Module 1 - 19 pages: Background of GST And Constitutional Amendment
• In this course, we shall be covering the constitutional background of GST,
key definitions and concepts under GST, Levy, Time of Supply, Place of
Supply, Input tax credit, Valuation, Registration, Returns, Payments,
Refund, Assessment, Appellate proceedings, Offences and Penalties, etc.
• The objective of the course is to impart basic understanding of GST which
will be useful to professionals from finance or tax background for
compliance and record keeping required under GST.
In the current chapter, we will be covering the brief background behind introduction of GST and
constitutional background. The list of the key topic covered is summarized below :-
‒ What is Indirect Tax?
‒ Taxes subsumed under GST
‒ Why GST was introduced
‒ Benefits of GST
‒ Roadmap of GST Implementation
‒ Constitutional Background
‒ Procedure for Amendment in GST law
‒ Overview of GST legislation
‒ Rate Structure in GST Regime
‒ Key Stake Holders
‒ GST Council and its Role
‒ Exemption Carried forward from Earlier Tax regime
• Indirect taxes are the taxes levied on goods or services supplied by a person and collected from buyers.
• The tax is basically levied on the seller of the goods or the provider of the services
• The seller/ provider of services passes tax burden to the end consumer and therefore ultimately it is the end consumer who bears this in the form of Indirect Tax
• For instance, Goods and services tax means tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption. GST on petrol, diesel and related products will be notified at later date.
Why GST?
- Cascading effect of taxation
- Multiple taxable events
- Double taxation of a transaction as both goods and Service
- Blocked credits
- Evolving laws Frequent changes
Roadmap:
GST – The Constitution of India has been amended by the Constitution (101st Amendment ) Act, 2016 for this purpose. Constitutional framework Article 246A - Union and States empowered to enact laws in relation to GST. The powers to make laws for inter-state supplies is exclusive to Union. Article 269A provides for making law in relation to inter-state supply of goods and services.
Article 269A provides for making law in relation to inter-state supply of goods and services.
Article 279A provides for constitution of GST Council.
174 Sections, rules, clarifications, circulars.
Present GST Tax Rate Structure is as follows**Additionally, compensation cess is levied for specified products.
Nil Rated:- Salt, Indian National Flag, duty credit scrips, etc.
5%:- Cream, Paneer, natural honey, etc.
12% :- Butter, candles, bicycles, contact lenses, etc.
18% :- Services like IT, telecom services, etc.
28% :- Pan Masala, Cigars, Cement, yachts, lottery, etc.
The process for creating GST Council started in India when the Constitution (One Hundred and Twentysecond Amendment) Bill 2016. GST Council was formed with Union Finance Minister as Chairperson, The
Union Minister or Ministers of State in-charge of Revenue or Finance for the following role:
Central or State Government grant exemptions in public interest which may be absolute or conditional
exemption. The illustrative list of exemption in earlier tax regime which were carried forward by the law maker in GST law as well are summarized below:
Type of Goods and Services Exempt under/Pre GST Regime/ Exempt under Post/ GST Regime
1. Agriculture products like fruits and vegetables, etc. Yes Yes
2. Services by way of admission to a museum, national park, wildlife
sanctuary, tiger reserve or zoo Yes Yes
3. Service provided by arbitral tribunal to specified entities Yes Yes
4. Services by a veterinary clinic in relation to health care of animals
or birds Yes Yes
5. Funeral Services Yes Yes
Module 2: Important Definitions. 11 Pages.
1. Understand some definitions:
- 2(52) Goods cover all (1) movable property (2) but not money and securities (3) include actionable claims like crops attached to land not severed (GST will be applicable - you might have exemption)
- 2(102) Services (1) anything other than goods (2) exchange of money (3) facilitating or arranging transaction in securities.
- 2(31) Consideration - (1) Payment made or to be made by money or otherwise even grants (2) Advance deposit only if there is a consideration
- 2(17) Business (1) any trade, commerce, manufacture (2) provision by club, association, society (3) admission to premises
- Composite supply - Bundled. One principle umbrella and multiple others.
