a consideration by a person in the course or furtherance of business
• Essential conditions : Supply of goods and services in the given forms
• Supply of goods or services made or agreed to be made
• For consideration
• In the course or furtherance of business.
Taxation -GST
• B) Import of services for a consideration whether or not in the course
of furtherance of business.
• C) the activities specified in schedule I made or agreed to be made
without consideration
• D) Activities mentioned in Schedule II to be treated as supply of goods
and services.
Taxation -GST
• SCHEDULE I : activities to be treated as Supply of goods and services
even though made without consideration :
• A) Permanent transfer or disposal of business assets where input
credit is availed:
situation Disposal of asset with Without consideration
consideration
In put credit availed at the Taxable supply Taxable supply
time of purchase
Input credit not availed at Taxable supply Not Taxable
the time of purchase
Taxation - GST
• B) Where there is supply between related persons or between distinct
persons, for the purpose of business without consideration, the same
shall be treated as supply.
Situation Su[pply with Supply without
consideration consideration
In the course or Taxable supply Taxable supply under sc. 1
furtherance of business
Not in the course or Not Taxable Not Taxable
furtherance of business
Taxation- GST
• C) Transaction between Principal / Agent :
• Supply of Goods between Principal and Agent shall be considered as supply provided that the
agent acts on behalf of the Principal. It may be noted that this provision applies for only supply of
goods and not services.
• D supply of services in case of imports:
Situation Import of services Import of services Without
with consideration consideration
By any person By taxable person By any other
person
In the course or Taxable supply Taxable supply Not Taxable
furtherance of
Business
Not in the course Taxable supply Not Taxable Not Taxable
or furtherance of
business
Taxation- GST
• Schedule II : Activities to be treated as supply of goods or services:
Prior to GST, certain activities where both services tax ( treated as
service) as well as VAT ( treated as goods ) was levied. Schedule II
clarifies there would be classified either as services or goods:
• Any transfer of title in goods >>> supply of goods.
• Any transfer of right in goods or of undivided share in goods without
transfer of title there o f >>> supply of service.
• Any transfer of title in goods under an agreement which stipulates
that property in goods shall pass at a future date upon payment of full
consideration as agreed >>> supply of goods.
Taxation - GST
• Any lease, tenancy, easement, license to occupy land >>>> Supply of
services
• Any lease , letting out of the building including a commercial,
industrial or residential complex >>>> supply of services.
• Any treatment or process which is applied to another persons goods
>>> supply of services
• When goods forming part of the assets of a business are transferred
to or disposed of by or under the directions of the person carrying on
business so as no longer to form part of business, whether for
consideration or not. >>> supply of goods
Taxation - GST
• Where goods held or used for business are put to private use or are
used or made available to any person for use other than business,
whether or not for consideration.>>> Supply of services.
• Renting of immovable property >>> supply of services
• Construction of a complex, building, civil structure or part thereof>>>
supply of services
• Temporary transfer or permitting the use or enjoyment of any
intellectual property right.>>> supply of services
• Works contracts>>> Supply of service
• Page 559/5608
Taxation- GST
• Negative List : Sec.7(2) Specifies negative list which should be treated
as neither supply of goods nor supply of services:
• A) Activities or transactions specified in schedule III
• B) Activities or transactions undertaken by the Central / state Govt or
local authority in which they are engaged as public authority as
notified…
Taxation - GST
• Schedule III : Negative list of supply of goods & services:
• Services by an employee to the employer
• Services by the court or tribunal
• Functions performed by Members of Parliament, state lgislattors, members of
municipalities and other local authorities.
• The duties perfumed by person holding any post in pursuance of provisions of the
constitution.
• Duties performed by any person as chair person, member or Director in a body
established by Central/ state Govt/ local authority and not deemed as employee.
• Services of funeral, burial, crematorium
• Sale of land
• Actionable claims, other than lottery, betting and Gambling,
Taxation- GST
• Charge of GST: It refers to levy of tax on taxable event which is supply
of of goods and services.
