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Jul,2018

…thinking of GST, think of Bizsol!

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Indes

Sr.No. Subject Pg. No. Author

1 India’s Tryst With GST 1 CS Venkat R Venkitachalam

2 Flash Back - One Nation - One Tax - One Year 2 CMA Ashok Nawal

3 Taxable Event In GST, Supply, Place of Supply & Valuation 7 CA Manoj Malpani

4 Bill To - Ship to Transactions and Its Place of Supply Under GST 12 CMA Amit Devdhe

5 GST Registration 14 CS Anita Patil

6 Composition Scheme Under GST 19 CA Neha Sarda

7 Classification of Goods & Services Under GST 22 CA Manoj Malpani

8 Reverse Charge Mechanism Under GST 24 CA Swaraj Chhallani

9 Input Tax Credit & Job Work 26 CA Vinay Jain

10 Returns Under GST 28 CA Sourabh Lahoti

11 Technology In GST 31 Mr. Rajeev Kabra

12 Json File Errors & Possible Suggestions/Actions to be Taken 33 CMA Amit Devdhe 13 Import & GST 36 CA Preeti Kulkarni

14 GST Impact on High Sea Sale Transaction 40 CA Abhishek Malpani

15 Exports Under GST 43 CMA Nanda Barde

16 Special Economic Zone in GST Regime 46 Adv. Kiran Sawale

17 Deemed Exports Benefit and Procedures 48 CMA Ajay Kalani

18 Export Oriented Unit in GST Regime 50 CA Manoj Behede

19 GST & FTP (Advance Authorization, EPCG, MEIS & SEIS) 52 Mrs. Sunita Kulkarni

20 Refund of GST Paid by Exporters on Inward Supplies or Outward Supplies 54 CA Preeti Kulkarni

21 E-Way Bill System Under GST 57 CS Anita Patil

22 Human Resources Practices & GST 61 Mr. Pravin Arote

23 Advance Ruling, Assessments, Adjudications & Appeals 64 Adv. Kiran Sawale 24 Accounts & Records 66 Ms. Deepali Dabke

25 Accounts Finalization & Audits 68 CMA Ashok Nawal

INDEX


An year ago to this day India had a tryst with destiny of an economic variety. On 1st of July 2017 with much fanfare and considerable trepidation, the nation embraced the most revolutionary economic legislation yet in its checkered history. The first anniversary of such a momentous event may be the right time to do a reality check of the Goods and Services Tax, a taxation system that came to be celebrated and maligned in equal measure. The success or failure of GST will have to be examined through two different prisms – one political and the other economic. Modi expected GST to give him political dividends and his government, economic rewards. As things turned out, one year on, the government clearly has come up short by quite some distance on both counts. Modi, invested huge political capital, expecting to be hailed as a messiah who brought economic prosperity to the nation through the implementation of GST. He was in for some disappointment. Unfortunately for Modi, the initial glitches and teething troubles put paid to his ambitions. In the end it looked as though the politician managed to sell the concept to the nation; but its technology partner failed comprehensively at the implementation stage. One year down the road one positive takeaway was the ability of the states to work together as if to justify the freshly minted cliché of cooperative federalism. It is possible that the much-touted cooperation came about just because the states ruled by the opposition parties barring one stood to gain from GST, being consuming states. For instance, the increase in revenues of the state of Kerala with almost empty coffers an year back was as high 16%. No wonder cooperation was forthcoming just for the asking from unexpected quarters. On the economic front GST was indeed a mixed bag over the last year. For a government that came to power on the promise of ease of doing business among others, GST proved to be a nightmare from the point of view of compliance requirements. Though the government was largely receptive to the demands for relaxations in the number and nature of periodic Returns, it was obvious that it was making a virtue of necessity by doing so. Even after one year since introduction of GST, the government is yet to put in place all the processes required. That speaks volumes about our preparedness (or the lack of it) to embrace the new taxation system. Less said about the complexities associated with the processes from registrations to refunds, the better. On the positive side one must accept the fact inflation had not flared up as expected on the introduction of

GST. The trade has paid a heavy price through loss of sales and uncertain market dynamics, all in the name of ache din that is yet to materialise. As if that is not enough even as the government claims that the tax base has increased with facts, the figures say that the parallel economy is still striving. Despite the shortcomings, looking back, it is creditable that we have managed to reach this far. One national market with one national tax administered by one national body. That is something that we can be proud of and is something that we can write home about. Having done what we have, the job is now cut out for all the stakeholders. With the implementation nightmare hopefully behind us, it is now time to focus on what we now must achieve. Expansion of the tax base and rationalization of the tax rates are some areas that come to mind. Simplification of Return filing processes should lead to better compliances. The anti-evasion measures like the newly introduced e-Way Bills coupled with tracking of purchases from unregistered dealers through Reverse Charge Mechanism should help plug leakages that is occurring now. Further, expansion of tax base and rationalization of tax rates should give the government the necessary head room to further reduce the rates and pass on the benefits to the consumer. The phase of resistance to change during the introduction stage is behind us. So is the phase of ignorance about the new law. An easier to comply regulatory environment coupled with measures to ensure compliances is sure to see buoyancy in collections and better acceptance of GST. The PM commended GST to the nation during the launch event an year back as a good and simple tax. Today, one year later, GST is perceived to be a good tax that is yet to become simple. On this important occasion we at Bizsol present to you this compendium of articles put together by our own professional team of experts on GST based not only on their intimate knowledge of the subject but also based on their hands-on experience of working in different companies in various sectors. I am sure the reader would be immensely benefited by the what our professionals have to offer covering the entire gamut of GST from all possible angles. Happy reading.

INDIA’s TRYST WITH GST

Author: CS Venkat R Venkitachalam, FCA,FCS Email: [email protected] Contact : +91 98905 33358

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PRE-GST JOURNEY:

Though Pre-GST journey starts from Kelkar’s Committee Report and thereafter detailed report in 2009-10, it was followed by 115th Constitutional Amendment Bill which was subsequently withdrawn. However, under the leadership of Hon. Prime Minister, Shri Narendra Modi, NDA Govt was committed to implement GST and hence Pre-GST major events are listed below :

TOWARDS TAX COMPLIANCES Recent survey of Economic Times reveals that Tax Net has been increased and tax compliances are much better. It is the impact of the bold decision taken by Hon. Prime Minister of demonetization followed by GST.

Draft Business Process Reports – June 2015

Draft GST Law – 25th Nov 2016

Draft Business Process Rules – Sept 2016

122nd Constitutional Amendment Bill

101st Constitutional Amendment Act notified on 8th September 2016

Formation of GST Council on 12th Sept 2016

GST Act Notified on 12th April 2017

FLASH BACK ONE NATION - ONE TAX - ONE YEAR

Author: CMA Ashok Nawal, FCMA, B.Com. Email: [email protected] Contact : +91 98901 65001

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Source : The Economic Times CO-OPERATIVE FEDERALISM – GST COUNCIL SUMMARY

GST has far reaching effect. Hon. Finance Minister Shri. Arun Jaitely is proven successful leader as a chairman of GST Council which consist of finance ministers of each state and no recommendation or decision can be taken without having 3/4th majority out of which only 1/3rd voting right is with Union Govt. and 2/3rd voting right is with the State Govt. and all the decisions so far has been taken unanimously. If this approach followed in number of areas, the progress of India will be faster and

economy will be benefited. GST is one of the example of achieving Cooperative Federalism for making India, Power Centre of the world. So far GST Council held 27 Meetings either through personal or video conferencing. Union Finance Minister and Finance Ministers of all State Govt needs to be congratulated for their efforts towards achieving the dream and forgetting political differences.

PROACTIVENESS OF GOVERNMENT – CIRCULARS, PRESS RELEASE,

SECTOR WISE INFORMATION BOOKLET CBIC has played a vital role for not only solving the difficulties and problems faced by trade & industries but had taken the lead role in educating and creating awareness through following actions.

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Number of Press Releases giving clarifications: Number of FAQ on E-way Bill Number of Circulars & Notifications

Sector Wise Information Booklet: 25 Nos. Number of Webinars

Ease of Doing Business GST Council & CBIC were having a concern on difficulties faced by trade & industries due to technological glitches and thereby there were frequent postponements of GSTR-3B, GSTR-1,

GSTR-4, GSTR-6, TRAN-1, TRAN-2, E-Way Bill, Reverse Charge for Procurement of Goods & Services from unregistered Taxpayers, Tax on advances for supply of goods, etc etc.

Waiting for Implementation

Though GST Act & Rules made thereunder have the provisions w.r.t. following: GSTR-2

GSTR-3

TDS

TCS

Match & Mismatch

These could not be implemented considering the maturity of the technology and awareness of the Trade & Industry. It is expected to change the major provisions in Act & Rules.

ADVANCE RULING

Though Advance Ruling Authority were notified much later, trade & industry have demonstrated the confidence in Advance Ruling Mechanism to avoid the litigation and advance ruling authorities also have reciprocated thereto. Following table will provide number of advance ruling on various matters.

Sr. No. State Number of Advance rulings issued

1 Maharashtra 16 2 Kerala 6

OR Simple Return

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Sr. No. State Number of Advance rulings issued

3 Andhra Pradesh 8 4 Delhi 6 5 Gujarat 15 6 Karnataka 8 7 Rajasthan 2 8 Telangana 4 9 Uttarakhand 7 10 West Bengal 7 Total 79

Now, it is proposed to have the centralised advance authorities to avoid divergent rulings. TAKE OF STAKE HOLDERS

It was expected each stake holder will be benefited but though there is a positive result, one has to wait for desired result. Let us see the facts w.r.t. various stake holders. CONSUMER

Source : The Economic Times MANUFACTURER

o Benefited on account of higher ITC benefits and lower tax rates without having control of passing the benefits

o Same MRP even after change in Tax Rate o Transitional Credit o Simple Return

SERVICE PROVIDER

o Benefited on account of higher ITC benefits without having control of passing the benefits o Simple Return

RESTAURANT

o Same MRP even after change in Tax Rate

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o Simple Return DISTRIBUTORS & WHOLE SELLERS

o Benefited on account of higher ITC benefits without having control of passing the benefits o Transitional Credit o Simple Return

GOVERNMENT Month GST Collection (Rs. In

crores)

July 17 92,283 Aug 17 93,590 Sept 17 93,029 Oct 17 95,132 Nov 17 85,931 Dec 17 83,716 Jan 18 88,929 Feb 18 88,047 Mar 18 89,264 April 18 1,03,458

May 2018 94,016 June 2018 95,610

Total 11,03,005

PATH AHEAD

Next Journey will be rationalization and simplification in the taxation laws and compliances. Following changes are expected in coming year. • Reduction in Tax Slabs

• Simplified Returns

• Coverage of GST to include Natural Gas and Petroleum Products?

• Centralised Advance Ruling Authorities

• Major Changes in GST Act & Rules

Conclusion : It was really challenging to implement GST and eliminate complexities of number of taxes. However, it has been once again established what you need, is determination which was demonstrated by Hon. Prime Minister & Hon. Finance Minister. This is one of the best example of Co-operative Federalism and can be repeated in number of areas. Although, there were teething issues mainly arising on account of technological glitches, implementation of GST is successful in India on the backdrop of experience of another country in the world.

I am proud to say Bizsolindia has played very vital role of creating the positivity of GST and getting the results to the trade & industry, which is otherwise also our mission.

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Taxable Event for GST

A taxable event is any event or occurrence that results in a tax liability. As we all know, prior to implementation of GST in India, there were multiple Indirect Taxes levied. The Indirect tax levied were collected by Central Government as well as State Governments. Also, there were multiple laws to levy & administer these taxes. This lead to different taxable event under the different laws. Addressing the issue of “Different Taxable Event” was at the core while designing the GST model in India. Accordingly, it was deliberated as agreed that “Supply” will be taxable event for levying the GST. In other words, if there is any “Supply”, the GST will be levied on such supply.

Scope & Meaning of “Supply”

As the taxable event for GST is “Supply”, it is of paramount importance to understand the scope of meaning of the word “Supply”. The GST Act, 2017 has defined supply in Section 7. The supply included following,

1. Supply of goods and / or services includes all forms of supply made or agreed to be made for a consideration by a person in the course or furtherance of business.