- Mixed supply 2(74) - Single price - different products with different GST rate - whatever the highest rate that would be applicable on other supplies. Example: Mobile with charger, earphone and other accessories (BOGIF - Buy one get one free will not fall in either 5 or 6)
- Continuous supply of Goods and another for Continuous supply of Services.
- Taxable and Non Taxable supply 2(18) and 2(78) Not covered example petroleum, liquor, Schedule 3.
- Works contract - Immovable property
- Recipient 2(39) - making payment, if not taking delivery or service
- Supplier 2(105) - supplying goods/services or agent
- Exempt Supplier 2(47) - Supply of any goods or services or both which attracts nil rate of tax, Wholly exempt from tax under section 11, or under section 6 of the IGST Act, Includes non-taxable supply
- Reverse Charge Section 2{98}: Liability of tax payable by recipient of notified goods or services
- Aggregate Turnover Section 2{6}: Very important definition - as based on it it would depend if you need to take registration?
- Aggregate value of all taxable supplies (excluding reverse charge)
- Exempt supplies
- Exports of goods/ services
- Inter-state supplies for same PAN
- Tax Period Section 2{106}: Period for which the return is required to be furnished; Monthly, quarterly, annual returns are to be files.
Module 3: Concept of supply under GST. 7 Pages.
Pre GST event: Exercise - taxable event was manufacture; VAT - Sale; Service - Event
All these events combined and is called Supply.
8 limbs and 2 provisio.
- Sale - ownership change
- Transfer - no change in ownership; goods moving from one branch to other
- Barter
- Exchange
- License
- Rental
- Lease
- Disposal - Depreciated assets
For consideration, in the course of business.
Proviso:
- Import of service
- Schedule 1 items - supply without consideration.
Supply is an inclusive definition.
Supply - Schedule 1
Supply - Schedule 11
Goods:
Activities to be treated as supply of goods
- Transfer of title in goods
- Transfer of title where property will pass at future date
- Goods cease to form part of business assets
- Transfer of assets where person ceases to be a taxable person
- (except where as a going concern or by a personal representative)
- Supply of goods by unincorporated association to its member
Supply of Services:
Supply- Schedule III: Supply of neither goods nor services
Sec. 7(2)(b) Such activities or transactions undertaken by
• Central government
• State government
• Any local authority
where they are engaged as public authorities. (as may be notified)
Module 4: Registration under GST 14 pages
Registration is the prerequisite for doing a business, but not all need to. Section 22 to Section 30 discuss registration.
If business in 15 states - need registration in all the states
Turnover:
Supplier of Goods
- Aggregate turnover > 40 lakhs (intra state turnover)
- Aggregate turnover >10 lakhs (intra state turnover for suppliers located in special category states*)
Supplier of services
- Aggregate turnover > 20 lakhs (inter or intra state turnover)
- Aggregate turnover >10 lakhs (turnover for suppliers located in special category states*)
Not liable for registration
1. Exclusive exempt supplier of goods or service
2. Where recipient is liable to pay tax under RCM
3. Certain taxpayers who are making supplies through e-commerce operator.
“Aggregate Turnover" means aggregate value of all taxable supplies (excluding value of inward supplies on which tax is
payable on reverse charge mechanism, exempt supplies, export of goods or services or both Inter-state supplies of
persons having the same PAN (to be computed on all India basis) but excludes central tax, state tax, union territory tax,
integrated tax and cess and includes all supplies made by the taxable person, whether on own account or made on behalf of all his principals
Voluntary registration
A person who is not liable for registration may still choose to obtain voluntary registration, all provisions of the Act as are applicable to a registered person, shall apply to such voluntary registered person. Benefits of Voluntary registration:
- Availing and passing on Input tax credit
- Good Rating under GST may help in increasing the scale of operations and adding more customers
- Renting premises, availing loans from banks and other such business requirements will become easier for businesses that are registered
Compulsory registration
Point 8 certain people might get exemption.
