GST Overview - Know All About Goods and Service Tax Smart Taxation System in India

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Meaning

• Goods and Services Tax (GST) is a value added tax
  and a comprehensive tax levy which is levied on
  the supply of goods and services all across the
  country. It will be levied only on the value
  added as against tax levied at each stage.

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Indirect Tax structure in India before GST

• The earlier indirect tax framework in India
  suffered from various shortcomings. Under the
  earlier indirect tax structure, the various
  indirect taxes being levied were not necessarily
  mutually exclusive.
• Example When goods were manufactured and sold,
  both Central Excise Duty (CENVAT) and State Level
  VAT were levied. Though both were essentially
  value added taxes but set off of one against the
  credit of another was not possible as CENVAT was
  a central levy and VAT was a state levy.

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Issues in Pre-GST regime

• Cascading effect
• Complexity
• Lack of uniformity
• Corruption (Under GST tax payers and department's
  dealing reduced radically)
• Tax Evasion (GST introduced dual checks for
  Central Government and State Governments)
• Complexity in determining the nature of
  transaction (eg. restaurant services)

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The Cascading Effect
Producer / Manufacturer Cost of input Value of output Tax rate Selling price including tax rate Tax burden
Producer A -- 1000 10 1100 (1000 10 of 1000) 100
Producer B 1100 1500 10 1650 (1500 10 of 1500) 150
Producer C 1650 2000 10 2200 (2000 10 of 2000) 200
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Constitutional Amendments

• Introduction of the GST required amendment in the
  Constitution so as to enable integration of the
  central excise duty including additional duties
  of customs, state VAT and certain state specific
  taxes and service tax levied by the center into a
  comprehensive GST and to empower both center and
  the state to levy and collect it.
• Consequently, Constitution (101st Amendment Act),
  2016 was passed.

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Taxes subsumed in GST

• Service Tax
• Excise Duty
• VAT/Sales Tax
• CVD and SAD
• Octroi and Entry Tax
• Additional Excise duty
• Excise duty under medicinal Act
• Entry tax other than levied by local bodies

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Acts governing the GST regime

• The Central Goods and Services Tax Act, 2017
• The Integrated Goods and Services Tax Act, 2017
• The Union Territory Goods and Services Tax Act,
  2017
• The State Goods and Services Tax Act, 2017 (for
  each State)
• The Goods and Services (State Compensation) Tax
  Act, 2017

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Taxable event Supply

• One of the very important features of the GST
  regime is the complete change in the taxable
  event. The taxable event in the GST would be the
  supply of goods and/or services.
• Continued...

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Taxable event Supply (Contd.)

• Supply includes
• (a) all forms of supply of goods and/or services
  such as sale, transfer, barter, exchange,
  license, rental, lease or disposal made or agreed
  to be made for a consideration by a person in the
  course or furtherance of business,
• (b) importation of services, for a consideration
  whether or not in the course or furtherance of
  business, and
• (c) a supply specified in Schedule I, made or
  agreed to be made without a consideration.

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Goods and Services Tax Network (GSTN)

• GSTN is the backbone of the Common Portal which
  is the interface between the taxpayers and the
  government. The entire process of GST is online
  starting from registration to the filing of
  returns.
• The GSTN will handle
• Invoices
• Various returns
• Registrations
• Payments Refunds

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Types of taxes and cess under GST

• CGST To be levied on all intra-state supplies.
• SGST/UTGST To be levied on all intra-state/UT
  supplies
• IGST To be levied on all inter-state/UT supplies
  and import of goods and services.
• GST Compensation CESS would be applicable on
  both supply of goods or services that have been
  specified luxury and demerit goods such as pan
  masala, tobacco, aerated waters, and motor cars
  etc.

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Goods kept outside the purview of GST

• Alcoholic liquor for human consumption (will
  continue to cover under State Excise and
  VAT/CST).
• Petroleum Products (will come under the GST
  purview from a date notified by the GST Council).