Sale Transfer Barter Exchange License Rental Lease or disposal

2. Importation of services for a consideration, whether or not in the course or furtherance of business

3. Activities specified in Schedule I, made or agreed to be made without consideration.

4. Schedule II specifies transactions which are to be treated as supply of goods or supply of services

5. Following shall be treated neither as a supply of goods nor a supply of services,

Activities Or Transactions specified in SCHEDULE III

Activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities as notified by government on recommendation of Council

In addition to above, the Government has right to notify transactions which will be treated as supply of goods and not supply of services or vice versa.

Whether the consideration is mandatory for “supply”?

The Section 7 of the CGST Act, 2017 clearly mentioned the words “consideration”. Therefore, there should be consideration for purpose of levying GST. However, the section also states that some specified transactions in Schedule I will be subjected to GST even when there is no consideration. Below is the list of the transactions which are subjected to GST even though there is no consideration.

1. Permanent transfer or disposal of business assets where input tax credit has been availed on such assets.

2. Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business:

Taxable Event in GST, Supply, Place of Supply & Valuation

Author: CA Manoj Malpani, FCA ACMA Email: [email protected] Contact : +91 99700 61039

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3. Gifts to Employees by Employer exceeding Rs.50,000/- treated as supply of goods or services or both.

4. Supply of Goods

(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or

(b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal.

5. Import of services by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business.

Apart from above specified transactions, the GST is leviable on the transaction wherein there is consideration.

GST Tax Structure in India

As mentioned earlier, the GST has merged Center as well as State levies. India designed a unique structure for levying GST in India. The structure ensured that autonomy of States / Center is not affected. GST has three levies which are levied depending upon nature of supply.

The nature of supply is decided on the basis of location of the supplier of goods / services and place of supply. If the location of the supplier of goods / services and place of supply is within the same state, then the supply is termed as “Intra State Supply” and accordingly CGST and SGST / UTGST is charged. Further, if the location of the supplier of goods / services and place of supply is in different states then IGST will be levied. Transaction of Exports / Imports are classified as inter-state and accordingly IGST is applicable on such transactions.

Place of Supply

GST is India has been designed on the principle of “destination-based consumption tax”. The place of supply is paramount to decide the nature of tax to paid and also the revenue of tax will be accrued to the state in which the goods / services are consumed. The place of supply decides, the location wherein the goods / services are consumed.

The IGST Act, 2017 has defined the place of supply of Goods / Services and Section 10 to 13 of the IGST Act, 2017 defines the place of supply.

Place of Supply for Goods

Goods Place of Supply

With movements of goods involved (whether by the supplier or the recipient or by any other person)

Location of the goods at the time at which the movement of goods terminates for delivery to the recipient

Without any movement of goods

Location where goods are located at the time when delivery takes place

Where goods are delivered before or during their movement either by way of transfer of documents of title to the goods or otherwise, to a recipient or any other person on the direction of a third person.

Principal place of business of third person

Goods installed / assembled Location at which installation / assembly has actually taken place

Goods on board a conveyance

Location where goods are taken on board

Residual Recommendation from council

Place of Supply of Goods - Import / Export

Goods Place of Supply Goods imported into India Location of the importer Goods exported from India Location outside India

GST

Intra-State

CGST SGST / UTGST

Inter-State

IGST

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Place of Supply of Services

Similar to Goods, place of supply for service has also been defined.

Nature of Service Place of Supply of Service

Services in relation to immovable property including services provided by architects, interior decorators, surveyors, engineers and other related experts or estate agents etc

Location at which the immovable property is located If the location of the immovable property is located or intended to be located outside India, the place of supply shall be the location of the recipient

Lodging accommodation by a hotel, inn, guest house, homestay, club or campsite, by whatever name called and including a house boat or any other vessel / any services ancillary to the services

Location at which the immovable property, boat or vessel is located.

Accommodation in any immovable property for organizing any marriage or reception or matters related therewith, etc

If the location of the immovable property or boat or vessel is located or intended to be located outside India, the place of supply shall be the location of the recipient

Restaurant and catering, personal grooming, fitness, beauty treatment, health services, cosmetic and plastic surgery

Location where the services are actually performed

Services in relation to training and performance appraisal

In case of registered person – location of such person. Other than registered person - location where the services are actually performed

Admission to a cultural, artistic, sporting, scientific, educational, or entertainment event or amusement park or any other place and services ancillary thereto.

Location of the event or park or other place, as the case may be


Services provided by way of organization of a cultural, artistic, sporting, scientific, educational or entertainment event etc and Services ancillary to these event

•When provided to a registered person – location of such person. •When provided to other than registered person - location where the services are actually performed.

Transportation of goods including mail or courier

•When provided to a registered person – location of such person. •When provided to other than registered person - location at which the goods are handed over for their transportation.

Passenger transportation service.

•When provided to registered person – location of such person. •When provided to other than registered person - place where the passenger embarks on the conveyance for the continuous journey. •When point of embarkation is not known at the time of issue of right to passage – location of registered person / location of recipient on records in case or location of supplier in case of unregistered person

Service on board a conveyance such as vessel, aircraft, train or motor vehicle

Location of the first scheduled point of departure of that conveyance for the journey.

Telecommunication services including data transfer, broadcasting, cable and direct to home television services:

Location where the telecommunication line, leased circuit or cable connection or dish antenna is installed.

Other specified Telecommunication Services

As per specified location.

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Banking or other financial services including stock broking.

•Location of the service receiver on the record of the service provider. •Where location of service receiver is not available, the place of supply shall be location of the supplier of services.

Insurance services.

•In case of registered person – location of such person •Other than registered person - location of the service receiver available on the records of the service provider.

Advertisement services to the central government, state government, a statutory body or a local authority meant for identifiable states

Each such State – Value will be proportionate basis / reasonable basis

Services not covered above.

When provided to registered person – location of such person. When provided to other than registered person - location of the service receiver available on the records of the service provider or if not available location of the service provider

In addition to above, the location of services has been separately defined in cases wherein the location of the recipient / supplier is outside India.

Valuation of Supply :

Generally, Valuation will be transaction value until it is supply to related person.

Valuation will be as follows :

Rule Valuation in Order Sequence

27 Value of supply of goods or services where the consideration is not wholly in money

Open market value of such supply

Sum total of consideration in money + money equivalent of consideration in other form if such amount is known at the time of supply

Value of supply of goods or services or both of like kind and quality

Sum total of consideration in money + money equivalent as determined by application of rule 4 or rule 5 in that order

28. Value of supply of goods or services or both between distinct or related persons, other than through an agent

Open market value of such supply

Value of supply of goods or services of like kind and quality

Value as determined by application of rule 4 or rule 5, in that order

Option to supplier - amount equivalent to 90% of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person

Value declared in the invoice shall be deemed to be the open market value of goods or services if the recipient is eligible for full input tax credit

29. Value of supply of goods made or received through an agent

Open market value of the goods being supplied or

90% of the price charged by the recipient to his unrelated customer,

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where the goods are intended for further supply by the said recipient

Value as determined by application of rule 4 or rule 5 in that order

30. Value of supply of goods or services or both based on cost.

110% of cost of production or manufacture or

110% of cost of acquisition

31. Residual method for determination of value of supply of goods or services or both

If value cannot be determined under rules 1 to 4 - using reasonable means consistent with the principles and general provisions of section 15 and these rules

Supplier of services can opt for this rule, disregarding rule 4

Conclusion

The term “Supply” and concept of “Place of supply” are crux for deciding levy of GST and hence one has to be very watchful to determine the levy and nature of levy.

Bizsolindia has expertise in assisting tax payers in deciding whether any supply is subjected to GST or not and nature of tax payable thereon.

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In today’s business Bill to – ship transactions are often occurrence. The main benefit of any subsequent sale during the movement of goods is exempt from tax leads to do a proper tax planning’s in current regime.

In the Bill to – Ship to model, the billing and shipping of goods are done to entities and two states.

For example :-

M/s. Sonu Ltd, a dealer in automobile goods, located in Maharashtra receives an order from M/s. Monu Ltd , located in Gujrat. The order is for the supply of 5,000 qty of automobile part, with an instruction to ship this goods to M/s. Natu Ltd (Customer of M/s.Monu Ltd), located in Karnataka.

There are two transactions involved in this example:-

Transaction-1 Transaction-2 Between Sonu Ltd. and Monu Ltd. :

Sonu Ltd. is the supplier and Monu Ltd. is the buyer. Accordingly, Sonu Ltd. will bill the transaction to Monu Ltd., and as per the instruction, ships the goods to Natu Ltd. in Karnataka.

Between Monu Ltd. and Natu Ltd. :

Monu Ltd. is the supplier and Natu Ltd. is the buyer. Monu Ltd. bills the transaction to Natu Ltd., and endorses the lorry receipt (goods shipped in a lorry by Sonu Ltd.) in favour of Natu Ltd.

Taxes:- CST 2% Taxes:- NIL

Forms:- Monu Ltd. – C Form

Sonu Ltd. – E-1 Form

Forms:- Natu Ltd. – C Form

Sonu Ltd. – Lorry Receipt

In the above illustration, Sonu Ltd. bills to Monu Ltd., and ships the goods to Natu Ltd. Sonu Ltd. issues Form E1 to Monu Ltd. as against the C form produced by Monu Ltd for availing CST @ 2%. Subsequently, Monu Ltd. bills to Natu Ltd. against C Form without charging any tax, and endorses the Lorry Receipt in favor of Natu Ltd.

Bill to – Ship to transactions in Current regime

In Bill to -Ship to transactions, there is two transaction a first sale and a subsequent sale. In the current regime, tax should be levied on both parts of the transaction.

However, to avoid tax being calculated multiple times through the course of the transaction, exemptions are provided on subsequent sales. These exemptions however, are subject to the furnishing of the prescribed forms under CST Act. To get the exemption on the subsequent sale, a declaration Form E1 has to be issued by the first seller, and C-Form has to be issued by the buyer for levy of CST at a reduced rate of 2%.

Bill to – Ship to transactions in GST regime

Under GST, the place of supply of goods is important to determine the transaction as interstate or intrastate and accordingly, the applicable taxes can be levied.

BILL TO.. SHIP TO TRANSACTIONS AND ITS PLACE OF SUPPLY IN

UNDER GST

Author: CMA Amit Devdhe, ACMA, M COM Email: [email protected] Contact : +91 9823217827

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In GST, if the goods are supplied by the supplier to the recipient on the direction of a third person, it will be deemed that the third person has received the goods, and the place of supply will be the principal place of business of such third person.

Place of supply for Bill to – Ship to transactions is defined under GST under Section 10 (b) of IGST;

(b) where the goods are delivered by the supplier to a recipient or any other person on the direction of a third person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third person has received the goods and the place of supply of such goods shall be the principal place of business of such person;

We will consider the same example in GST regime.

Conclusion

The government has adopted international standard for classification of goods / services. But “whether the the taxpayer is educated to system of classification?” is a million dollar question. The small tax payers are not equipped to understand the HSN classification and its explanatory notes making their position vulnerable for incorrect classification leading to incorrect payment of GST. The taxpayer / professionals should be careful in classifying the goods and services so that avoid future litigations.

Bizsolindia has expertise in assisting tax payers in classifying the goods / services and you can reach us for the same.

In the example, on the instruction from Monu Ltd., Sonu Ltd. ships the goods to Natu Ltd. located in Karnataka. Here, Monu Ltd. is deemed as the third person. Therefore, the place of supply will be the principal place of business of the third person i.e., Gujrat. Accordingly, Sonu Ltd. charges IGST on billing to Monu Ltd. and in second part of transaction between Monu Ltd. and Natu Ltd. will also be interstate, and IGST will be charged.

Let us discuss further with various scenarios along with its place of supply,

Supplier Bill to (Third party)

Ship to (Recipien

t)

Place of Supply

GST

Maharashtra Maharashtra Maharashtra Maharashtra CGST+SGST

Maharashtra Karnataka Maharashtra Karnataka IGST Maharashtra Maharashtra Karnataka Maharashtra CGST+SGST Maharashtra Karnataka Karnataka Karnataka IGST

Considering the GST provisions, it is very important to have an accurate determination of place of supply for below reasons:

Wrong classification of supply between interstate or intra-state and vice-versa may lead to hardship to the taxpayer as per section 19 of IGST Act and section 70 of CGST Act.

