gst- an overview

By FCA Shweta Bagaria SarawgeePartner- Bharat D Sarawgee & Co

Bharat D Sarawgee & Co.

What is GST?... brief Overview

Why to implement GST?...the purpose

How to implement GST?...the methodology of implementation

What will be the design of GST?...the detailed law

How will it impact Businesses?.....


...brief overview


�Goods and Services Tax" is a comprehensive indirect tax on

manufacture, sale and consumption of goods and services throughout

India, to replace several indirect taxes levied by the Central and State

governments.

�GST is a consumption based tax that the tax will be paid in the state

where goods are finally consumed

�GST will be implemented in dual mode Central GST (CGST) to be

collected by Centre replacing Excise Duty & Service Tax and State GST

(SGST) to be collected by State replacing VAT , Entry Tax and other state

taxes

�Interstate transactions to attract Integrated GST(IGST) which is proposed

to be the double rate of CGST i.e. addition of CGST and SGST Bharat D Sarawgee & Co.

CGST

SGST

IGST

Service Tax

Excise Duty

VAT

Entry Tax

Luxury Tax

Purchase Tax

Octroi

CST

CVD

SAD


�Expected Rate of GST (SGST+CGST) as proposed by the

Empowering Committee is 15-15.5%

�State Panels proposed approx. 27%

�The Rate of GST is not yet finalized, likely to be close to 18% as

indicated


Why? …. the Purpose


�Amalgamating several Central and State taxes into a single tax would

mitigate cascading or double taxation, facilitating a common national

market.

�The simplicity of the tax should lead to easier administration and

enforcement

�Tax Evasion is reduced

�Self Policing Mechanism

�Transparency- Invoice will show the total value of tax paid on the product

�Uniformity Bharat D Sarawgee & Co.

How?... the methodology of implementation


�Constitution Amendment Bill passed by Lok Sabha in May, 2015

�Bill passed by Rajya Sabha on 03/08/16 with modification

�Bill resent to Lok Sabha for approval of modifications and approved on 12/08/16

�Bill to be ratified by half of the State Legislatures

�CGST/IGST Bill to be placed in two houses and to be approved

�States to pass State specific GST ActsBharat D Sarawgee & Co.

What will be the design?...the detailed law


GST LAW

By Empowered Committee

CGST Act

Sections 1 to 162E

4 Schedules

GST Valuation

Rule

IGST Act

Sections 1 to 33


Preliminary

• Coverage

• Definition

Taxable Event

• Supply

Time of Supply

• Of Goods

• Of Services

Place of Supply

• Inter State

• Intra State

Valuation

Input Tax Credit

Input Service Distributor

Payment of Tax

• Normal Payment

• TDS

Procedures

• Registration

• Returns

Transitional Provisions

Miscellaneous Provisions


Coverage�Central GST Act extended to entire India including Jammu &

Kashmir

�Coverage to include territorial waters, continental shelf,

exclusive economic zone or any other maritime zone

�Petroleum Products and Alcoholic Liquor for human consumption

is out of scope of GST currently

�Tobacco products will be subject to excise duty plus GST


Key DefinitionBusiness means any

(a)trade, commerce, manufacture, profession, vocation or any other similar activity,

whether or not it is for a pecuniary benefit;

(b) any transaction in connection with or incidental or ancillary to (a) above;

(c) any transaction in the nature of (a) above, whether or not there is volume, frequency,

continuity or regularity of such transaction;

(d) supply or acquisition of goods including capital assets and services in connection

with commencement or closure of business

(e) provision by a club, association, society, or any such body (for a subscription or any

other consideration) of the facilities or benefits to its members, as the case may be;

(f) admission, for a consideration, of persons to any premises; and

(g) services supplied by a person as the holder of an office which has been accepted

by him in the course or furtherance of his trade, profession or vocation;


Consideration includes(a) any payment made or to be made, whether in money or otherwise, in respect

of, in response to, or for the inducement of, the supply of goods and/or services,whether by the said person or by any other person;(b) the monetary value of any act or forbearance, whether or not voluntary, in

respect of, in response to, or for the inducement of, the supply of goods and/orservices, whether by the said person or by any other person- Pre deposit is not aconsideration till it is not so applied against the provision of services

Capital Goods- Adopted from Cenvat Credit Rules 2004 with changes to replacesale with supply and factory with place of business

Aggregate Turnover means the aggregate value of all taxable and non-taxablesupplies, exempt supplies and exports of goods and/or services of a person having

the same PAN, to be computed on all India basis and excludes taxes, if any,charged under the CGST Act, SGST Act and the IGST Act, as the case may be

Key Definition….Contd


Goods means every kind of movable property other than actionable claim andmoney but includes securities, growing crops, grass and things attached to or forming part of theland which are agreed to be severed before supply or under the contract of supply;Explanation.– For the purpose of this clause, the term ‘moveable property’ shall not include anyintangible property.