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GST on Import and Export

• Countervailing Duty (CVD) and Special Additional
  Duty (SAD) on imports have been replaced with
  IGST.
• Any supply made by a registered dealer as an
  export or supply to an SEZ qualifies for Zero
  Rated Supplies in GST. The rate of tax on such
  supplies is Zero or we can say the supplies are
  tax-free.

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GST World Wide

• France was the first country to implement GST in
  1954.Within 64 years of itsadvent, about 160
  countries acrossthe world have adopted GST.
• India, Canada and Brazil have adopted dual GST
  model.
• The World Banks says, India has most complex GST
  structure in the world with not only highest tax
  rates but also a number of tax slabs.But, it
  will boost the GDP as well.

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Introduction

• GST Council is a constitutional body for making
  recommendations to the Union and State Government
  on issues related to Goods and Services Tax.
• GST Council is a joint forum of the Center and
  the States, shall consist the following members
• Union Finance Minister
• Union Minister of State in charge of Revenue or
  Finance
• Minister in charge of Finance or Taxation or any
  other Minister nominated by each State Government.

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Role of GST Council

• GST Council shall make recommendations to the
  Union and the States on the following matters
• taxes, cesses, and surcharges levied by the
  Union, the States and the local bodies which may
  be subsumed in the GST
• goods and services that may be subjected to, or
  exempted from the GST
• threshold limit of turnover below which goods and
  services may be exempted from goods and services
  tax
• continued...

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Role of GST Council (Contd.)

• Any special rate or rates for a specified period,
  to raise additional resources during any natural
  calamity or disaster
• Special provision with respect to the States of
  Arunachal Pradesh, Assam, Jammu and Kashmir,
  Manipur, Meghalaya, Mizoram, Nagaland, Sikkim,
  Tripura, Himachal Pradesh and Uttarakhand
• Council shall recommend the date on which GST be
  levied on petroleum products.

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Introduction

• GST Compensation Cess is an additional cess
  levied on certain notified goods in addition to
  GST applicable on it. Due to the implementation
  of GST many states faced a decrease in revenue as
  it is a consumption based tax. Thus, states which
  were manufacturing oriented faced a loss in
  revenue.
• To compensate these states, an additional tax by
  the name GST compensation cess is levied. It is
  imposed on certain notified goods and revenue
  collected from it is distributed amongst these
  states. This Cess will be levied for 5 years from
  the date of implementation of GST.

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Goods liable for GST Cess

• Pan Masala
• Tobacco and tobacco products
• Cigarettes
• Coal
• Aerated water
• Motor vehicles

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ITC not available on the following items

• Motor vehicle except when they are used for
  making the following taxable supplies
• - Further supply of such vehicles or conveyances
  or
• - Transportation of passenger or
• - Imparting training on driving such vehicles
• - Used for transportation of goods
• Goods or services on which the tax is paid under
  composition scheme.
• Goods or services used for personal consumption.
• Goods lost, stolen, destroyed, written off or
  disposed of by way of gift or free samples.
• Certain other supplies.

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Tax Invoices and Vouchers

• Tax Invoice (For sale of goods or services)
• Bill of Supply (Other than Tax Invoice)
• Receipt Voucher (For Advance Payment)
• Refund Voucher (For returning)
• Invoice for Purchase from Unregistered Person
• Payment Voucher for purchase from Unregistered
  Person

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Composition Scheme Introduction

• It is a simple and easy scheme for small
  taxpayers whose turnover is less than Rs. 1.50
  crore.
• Persons ineligible for this scheme
• Supplying exempt goods/services
• Supplier of services other than restaurant
  related services
• Manufacturer of ice cream, pan masala, or tobacco
• Casual taxable person or a non-resident taxable
  person
• Supplier of goods through e-commerce operator.

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Composition Scheme Conditions

• ITC cannot be claimed
• Cannot issue tax invoice
• Cannot make any inter-state supply of goods.
• Cannot supply GST exempted goods
• Taxpayer has to pay tax at normal rates for
  transactions under Reverse Charge Mechanism (RCM)
• If a taxable person has different segments of
  businesses under the same PAN, then all such
  businesses under the scheme collectively or opt
  out of the scheme.
• Taxpayer has to mention the words composition
  taxable person on every notice or signboard
  displayed prominently at their place of business.
• Taxpayer has to mention the words composition
  taxable person on every bill of supply issued by
  him.

