GST India: Taxes on goods and services are already there in our country in different forms like Excise Duty, VAT, Service Tax, Entry Tax, Entertainment tax etc. All these are different levies by Central or State Governments and are having altogether different sets of taxable events, rates, procedures and compliances. The existing legal framework of these indirect taxes pose some challenges and issues before tax payers like:
- Multiplicity of taxes.
- Cascading effect of taxes (tax on taxes).
- Classification issues.
- Excessive compliances.
- Fractured flow of Input Credits.
The proposed GST regime is bound to affect most aspects of every business be it procurement, supplies, Geographical Presence etc. Accordingly, it is advisable for all business entities, specially those having multiple locations or are having multiple registrations, to analyze their business structure in the light of the proposed law and have a complete impact analysis of their business process.
Liability under GSTUnder the GST regime, liability to pay tax arises when a person crosses the turnover threshold of Rs 20 lakhs (Rs 10 lakhs for North Eastern & Special Category States) except in certain specified cases where the taxable person is liable to pay GST even though he has not crossed the threshold limit. The CGST / SGST is payable on all intra-State supply of goods and/or services and IGST is payable on all inter- State supply of goods and/or services. A Composition Scheme, which is mainly devised for small taxpayers, provides concessional rate of tax and filing of quarterly returns instead of monthly return. To be eligible for registration under Composition scheme it is required that the aggregate turnover of a registered tax payer should not exceed Rs 75,00,000/- in the preceding financial year. (The limit is Rs 50,00,000/- for North Eastern and Special Category States)
Taxable Event under GST India
- Services from an employee to employer
- Services by any court or Tribunal
- (a) functions performed by members of Parliament, member of State Legislature, member of Parchayats, member of Municipalities and members of other local authorities
- (b) the duties performed by any person who holds any post is pursuance of the provision of the Constitution is that capacity or
- (c) the duties performed by any person as a Chairperson or a Member or a director in a body established by Central Government or a State Government or local authority & who is not deened as an employee before the commencement of this clause
- Services of funeral, burial, crematorium or mortuary
- Sale of land subject to Schedule II(5)(b), sale of building
- Actionable claims, other than lottery, betting and gambling
Time of Supply Under GST India
- Date of issue of the invoice by supplier or the last date when he is required to issue the invoice.
- Date on which payment is received by the supplier.
Place of Supply Under GST IndiaThe concept of place of supply is important to work out whether a particular transaction is Intra-State or Inter State. If a particular transaction is Intra-State, there will be two taxes i.e. SGST & CGST. If the transaction is in the course of Inter-State Trade, one tax i.e. IGST will be levied. The rate of tax of IGST will be equivalent to sum total of SGST & CGST.
- Import of Goods/ Services in India.
- Supply where ‘Location of supplier’ is in India and the ‘Place of Supply’ is outside India. export and some other supplies which cannot be technically classified as Export due to non realization of consideration in convertible foreign exchange or supply to distinct person of same entity).
- Supply to/ by a SEZ unit or developer.
- Any other supplies which are not an Inter-State Supplies, as may be specified.
Valuation under GST India
- All statutory levies other than GST.
- Any Obligation of Supplier which as been paid by the Recipient.
- Expenses incidental to supply including any amount charged for anything done by the supplier at the time or before supply, in respect of supply of goods/ services.
- Interest, late fee, or penalty for delayed payment of consideration.
- Non-Govt. Subsidies directly linked to the price. However the Transaction Value shall not include:
- Any discount given before or at the time of supply, as evidenced from Invoice and
- Any discount after the supply has effected, where the discount is in terms of an agreement entered into at or before such supply and the recipient has reversed the respective ITC.
Input Tax Credit
- a) He is in possession of Tax Invoice/ Dr. Note/ Prescribed Tax paying document.
- b) He has actually received the goods and/ or Services.
- c) Tax Charged in the invoice has actually been paid to the credit of your Account.
- d) He has furnished required return under GST Law.
- IGST in order of IGST, CGST and SGST;
- CGST in order of CGST and IGST;
- SGST in order of SGST and IGST;
Transition to GSTMigration or Transition to GST is a process of existing tax payers’ transition into GST regime from the existing indirect taxation regime. Among many, two most important aspects of transition are Input Tax Credit and GST Registration:
- Carry forward of complete and eligible Input tax credits paid on goods, input services and capital goods. The tax payer might have paid Sales Tax, Services Tax and Excise Duty on inwards supplies in the existing tax regime which are eligible to be carried forward. Further it may be possible that those eligible credit may not be reflected in the returns filed in the existing laws. Identification and proper compliances to carry forward the same are most important aspect of the Transitional phase.
- It is better to decide the place or places of registration in the proposed regime as soon as possible. It may be noted that unlike existing service tax system whereby the tax payer can take centralized registration, as per model GST law there will not be any system of centralized registration. Persons located in different States will have to take separate registration under GST. In addition to it, person having multiple business verticals in the same State will be having option to take different registrations within the same State. All registrations shall be treated as a separate taxable person from adjudication and compliances point of view under proposed GST law.