Location of Recipient of service(i) where a supply is received at a place of business for which registration has been obtained, thelocation of such place of business;(ii) where a supply is received at a place other than the place of business for which registrationhas been obtained, that is to say, a fixed establishment elsewhere, the location of such fixedestablishment;(iii) where a supply is received at more than one establishment, whether the place of business orfixed establishment, the location of the establishment most directly concerned with the receipt ofthe supply; and(iv) in absence of such places, the location of the usual place of residence of the recipient;



Key Definition….ContdLocation of Supplier of service

(i) where a supply is made from a place of business for which registration has been obtained, thelocation of such place of business ;

(ii) where a supply is made from a place other than the place of business for which registration hasbeen obtained, that is to say, a fixed establishment elsewhere, the location of such fixedestablishment;

(iii) where a supply is made from more than one establishment, whether the place of business orfixed establishment, the location of the establishment most directly concerned with the provisionof the supply; and

(iv) in absence of such places, the location of the usual place of residence of the supplier;

Recipient where a consideration is payable for the supply of goods and/or services, the personwho is liable to pay that consideration, (b) where no consideration is payable for the supply ofgoods, the person to whom the goods are delivered or made available, or to whom possession oruse of the goods is given or made available, and (c) where no consideration is payable for thesupply of a service, the person to whom the service is rendered, and any reference to a person towhom a supply is made shall be construed as a reference to the recipient of the supply;

Explanation.- The expression “recipient” shall also include an agent acting as such on behalf ofthe recipient in relation to the goods and/or services supplied.



Services means anything other than goods

Explanation: Services include intangible property and actionable claim

but does not include money.

Works Contract means an agreement for carrying out for cash,

deferred payment or other valuable consideration, building,

construction, fabrication, erection, installation, fitting out, improvement,

modification, repair, renovation or commissioning of any moveable or

immovable property;


Key Definition …ContdTaxable Person is a person whose aggregate turnover exceeds Rs 10 lacs or Rs 5 lacsin case of North East States including Sikkim and includes

Central Govt or State Govt or any local authority in respect of activities when they are

engaged as public authorities

An unincorporated association or a club

Excludes

�Public Authorities as mentioned in Schedule IV

�Services provided in an employee – employer relationship

�Persons receiving services liable to tax on reverse charge used for personal use up to an amount to be specified

�Any person engaged in business of goods or service which are excluded from the scope of the Act

�An Agriculturist


Taxable Event- Supply of Goods/Services

Includes

Sale, Transfer

Lease

Barter, Exchange

Agency

License

Rental

Furtheran

ce of Business

With Conside

ration

Even Stock Transfer will be covered under Supply Bharat D Sarawgee & Co.

Deemed Supply without Consideration- Schedule 1

�Permanent transfer/disposal of business assets.

�Temporary application of business assets to a private or non-business

use.

�Services put to a private or non-business use.

�Assets retained after deregistration.

�Supply of goods and / or services by a taxable person to another

taxable or nontaxable person in the course of furtherance of business

provided that the supply of goods by a registered taxable person to

a job-worker in terms of section 43A shall not be treated as supply of

goods.


Deemed Supply of Goods- Schedule 2

�Any Transfer of title in goods

�Transfer of title in goods under an agreement that the title will pass at a future dateon payment of consideration

�Transfer/Disposal of goods forming part of business assets by the person carrying

business

�Transfer/Disposal of Goods forming part of business of taxable person by any personhaving right to so to realise the debts is supply of goods by the taxable person

�Where any person ceases to be a Taxable person , the business assets will be

deemed to be supplied by him before he ceases to be a taxable person unless hehas transferred the business as a going concern or his representative is running thebusiness and deemed as taxable person


Deemed Supply of Services- Schedule 2�Transfer of goods or right in goods or any share in goods without transfer of title

�Lease, Tenancy, license to occupy land

�Lease or letting out of building for industrial, commercial or residential either wholly or partly

�Any treatment or process which is being applied on other persons goods

�Where business assets are put to any use other than business use

�Renting of Immovable Property

�Construction of a complex, building, civil structure intended for sale to a buyer except where the entire consideration has been received after issuance of CC or occupation whichever is earlier Bharat D Sarawgee & Co.