Time limit and Process of Registration
Time limit for registration
• Within 30 days from the date on which the person becomes liable
• A casual taxable person or a non-resident taxable person shall apply for registration at least 5 days prior to the commencement of business
Process of registration
• Application of registration filed by the taxable person along with Aadhar authentication
• Proper officer on receipt of application shall examine the details and if details are found in order, approve the same within seven working days
• If the application submitted is found to be deficient, communication must be made in Form REG-03 within 7 working days from date of submission of application
• Reply to the said notice shall be made in Form REG-04 within a period of 7 days from date of receipt of notice
• Where application is not approved by the officer within the due time limit, application for registration shall be deemed to have been approved.
Composition Scheme
- Composition dealer is not allowed to collect outward tax from customers
- Not allowed to avail Input tax credit
- Required to pay tax through GST CMP-08 quarterly and furnish GSTR-4 and GSTR-9A annually
- Required to issue Bill of Supply instead of Tax Invoice
Composition scheme – Sec. 10
10(1) r/w 10(2)
Composition scheme - I
• Aggregate Turnover in preceding financial year ≤150lacs (75 lacs for specified states)
• Services along with goods can be supplied up to 10% of turnover in state (preceding financial year) or 5 lakh rupees, whichever is higher.
• Tax rate – Refer Annexure A
• Liable to pay tax under
reverse charge u/s 9(3) and
9(4) at applicable rates
10(2A)
Composition scheme - II
• Applicable for suppliers not eligible to pay tax under 10(1) r/w 10(2)
• Aggregate Turnover (preceding financial year) not exceeding 50 lacs
• Tax rate – 6% for suppliers opting or said scheme
• Liable to pay tax under reverse charge u/s 9(3) and 9(4) at applicable rates
Eligibility
• Not engaged in making any supply of goods or services which are not leviable to GST
• Not engaged in making any interState outward supplies
• Not engaged in making any supply through an electronic commerce operator required to comply with sec 52
• Not a manufacturer as may be notified by the Government
• Neither a casual taxable person nor a non-resident taxable person
10(1) r/w 10(2)
Composition scheme - I
• Aggregate Turnover in preceding financial year ≤150 lacs (75 lacs for specified states)
• Services along with goods can be supplied up to 10% of turnover in state (preceding financial year) or 5 lakh rupees, whichever is higher.
• Tax rate – Refer Annexure A
• Liable to pay tax under reverse charge u/s 9(3) and 9(4) at applicable rates
10(2A)
Composition scheme - II
• Applicable for suppliers not eligible to pay tax under 10(1) r/w 10(2)
• Aggregate Turnover (preceding financial year) not exceeding 50 lacs
• Tax rate – 6% for suppliers opting for said scheme
• Liable to pay tax under reverse charge u/s 9(3) and 9(4) at applicable rates
Eligibility
• Not engaged in making any supply of goods or services which are not leviable to GST
• Not engaged in making any interState outward supplies
• Not engaged in making any supply of services through an electronic commerce operator required to comply with sec 52
• Not a manufacturer as may be notified by the Government
• Neither a casual taxable person nor a non-resident taxable person
Documents needed:
Cancellation of registration
Revocation of cancellation of registration
• Application for revocation: Any registered person whose registration is cancelled by the
proper officer on his own motion, may apply to such officer for revocation of cancellation of
registration in such manner, within such time and subject to such conditions and
restrictions, as may be prescribed.
• Acceptance or Rejection of application by proper officer: The proper officer may in
such manner and such period as may prescribed, by order, either revoke cancellation of
registration or reject the application
Provided that application for revocation of cancellation of registration shall not be rejected
unless the applicant has been given an opportunity of being heard.
Module 5 PPT 35 Concept of Place of Supply under GST.
Place and location determine nature of supply i.e. interstate or intra state.
Any interstate supply IGST will be applicable and intra state it will be, CGST or SGST or UTGST depeding on the location.