The taxpayer will have to pay the correct tax along with interest for delay on the basis of revised/correct classification.

Also, correct determination of place of supply will help us in knowing the incidence of tax.

Where wrong taxes have been paid on the basis of the wrong classification, refund will have to be claimed by the taxpayer.

Lastly, it is very important to understand first the main purpose of transaction in proposed Bill to – Ship to transactions, as it will define the place of supply under GST regime and taxes will be applicable accordingly.

Bizsolindia has expertise in assisting tax payers in consultation in chargeability of correct taxes on business transactions and you can reach us for the same.

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Introduction: In any tax system registration is the most fundamental requirement for identification of tax payers ensuring tax compliance. Registration of any business entity under the GST Law implies obtaining a unique number from the concerned tax authorities for the purpose of collecting tax on behalf of the government and to avail Input tax credit for the taxes on inward supplies. Without registration, a person can neither collect tax from his customers nor claim any input tax credit of tax paid by him. Need and advantages of GST registration:

Registration will confer the following advantages to a taxpayer:

1. He is legally recognized as supplier of goods or services.

2. He is legally authorized to collect tax from his customers and pass on the credit of the taxes paid on the goods or services supplied to the purchasers/ recipients.

3. He can claim input tax credit of taxes paid and can utilize the same for payment of taxes due on supply of goods or services.

4. To enjoy seamless flow of Input Tax Credit from suppliers to recipients at the national level.

Persons required to obtain GST registration:

Every supplier who makes a taxable supply having aggregate turnover more than Rs.20 Lacs for States other than Special Category states.

Every supplier who makes a taxable supply having aggregate turnover more than Rs.10 Lacs for

Special Category States (Arunachal Pradesh, Assam, J&K, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, HP, Uttarakhand etc.

Aggregate turnover shall include all supplies made by the taxable person, whether on his own account or made on behalf of all his principals

Supply of goods, after completion of job-work shall not be included in the aggregate turnover of the registered job worker

Every person who is registered on the day immediately preceding the appointed day

No registration required if goods / services are wholly exempt / not liable to tax

No registration required by an agriculturist, for the purpose of agriculture

The transferee, or the successor upon transfer of business as a Going Concern

The transferee in a case of transfer on account of amalgamation or de-merger of two or more companies by an order of a High Court

Any person may voluntarily get himself registered.

Persons required to obtain GST registration irrespective of threshold limit: • persons making any inter-State taxable supply

• Casual taxable persons & Non-resident taxable persons

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GST Registration

Author: CS. Anita Patil ACS, M.Com, LLB Email: [email protected] Contact: +91 8600168215


• Persons who are required to pay tax under reverse charge

• persons who are required to deduct tax at source

• persons who are required to collect tax at source

• persons who supply goods and / or services on behalf of other registered taxable persons whether as an agent or otherwise

• Input Service Distributor

• persons who supply goods through electronic commerce operator who is required to collect tax (other than on which electronic commerce operator is required to pay tax)

• every Electronic Commerce Operator

• every person supplying online information and database access, or retrieval services from a place outside India to a person in India, other than a registered taxable person

• such other person or class of persons notified by the Central Government or a State Government on the recommendations of the Council

• Every person who is registered on the day immediately preceding the appointed day

• No registration required if goods / services are wholly exempt / not liable to tax

• No registration required by an agriculturist, for the purpose of agriculture

• The transferee, or the successor upon transfer of business as a Going Concern

• The transferee in a case of transfer on account of amalgamation or de-merger of two or more companies by an order of a High Court

• Any person may voluntarily get himself registered.

Time limit for registration • Within 30 days from the date on which the person

becomes liable to registration.

• Non-Resident / Casual Taxable Person to apply for registration at least 5 days prior to commencement of the business.

• Application for extension of period of registration in case of Non-Resident / Casual Taxable Person shall be made in FORM GST REG-10 before the end of the validity of registration.

Different Forms for GST Registration Procedure: GST FORM PARTICULARS

GST REG-01 Application for New Registration GST REG-02 Acknowledgement for submission of

registration application GST REG-03 Notice to Applicant for Clarifications

w.r.t. application GST REG-04 Clarification by applicant w.r.t. above GST REG-05 Rejection of application GST REG-06 Certificate of Registration GST REG-07 Application for New Registration by

person required to deduct TDS / collect TCS

GST REG-08 Cancellation of registration w.r.t. TDS / TCS

GST REG-09 Application for New Registration by non-resident taxable person

GST REG-10 Application for registration by a person supplying online information and data base access or retrieval services from a place outside India to a non-taxable online recipient

GST REG-11 Application for extension in period operation by casual taxable person and non-resident taxable person

GST REG-12 Issue of order for Suo moto registration GST REG-13 Application for obtaining unique

identity number GST REG-14 Application for amendment in

registration GST REG-15 Order w.r.t. amendment in registration GST REG-16 Application for cancellation of

registration by registered person GST REG-17 Show cause for cancellation GST REG-18 Reply to above show cause notice GST REG-19 Cancellation of Registration GST REG-20 Order for drop the proceedings w.r.t.

Cancellation of Registration GST REG-21 Application for revocation of

cancellation of registration GST REG-22 Order for revocation of cancellation GST REG-23 Notice for rejection of revocation of

cancellation GST REG-24 Reply to SCN related to drop the

proceedings GST REG-25 Application for provisional registration

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GST FORM PARTICULARS GST REG-26 Provisional Certificate of registration to

existing registered persons GST REG-27 Notice for cancellation of provisional

registration GST REG-28 Order for cancellation of provisional

registration GST REG-29 Application for cancellation of

registration who is not liable to register under GST

GST REG-30 Physical Verification of Business Premises Report

Documents required for New Registration: 1. Photographs (wherever specified in the

Application Form) a. Proprietary Concern – Proprietor b. Partnership Firm / LLP –

Managing/Authorized/Designated Partners (personal details of all partners are to be submitted but photos of only ten partners including that of Managing Partner are to be submitted)

c. HUF – Karta d. Company – Managing Director or the Authorised

Person e. Trust – Managing Trustee f. Association of Persons or Body of Individuals –

Members of Managing Committee (personal details of all members are to be submitted but photos of only ten members including that of Chairman are to be submitted)

g. Local Authority – CEO or his equivalent h. Statutory Body – CEO or his equivalent i. Others – Person in Charge

2. Constitution of Business: a. Partnership Deed in case of Partnership Firm, b. Registration Certificate / Proof of Constitution in

case of Society, Trust, Club, Government Department, Association of Persons or Body of Individuals, Local Authority, Statutory Body and Others etc.

3. Proof of Principal Place of Business: a. For Own premises –

Any document in support of the ownership of the premises like latest Property Tax Receipt or Municipal Khata copy or copy of Electricity Bill.

b. For Rented or Leased premises – A copy of the valid Rent / Lease Agreement with any document in support of the ownership of the

premises of the Lessor like Latest Property Tax Receipt or Municipal Khata copy or copy of Electricity Bill.

c. For premises not covered in (a) & (b) above – A copy of the Consent Letter with any document in support of the ownership of the premises of the Consenter like Municipal Khata copy or Electricity Bill copy. For shared properties also, the same documents may be uploaded.

d. For rented/leased premises where the Rent/lease agreement is not available, an affidavit to that effect along with any document in support of the possession of the premises likes copy of Electricity Bill.

e. If the principal place of business is located in an SEZ or the applicant is an SEZ developer, necessary documents/certificates issued by Government of India are required to be uploaded.

4. Bank Account Related Proof: Scanned copy of the first page of Bank passbook or the relevant page of Bank Statement or Scanned copy of a cancelled cheque containing name of the Proprietor or Business entity, Bank Account No., MICR, IFSC and Branch details including code.

5. Authorization Form Also the below documents and information required for filling online data at the time of Registration: a. PAN Card of the Assessee. a. PAN Card and Aadhar Card of Authorized

Signatories. b. Email Id’s and mobile numbers of the Authorized

Signatories. c. Digital Signature for uploading the form, if

required. d. Email ID for all future correspondence from

GST. e. Mobile No for all future correspondences from

GST. f. DIN number of Directors - for company.

GST Registration – Specific Issues:

• SEZ unit and SEZ developer shall make separate application for registration as business vertical distinct from units located outside SEZ.

• PAN / TAN is mandatorily required for registration, however for GST registration of

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non-resident taxable person other document may be sufficient.

• If person fails to register, officer may proceed to register as Sue Moto registration.

• Registration or Unique Identity Number shall be deemed to have been granted if no deficiency is communicated.

• Any rejection of application for registration or the Unique Identity Number under the CGST Act / SGST Act shall be deemed to be rejection.

• Every registered person shall display his certificate of registration in a prominent location at his principal place of business and at every additional place or places of business.

• Every registered person shall display his GSTIN on the name board exhibited at the entry of his principal place of business and at every additional place or places of business.

GST Registration Number:

• After successful registration, GST number is issued state wise, PAN-based, 15-digit GSTIN as under:

Digits Particulars 1st & 2nd State Code as defined under the Indian

Census 2011 Unique Two Digit Code 3rd to 12th PAN 13th to 14th Entity Code 15th Checksum Character Amendment in GST Registration: For amendment in GST registration, there are Core field amendments and Non-Core Field Amendments. A) What are core fields? Amendments in following fields of the registration are called core fields. • Name of the Business, (Legal Name) if there is no change in PAN • Addition / Deletion of Stakeholders • Principal Place of Business (other than change In State) or Additional Place of Business (other

than change in State)

B) What are non-core fields?

Fields of the registration application except legal name of the business, Addition/ deletion of stakeholder details and principal place of business or Additional place of business are called non-core fields. Non-core field amendments are available for editing, and changes in it are auto populated in registration of the taxpayer. No approval is required from the Tax Official if any amendments are made to these fields by the taxpayers.

C) Which fields CANNOT be amended using the application for Amendment of Registration? Application for Amendment of following fields cannot be amended using Amendment of Registration option: 1. Change in PAN: Application for Amendment of Registration cannot be filed for change in PAN because GST registration is PAN-based. You need to make fresh application for registration in case there is change in PAN. 2. Change in Constitution of Business resulting in change of PAN: Application for Amendment of Registration form cannot be filed for change in Constitution of Business as it results in change of PAN. 3. Change in Place of Business from one State to other: Application for Amendment of Registration form cannot be filled if there is change in place of business from one state to the other because GST registrations are state-specific. If you wish to relocate your business to another state, you must voluntarily cancel your current registration and apply for a fresh registration in the state you are relocating your business.

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• Cancellation of registration By registered person:

Discontinuation of business Change in constitution of business Transfer of business Where person is no longer liable for

registration. By proper officer:

Does not conduct any business from the declared place of business

issues invoice or bill without supply of goods or services

contravened the provisions of the Act or the rules made thereunder

Non filing of return for continuous period of 6 months

Non filing of return for 3 consecutive tax periods in case of persons opting for compounding levy

Voluntary registration and business not commence within 6 months.

Any registration has been obtained by means of fraud, willful misstatement or suppression of facts

The registered person should be very cautious, if there is any requirements to amend vide Core / Non-Core Fields, the same should be completed immediately, otherwise there will be litigations pertaining to ITC availed w.r.t. Such additional locations which are not added in the exisiting GSTIN. We Bizsolindia have expertise in all GST compliances including obtaining GST registrations all over India; you may reach us for any assistance in this respect.

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GST Council have properly acknowledged the issued of compliances and IT infrastructure and resource limitation of small manufacturers, traders and restaurants comes through section 10 of CGST Act and amended the composition scheme time to time for ensuring ease of doing business. The basic objective of such composition scheme is to bring simplicity and reduce compliance cost for small tax payers. Following registered person having aggregate turnover in preceding financial year below 75 lakhs may opt for composition levy:-

1. Manufacturers (except of some goods specified below)

2. Traders 3. Restaurants

Turnover limit is Rs. 50 lakhs for special category states. Further, aggregate turnover includes turnover of taxable and exempt goods/ services along with exports on an all India basis. Taxes and cess levied under any of the GST acts are not to be considered for computation of aggregate turnover. Following persons are not eligible to opt for composition:-

1. Supplier of service other than restaurant. 2. Person engaged in making any supply of goods

which are not leviable to tax under GST Acts (Eg. Petrol, Diesel, alcohol for human consumption etc.)

