Goods & Service Tax – An Overview

SRD Legal, Advocates & Consultants
Goods & Service Tax –
An Overview
Organized By. :-
SG Institute ofTax & Exim Management
Faculty :Sanjay Dwivedi-SRD Legal
18th,August 2017

“Every Government has a right to levy taxes.
But no Government has the right, in the process
of extracting tax, to cause misery and
harassment to the taxpayer and the gnawing
feeling that he is made the victim of palpable
injustice”
- Adv. Nani Palkhivala
18th,August 2017

An Ideal Indirect Tax
1000
• 100
1200
• 120
1500
• 150
18th,August 2017
100 3020
C
o
n
s
u
m
e
r

Dream Tax System
Value Rs. 1,000
Tax @15% Rs. 150
Total Rs. 1,150
18th,August 2017
• IncomeTax
• Customs Duty
• GST
Dream
Invoice

Why GST?
 MultipleTaxes (17 to be subsumed into
GST)
 Multiple Laws,Authorities & Compliances
 No uniformity across country
18th,August 2017

Why GST?
 Credit in Inter-state transactions – depots
for tax planning
 ‘C’ Form,Vanishing Dealer
 SAD vs.VAT – Importer to go through
refund process; unfair advantage when
VAT > SAD
 Check posts & Road Permit: Barrier to
the Speed of Business
18th,August 2017

Why GST?
 Extreme Complexities
◦ Whether the process amounts to
manufacture
◦ Goods vs. Services
◦ Composite Contracts
◦ Variation in rates across the country
◦ Excise became cost to traders (Cascading
effect)
 Breeding ground for corruption
18th,August 2017

Idea of GST – Comprehensive
Coverage
 GST Adopted by 150 countries
 Comprehensive tax covering goods as
well as service
 Manufacturer/Service Provider to
Retailer: Entire chain to be taxed
 Seamless chain of credit at each stage
 No distinction between goods and
service
18th,August 2017

Idea of GST - Uniformity
 Uniform rate of Tax all over the country
 Uniform rate for both Goods and
Services
 Uniformity in classification, valuation &
procedures
 A single unified authority handling
assessment, collection, investigation,
adjudication, appeal etc.
18th,August 2017

India’s Struggle for GST
 2000: PM Atal Bihari formed ‘Asim
Dasgupta Committee’
 2004: PM Manmohan Singh: JointWorking
Group to decide road map
 2006: FM Chidambaram declared that
GST shall be implemented from 2010
18th,August 2017

Reluctance of States
 Origin vs. Destination debate
 Struggle for power to
◦ levy tax;
◦ scrutiny, assessment, search, seizure,
investigation
……. all in the name of federalism &
autonomy
18th,August 2017

17 Taxes merged into GST
C. Excise
CVD
Service
Tax
VAT
GST
18th,August 2017

Taxes merged
 Taxes to be subsumed in GST
 Taxes that are not be subsumed in GST
18th,August 2017

‘Supply’:The new Taxable Event
Tax Taxable Event
C. Excise Manufacture
ServiceTax Provision of service
VAT/ CST Sale of goods
GST Supply of Goods or Services
18th,August 2017

Unique Design:Agreed Principles
 Centre as well state to simultaneously tax
the same transaction and the same value
 Destination based tax: Buyer state to
receive the SGST
 Receiver to get credit across the country
18th,August 2017

Unique Design
 On every supply:
◦ Central GST; and
◦ State GST
 What to do in case of inter-state
transactions?
 Cross utilisation of credit:
◦ Not permissible between State and Central GST
◦ But no distinction between service & goods
18th,August 2017

A Typical Invoice
Inter-State Supply (supply
from one state to another)
Intra-State Supply (supply
within the state)
Value 1000 Value 1000
IGST 18% 180 CGST 9% 90
SGST 9% 90
Total 1180 Total 1180
18th,August 2017
* Above rates are given only as an illustration.

Tax on Imports
Import of Goods Import of Services
Value 1000 Value 1000
BCD 10% 100 BCD N.A. 0
IGST 18% 198 IGST 18% 180
Total 1298 Total 1180
18th,August 2017
* Above rates are given only as an illustration.

Utilization of Credits
18th,August 2017
Integrated
GST
Central
GST
Central
GST
State GST
State GST

Octroi, LBT, Cess?
 Power toTax remains.
 Central Government has agreed to
compensate Maharashtra Government.
 Hence, no Octroi, LBT, Cess.
18th,August 2017

Coverage
 All Goods & All Services except:
◦ Electricity
◦ Alcohol for human consumption
 Petroleum Products (Crude, Petrol, HSD, Natural Gas,ATF) to
be brought under GST later.
 Real Estate: GST to apply on sale before CC; Stamp Duty,
PropertyTax not merged into GST.
 Excise + GST on Tobacco &Tobacco Products
18th,August 2017

Applicable to all
Manufacturer
Trader – Entire Chain till the
retailer
Service Providers
Professionals
E-Commerce Operators &
Aggregators
18th,August 2017

Threshold
 Exemption till turnover of Rs. 20 lakh –
only for ‘intra-state’ supplies [Exemption
limit is 10 lakh for 11 states; and there are
several situations where exemption is not
available].
 Registered person buying from un-
registered person – GST payable under
RCM
18th,August 2017

Registrations
 State-wise (the state ‘from’ where supply
is made).
 Option to have separate registration for
each vertical of business in the same
state.
 Tax payments, Credits, Returns & Records
– linked to the registration
18th,August 2017