Relevance of Place of Supply (POS)
• POS has been defined under IGST Act
• POS along with location of supplier determines nature of supply i.e. whether supply is inter-state or intra state
Location of recipient and supplier has been defined under GST basis place of business .
• Specific cases have been provided in law wherein levy of GST has been pre-determined. In case of supply from DTA to SEZ, IGST would be levied and same is always treated as an inter-state transaction. Similarly, imports of goods and services are inter-state supplies.
Place of Supply (POS) of goods in other miscellaneous cases:
“export of goods” with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India [Section 2(5) of the IGST Act,2017]
Nature of Transaction Place of Supply
Goods supplied on board a conveyance [Sec. 10(1)(e)] Location where goods are taken on board
Import into India [Sec. 11(1)] Location of importer
Export from India [Sec. 11(2)] Location outside India
Place of Supply (POS) of goods: Bill to – Ship to (Out of India)
Nature of Transaction Understanding Place of Supply
Bill to in India –Ship to out of India
[Sec. 10(1)(b)]
• Direction given by Indian (Bill to) party
• Movement of goods outside India results transaction
into Export for the bill to party
• Principal place of business of person
giving the direction
Bill to out of India – Ship to in
India
[Sec. 10(1)(b)]
• Movement is within India, thus not export of goods
• Shipped to location not relevant for determining
place of supply
• Location outside India since the
person giving the instruction is
outside India. In such a case IGST
would be charged
Place of Supply of Services
Place of Supply (POS) of services where both supplier and recipient are located in India
POS of services shall be guided by general rule [Sec. 12(1)] as mentioned below (except in case of specific services):
Transaction: Supply of restaurant and catering services, personal grooming, fitness, beauty treatment, health service including cosmetic and plastic surgery [Sec. 12(4)]
Place of supply: Location where services are actually performed
(Not all data included)
Module 6: Time and Value of Supply PPT: 12
Time is relevant, because Tax is applicable from the time of supply on the value of supply.
Module 7: Input Tax Credit: PPT 12
Very important topic = Cash.
It can be utilised against output tax credit.
Input Tax under GST
Definition Sec. 2(62) - • CGST/ SGST/ IGST/ UTGST charged on supply of goods or
services
Inclusion Sec. 2(62)
• IGST on imports
• CGST/ IGST/ SGST/ UTGST paid under reverse-charge
Exclusion • Tax paid under composition levy
Time-limit Sec. 16(4): • Earliest of filing return for September* following end of the financial year or annual return
**Under finance bill 2022, an amendment has been proposed to substitute ‘due date of filing return for September’ with ’30 November’
following end of the FY. This amendment will be applicable from such date as may be appointed by a notification
First and formost condition is that the invoice has to be raised.
Other Conditions:
- Invoice, debit note, self invoice, ISD invoice/credit note and bill of entry or other document prescribed in Custom Act,1962 can be used.
- Receiver of ITC can avail credit in respect of invoices and debit notes which have been furnished by supplier in GSTR-1/ IFF and appearing in GSTR-2B
- Banking company have an option to comply with sec. 17(2) i.e. either to reverse the credit pertains to exempt supply for example interest received or may claim 50% of ITC eligible.
- Rule 41 of CGST Rules, 2017 have also provided provision for transfer of credit in case of sale, merger, de-merger, amalgamation, lease or transfer of business.
ITC – Goods sent for Job work
Job worker is not the principal, he is just doing on behalf of principle.
Note: - Above conditions does not applies to moulds and dies, jigs and fixtures, or tools sent out to a job worker for job work.
Input: has to be return within one year. Maintain books of accounts.
Capital Goods: Return period of capital goods is 3 years.
This is not applicable for liquor and petroleum and its products as they are covered separately by state.
Formula to be applied on a monthly and yearly basis,
keep knocking of the credit in this order.
Mechanism to utilise to knock of the credits.
Thumb rule - IGST must be fully utilised before utilising the other.