3. Person making interstate supply for goods. 4. Person selling goods through E-Commerce

Operator who is required to collect tax at source.

Hence a person selling goods from own website can register under composition if he satisfies other conditions.

5. casual taxable person or a non-resident taxable person;

6. Manufacturer of Ice Cream, edible ice, Pan Masala, Tobacco and manufactured tobacco substitutes.

7. Where application is filed u/r 3(1) as stated below, the person must not possess any goods in stock on appointed date (22nd June 2017) which were purchased /stock transferred in inter state trade. Nor shall he possess any goods which were imported. This provision has been inserted because state government has never received any tax on such goods.

8. Person having stock of goods purchased from unregistered person and tax u/s 9(4) has not been paid.

9. Person who collects tax at source u/s 56 of CGST Act.

A person supplying goods as part of works contract will not be eligible for composition levy as works contract is termed as service under Schedule II of CGST act. In case a restaurant is supplying alcoholic liquor for human consumption, it cannot opt for composition levy as it is engaged in supply of goods not taxable under GST. Further, option for composition levy is to be exercised on an all India basis for the same PAN. Person having branch in multiple states / UT cannot opt for composition partially for one/some state only. All the business verticals registered with same PAN will be considered under composition if one opt for same.

COMPOSITION SCHEME

UNDER GST Author: CA Neha Sarda, ACA, Email: [email protected] Contact: +91 83904 88884

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Procedure for application A migrated person who wants to apply for composition should intimate in FORM GST CMP 01 electronically. This facility is already available under Services Tab of www.gst.gov.in. In case where CMP 01 is filed after the appointment date, such person shall not collect tax from the appointment date. Comprehensive table for application under composition levy:- Rule Applicability Form 3(1) Person granted registration

under provisional basis. Give details of stock in FORM GST CMP-03. Intimation for one state will be considered as intimation for pan India. Further, he cannot carry forward credit in TRAN 01.

GST CMP 01

3(2) Person who applies for fresh registration can at the time of such application opt for composition.

Part B of GST REG-01

3(3) Already registered person wanting to opt for composition shall file application before commencement of financial year and furnish statement in FORM GST ITC-03. Intimation for one state will be considered as intimation for pan India. Such application cannot be filed at anytime of the year but has to be filed before commencement of year. Further, such person shall pay amount by way of debit to electronic credit ledger the amount of tax equal to credit of all inputs and capital goods as reduced.

GST CMP-02

Intimation need not be furnished each year. Intimation once given will hold good until he satisfies all the conditions applicable to composition person. Option to apply for composition was open till 30th September 2017, effective date being 1st October 2017. Supply of goods/ specified service Once registration is granted, such person should issue Bill of Supply instead of Tax Invoice. Such bill of supply shall be issued from the effective date. No tax can be charged separately under bill of supply. Further the words “composition taxable person, not eligible to collect tax on supplies” shall be mentioned at the top of the bill of supply issued by him. Also such person shall mention the words “Composition Taxable Person” on every notice or signboard displayed at a prominent place at all his business places. Following are the tax rates applicable for various registered persons:- Sr. No Registered Person Total GST

Rate 1 Manufacturers, other than

manufacturer of Ice Cream, edible ice, Pan Masala, Tobacco and manufactured tobacco substitutes.

2%

2 Restaurants 5% 3 Any other eligible person 1%

U/s 10 of CGST Act, tax is payable on turnover in state. Hence in case a person under composition levy is supplying taxable and exempt goods, tax under composition levy is to be paid on both. One of the important drawback of person under composition levy is that such person cannot make inter state supplies. Hence such person cannot supply to SEZ. Also it should be noted that inter-state outward supply is not allowed while there is no such restriction on inter-state purchases. Compliance A person opting to levy tax under composition levy is required to file quarterly return in Form GSTR-4. Such

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GSTR-4 shall be filed by the 18th of subsequent month of each quarter. In case 3 consecutive return are not filed, a proper officer may cancel the registration. Thankfully compliance is at a very low level and will help the SMEs on focusing on innovation and developing market. Further, such person is also liable to pay tax under reverse charge u/s 9(3) and 9(4). Credit of any tax paid is not available to person under composition levy. Given that no credit is allowed for any of the inward supplies including that of tax paid under reverse charge, composition levy does heavily affect the margins. Cancellation of Registration In case where a person ceases to satisfy any of the condition mentioned above, then such person will be liable to pay tax at normal rates. For each taxable supply he will have to issue Tax invoice. Further within 7 days he will have to intimate in FORM GST CMP-04.

A person who wants to withdraw form composition levy will have to file application in FORM GST CMP-04.

If proper officer has reason to believe that registered person was not eligible for composition levy or has contravened any of its provisions may issue a notice in FORM GST CMP-05 with time period to reply within 15 days in FORM GST CMP-06. With regards to such reply, the officer shall issue an order in FORM GST CMP-07 within 30 days of receipt of reply in FORM GST CMP-06.

In case where a person withdraws from composition levy or is denied by proper officer then he shall file FORM GST ITC-01 to claim credit of goods in stock as on the date of withdrawal or the date of FORM GST CMP-07 as applicable. Further, withdrawal/ denial under one state will be applicable on pan India basis. During transition from composition levy to normal levy or vice-a-versa

provisions w.r.t. availment / reversal of ITC on stocks will be applicable.

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Need for Classification of Goods & Services

GST was implemented on 1st July 2017. Entire India is divided when it comes to commenting on successful implementation of GST. India being promotor of “freedom of speech” everyone is entitled for his / her views and rightly so.

The GST council had various options while deciding the taxes rates. One view was that all the goods & services should be taxed at one rate. There was discussion on “Revenue Neutral Rate (RNR)” and every stake holder came with its own RNR based on its old database and assumptions. Other view on the tax rates was levying different GST on the different class of goods & services. The GST council has opted for the later option and rightly so. In a country like India where there is considerable divide between poor and rich, there cannot be one tax rate for all goods & services.

As we all know, the GST council had opted for different tax rates i.e. 0%, 5%, 12%, 18% and 28%. In addition to this, the Council has decided certain exemptions which were granted by way of various notification issued time to time. Considering the different tax rates and exemptions for specific goods / services, it was important to arrive at proper classification of goods and services so that the tax payer can discharge the correct GST liability.

Classification of Goods under GST

Prior to GST, the Central Government was classifying the goods on the basis of Central Excise Tariff which was resembling the Harmonised System of Classification (HSN) for levying the Central Excise duties. Apart from these every states had their own schedule & classification for levying the VAT.

Being “one nation-one tax”, it was important to have one classification mechanism applicable for classification of goods. Accordingly, the GST Council decided to opt for “Harmonised System of Nomenclature” for classification of the goods. HSN is an international practice of adopting a uniform classification was done to facilitate a common understanding of products across countries. HSN is a multi-purpose 8 digit product coding system for classifying goods.

The Indian Customs Tariff has been designed on the basis of the HSN and hence the council decided to adopt Indian Custom Tariff for classification the goods. Accordingly, it can be noted from that the notification levying GST on goods has reference to Customs Tariff Act. One can note below line in the notification,

“In this Schedule, ―tariff item, ―heading, ―sub-heading and ―Chapter shall mean respectively a tariff item, heading, sub-heading and Chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975).”

It is important to note that the Custom Tariff has to read in accordance with the Rules of Interpretation, Section Noted and Chapter Notes.

Classification of Services under GST

Prior to GST, the services were specified / defied for levying of service tax, however there was no scientific method while classifying the services. The service tax paid under the accounting code published by the CBIC (Earlier CBEC).

For classification of the services under GST, the GST Council adopted for Central Product Classification (CPC) which is accepted internationally for classification of the services. Under the GST, the services are classified under HSN starting from “99”. The numbers after 99 represents

Classification of Goods & Services under GST

Author: CA Manoj Malpani, FCA ACMA Email: [email protected] Contact : +91 99700 61039

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the CPC codes which are internationally accepted. Recently, the CBIC has issued classification directory of services which can be referred to decide the exact classification of the services. It is important to note that the directory issued by the CBIC do not have explanatory notes. However, as the classification has been done on the basis of CPC, one has to refer the explanatory notes to CPC for correct classification of the services.

Care to be taken while classification of Goods & Services

1. The custom tariff to be used for classification of goods,

2. The section notes and chapter notes to be referred before reading the entries.

3. For services CPC classification and explanatory noted to be referred.

4. Every relevant entry has to be read in plain and simple terms. One should not make any assumptions and presumptions.

5. The coverage of an entry has to be construed strictly.

6. For availing benefits under an exemption notification, the conditions have to be strictly complied.

7. When more than one exemption is available, the taxpayer can opt for that notification which is more beneficial.

8. The tax payer can refer the settled case laws on classification of goods.

9. Do not simply rely on “Google Search” for classification of goods / services.

Reporting requirement in GST returns

HSN wise summary mandatory for tax payers having turnover above 1.5 Cr. The HSN reporting mandatory as under,

▪ upto 1.5 Cr : Not mandatory

▪ More than 1.5 Cr but upto 5 Cr : 2 digits

▪ More than 5 Cr : 4 digits

In GSTR-1 returns, the taxpayers are required to summaries their outward supplied on the basis of HSN classification of goods and services. The HSN summary helps Government to formulate tax policies, formulate schemes etc.

Conclusion

The government has adopted international standard for classification of goods / services. But “whether the the taxpayer is educated to system of classification?” is a million dollar question. The small tax payers are not equipped to understand the HSN classification and its explanatory notes making their position vulnerable for incorrect classification leading to incorrect payment of GST. The taxpayer / professionals should be careful in classifying the goods and services so that avoid future litigations.

Bizsolindia has expertise in assisting tax payers in classifying the goods / services and you can reach us for the same.

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On the event of 1st anniversary of GST rollout, it is important to have a brief look on where we have reached so far and the path ahead. One of the important and tedious concept of GST is reverse charge mechanism. In the normal course of business, the person supplying goods or services is required to deposit GST. But by virtue of Sec 9(3) & 9(4) of the CGST Act, 2017 and in terms of Sec 5(3) & 5(4) of the IGST Act, 2017, the liability to deposit GST has been vested on recipient of goods & services under Reverse Charge. In normal course, the supplier of goods or services is liable to pay tax on its supplies. But by virtue of aforesaid sections, the recipient is liable to pay GST under reverse charge. As defined under section 2(98) of CGST Act, 2017, “reverse charge” means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or subsection (4) of section 5 of the Integrated Goods and Services Tax Act; Reverse charge under Section 9(3) of CGST Act In terms of provision of this section, the government may on recommendation of council, specify the categories of goods and services, the tax on which shall be paid on reverse charge basis by the recipient of such goods/ services. With reference to this section, Notification No. 04/2017 – Central tax (Rate) has been issued stating the list of goods for which GST is payable under Reverse charge by the recipient of such goods. Some of the goods covered are Cashew nuts, not shelled or peeled, Tobacco leaves, Silk yarn etc.