Nature of Supply Description Taxes to be levied
Intra state supply Supply of goods or services CGST & SGST or
or both within the same CGST & UTST as the case
state or same union may be.
territory
Inter state supply Supply of goods or services IGST
or both between the states
or union territories,
exports, supply to SEZ etc.
Taxation GST
• Transaction Nature of supply
• Supply of Goods and services within state Intra state supply
• Supply of goods and services with same union territory : intra state
• Between two different states Inter state supply
• Between State and Union territory Inter state supply
• Import of goods or services into India : Inter state supply
• Export of Goods &Services : Inter state supply
• Goods and services to SEZ developer/unit Inter state supply
Taxation : GST
• Reverse Charge ; Means the liability to pay GST is by the recipient of
supply of goods/ services and not the supplier.
• Normally it is supplier who is liable to pay GST This is also called
forward charge but in reverse charge it is the recipient of supplier
who will pay GST.
• GST Registration: all the persons liable to reverse charge re required
to register. All person whose turn over exceeds 20 Lakhs must register
under GST .
Taxation- GST
• Reverse Charge : The term reverse charge means the liability to pay
tax by the recipient of goods or services or both instead of supplier of
such goods or services of both.
Basis Forward Charge Reverse charge
Meaning Forward charge means the Reverse charge means the
liability to pay tax is by liability to pay tax on the
supplier of the goods and recipient of goods or
services or both services or both
GST Registration Required once a supplier All persons who are
meets the threshold limit required to pay tax under
of Rs.20 lakhs ( 10 lakhs in treverse charge have to
case of specified states) register for GST
irrespective of threshold.
Taxation - GST
• Reverse Charge : Examples :
• Forward Charge : If chartered accountant provided service to his
client, the tax will be payable by the chartered accountant ( supplier).
• Reverse Charge : If advocate provided a legal service to a company,
tax will be payable by the company. ( Recipient).
• Supplies covered by Reverse Charge are:
• Goods and services supplied notified by the Govt
• Goods and services supplied by unregistered person to registered
person.
Taxation -GST
• Govt has notified certain services for reverse charge: where recipient will pay GST to Govt instead
of supplier:
Supplier of service Recipient of service
Goods Transport agency who has not Any factory, society, any person
paid central tax@6% for transportation of registered under GST/IGST, Body
Goods by road corporate, partnership or any casual
taxable person.
Legal service by advocate or firm of Business entity located in taxable
advocates territory
Service by arbitration tribunal …do…
Insurance agent Any person carrying on insurance
business
Recovery agent Banking co or financial institution
Author, music composer, photographer, Publisher, music co, producer located in
artist. taxable territory.
Taxation - GST
• Digital Commerce operator : Sec. 9(5)
• Electronic commerce means supply of goods or services or both,
including digital products over digital or electronic network.
• Electronic Commerce Operator means any person who owns,
operates, or manages digital or electronic facility or platform for
electronic commerce.
• The Govt has notified certain list of supply of services , where the tax
on intra state supplies shall be paid by electronic operator if such
services are supplied thorough him.
Taxation GST
• Persons liable to pay tax in case of electronic commerce operator :
Situation Person liable to pay tax
If the electronic operator is located in Electronic commerce operator.
taxable territory
If electronic operator does not have Person representing such electronic
physical presence in the taxable territory commerce operator in taxable territory.
If electronic commerce operator has Electronic commerce operator shall
neither the physical presence nor any appoint a person in the taxable territory
representative in the taxable territory. for the purpose of paying the tax.
Taxation - GST
• Composition Levy Sec.10 :
• Composition levy is the method of levy of tax for small and medium size
enterprises whose turnover is within the limit prescribed in the Act.
• Advantages:
• No classification of goods required.
• Single GST rate is applicable on all supplies made.
• No requirements to raise tax invoice.
• Payment of tax and return filing is to be done at the end of every
quarter.
Taxation - GST
• Disadvantages:
• Tax payer can not avail the benefit of input credit.
• Can not charge tax on the invoice raised by him.
• A limited territory of business: The dealer is barred from carrying out
inter-state supplies.
• Turnover limit : Aggregate turnover in the preceding financial year does
not exceed Rs. 1 crore.