Module 8: Input Service Distributor: PPT 8
Input Service Distributor means an office of a supplier which receives tax invoices towards the receipt of input services and distributes credit of GST paid to its branch offices.
Points for Consideration:
Invoice should contain:
- Name, address, GSTIN of ISD and recepient
- A consecutive serial number
- Date of issue
- Amount of credit distributed
- Signature authorised representative
ISD shall only deal with input services. It cannot keep credits in its own books.
Module 9: Job Work and TDS/TCS - Page 10
Job work is supply of service.
• Ownership of goods belongs to Principal andtreatment or process on such goods are undertaken by job worker.
• As per Schedule II of CGST Act, “Any treatment or process which is applied to another person's goods is a supply of services.” Hence, Job work is a supply of Service.
• The principal is allowed to avail credit on the goods directly sent to the job worker.
Job work - Procedure:
Inputs or capital goods can be sent by a principal to job worker without payment of tax under a Delivery Challan along with e-way bill, if applicable.
• Inputs or capital goods can be supplied from business premises of unregistered job worker if principal has added it as additional place of business.
Job Work – Other Provisions
• Principal may on intimation, send and bring back goods from “Job Worker” to any of his place of business without payment of tax provided the goods are returned within the prescribed time limit as summarized below:
• Type me Limit
- Inputs (whether completed or otherwise) - 1 year
- Capital Goods (other than moulds and dies, jigs and fixtures, or tools) - 3 Year
• If Inputs or Capital Goods (other than other than moulds and dies, jigs and fixtures, or tools) are not returned
within prescribed time limit, it shall be considered as deemed supply on the date when such goods were
received by the job worker.
• Waste and scrap generated during job work may be supplied on payment of tax by job worker, if job worker is
registered or by principal, if job worker is unregistered.
Tax Deducted at Source (TDS)
Person required to deduct TDS
• Department / Establishment of Central Government /State Government
• Local Authority
• Government Agencies
• Other person notified by the government
Transaction Value • Where total value of such supply of goods and / or services under acontract exceeds INR 2.5 lakhs.
• Taxable value of supply excluding GST indicated in invoice needs to be
considered for deduction.
Rate • 1% CGST + 1% SGST [2% in case of IGST] of payment made or credited
to the supplier
Non-Applicability of TDS
• If location of supplier and place of supply is in a state different from the
state of registration of the recipient
Time Limit of Payment • 10th day of the succeeding month in which deduction has been made
Interest for delayed
payment
• Interest at the rate notified, not exceeding 18% to be paid
Certificate • Certificate in Form GSTR-7A will be made available in GST portal once
return is filed
Excess / Erroneous Deposit
• Refund shall be according to Section 54
• No refund to deductor if the amount has been credited to electronic cash ledger of the deductee
Claim in Electronic Cash Ledger by Deductee
• Deductee shall claim the credit in his electronic cash ledger of the amount of deduction made by the deductor
Tax Collected at Source (TCS)
Person required to
collect TCS
• E-commerce operator (not agent) shall collect TCS on taxable supplies made
through it by other supplier, where consideration with respect to such
supplies is to be collected by the operator
Rate • 0.5% CGST + 0.5% SGST [1% IGST] of net value of taxable supplies made
through it
Net Value of Taxable
Supplies
• Aggregate value of taxable supplies of goods and/or services made through
e-commerce operator excluding supplies notified under Section 9(5) of CGST
Act and value of taxable supplies returned
Time Limit of Payment • 10th day of the succeeding month in which collection has been made
Interest for delayed
payment
• Interest at the rate notified, not exceeding 18% to be paid
Furnishing of Statement • Monthly- on or before 10th of succeeding month in Form GSTR-8
• Annually- on or before 31st December following the end of the financial year
• Rectification- before due date of filing of return for the month of September
following the end of the financial year or actual date for furnishing of the
relevant annual statement, whichever is earlier
Claim in Electronic
Cash Ledger
• Collectee shall claim the credit in his electronic cash ledger of the amount
of tax collected by the collector
Module 10: Payment of Tax under the GST Law PPT 15 pages.