Further Notification No. 13/2017- Central Tax (Rate) has been issued to notify services for which tax is payable by the recipient of such services. Some of the services covered under notification are Supply of Services by a goods transport agency (GTA) in respect of transportation of goods by road to specified entities with specified exemptions, services provided by advocate, Services provided by way of sponsorship to any body corporate or partnership firm, Services supplied by a director of a company or a body corporate to the said company or the body corporate etc. It is pertinent to note that for provider of such goods or service services on which tax is payable under reverse charge, such outward supplies are to be treated as exempt supply. Hence the provider of such outward services is not eligible to take credit of input and input services exclusively used for providing such out services. Also the supplier of goods/ services should reverse common credit as per provision of Rule 42 and 43 of CGST Rules, 2017. Also the supplier should mention in its tax invoice that GST on such invoice is to be paid under reverse charge by the recipient of service. As for the implications in the recipient, provision of Section 9(3) of CGST Act, 2017 clearly spell out that all the provision of the act shall apply to recipient as if he is the person liable for paying the tax in relation to the supply. Hence it is the liability of recipient to discharge tax on such inward supplies. The recipient of such supply should disclose the value of such inward supplies in table 3.1 (d) i.e. Inward supplies (liable to reverse charge) of GSTR 3B. Amount disclosed in table 3.1(d) form part of total outward liability of the recipient. Similarly the amount as disclosed under Table 3.1 (d) is to be entered under table 4 (3) under Inward supplies liable to reverse charge. This will enable the recipient to claim credit of GST paid under reverse charge. Based on the invoice of

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Reverse Charge Mechanism under GST

Author: CA Swaraj Chhallani. ACA Email: [email protected] Contact : +91 98225 76041


supplier the recipient is also liable to find correct HSN/ SAC of the goods / Services and disclose the same in inward summary in GSTR 2 as applicable. Reverse charge under Section 9(4) of CGST Act Under the provision of this section, tax in respect of supplies from unregistered persons to registered person shall be paid by the recipient under reverse charge. In this case as the supplier is not registered under GST, he is not liable to issue tax invoice or charge GST. In this case also all the provisions of Act apply to recipient as if he is the person liable for paying the tax in relation to the supplies. This provision is commonly known as URD RCM. No doubt the provision has huge ramifications of the overall business practices of the tax payers and has forced all to have introspection on procurement policies. In this regards Notification was issued to specify a limit of Rs. 5,000/- per day from any or all the suppliers as threshold limit for which no tax was payable under RCM. Notification No. 8/2017- Central Tax (Rate). Later on vide Notification No. 38/2017- Central Tax (Rate) Dt. 13th October, 2017 the central government has amended the erstwhile Notification 8/2017 to remove the limit of Rs. 5,000/- and has effectively made all such transaction exempt from GST. Later on through two different notifications the date of such exemption was extended till 30th September 2018. Notification No. 12/2018-Central Tax (Rate), Dt. 29-06-2018. Time of Supply in case of Goods Time of supply in case of supplying goods when tax payable under Reverse Charge, whichever is earliest from the following dates:-

the date of the receipt of goods; the date of payment as entered in the books of

account of the recipient; the date on which the payment is debited in his

bank account, whichever is earlier; the date immediately following thirty days from

the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier

Time of Supply in case of service Time of supply in case of supplying services when taxes payable under reverse charge mechanism, whichever is earliest from the following dates:-

the date of payment; or

the date immediately following after sixty days from the date of issue of the invoice by the supplier; whichever is earlier.

However, if it is not possible to find out the time of supply in aforementioned cases, the time of supply will be considered the date of entry in the books of account of the recipient of the supply. Manner of Payment As per section 49(4) of CGST Act, 2017, input tax credit can be used for payment of output tax only. Therefore tax under RCM can be paid through cash only without utilizing ITC. Though not new for many tax payers, the provision of URD RCM has given some pain to the industries. Hence it is not surprising that the government has decided to extent the exemption. As a business strategy, companies should ensure that the system implementation is done in an appropriate manner and a through system audit is done to ensure that HSN and SAC are captures even in case of purchases from unregistered persons.

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Input Tax Credit Implementation of GST w.e.f. 01st July 2017 has revolutionized the Indian indirect Tax system and Input Tax Credit is one of important factor which has helped in eliminating the cascading effect of taxes. Input Tax Credit (ITC) means credit availment of credit of Goods and Services tax charged on any supply of goods or services or both made to registered person which are intended in the course or furtherance of business. Condition for Availment of ITC

1. Person must be registered as a taxable person under GST

2. Said inputs and input services are used or intended to be used in the course or furtherance of business

3. Possession of tax invoice or debit note issued by registered supplier

4. Registered person has received goods or services or both

5. Returns are furnished 6. When goods are received in installments or lots then

ITC can be availed on receipt of last installment or lot 7. Payment to be made to the suppliers within 180 days

from the date of invoice of amount of goods or services along with tax

8. ITC is not allowed when depreciation of tax component is claimed of a capital good

Time limit for Availment of ITC ITC can be availed within the time limit as mentioned below, whichever is earlier:

a. Furnishing of return for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or

b. Furnishing of annual return

Negative list of ITC ITC is not allowed in w.r.t following:

1. GST paid on purchases of motor vehicle will not be entitled as credit to company

2. GST paid on any expenses like Food and Beverages, Outdoor Catering, Beauty Treatment, Health Services, Cosmetic and Plastic Surgery

3. GST paid on any membership expenses of club, health and fitness center

4. GST paid on services taken for Rent-a-cab, Life Insurance, Health Insurance except where the Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force

5. GST paid on expenses on travel benefits extended to employee on vacation

6. GST paid on expenses related on Works contract services related to construction (other than plant and machinery)

7. GST paid on goods & services used for construction of immovable property (other than plant and machinery)

8. GST paid by composition dealer 9. GST on goods received by non-resident person 10. GST paid on goods & services used for personal

consumption 11. GST paid on inputs / goods which are Lost, Stolen,

Destroyed, Written Off, Gifts, Free Samples 12. When GST is paid on inputs and inputs services used

for providing exempt supplies Reversal of ITC When a taxable person is using inputs or input services for providing taxable including zero rated supplies and partly for effecting exempt supplies, the ITC in such case is restricted

INPUT TAX CREDIT & JOB WORK

Author: CA. Vinay Jain, ACA, B.Com Email: [email protected] Contact : +91 86001 08905

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to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.

Particulars Treatment Add: Total Input Tax

Credit T

Less: Exclusive Input Tax Credit

T1 Fully reverse

Less: Exclusive for exempt supplies

T2 Fully reverse

Less: IT not eligible u/s 17(5)

T3 Fully reverse

Less: Other than Exempted Supply

T4 Fully avail

Net Common Credit C Refer below Less: Credit attributable to

exempt supplies – reverse in t/o ratio of respective state

D1 Fully reverse

Less: Credit attributable to non-business - reverse 5% of C

D2 Fully reverse

Net eligible common credit (C-D1-D2)

Fully avail

Particulars Treatment

Add: Total Input Tax Credit n CG

T

Less : Exclusive for other than business / exempt supplies

No credit in elec. Credit ledger

Less: Exclusive for taxable supplies

Full credit in elec. Credit ledger

Net Common Credit of CG

Tc Avail equally every month for 60 months

Less: Credit attributable to exempt supplies – reverse in t/o ratio

Te Reverse every month for 60 months

ITC w.r.t. inputs and capital goods sent to job worker 1. Taxpayer will have to ensure no inputs or capital goods

can be sent for job work without intimation. 2. Principal is entitled to take ITC of input tax on inputs even

if the inputs are directly sent to a job worker for job-work without being first brought to his place of business

3. Inputs which are sent to job worker should be received by principal within the period of 1 year from the date it is sent

4. Necessary applicable GST will have to be paid on the scrap generated and dispose off from the job worker’s place.

5. The goods can be sent from one job worker to another job worker directly. Similarly, it can be supplied / or exported from job worker’s premises subject to ensuring proper procedure is followed.

6. Principal is allowed to avail ITC on the capital goods sent to job worker for job work

7. Principal should receive the capital goods within the period of 3 years of being sent out else it will be treated that such capital goods are supplied to job worker by principal from the day it was sent and GST is payable on same along with interest

Sequence of Utilization of ITC Provisional Credit: Any such credit received on inward supplies is provisional till the time, GSTR-2A do not match with inward supplies accounted in the books of account & tax is paid by the supplier. Conclusion Registered person needs to ensure that there is proper system in place to be compliant with the various provision of ITC and at the same time he is not deprived of the eligible ITC and burdened with the cost due to negligence at any point of time.

Bizsolindia provides the matching tool and also necessary advisory and documentary support to ensure 100% compliance of law and no loss of ITC.

IGST

CGST

SGST/ UTGST

CGST

IGST

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SGST / UTGST

IGST

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Return means statement of information (facts) furnished by the taxpayer to tax administrators at regular intervals in which detail of Outward Supplies, Inward Supplies, Deductions, Exemptions is to be reported.

Filing of GST returns helps in determination of tax liability of the return filer and at the same time it also has a huge bearing on determination of tax liability of other persons with whom the former has entered into taxable activities.

All registered persons under GST must file monthly/quarterly and annual GST Returns based on the type of business.

The basic feature of the return mechanism in GST include electronic filing of returns, uploading of invoice level information and auto population of information relating to ITC from returns of supplier to that of recipient, invoice-level information matching & auto reversal of ITC in case of mismatch. The returns mechanism is designed to assist the taxpayer to file returns & avail correct ITC.

In any case all GST returns have to be filed online only using either offline GST return tool and uploading of JSON file or punching the details online on GST portal.

Return Form Particulars Who should File Interval Due Date GSTR-1 Details of Outward

Supplies of taxable goods and/or services effected

All registered persons including casual registered persons except ISD, NRTP, Composition Taxpayer, Tax Deductor, ECO, Supplier of OIDAR services

Monthly exception Quarterly for those whose aggregate turnover is up to Rs 1.5 crores

10th of the next month

GSTR-3B (As GSTR-2 & GSTR-3 has been currently suspended, GSTR-3B has

Details of Outward Supplies, Inward Supplies liable to RCM & Input tax credit availed.

All registered persons including casual registered persons except ISD, NRTP, Composition Taxpayer, Tax Deductor, ECO, Supplier of OIDAR services

Monthly (Nil return if no supplies effected


Returns Under GST

Author: CA Sourabh Lahoti, ACA, M COM Email: [email protected] Contact : +91 9423866197

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Return Form Particulars Who should File Interval Due Date been introduced as a summary return)

during a period)

GSTR-4 Return for Composition Taxable person

Composition Taxpayer Quarterly (Nil return if no supplies effected during a period)


GSTR-5 Return for Non-Resident Taxable person

Registered NRTP Monthly (or a part of month)

20th of the next month or 7th day after the last day of validity of registration, whichever is earlier

GSTR-5A Return for Non-Resident Persons providing Online Information & Database Access or Retrieval Services

OIDAR Monthly (or a part of month)


GSTR-6 Return for Input Service Distributor

ISD Monthly (or a part of month)


GSTR-8 Details of Supplies effected through E-commerce operator & the amount of tax collected.

E-commerce operator (not being an agent)

Monthly 10th of the next month

GSTR-9 Annual Return Form – Format yet to be finalised

All registered persons except casual registered persons , ISD, NRTP, Tax Deductor, ECO

Annually 31st December of next financial year

GSTR-9A Annual Return Composition Taxable Person


GSTR-9C Annual Return (Audited by CA / CMA)

All registered persons having turnover more than Rs. 2 Cr.


GSTR-10 Final Return Person whose registration has been cancelled or surrendered

Once when registration is cancelled or surrendered

Within 3 months of the date of cancellation or date of cancellation order, whichever is later.

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Return Form Particulars Who should File Interval Due Date GSTR-11 Details of inward

supplies to be furnished by a person having UIN & claiming refund

Person having UIN Monthly 28th of the month following the month for which statement is filed

ITC-04 Details of challans in respect of goods dispatched to a Job worker or received from a Job worker or sent from one job worker to another

Registered Taxable person sending inputs & capital goods to Job worker

Quarterly 25th of the month succeeding the said quarter

*Abbreviations: - ISD – Input Service Distributor - NRTP – Non-resident taxable person - ECO – E-Commerce Operator - OIDAR – Online Information access and Database Services

Return once filed cannot be revise in GST regime, whatever rectifications of errors/omissions is allowed in the subsequent returns. However, no rectification is allowed after furnishing the return for the month of September following the end of the financial year to which such details pertain or furnishing of the relevant annual return, whichever is earlier. GSTR-2, GSTR-3, GSTR-7 & GSTR-9B are suspended till further notice. Bizsolindia has expertise in assisting tax payers in GST return compliances & timely filing of returns you can reach us for the same.