Deemed Supply of Services- Schedule 2

�Temporary Transfer of any intellectual property right

�Development design, programming, customization etc. of any IT Software

�Agreeing to the obligation to refrain from an act or do an act

�Works contract including transfer of property in goods

�Right to use any goods

�Supply of food or any other article for human consumption other than alcoholic liquor


Certain Typical examples of supply of goods/services basis past precedents

�Goods- Standing Trees are not goods but severed ones are goods

� Master Copies of Films, Songs and music are goods

�Technical designs and drawings are goods

�Unit of Mutual Funds are goods

�Software in physical form is goods otherwise a service

�Electricity is goods

�Any transaction in money is excluded from service thus interest,

dividend, loans, profit distribution, sale purchase of securities etc. are not

services nor goods

�Compensation received from Government is not a service


Certain Typical examples of supply of goods/services basis past precedents

�Supply of SIM is service

�Development of Software is a service

�Sale of Copyright, trademark, Royalty, Carbon Credit etc. are service

�Actionable Claims are service

�Hiring, Leasing is service

�Demurrage Charges, Cancellation Charges, LD Charges etc. are service

�Plant and Machinery assembled at Site is not supply of goods but service

�Notice Pay recovered from the employee is a service


POT-Time of Supply of Goods

Earlier of

Date of Removal of

Goods

Date of availability of

goods to recipient

Date of Invoice

Date of Payment

Date of receipt in books of recipient


Supplier

Invoice is raised within

specified

days of completion of service

Date of Payment

Payment

Received

before

Completion of service

Date of Invoice

Y

Y

N

N

N

Payment Received

before date

of Invoice

Date of Completio

n of

service

Y

POT- Time of Supply of Service


Service Provider

Goods Supplier

Date of Payment

If payment

made before

raising Invoice

Y

N

N

Date up to

which payment or statement is

made

Date of

Invoice

Y

Y

N

If payment is

made

before invoice

Date of payment

Y

N

Date of

Invoice

Due date of Payment

mentioned in contract

Due Date of

Payment

In case of successive payments/ statements

If payment is linked to a completion of event then the date of completion of event

Time of Supply-Continuous Supply


POT-Time of Supply of Goods

Earlier of

Date of Receipt of

Invoice

Receipt of Goods/Service

Date of Payment

Date of debit in books of

Account


POT-Residual Clause

If not determinable as per any of given provisions

The due date of periodical return, if return is to be filed

or

The date of payment of CGST/SGST


Place of Supply- relevance

�When the location of supplier and place of supply are in different states

then the supply is Interstate

�Interstate supplies of Goods and Service and will attract IGST

�A supply of goods or service in the course of import or export will be

treated as deemed Interstate supplies and will attract IGST


Place of Supply - Goods◦ If the supply involves movement then the place where the movement of

goods terminates

◦ If the goods are delivered to a place on instruction of the third person

before or during the movement of goods either by way of transfer of

documents of title then the place of supply will be the business place of

the third person

◦Where the supply does not involve movement of goods then the place

where the goods are delivered to recipient

◦Where goods are assembled at site, then the place of assembly

◦Where goods are supplied on board of a conveyance then the location

at which such goods are taken on board


Place of Supply- ServicesLocation of Recipient of Service will be place of supply of service except for

◦ Services relating to immovable property- place where the immoveable

property is situated

◦ Performance based services like restaurant, beauty parlors, health services

etc.- place where the services are performed

◦ Training and performance appraisal to a person other than registered-

place of performance

◦ Admission to events- the pace where the events take place

◦Goods transportation to a person other than registered person- place

where such goods are handed over for transportation

◦ Passenger transportation service to a person other than registered person-

the place from where the passenger embarks on continuous journeyBharat D Sarawgee & Co.

Place of Supply- Services…contd◦ Service on board a conveyance- the place of the first scheduled point of

departure

◦ Telecommunication service, data transfer, broadcasting- in case of fixed

lines, installations, circuits- the place where they are installed for services

◦ In case of post paid mobiles and internet connections, the billing address

of recipient of service

◦ Prepaid mobile connections- place from where the vouchers are sold or

where the payment is received, in case of online purchase the location of

the recipient of service in record of the supplier

◦ Banking and other financial service including stock broking-location of

recipient of services on record of the supplier

◦ Insurance services to a person other than registered person, the place of

the recipient in records of the supplier Bharat D Sarawgee & Co.