Introduction
Format of Liability Register, Electronic Credit Ledger and Electronic Cash Register
• Payment of tax is to be made on or before 20th of succeeding month.
• A unique identification number shall be generated for every debit/credit made in electronic liability register, electronic credit
register and electronic cash register.
• Every taxable person shall discharge his tax and other dues under this Act in the following order:
o Self-assessed tax and other dues related to previous tax periods
o Self-assessed tax and other dues related to current tax period
o Any other amount/demand payable under section 73 or section 74
• Mode of Payments are summarized below:
- Internet banking
- Credit Card or Debit card
- NEFT/RTGS
- Over the counter (OTC)
- OIDAR Services - international money transfer through Society for Worldwide Internet banking
Electronic Liability Register
Applicability • This register is applicable for every person liable to pay tax, interest, penalty, late fee or any other amount
Form • GST PMT-01
Items to be Debited
• Amount of tax, interest, late fees or any other amount payable as per return
• Amount of tax, interest or any other amount payable as determined by proper officer
• Amount of tax & interest payable due to mismatch under section 42 & section 43
• Amount of interest that may accrue from time to time
Payment made to be credited • Every payment has to be made either from electronic cash ledger or electronic credit ledger
Miscellaneous
• Amount of demand debited shall stand reduced to the extent relief given by proper officer or appellate tribunal or court by way of credit in register
• Amount of penalty imposed or liable to be imposed shall stand reduced to the extent of payment made of tax interest or penalty by way of credit in register
Discrepancy
• If the registered person notices any discrepancy in the register, communicate the same to the officer exercising jurisdiction in
Form GST PMT-04
Electronic Credit Register
Applicability • This register is applicable for every registered person eligible to take ITC
Form • GST PMT-02
Items to be Debited
• Amount of liability discharge through input tax credit
• Amount of refund claimed, if any
Items will be Credited • Eligible input tax credit
Miscellaneous • If the amount of refund claimed is rejected, amount debited earlier shall be re-credited to electronic credit ledger
Discrepancy
• If the registered person notices any discrepancy in the register, communicate the same to the officer exercising jurisdiction in
Form GST PMT-04
These registers are auto populated and no manual intervention is allowed.
Electronic Cash Register
Applicability • This register is applicable for every person liable to pay tax, interest, penalty, late fee or any other amount
Form • GST PMT-05
Items to be Debited • Amount of liability discharged through this register
Items to be Credited • Deposit made through Internet banking, credit/debit card,
NEFT, RTGS & OTC
Miscellaneous
• Any payment made in this register shall be made after generating challan in Form GST PMT-06 and his challan will be valid for 15 days.
• Where payment is made by way of NEFT/RTGS, mandate form will be generated and that mandate form shall be submitted to the bank from where payment is made and this mandate form shall be valid for 15 days.
• On successful credit of the amount to the account of the Govt., CIN will be generated by collecting bank
• On receipt of CIN, amount deposited shall be reflected in the electronic cash ledger of the concerned person
• In case any refund is claimed from this register, refund amount shall be debited in this register. If the refund claim made is rejected by proper officer, amount to the extent of rejection shall be credited to this register
Discrepancy
• If the payment amount is debited but no CIN has been generated, registered person shall communicate in Form GST PMT – 07 through the common portal to the bank or electronic gateway through which deposit was initiated
• If the registered person notices any discrepancy in the register, registered person shall communicate the same to the officer exercising jurisdiction in Form GST PMT-04
Format of Challan
Format of GST PMT-09
With effect from 1st January 2020, CBIC has inserted section 49(10), as per which Tax Payers are eligible to transfer the fund available in cash ledger balance of any Tax Head such as CGST, SGST & IGST to other Head such as SGST or IGST, CGST or IGST and CGST or SGST via filing of GST PMT-09.
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