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Bizsol GST Returns Compliance Tool

Key features: -

Comprehensive Dashboard giving summary of filing status and issues Reconciliation of data as per Books of accounts, GSTR 1 and GSTR 3B Complete data management in one file for easy review in the future Just share your reports as they are from your system and we will generate & file the return Simple, Smart Way for GST return compliances As per requirement of company comprehensive tool design You can reach us for avail such smart services from this tool

GSTR 1•Outward supplies

GSTR 3B•Summary Return

GSTR 9•Annual Return

GSTR 2A•Reconcialition

GSTR 4•Componding Tax

ITC 4•Job work return


GST - a transformation, though in the indirect tax regime, but has had a major impact on many. Businesses had to go through a restructuring phase in their processes. Tax professionals had to unlearn, unwind their experience and re-learn, re- create their experiences with GST parlance. Information technology being the back bone, needless to say has definitely played a vital role during this revolutionary time and has put the technocrats on toes. GST has got in acute transparency in the business transacted throughout with the aid of information technology. This have had their baby steps in the earlier tax regimes as well to the extent of online filing of returns etc. but, the same was not completely digitized to the extent done in GST. Hats off to team GSTN (Goods and Service tax Network) for facilitating in the required infrastructure. GSTN has something for everyone, if you have lesser volume of transactions you can online feed in your data on their portal, if you are a medium sized organization you have an offline tool which facilitates bulk upload of data, but if you have huge amount of transactions then, you need the help of technical experts like us in the field who act as connectors between yourself and the GSTN portal. GSP’s (Goods Service providers) and ASP’s (Application Service Providers) perform this vital role of such connectors. Connectors basically take data from the user’s process, convert and packet it in the required format for transportation on the GST portal. In the initial phases of GSTN going live, many strong reactions were getting thrown from the industry such

as data not getting uploaded, server being crashed, so on and so forth. With my experience of around last 13 years handling and developing similar nature of data dominant technical systems relating to the automation of the crucial document compliances , tax calculations , maintenance of credit ledgers required for Export Oriented Units, SME’s under EXIM schemes etc, I have noticed a typical tendency of the users to generally put all the failures of the system implementation on the technical capabilities of the system , but I would like here to bring to the notice of the readers that any system design works on base fundamental logic relating to the functionality to be implemented and is bound by the rules defined by business , hence needless to say the systems successfully process only that data which is in line with the system requirements and eventually driven by the business functions. If the data input given to the system is not as required, it is bound to throw it out giving appropriate alerts, and if it does not, I personally consider this to be a indiscipline system taking any garbage in and throwing garbage out. Any system takes time to evolve and definitely goes through teething troubles and GSTN system is no exception to this and had some concerns initially relating to submission and filing of the returns, but we need to appreciate the efforts taken by the entire team in giving timely support for any technical hitches faced ensuring non-stop processing of the data on the portal. Team GSTN was aptly prepared for well in advance with anticipated huge amount of invoice uploads and server capacities required.

TECHNOLOGY IN GST

Author: Mr. Rajeev Kabra, B.Sc., MBA Email: [email protected] Contact : +91 98900 66350

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BizsolIT is an ASP and has had the experience of processing huge amount of data for its esteemed clientele, and would like to put it black and white here that we have been able to seamlessly upload all such data on the portal with minimal difficulties. Mostly the uploads as mentioned get affected due to wrong data like incorrect GSTIN, invalid customer GSTIN, invoice series length beyond of what has been prescribed, incorrect decimal values, wrong place of supply etc. We analyse all these foreseen hurdles and correct them before data transport to have minimal obstructions for uploads. Still many a times we are left with many other logical inconsistencies which get rejected on the portal, like for example incorrect invoice number tagged in case of credit debit note upload. Beyond this still there is a huge chance of data getting uploaded incorrect, though it may have passed all the technical directives of GSTN, for example an invoice gets uploaded as INV2018001 and the number on the actual invoice being INV2018/001. Now, how does it matter, it matters not to the registered person who has uploaded the invoice but, to the counterparty GSTIN to whom the invoice is issued, as the number on his invoice and that uploaded does not match in GSTR2, he gets exposed to the risk of losing his credit. Here comes in picture BizsolIT’s unique reconciliation module which helps to reconcile all such cases of pattern mismatch, value mismatch, to maximum accuracy. Another important aspect being e-way bill powered by NIC, which helps in online tracking of movement of goods, acts as a strong control point. Like returns NIC also has provided online creation of e-way bill and also a bulk upload of invoice data for auto generation of e-way bills through ASP/GSP services. Point to note is all these data transportation mechanisms provided by NIC as well as GSTN, work in an absolute secured way, with no threats of data leakages. A small point to note, for ease of life in GST, for all of us to remember is, absolute discipline in maintenance of records and processes to avoid data modifications and reconciliations at the last moment of return filing. Wherever data handling or processing is done through ERP’s, avoid any manual data maintenance and adhere to 100 % data processing through ERP’s.

Over and all a huge round of applaud to all the hard work put in by the GSTN technical team for being a very strong facilitator in rolling out GST and standing as a strong support and building a strong responsive mechanism to cater to the frequent changes got in by GST law during the past one year.

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Filing GST returns…??

As all GST returns have to be filed online only using either offline GST return tool or punching online on portal, it has all possibilities to get error if you have selected to upload the return using offline GST return tool using either “Excel template” or “CSV files”.

Unfortunately, GST return preparation tool will generate JSON file even if errors contain in the data entered but after uploading the same file on portal after some time you may get error status and you may get frustrated or even miss out the due date of filling the return.

I have complied possible error and suggestions while filing of GST returns;

Sr.No. Possible Error Suggestion/Action to be taken 1 Jason file uploaded

successfully with no error report but less invoices updated on GST portal

1. Values accepted only up to 2 decimal point. More than 2 decimal figures will not be updated on online portal. Round up values in this manner only

2. Cross tally total invoice numbers uploaded and reflected in online portal

3. This error is due to wrong GST number of customer in Jason file 4. Cross tally for total turnover details and aggregate turnover details

as same is not reflected when Jason file is uploaded 2 GST number is not correct Utmost care must be taken while uploading the details in offline tool for GST numbers. It should be always validated well from GST portal

3 Error in Json structure validation

1. Punching of state name instead of selecting from dropdown in excel utility

2. Multiple tax rate in one invoice but same has punched with single line

3. Wrong Port code or Shipping bill number 4. In case of exports without payment of duty - selecting GST rate

other than 0% 5. No special character should be present in any cell 6. Ensure that GSTIN is mentioned in the JSON file.

JSON file errors & Possible Suggestions/Actions to be taken

Author: CA Amit Devdhe, ACMA, M COM Email: [email protected] Contact : +91 9823217827

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Sr.No. Possible Error Suggestion/Action to be taken 7. Ensure that you have uploaded the most recent and correct JSON

file in the GST Portal under the correct GSTIN. 8. If the problem still persists, download the latest version of the

GST Offline return tool or GST software and prepare the JSON file

4 No Gross turnover details reflecting after uploading JSON file

Cross tally for total turnover details and aggregate turnover details as same is not reflected when Jason file is uploaded. You are required to punch the same online and save the same.

5 No documents issued reflected in Table no. 13

Cross tally for document issued during the period details (Table no.13) as same is not reflected when Jason file is uploaded. You have to update and save and wait for some time to update the same. 6 No section data or Gross

Turnover is available to process the request

If you’re filing a NIL return without any invoices, you need to punch in table no.8 all values to 0 (again) then save the return. Error will be resloved 7 The GSTIN is invalid.

Please provide a valid GSTIN

1. Download JSON report and open in Word Doc 2. Search for the error number ‘RET191113’ 3. You will see the invoices where the issue has occurred. 4. Note the invoice numbers 5. Correct the GSTIN and then re-upload to GSTN portal

8 The rate entered is not valid according to the Rate List

You must have not entered correct tax rates. Kindly round off the tax rate before uploading the same in excel utility or CSV file.

9 Invoice number does not exist. Please enter a valid Invoice number.

Invoice Number should be alphanumeric, a maximum of 16 characters in length, and can contain only ‘-’ or ‘/’ as special characters. Please check that all invoice numbers follow this format.

10 Invoice already exist with different CTIN or same CTIN. Please delete the existing invoice and re-upload again

1. Check if the invoice is already uploaded on govt portal: 2. Ignore the error if the invoice is uploaded and you don’t need to

make any changes 3. To make changes, delete the old invoice on the government

portal. 4. Upload the changed invoice with proper JSON file

11 Date is Invalid. Date of invoice cannot be before registration date.

1. This is possible that invoice date you have mentioned is earlier than the date on which your customer has obtained their GSTIN registration.

2. Delete the these invoices 3. Enter these invoices to B2C(S) section 4. Your client may not be eligible for ITC in such cases

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Further, if you are finding out the error from JSON file (by opening it on word doc) below mentioned error list will be useful;

Sr.No. Error Description Error Code 1 The GSTIN is invalid. Please provide a valid GSTIN RET191113 2 No section data or Gross Turnover is available to process the request RET191148 3 The rate entered is not valid according to the Rate List RET191175 4 Date is Invalid. Date of invoice cannot be before registration date. RET191114 5 Error in Json structure validation RET191106 6 Do enter the correct shipping bill date that is on or after Invoice Date

and on or before today's date RET191176

7 Invoice number does not exist. Please enter a valid Invoice number. RET191115 8 Invoice already exist with different CTIN or same CTIN. Please delete

the existing invoice and re-upload again RET191133

9 Original Invoice is Invalid. Original invoice cannot be tracked. Please enter correct invoice number and date.

RET191124

10 The Place of supply and state code of the Supplier should be different for Inter State supply

RET191179

Lastly, filing of correct return is utmost important in GST regime as it will affect the subsequent users returns. While filing of GST returns one must look for these errors and carefully eliminate these errors for successfully filing of GST returns without any errors. Happy error free filing of returns. Bizsolindia has expertise in assisting tax payers in GST return compliances & timely filing of returns you can reach us for the same and Bizsolindia has developed various tools to do business with ease, which includes HSN & SAC Rate Finder, Refund Tool, Matching Tool, Returns Compliance Tools, which will have immense usefulness to all tax payers.

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Goods are imported in India and normally Bill of Entry for home consumption is filed. However, there will be a cases, where one needs to study the applicability of duty.

Type of Sale Documents Applicable Rate of Duty Importation Bill of Entry Basic Customs Duty + IGST Sale from SEZ & FTWZ Bill of Entry Seller will file the Bill of Entry on behalf of Buyer and

pay Basic Customs Duty + IGST High Sea Sale Commercial Invoice

High Sea Sale Agreement Buyer will file the Bill of Entry and pay Basic Customs Duty + IGST

Sale from Public Bonded Warehouse or Private Bonded Warehouse

Commercial Invoice from Seller to Buyer

Buyer will file the Bill of Entry for Home Consumption and pay Basic Customs Duty + IGST and also Seller will charge the IGST to the Buyer over & above IGST charged on Commercial Invoice in accordance with Board Circular No. 46/2017-Customs dated 24-11-2017

Let us analyze the legal provisions for applicability of GST in each case of sale. Importation : “India” has been defined u/s 2(56) of CGST Act 2017 & As per Section 7 (2), Supply of goods imported

into India, till they cross customs frontier of India, shall be treated to be supply of goods in course of inter-State trade or commerce. Further as per Section 8 (1) (ii), goods imported into the territory of India till they cross the customs frontiers of India will not be treated as Intra State supply of goods. Further, Section 3(7) of Customs Tariff Act 1975 which is reproduced below : Any article which is imported into India shall, in addition, be liable to Integrated Tax at such rate, not exceeding forty percent. As is leviable under section 5 of the Integrated Goods & Services Tax Act 2017, on a like article on its supply in India, on the value of the imported article as determined under section (8). In view of the above, on importation of goods and clearance from the port of importation will attract IGST over & above Basic Custom Duty.

Sale from SEZ and FTWZ :

In accordance with Rule 11(11) of SEZ Rules 2006, SEZs are deemed to be Port and they are included in Section 7 of the Customs Act 1962 in accordance with the provisions of Section 53 of the Customs Act 1962, Since, SEZ Act & SEZ Rules & Customs Act 1962 and rules made thereunder includes SEZ & FTWZ as port, basic custom duty + IGST and

IMPORT & GST

Author: CA Preeti Kulkarni, ACA, B.Com Email: [email protected] Contact : +91 98607 91783

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any other applicable duties will be required to be paid in the same line as if imported from Port of Importation, airport, inland container depot, land customs station.