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Who is liable to be registered?

• Any business whose annual turnover is Rs. 20
  lakhs (Rs. 10 Lacs for special category states)
• Anyone registered under the previous regime, for
  example, VAT or Service Tax.
• Casual taxable person
• Non-Resident taxable person who doesnt have a
  fixed place of business
• Taxable person under reverse charge
• Input service distributor
• Continued...

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Who is liable to be registered? (Contd.)

• E-commerce operator
• Inter-State supplier of goods
• Suppliers who supply through an e-commerce
  operator
• A person who supplies on behalf of some other
  taxable person (i.e. an agent of a principal).
• TDS Deductor
• Supplier of online information and database
  access or retrieval (OIDAR) services from outside
  India to a non-registered person in India
• any person may voluntarily obtain registration.

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Documents Required for GST Registration

• Aadhaar card
• Address proof of the place of business
• Bank account statement/cancelled cheque
• Identity and Address proof of Promoters/Director
  with photographs
• Digital Signature
• Proof of business registration or incorporation
  certificate
• PAN Card of the Business or Applicant
• Letter of Authorization/Board Resolution for
  Authorized Signature

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Types of Returns

• GSTR - 1 Outward Return
• GSTR - 2 Inward Return
• GSTR - 3 Monthly Return
• GSTR - 3B Summary Return
• GSTR - 4 For composition dealer
• GSTR - 5 For NRTP

• GSTR - 6 For ISD
• GSTR - 7 For Tax Deductor
• GSTR - 8 For Tax Collector
• GSTR - 9 Annual Return
• GSTR - 10 Final Return
• GSTR - 11 For persons having UIN

Abbreviations NRTP Non-resident Taxable
Person ISD Input Service Distrbutor UIN Unique
Identification Number
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Due Dates of Returns
Types of GST Returns Due Date
GSTR - 1 10th of the next month
GSTR - 2 15th of the next month
GSTR - 3 20th of the next month
GSTR - 3B 20th of the next month
GSTR - 4 18th of the month following the end of the quarter
GSTR - 5 20th of the next month
GSTR - 6 13th of the next month
GSTR - 7 10th of the next month
GSTR - 8 10th of the next month
GSTR - 9 31st December of the end of the financial year
GSTR -10 within 3 months of the cancellation of the registration
GSTR - 11 28th of the month following the month in which inward supply received
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Challenges under GST

• Lack of clarity on GST provisions and rules.
• Robust and efficient IT infrastructure is
  required to manage the central database.
• E-commerce giants like Flipkart, Amazon also have
  not escaped the after effects of GST roll-out.
• Multiple returns are required to be filed.
• Small Scale Industries suffered at the initial
  stage of introduction.

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Introduction and Applicability

• Normally, the supplier of goods or services pays
  the tax on supply. In the case of Reverse Charge,
  the receiver becomes liable to pay the tax i.e.
  the chargeability gets reversed.
• Reverse Charge is applicable in the following 3
  cases
• Supply from an Unregistered dealer to a
  Registered dealer (Suspended till Sept 30th,
  2018)
• Services through an e-commerce operator
• Supply of certain goods and services specified by
  CBIC (formerly known as CBEC).

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National Anti-Profiteering Authority (NAA)

• If NAA finds that entity has not passed on GST
  benefits, it will either direct entity to pass on
  benefits to consumers or if beneficiary cannot be
  identified, it will ask the entity to transfer
  amount to consumer welfare fund within
  specified timeline.
• NAA has power to cancel registration of any
  entity or business if it fails to pass on to
  consumers benefit of lower taxes under GST
  regime, but it will probably be last step against
  any violator.
• NAA will suggest return of undue profit earned
  from not passing on reduction in incidence of tax
  to consumers along with an 18 interest, and also
  impose penalty.