Export/Import of ServicesExport

◦ Supplier in India

◦ Recipient is outside India

◦ Place of Supply is outside India

◦ Payment in convertible Forex

◦ Supplier and recipient are not mere entities of same person

Import

◦ Supplier is outside India

◦ Recipient is in India

◦ Place of supply is in India

◦ Supplier and recipient are not mere entities of same person Bharat D Sarawgee & Co.

Valuation- Supply

Transaction Value Method

-Price payable/Consideration for goods or services

-supplier and recipient are not related

Includes

�Any amount paid by the receiver on suppliers behalf and not included

in Price

�Appropriate cost of any counter supply by recipient in connection with

the original supply at reduced rates or free

�Any taxes and duties other than under CGST,SGST,IGST

�Royalties and License fees


Valuation- Supply

�Packing charges paid by the recipient not included in Price payable

�Subsidies of any manner connected with supply

�Any discounts provided after the supply, which is not certain at the

time of supply is included, although trade discounts are excluded if

provided on invoice

�Any reimbursable expenditure paid by recipient on behalf of supplier


Valuation Rules- in specific cases◦Where Consideration is not monetary

◦Where supplier and recipient are related

◦Where there is a reason to believe that the transaction value declared is

incorrect

◦ In case of Pure Agent, Money Changer Insurer, Air Travel Agent,

Distributor of Lottery


Valuation- Methods for specific cases

Comparison Method

• Value of like quality of goods/services supplied

• At same time

• Adjusted by factors like design, place etc.

Computed value Method

• Cost of Production of goods/ provision of service

• Charges for brand/design

• Profit or other general

Residual Method

• Reasonable basis in consistent with general provisions

Above methods to be followed sequentiallyBharat D Sarawgee & Co.

Valuation- MiscellaneousPure Agent Services value is Nil on satisfaction of certain conditions as mentioned in valuation rules

Proper Officer may deny the correctness of Transaction value as declared by the supplier

In case of taxable and non taxable supplies, the value shall be deemed to be such part of consideration as attributable thereto

Transaction value is also applicable for Stock transfers

Transaction value is accepted even if the supplier and recipient are related provided the

price is not influenced by the relationship


Input Tax Credit

Input Tax means GST charged on any supply of goods and/or

services which are used or are intended to be used in thecourse or furtherance of his business and includes tax paid onreverse charge basis

Credit of Input Tax at the time of Registration- GST contained inthe input held in stocks and inputs contained in semi finished,

finished stocks in hand


ITC mechanism assuming GST to be 6%


Requirements of availing Input Tax Credit

�Tax Invoice/Debit Note/Supplementary Invoice

�Goods or service has been received

�Tax has already been paid thru cash or thru credit ledger

�Return has been filed by the taxable person


Negative list of Input Tax Credit�Motor vehicles except when the business is dealing in Motor Cars or

when they are used for transportation of goods or passengers, motor

training

�Goods and Services used for personal consumption of employees

�Goods and services used by a principal in works contract with regard to

immovable property

�GST paid under composition scheme

�Goods and Services used for personal consumption Bharat D Sarawgee & Co.

Ineligibility of Input Tax Credit�Input Invoice not older than one year

�Input tax on any invoice pertaining to any year is cannot be claimed after expiry of September of the subsequent financial year or after filing of annual return whichever is earlier

�No Input tax Credit with respect to input used in exempt supplies

�Proportionate utilization of Input Tax Credit in case of usage in taxable and exempt supplies

�Input Tax Credit is not allowed if depreciation is claimed


Order of Input Credit Availment

IGST

IGST

CGST

SGST

CGST

CGST

IGST

SGST

SGST

IGST

SGST-CGST or vice versa set of not allowedBharat D Sarawgee & Co.

Temporary Denial of Credit

�Non filing of Valid Return

�Non payment of self assessed tax

�Non matching of Inward Supply return by a recipient with the corresponding output supply return by the provider

�Non Matching of the Credit Note details issued by the Supplier with the Inward supplies of recipient

�Non matching of Customs return with the Inward Supply return by recipient in case of Import

�Interest will be refunded if paid by the recipient up to the amount paid by the supplier

on late payment

If supplier/receiver provides the detail in sufficient time, the output liability will be adjusted


Input Service Distributor (ISD)