Applies to
 In general all business transactions for
consideration would attract GST
 But, in certain cases even supplies without
consideration would attract GST (listed in
Schedule I)
18th,August 2017

Rate of Tax
 Item wise rates will be notified
 Approved slabs:
18th,August 2017
5% 12% 18% 28%

Flow of Money
18th,August 2017
C
o
n
s
u
m
e
r
Value
Tax
Retains
Value
Pays theTax
to
The Business

Taxable Person:Who pays to the
Government?
• The supplier pays to governmentNormal
• The recipient pays to government
(applies to specified goods or
services)
Reverse
• Supply by unregistered person to
registered person – Tax payable by the
registered person (i.e. reverse charge)
URP
18th,August 2017

Major Distortions
 One Nation
 Two Authorities (Central & State Govts.)
 ThreeTaxes (CGST, SGST, IGST)
 Four Rates (5%, 12%, 18% & 28%) +
Compensation Cess
 Five Returns (Outward supply, inward
supply, consolidated return, ISD & Annual
Return)
18th,August 2017

Place of Supply
 IGST payable when ‘place of supply’ is in
another state (Inter-state supply)
 CGST + SGST payable when ‘place of
supply’ is in the same state in which the
supplier is located (Intra-state supply)
18th,August 2017

Place of Supply
 Whether a supply is ‘inter-state’ or ‘intra-
state’ would be determined as per
provisions in the IGST Act.
 Inter-state:
◦ location of supplier &
◦ place of supply (not the location of receiver)
are in different states
 Separate provisions to determine
◦ Place of supply of goods; and
◦ Place of supply of services
18th,August 2017

Time of Supply
 Tax liability would arise when the ‘time of
supply’ occurs.
18th,August 2017
C. Excise Removal of Goods
ServiceTax Point of Taxation
GST Time of Supply

Time of Supply
 In general time of supply is the earliest of
the following three:
◦ Date of issue of Invoice
◦ The legal last date for issuing the Invoice
◦ The date of receipt of payment
 Thus, tax is payable on receipt of
‘Advances’ (for goods as well as services)
18th,August 2017

Procedural Simplicity
 Single Registration in one state (all India
centralised registration to service
providers gone)
 Taxes to be paid against the registration
 Tax Challan to show IGST, CGST, SGST
separately- but single challan would suffice
 Online Returns - single window
18th,August 2017

Inter-state transactions
‘C’ Form
‘F’ Form
Not Required Anymore
18th,August 2017

IT Based System
 Portal www.gst.gov.in
 Registrations, Returns, Refunds, Credits
etc.
 Electronic Credit Ledger
 Electronic Cash Ledger
18th,August 2017

Documents for supply
• Taxable Supplies Tax Invoice
• Non-taxable supplies
• Composition Scheme Bill of Supply
• Receipt of Advances ReceiptVoucher
• Payment made to unregistered
supplier PaymentVoucher
• If excess value and/ or tax
charged Credit Note
• If short value and/ or tax
charged
Debit Note
18th,August 2017

Records
 Production or manufacture of goods;
 Inward and outward supply of goods or
services or both;
 Stock of goods;
 Input tax credit availed;
 Output tax payable and paid
18th,August 2017

Returns
 Outward supplies – by 10th
 Inward supplies – by 15th
 PayTax & Final Return – by 20th
◦ Return invalid if tax not paid
 Matching of Credits – unmatched credits
would be added to liability
 ISD Return – by 20th
18th,August 2017

Annual Return
 Annual Return – by 31st December of
next year
 Audit by Chartered Accountant/ Cost
Accountant – Turnover limit to be
prescribed
 Audited copy of the annual accounts and
a reconciliation statement to be filed
 Late fees Rs. 100/- per day (max 0.25% of
turnover)
18th,August 2017

Composition Scheme
 Scheme is optional
 InputTax Credit not available
 Buyer too cannot avail credit on such
supplies
 Scheme available to traders with turnover
below Rs. 50 lakh
 Scheme not available to service providers
and manufacturers
18th,August 2017

TDS Provisions
 Mostly by government authorities
 But other persons can also be notified
 TDS @1% if value of supply under a
contract exceeds Rs. 10 lakh
18th,August 2017

Focus Area
 Time of supply
 Place of supply
 Valuation – barter, mix of monetary &
non-monetary considerations, self
supplies
 Matching of Credits
18th,August 2017

Journey So far
 Constitution has been amended (President
Assented on 08th Sept, 2016)
 GST Council constituted.
 Council has decided the exemption
threshold, rates of GST etc.All Acts
approved.
 Acts passed by the Parliament (assented by
the President on 12th April, 2017)
 MassiveTraining program being conducted
for officers
18th,August 2017

Role of the GST Council:
To recommend
 Principal decision making body on GST
 Which taxes to be subsumed in GST
 What to tax and what to exempt
 Rates of tax
 GST Laws, principles of levy
 Principles governing the place of supply;
 Apportionment of IGST between state &
Centre
 Mechanism of Dual Control (State &
Centre)
18th,August 2017

What Next
 Enactment of GST Act by States & the
UnionTerritories
 Testing of network
 Education of business community
 Migration of data fromVAT/ Excise/
ServiceTax servers to GST
 Registration
18th,August 2017

SG Institute ofTax & Exim Management
Thanks
Sanjay A. Sonawane
+91 9004815061/
+919869506261
gst@swayambhugroup.com ,
http://swayambhugroup.com/
18th,August 2017

Goods & Service Tax – An Overview

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