• In the states of Assam, Arunachal Pradesh, Manipur, Meghalaya,
Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh: Limit of
Turnover is Rs.75 lakhs.
Taxation - GST
• Composition GST tax rate :
Nature of registered student CGST to be paid
In case of manufacturers ( other than mfg of ice cream, pan 0.5% of turnover
masala and tobacco products)
Persons engaged in the supply of goods being food or any 2.5% of turnover
other article or any drink other than alcoholic liquor for
human consumption
In case of other supplies 0.5% of turnover.
Taxation GST
• The following persons can not opt for the composition scheme:
• Persons engaged in supply of services other than food/articles of
human consumption (Other than Schedule II part B)
• Persons engaged in supply of goods which are not liveable to tax.
• Persons engaged in inter state supply of goods.
• Person making supply of goods through electronic commerce
operator.
• Persons engaged in manufacture of ice scream, pan masala and
tobacco products.
Taxation GST
• Exemptions from GST:
• Exempt supply means supply of any goods or services or both which
attract nil rate of tax or which may be wholly exempt from tax
• Under sec.11 of GST nad sec.6 of IGST, Central Govt has power to
power to grant exemption by issuance notification or special order.
• Notification dated 28th June 2017 exempts following goods:
• Vegetables( Potatoes, tomatoes, onions etc)
• Fruits ( Banana, grapes, apples oranges etc)
• Foodgrains (n other than those bearing a registered brand name)
Taxation- GST
• Goods exempted from GST Contd:
• Fish/ Meat ( including live fish)
• Electricity
• Human blood and its components
• Indian National Flag
• Printed books, newspapers, journals and periodicals
• Handmade musical instruments
• By notification dated 5.7.2017 Govt has exempted all goods imported
by a unit or a developer in SEZ .
Taxation - GST
• Exempt Services: There about 82 services listed in text book ( page 574 to 588):
Few of them are listed as under:
• Services by Registered Trust ( Registered u/s12 AA of Income Tax ) by way of public
charitable activities.
• Services by way of transfer of a going concern as a whole or an independent part
thereof.
• Pure services ( excluding works contract service) to Central /state/ local authorities)
• Services provided by Govt
• Services by Fair Price shops
• Services by way of renting residential dwelling for residence ( Renting for com.
purpose will attract GST.
Taxation GST
• Time & Value of Supply:
• Time of supply at which the liability to pay GST arises. Time of supply
means point in time when the goods have been deemed to be
supplied or services have been deemed to be provided.
• Time of supply of goods will be the earliest of the following:
• A) Date of the Invoice
• B) Date of receiving the payment.
• Date of issue of Invoice : Date of issue of invoice or last date on which
he is required to issue invoice.
Taxation GST
• Time limit for issue of invoice:
• Time limit for issue of invoice is before or at the time of :
• A) Removal of goods where supply involves movement of goods.
• B) Delivery of goods or making available to the recipient , in any other
case.
• Date of receiving the payment: shall be earliest of the following:
• A) Date on which payment is entered in suppliers books of account or
• B) Date on which the payment is credited to suppliers bank acoount.
Taxation GST
• Time of Supply for services:
• Time of supply for services under forward charge:
situation Time of supply
a) Where the invoice is issued for service i) Date of issue of Invoice
within 30 days from the date of supply ii) The date of receipt of payment ,
Whichever is earlier
b) Where the invoice is not issued in 30 i) The date of provision of service or
days or 45 days, as the case may be, date ii) Date of receipt og payment
of supply of service whichever is earlier.
c) In any other case i) Date on which the recipient shows
the receipt of service in his books of
account.
Taxation GST
• Time of supply of service under the reverse charge:
• The time of supply of services payable on reverse charge will be
earliest of the following dates:
• The date of payment
• The date immediately following sixty days from the date of issue of
invoice.( Or any other document in lieu of invoice ) by the supplier.
Taxation- GST
• Value of Taxable supply:
• GST has to be computed on the assessable value of supply of goods
and services.
• The value of supply of goods or services or both shall be the
transaction value, which is the price actually paid or payable for the
said supply , where the supplier and recipient of the supply are not
related and price is the sole consideration for the supply.