�Input Credit of services received and paid for at Administrative Office

may be used against the payment of output liability generated at the

manufacturing or the selling units

�Input Service Distribution is required to be taken by the administrative

offices

�Tax Invoices to be issued by the ISD

�CGST, SGST and IGST are distributed as IGST when the distributor and

recipient of credit are located in different states

�CGST, SGST and IGST are distributed as CGST, SGST and CGST/SGST/IGST

respectively when the distributor and recipient of credit are located in

different states


Tax Payment

�Electronic Cash Register- used for payment of taxes, Interest and

Penalties

�Electronic Credit Register- used for payments of taxes, interest and

penalties

�Due date not fixed

�Interest Rate not fixed


Tax Deduction at Source

�Government may empower certain categories of persons to deduct

tax @1% from supply if the value of supply exceeds 10 lacs of rupees

�To be deposited within 10th of next month

�If tax deduction certificate is not provided within 5 days of depositing

the amount with government then the deductor will be paying Rs 100

per day of default up to Rs 5000

�The credit of tax deducted will have to be claimed in Electronic Cash

registerBharat D Sarawgee & Co.

Composition Levy

�Aggregate Turnover not exceeding Rs 50 lacs

�Tax rate not lower than 1%

�No Input Credit available

�No Levy of tax from recipient of supply- cannot be shown on invoice

�All the Registration under one PAN will have to adopt

Composition scheme

�With the approval of proper officer on satisfaction of

specified conditions


RegistrationPersons liable for Registration

�Supplier with Aggregate Turnover of specified Limit

�Persons registered under earlier law

�Transferee of the business

�Merger/Amalgamation

�Casual Taxable person

�Persons making Interstate taxable supply

�Persons required to make reverse charge tax

�Non Resident Taxable person

�Persons required to deduct tax

�Input Service Distributor

�Electronic Commerce Operator

�An Aggregator who supplies under his brand nameBharat D Sarawgee & Co.

Registration Process�Application in specified format to proper officer to be made within 30

days from when he is liable for Registration

�PAN based Unique ID Generation

�Registration is to be granted within a specified period as prescribed if

no objection is observed

�Any rejection of application under CGST/SGST will be deemed to be

rejection of application under SGST/CGST


Registration Cancellation

Registration may be cancelled if applied for in the prescribed manner in

following cases

�Business transferred

�Death of proprietor

�Merger

�Disposal of Business

�Change in Constitution

�No longer liable to be registered


Registration Cancellation

Registration may be cancelled by the proper officer suo moto in

following cases

�On contravention of any provisions of Act or Rules

�A person paying tax under composition scheme not furnishing returns

for three consecutive tax periods

�A person paying tax other than under composition scheme on not

furnishing returns for consecutive six months

�Non commencement of business within six months of voluntary

Registration


Registration

�Cancellation of registration under CGST Act/SGST Act will be

deemed to cancellation of SGST/CGST registration

�Revocation of cancellation request is to be given within 30 days of the receipt of cancellation notice, and proper officer

cannot reject the request without a Show cause Notice


ReturnsOutward Supplies-

10th of next month

Inward Supplies-

15th of next month

Tax Deducted at Source-

10th of next month

ISD Return-

13th of next month

Consolidated Return-

20th of next month


Penalties for Non filing

�Monthly Return- Rs 100 for every day of default up to Rs 5000

�Annual Return- Rs 100 for every day of default up to Rs .25% of the aggregate turnover


Returns�If previous returns are not filed, no new return allowed

�Return without payment of due tax will be an invalid return

�Nil Return Mandatory if no transactions

�Any rectification in the return of a period is allowed up to

the end of Sept subsequent to the FY it pertains

�Annual return to be filed by 31st Dec after the end of FYBharat D Sarawgee & Co.

Transition Provision

Registration

�All the persons registered under Acts being subsumed will be granted

provisional registration on one appointed day

�The provisional Registration will be valid for six months

�Required information is to be submitted within six months for issue of

final registration

�If the person fails to submit the required information, the earlier

registration may be cancelled


Transition Provision…. contd

Input Tax Credit

◦Will be carried forward in the electronic ledger to the extent it

was declared in the earlier return up to the day prior to the

appointed day in the prescribed manner of VAT and service tax,

excise if it is admissible in the new Law

◦ Credit on capital goods will also be allowed to be taken in credit

ledger to the tune it is available but unavailed in the Return


Other Provisions

�Revenue Neutral rate to be calculated

�Centre to compensate states for the losses for five years

�Central Clearing Arrangement to be in Place for settlement of Credits

between centre and states and distribution of IGST


A Long Way Ahead !!!!!


Thank YouBharat D Sarawgee & Co.