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HSN SAC

• Harmonized System of Nomenclature (HSN) and
  Service Accounting Code (SAC) will be new
  concepts for most businesses, even though they
  have been borrowed from existing systems.
  Businesses need to determine the HSN and or SAC
  of the goods and services that they sell, since
  these are mandatory fields in a GST compliant
  invoice.
• It is a multipurpose international product
  nomenclature developed by the World Customs
  Organization (WCO). HSN is assigned to goods by
  organizing them in a hierarchical manner and is 8
  digits long. Depending on the turnover or nature
  of sale, a business might be required to quote a
  2-digit HSN, a 4-digit HSN or an 8-digit HSN
  (mandatory for exports). Continued...

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HSN SAC (Contd.)

• Small businesses under composition scheme will
  not be required to mention HSN codes in their
  invoices.
• A business whose turnover is less than INR 1.5
  crore need not quote HSN in the invoice
• A business with turnover between INR 1.5 crore
  and INR 5 crore will need to quote a 2-digit HSN
• A business with turnover equal to or greater than
  INR 5 crore will need to quote a 4-digit HSN
• All exports will need to quote 8-digit HSN in the
  invoice
• SAC is the nomenclature adopted by the GST
  Council for identifying services delivered under
  GST. This is similar to the classification that
  was in existence under the Services Tax regime.

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Introduction and Applicability(suspended till
Sept 30th, 2018)

• TDS is one of the ways to collect tax based on
  certain percentages on the amount payable by the
  receiver on goods/services. Tax so deducted need
  to deposited with the revenue authority by the
  due dates so prescribed.
• Following persons are liable to deduct TDS
• A department or an establishment of the
  Government or
• Local authority or
• Governmental agencies or
• Such persons or category of persons as may be
  notified. (Such as Societies, PSUs etc.)

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When will the liability to deductTDS be
attracted? What is the rate of TDS?

• TDS is to be deducted at the rate of 2 per
  cent(CGST SGST) on payments made to the
  supplier of taxable goods and/or
  services,where the total value of such supply,
  under anindividual contract, exceeds Rs.
  250,000/-.
• No deduction of Tax is required when the location
  of supplier and place of supply is different from
  the State of the registration of the recipient.
  (refer chart)

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TCS compliance for e-commerce sector (suspended
till Sept 30th, 2018)
A clause has been inserted under GSTlaw for all
the e-commerce aggregators. E-commerce
aggregators are made responsible under the GST
law fordeducting and depositing tax at the rate
of 2 (CGSTSGST) from each of the transaction.
Any dealers/traders selling goods/services online
would get the payment after deduction of 2 tax.
Continued...
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TCS compliance for e-commerce sector (Continued)
It is a significant change which wouldincrease a
lot of compliance andadministration cost for
online aggregatorslike Flipkart, Snapdeal,
Amazon etc. Theywould need to deposit the tax
deducted bythe 10th day of the next month. All
the traders/dealers selling goods/services online
would need to get registered under GST even if
their turnover is less than 20 Lakhs for claiming
the tax deducted by Ecommerce operators.
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Introduction

• E-Way Bill is an electronic way bill for movement
  of goods which can be generated on the E-Way Bill
  Portal. Transport of goods of more than Rs.
  50,000 (Single Invoice/bill/delivery challan) in
  value in a vehicle cannot be made by a registered
  person without an e-way bill.
• E-Way bill can also be generated or cancelled
  through SMS, Android App and by Site-to-Site
  Integration(through API). When an e-way bill is
  generated a unique e-way bill number (EBN) is
  allocated and is available to the supplier,
  recipient, and the transporter.

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Who should Generate an E-Way Bill?

• Registered Person E-Way bill must be generated
  when there is a movement of goods of more than
  Rs. 50,000 in value to or from a Registered
  Person. A Registered person or the transporter
  may choose to generate and carry e-way bill even
  if the value of goods is less than Rs. 50,000.
• Unregistered Persons Unregistered persons are
  also required to generate e-Way Bill. However,
  where a supply is made by an unregistered person
  to a registered person, the receiver will have to
  ensure all the compliances are met as if they
  were the supplier.
• Transporter Transporters carrying goods by road,
  air, rail, etc. also need to generate e-Way Bill
  if the supplier has not generated an e-Way Bill.

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Thank You