• Where the taxable value can not be determined as transaction value,
the same shall be determined as per Determination of value of supply
of CGST rules 2017.
Taxation GST
• Taxable value of supply: contd-
• Taxable value of supply shall include :
• A) any taxes, duties, cess etc levied under the law.
• B) incidental expenses including commission/ packing etc
• C) Interest or late fee or penalty for delayed payment
• D) subsidies directly linked to price.
• Exclusions to be made :
• Discounts, if such discount is duly recorded in the invoice.
Taxation GST
• INPUT Tax Credit
• Purpose : To mitigate the cascading effect of double taxation ( In past we had
MODVAT /CENVAT / service tax credit rules).
• Input tax: means Central, State, Integrated or Union Territory tax charged on any supply of
goods and services.
• Eligibility and conditions for Input tax Credit:
• The person should be registered under any GST Act
• The credit should be on any supply of goods or services or both
• The goods and services should be used or intended to be used in the course or
furtherance of business.
• Credit should be availed and utilised in the manner prescribed u/s 49.
Taxation GST
• Additional Conditions for availing ITC:
• A) Person should be in possession of invoice or debit note issued by
supplier, or such other tax paying documents.
• B) The person should have received the goods or services or both
• C) The tax charged in respect of such supply should be actually paid to
the Govt.
• D) Registered person has furnished the return.
• Other aspects:
• Where goods are received in lots or instalments, the registered person
shall be entitled to take credit upon receipt of last instalment.
Taxation GST
• Where registered person has taken benefit of depreciation on capital goods, he will not be permitted to take credit of input tax on such equipment.
• A registered person shall not be entitled to take input credit in respect of any invoice or debit note for supply of goods or services after the date of furnishing the return for the month of September following the end of financial year, or furnishing the relevant annual return whichever is earlier.
• In other words:
• Time limit for claiming Input tax credit is the earliest of the following:
• A) Due date for filing the return for September month following the end of financial year.
• Actual date of filing the return for the relevant year.
• 44
Taxation- GST
• Other points: If recipient fails to pay to the supplier for the supplies
made within 180 days, the credit taken earlier by registered person shall
be reversed. By way of adding the ITC amount to his output tax liability
alongwith interest thereon.( not applicable in case of reverse charge)
• In such cases where recipient fails to pay within 180 days, the recipient
shall file the details of such supplies in form GSTR 2 which will be filled
in Dec.
• Registered person is liable to pay the ITC so reversed @18% for the
period starting from the date of availing credit till the period it is
actually paid.
Taxation GST
• Apportionment for Credit :
• Where the goods and services are used by registered person partly for
purpose of business and partly for other purposes, the amount of
credit shall be restricted to so much of the input tax as is attributable
to business purposes.
• Where the goods or services are used by the registered person partly
for effecting taxable supplies and partly for exempt supplies, the
amount of credit shall be restricted to so much of input tax as is
attributable to the said taxable supplies including zero rated supplies.
Taxation GST
• Blocked Credits :
• ITC shall not be available in following transactions: Blocked credits
• Motor vehicles and other conveyances except when they are used for a) making taxable supplies of vehicles or transportation
of passengers, or imparting training or driving b)for transportation of goods.
• Food and beverages , outdoor catering beauty treatment, health services, cosmetic and plastic surgery except when used for
further supply of such goods and services as an element of taxable composite or mixed supplies.
• Membership of club, health and fitness centres
• Rent a cab, life insurance and health insurance except where a) it is mandatory for an employer to provide such services as
mandatory in law, or b) when used for further supply of same category of goods and services.
• Travel benefits extended to employees on vacation such as leave or home travel concession.
• Works contract services when supplied for construction of an immovable property ( other than plant and Machinery.
• Goods and services received by a taxable person for construction of immovable property.
• Good and services on which tax has been paid u/s 10.
• Goods or services received by non resident taxable person except on goods imported by him.
• Goods or services used for personal consumption.
• Goods lost, stolen, destroyed or disposed of by way of gift or free samples.