High Sea Sale: Separate Article is inserted by my colleague in this GST Special Bulletin. Sale from Public Bonded Warehouse or Private Bonded Warehouse As per Section 2(4), “customs frontiers of India” means the limits of a customs area as defined in section 2 of the

Customs Act, 1962. Further as per Section 2(11) "customs area" means the area of a customs station and includes any area in which imported goods or export goods are ordinarily kept before clearance by Customs Authorities. Also, as per Section 2(13) "customs station" means any customs port, customs airport or land customs station;

Considering the definition of customs frontier, customs area and customs station, it can be concluded that the Bonded warehouse is a customs area wherein the goods are kept before clearance by Customs Authorities. It is therefore clear that when goods are stored in a Bonded Warehouse, the goods have already been imported into India.

As per Section 7(2), Supply of goods imported into India, till they cross customs frontier of India, shall be treated to be supply of goods in course of inter-State trade or commerce.

Thus, the sale from Bonded warehouse will be covered under Section 7(2) since the limits of the area of a customs station in which imported goods or export goods are ordinarily kept before clearance by customs authorities are not crossed i.e. customs frontier of India are not crossed.

CBEC has also taken the same view in the Circular No. 46/2017-Customs dated 24-11-2017 but CBIC further issued the circular reverting their stand vide their circular number 3/1/2018-IGST dtd. 25.05.2018, wherein it has been stated that Quote 6. It is therefore, clarified that integrated tax shall be levied and collected at the time of final clearance of the warehoused goods for home consumption i.e., at the time of filing the ex-bond bill of entry and the value addition accruing at each stage of supply shall form part of the value on which the integrated tax would be payable at the time of clearance of the warehoused goods for home consumption. In other words, the supply of goods before their clearance from the warehouse would not be subject to the levy of integrated tax and the same would be levied and collected only when the warehoused goods are cleared for home consumption from the customs bonded warehouse. 7. This Circular would be applicable for supply of warehoused goods, while being deposited in a customs bonded warehouse, on or after the 1stof April, 2018. Unquote

The taxability of the said transaction will be as under:

Particulars Customs Duties

Valuation IGST / CGST + SGST

Valuation

Filing of BOE for warehousing by A Ltd

NIL Assessable value needs to be determined in accordance with Section 14 (1) of the Customs Act, 1962 - value at the time of import should be considered which is the transaction value of such goods, i.e. the price actually paid or payable for the goods when sold for export to India for delivery at the time

NA NA

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Particulars Customs Duties

Valuation IGST / CGST + SGST

Valuation

and place of importation read with valuation rules

Sale of A Ltd to B Ltd and filing of BOE for home consumption by B Ltd

BCD + IGST

Value at the time of import should be considered. Since Bond to Bond Bill of Entry is already made wherein the assessable value is already arrived at by adding landing charges, there will not be a requirement of determining the assessable value at time of bill of entry for home consumption and the assessable value at time of warehousing will be considered for determining assessable value for home consumption.

NA NA

It is pertinent to note the Supreme Court Decision in case of M/s Ashoka Hotel Vs Assistant Commissioner of

Commercial Taxes where in it is held that when the goods are kept in bonded warehouses, it cannot be said that goods have crossed the customs frontiers of India. The goods are not cleared from the customs till they are brought into India by crossing the customs frontier. This case is on the pretext that the duty-free shops of the appellant are beyond the customs frontiers of India and sale takes place before the goods crossed the customs frontiers of India i.e. outside India and hence outside purview of the State Tax. Para 23: “Looking to the afore stated legal position, it cannot be disputed that the goods sold at the duty-free shops, owned by the appellant, would be said to have been sold before the goods crossed the customs frontiers of India, as it is not in dispute that the duty free shops of the appellant situated at the 13 International Airport of Bengaluru are beyond the customs frontiers of India i.e. they are not within the customs frontiers of India Para 30: “They again submitted that `in the course of import' means `the transaction ought to have taken place beyond the territories of India and not within the geographical territory of India'. We do not agree with the said submission. When any transaction takes place outside the customs frontiers of India, the transaction would be said to have taken place outside India. Though the transaction might take place within India but technically, looking to the provisions of Section 2(11) of the Customs Act and Article 286 of the Constitution, the said transaction would be said to have taken place outside India. In other words, it cannot be said that the goods are imported into the territory of India till the goods or the documents of title to the goods are brought into India. Admittedly, in the instant case, the goods had not been brought into the customs frontiers of India before the transaction of sales had taken place and, therefore, in our opinion, the transactions had taken place beyond or outside the custom frontiers of India.”

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Section 7(2) specifically covers those cases where goods are imported into India but have not crossed the customs

frontiers. Therefore, this case law will not be relevant in GST Scenario. To conclude, even when, Title of property changes in the Public Bonded Warehouse and private Bonded Warehouse, there will be no impact of double taxation. In other words, IGST will be paid only once and only once credit will be available.

**********

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High Sea Sale: High Sea Sale is very common trade practice where original buyer of goods sale those goods to third party before the goods are entered into customs clearance. It is the sale of goods which is made after the goods cross the Custom Barriers of the Foreign Nation but before crossing (entering) the Custom frontiers of India by way of transfer of document of title. High sea sales is a sale carried out by the actual consignee (i.e. the consignee shown in the Bill of Lading) to another buyer while the goods are on high seas or after their dispatch from the port of loading and before their arrival at the port of discharge. High Sea Sales’ is a common trade practice whereby the original importer sells the goods to a third person before the goods are entered for customs clearance. This type of sale can be carried out number of times before actual filing of Bill of Entry. After the High sea sale of the goods, the Customs declarations i.e. Bill of Entry etc is filed by the person who buys the goods from the original importer during the said sale. For example, if a buyer in India purchases iron scrap from China and while the shipment is in transit, the goods are sold to another person. This transaction would be termed as high sea sales. Hence, the high sea sales agreement / contract should be signed after dispatch of goods from the origin and prior to their arrival at destination. On concluding the high sea sales agreement, the bill of lading should be endorsed in favour of the buyer. The title of the goods transfers to the buyer and bill of entry is also filed in the name of buyer.

Pre-GST Taxation Regime:

Prior to GST, CBEC has issued various instructions regarding high sea sales appropriating the contract price paid by the last high sea sales buyer into the Customs valuation [Circular No. 32/2004-Cus. dated 11-5-2004 refers]. Such sale was considered as sale in the course of import into territory of India and was not subjected to sales tax. Before issue of Custom Circular 33/2017 all inter-state transactions are subject to IGST. High sea sales of imported goods are akin to inter-state transactions. Owing to this, it was presented to the Board as to whether the high sea sales of imported goods would be chargeable to IGST twice i.e. at the time of Customs clearance under sub-section (7) of section 3 of Customs Tariff Act, 1975 and also separately under Section 5 of The Integrated Goods and Services Tax Act, 2017.

Post- GST Regime:

Indian taxation is governed through Article 286 of Constitution of India. In GST regime, no law of a State has the authority to frame law w.r.t. supply of goods or services or both in the course of import of goods or services or both into the territory of India. Only Parliament has the authority to formulate principles for determining when supply of goods or services or both take place in the course of import into territory of India. Therefore, such expression could be explained in IGST Act and not in other GST laws.

GST Impact on High Sea Sale Transaction

Author: CA Abhishek Malpani, FCA, B.COM Email: [email protected] Contact : +91 94229 27642

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Legal Provisions:

Important Definitions as per IGST: • Section 2(4), “customs frontiers of India” means the limits of a customs area as defined in section 2 of the Customs Act, 1962 • Section 2(10) ‘‘import of goods” with its grammatical variations and cognate expressions, means bringing goods into India from a place outside India Important Definitions as per CGST Act: • Section 2(56) “India” means the territory of India as referred to in article 1 of the Constitution, its territorial waters, seabed and sub-soil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976, and the air space above its territory and territorial waters. Important Definitions as per Customs Act: • Section 2(11) "customs area" means the area of a customs station and includes any area in which imported goods or export goods are ordinarily kept before clearance by Customs Authorities • 2(13) "customs station" means any customs port, customs airport or land customs station; ✓ Though GST Act does not define “crossing the customs frontiers”, Section 2(ab) of CST Act, 1956 defines it as: “crossing the customs frontiers of India'' means crossing the limits of the area of a customs station in which imported goods or export goods are ordinarily kept before clearance by customs authorities. ✓ As per Section 7 (2), Supply of goods imported into India, till they cross customs frontier of India, shall be treated to be supply of goods in course of inter-State trade or commerce. Further as per Section 8 (1) (ii), goods imported into the territory of India till they cross the customs frontiers of India will not be treated as Intra State supply of goods. Nature of supply in case of “High Sea sale” transactions:

As per Section 7(2) of IGST Act, 2017 supply of goods imported into territory of India, till they cross custom frontiers of India, shall be treated a supply of goods in the course of inter-state trade or commerce.

Custom frontiers of India includes:-

a) Custom Port

b) Custom Airport

c) International Courier Terminal

d) Foreign Post Office

e) Land Custom Stations

f) Area in which imported goods meant for export are ordinarily kept before clearance by Custom Authorities.

g) Bonded Warehouse

Where a transfer of documents of title takes place during import, the question of payment of tax by the importer would not arise since the documents of title would be transferred before the goods cross the custom frontiers of India.

Time of Supply:

After detail deliberation of GST council & number of representation made by industry, government has decided that GST on high sea sale (s) transactions of imported goods, whether one or multiple, shall be levied and collected only at the time of importation i.e. when the import declarations are filed by last buyer of high sea sale transaction before the Customs authorities for the customs clearance purposes for the first time.

It has been clarified vide Circular No- 33/2017- Customs dated 1st August 2017, that IGST on High Sea Sales transaction on imported goods, whether one or multiple, shall be levied and collected only at the time of importation i.e. when the import declarations are filed before the Custom authorities for the custom clearance purposes for the first time

Customs Tariff Act Change: Government already envisioned in the provisions of section 3 (12) of Customs Tariff Act, 1975 inasmuch as in respect of imported goods, all duties, taxes, cesses etc shall be collected at the time of importation i.e. when the import declarations are filed before the customs authorities for the customs clearance purposes.

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Valuation of High Sea Sale Transaction:

Value addition accruing in each such high sea sale shall form part of the value on which IGST is collected at the time of clearance. The importer (last buyer in the chain) would be required to furnish the entire chain of documents, such as original Invoice, high-seas-sales-contract, details of service charges/commission paid etc, to establish a link between the first contracted price of the goods and the last transaction.

In case of a doubt regarding the truth or accuracy of the declared value, the department may reject the declared transaction value and determination the price of the imported goods as provided in the Customs Valuation rules.

Conclusion: Clarification issued by the department is the welcome step to avoid the litigation. It avoids multiple payment of IGST on each high sea sale transaction. Now IGST is payable only at the time of importation of goods in India & filing of Bill of Entry by final buyer of goods.

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Bizsol ITC Reconciliation Tool

Key features:-

Detailed dashboard giving details of amount of ITC credit considered by the company, reflected in GSTR 2A, etc.

Highlighting the issues in books of accounts related to wrong invoice number, wrong GSTIN, invoice booked in subsequent months, wrong tax heads.

Simple and easy to understand detail reports for Match, Mismatch and Not found either in books of accounts or GSTR 2A

Minimal inputs required, and you will get maximum of it

You can reach us for avail such smart services from this tool

Books of accounts GSTR 2A


On implementation of Goods and Service Tax, various procedures of export has been changed. Since implementation of GST, the provisions & Rules regarding exports have changed time to time by issuing notifications & circulars. Some of the amendments are also made with retrospective effect. Definition of Export Exports may be either Goods or Service or both and are defined as follows in the IGST Act. Sec 2(5) of IGST Act : “export of goods” with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India; Sec 2(6) of IGST Act : “export of services” means the supply of any service when,–– (i) the supplier of service is located in India; (ii) the recipient of service is located outside India; (iii) the place of supply of service is outside India; (iv) the payment for such service has been received by the supplier of service in convertible foreign exchange; and (v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8; Export as Zero-rated supply Sec 16. (1) of IGST Act : “zero rated supply” means any of the following supplies of goods or services or both, namely:– (a) export of goods or services or both; or (b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit. (2) Subject to the provisions of sub-section (5) of section 17 of the Central Goods and Services Tax Act, credit of input tax may be availed for making zero-rated supplies, notwithstanding that such supply may be an exempt supply. All export of goods and services shall be regarded as Zero rated supply. Even export of exempted goods or services

or both shall be regarded as zero rated supply and input tax credit on such exempted supplies shall be available. Export with payment of IGST Export of goods or services can be made with payment of IGST. The exporter may get refund of taxes by way of payment of IGST at the time of export. The conditions and procedures are specified in Rule 96 of CGST Rules. The shipping bill filed by an exporter shall be deemed to be an application for refund of integrated tax paid on the goods exported out of India and such application shall be deemed to have been filed only after submission of export general manifest and furnishing of a valid return in Form GSTR-3 by the applicant. Export without payment of IGST Export can also be made without payment of IGST by execution of Legal undertaking or Bond. Any registered person opted for this option needs to furnish, a bond or Letter of Undertaking in FORM GST RFD-11 to the Jurisdictional Commissioner which is valid for one year. Application for refund shall be made in FORM GST RFD-01A according to the provisions of Section 54 of CGST Act and Rule 89 of CGST Rules. Supply to SEZ Section 7 of IGST Act specifies that supply of goods or services or both to or by a Special Economic Zone developer or a Special Economic Zone unit shall be regarded as inter-state supplies. Further supply made to Special Economic Zone developer or a Special Economic Zone unit are also regarded as ‘zero-rated supplies’

Export under GST

Author: CMA Nanda Harshal Barde, ACMA, M.com Email: [email protected] Contact :9561094454

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Goods/services can be supplied to SEZ with payment of IGST or without payment of IGST under bond or Legal Undertaking. Refund under Rule 89 of CGST Rules shall be available to a Special Economic Zone unit or a Special Economic Zone developer, the application for refund shall be filed by the (a) supplier of goods after such goods have been admitted in full in the Special Economic Zone for authorised operations and endorsed by the specified officer of the Zone; (b) supplier of services along with evidence regarding receipt of services for authorised operations as endorsed by the specified officer of the Zone. Merchant Export Merchant exporter do not have own any manufacturing facilities but they buy goods from the manufacturer in domestic Tariff Area (DTA) to execute export order with overseas customers. As per Foreign Trade policy (2015-20), Para 9.33 “Merchant Exporter” means a person engaged in trading activity and exporting or intending to export goods. On implantation of GST, the merchant exporters were required to buy goods with payment of GST from suppliers. Where as in pre-GST era such supplies were exempt in VAT as well as excise. The merchant exporter were required to pay GST on the supplies received by them, however they could not get the refund in time, this has resulted in blockage of working capital with them. To address this issue, notification 40/2017 Central tax Rate dated 23.10.2017 and 41/2018 Integrated Tax Rate dated 23.10.2017 has been issued. W.e.f. 23.10.2017 concessional rate of GST @0.1% was made applicable on the supplies made to merchant exporters with certain conditions. However the merchant exporters were restrained from export of goods with payment of IGST under Rule 96 of CGST Rules w.e.f. 23.10.2018, even if the exports made by merchant exporters are regarded as zero-rated supplies. Refund under Rule 89 of CGST Rules is the only option available for the merchant exporters. Deemed export Following supplies are regarded as deemed export as per notification 48/2017 Central Tax dated 18th October 2107.

1. Supply of goods by a registered person against

Advance Authorisation 2. Supply of capital goods by a registered person

against Export Promotion Capital Goods Authorisation

3. Supply of goods by a registered person to Export Oriented Unit

4. Supply of gold by a bank or Public Sector Undertaking specified in the notification No. 50/2017-Customs, dated the 30th June, 2017 (as amended) against Advance Authorisation.

Such supplies are made within India and the consideration against these supplies are received either in Indian rupees or in convertible foreign exchange. All supplies notified as supply for deemed export will be subject to levy of taxes i.e. such supplies can be made on payment of tax and cannot be supplied under a Bond/LUT. In respect of supplies regarded as deemed exports, the application for refund may be filed by, - (a) the recipient of deemed export supplies; or (b) the supplier of deemed export supplies in cases where the recipient does not avail of input tax credit on such supplies and furnishes an undertaking to the effect that the supplier may claim the refund. Rule 89 of CGST Rules provide that in case of deemed export both recipient as well as supplier can apply for refund, however only the recipient of supplies can submit online refund application in FORM GST RFD-01A, there is no provision in online application for supplier of goods in case of deemed export. Export of Goods to Nepal and Bhutan Export of goods to Nepal or Bhutan fulfills the condition of definition of export regarding taking goods out of India. Hence, export of goods to Nepal and Bhutan will be treated as zero orated supplies and consequently will also qualify for all the benefits available to zero rated supplies under the GST regime irrespective of the fact that export realization is received in Indian Currency. However, the definition of ‘export of services’ in the GST requires that the payment for such services should have been received by the supplier of services in convertible foreign exchange, hence it is not considered as zero-rated supply.

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Conclusion To sum up

1. Export of goods or services or both shall be regarded as zero rated supply. IGST shall not be applicable on export of goods/services/both.

2. Export may be made with payment of IGST subject to certain conditions as per Rule 96 of CGST Rules.

3. Export may also be made without payment of IGST by execution of Bond or Legal Under Taking. In such case exporter may opt for refund under Rule 89 of CGST Rules.

4. Supplies made with India to Advance Authorization holder, EPCG holder, EOU shall be regarded as deemed export. Refund under Rule 89 shall be obtained in case of deemed export.

5. Supplies made to SEZ developer and SEZ unit shall be regarded as zero-rated supplies and IGST shall not be applicable on such supplies. Refund under Rule 89 of CGST Rules shall be available on such supplies.

6. Goods can be supplied to merchant exporter with concessional rate of [email protected]%. However where goods are received at concessional rate of GST, merchant exporter shall not be eligible for export with payment of IGST. Merchant exporter can avail refund under Rule 89 of CGST Rules.

7. Export of goods to Nepal or Bhutan shall be regarded as zero-rated supplies even if consideration is not received in foreign currency. Such exports shall be entitled for all the benefits of zero-rated supplies.

8. Supply of services to Nepal or Bhutan shall not be regarded as export of service where consideration is not received in foreign currency and such supplies shall be subject GST.

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Introduction Special Economic Zones (SEZs) Scheme in India was conceived by the Commerce and Industries Minister Murosoli Maran during a visit to Special Economic Zones in China in 1999. The scheme was announced at the time of annual review of EXIM Policy effective from 1.4.2000. The basic idea is to establish the zones as areas where export production could take place free from all rules and regulations governing imports and exports and to give them operational flexibility. Special Economic Zone (SEZ) is a specifically delineated duty free enclave, which shall be deemed to be a foreign territory for the purposes of trade operations and duties and tariffs. In order to give a long term and stable policy framework with minimum regulatory regime and to provide expeditious and single window clearance mechanism, a Central Act for Special Economic Zones has been found to be necessary in line with international practice.

The Special Economic Zones Act, 2005, was passed by Parliament in May, 2005 which received Presidential assent on the 23rd of June, 2005. After extensive consultations, the SEZ Act, 2005, supported by SEZ Rules, came into effect on 10th February, 2006, providing for drastic simplification of procedures and for single window clearance on matters relating to central as well as state governments. The main objectives of the SEZ Act are:

Generation of additional economic activity Promotion of exports of goods and services Promotion of investment from domestic and foreign

sources

Creation of employment opportunities Development of infrastructure facilities

It is expected that this will trigger a large flow of foreign and domestic investment in SEZs, in infrastructure and productive capacity, leading to generation of additional economic activity and creation of employment opportunities.

The SEZ Act 2005 envisages key role for the State Governments in Export Promotion and creation of related infrastructure. A Single Window SEZ approval mechanism has been provided through 19 members inter-ministerial SEZ Board of Approval (BoA). The applications duly recommended by the respective State Governments/UT Administration are considered by this BoA periodically. All decisions of the Board of approvals are with consensus.

Benefits

Various incentives and exemption has been provided for Special Economic Zone Units. However, for SEZ developer who is setting new SEZ Income tax exemption is no more available.

Income Tax Act 1961 (Direct Taxes)

Income Tax Exemption for a period of 15 years on Export Income as follows: (Section 10-AA) for the Units which starts commercial production on or before 31.03.2020

– 100% IT exemption for 1st five years

– 50% IT exemption for next 5 years

SPECIAL ECONOMIC ZONE IN GST REGIME

Author: Adv. Kiran Sawale, B.Com, LL B. Email: [email protected] Contact : +91 98600 71411

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– 50% IT exemption of the ploughed back export profit for next 5 years

The above exemption is available subject condition that:

– It has commenced operations on or after 1st April 2006 in SEZ but not later than 31.03.2020

– It is not formed by splitting up or reconstruction of a business already in existence.

– It is not formed by transfer to a new business of machinery or plant previously used for any purpose (80:20).

Customs Act, 1972 and GST Act, 2017

There is exemption from payment of customs duties on the imports made by the SEZs. In case sale to domestic area, it will be treated as import for DTA buyer and appropriate customs duties are required to be paid. The domestic supplier can claim duty drawback on supplies made to SEZs.

Under GST regime, supplies to SEZs are made a zero rated similar to physical exports. Similar to exports supplies to SEZs to be made under Bond/LUT or on payment of IGST as the supplies made to SEZs are treated as inter-state supplies. Under GST law easy refund procedure is prescribed for supplies made to SEZs.

After GST rollout one year has been passed, but still there are no amendments made in SEZ Act and Rules made thereunder. There are references of repealed laws like exemption from services tax, excise duty etc. which needs to be amended.

There are certain benefits which are allowed under SEZ law but no corresponding provision is made in GST law, for example, SEZ Rules allows duty free procurement to the contractor or sub-contractor of SEZ whereas GST law does not have such provision. On the other hand, when provisions of SEZ law has overriding effect over any other law implantation of its provision has made difficult in absence corresponding provision in GST law.

Other Benefits

Apart from tax benefits SEZs are also entitled for other benefits like exemption from stamp duty and electricity duty. Certain flexibility also made available under FEMA:

100% Foreign Direct Investment through automatic route - barring few sectors.

Facility to retain 100% foreign exchange receipts in EEFC Account.

Facility to realize and repatriate export proceeds within 12 months.

Overseas investment by SEZ units from EEFC account through automatic route.

Release of foreign exchange of DTA units to buy goods to units in SEZ’s.

Profits allowed to be repatriated freely without any dividend balancing requirement.

Conclusion

Any supplier to SEZ Developer and SEZ Units will have to obtain the registration, since such supplies are treated as inter-state supply and they will not be entitled to claim any exemption of threshold limit and such supply will be zero rated. Similarly, SEZ Developer & Unit are not required to pay GST under Reverse Charge Mechanism.

The SEZ is very lucrative scheme which promotes foreign investment and foreign exchange in India, creates good infrastructure and employment. It is expected the Government should extend the sunset clause under Income tax law which will align to the Make in India initiative.

There is need that SEZ Act and rules should suitably be amended to give effect of GST law and GST law should also be aligned with the SEZ law.

Bizsolindia provides end to end solutions for advisory and implementation to achieve the objective of the SEZ Developer and SEZ Unit.

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Background GST council in its 22nd meeting on 6 October 2017, it has been decided that domestic supplies to holders of Advance Authorization (AA) / Export Promotion of Capital Goods Authorization (EPCG) and Export Oriented Unit (EOU) would be treated as deemed exports under Section 147 of CGST/SGST Act and refund of tax paid on such supplies is allowed. To give effect to the said decision Notification No. 48/2017- Central Tax dated 18 October 2017 has been issued to notify the following supplies as deemed exports;

1. Supply of goods by a registered person to a holder of AA

2. Supply of capital goods by a registered person to a holder EPCG

3. Supply of goods by a registered person to EOU 4. Supply of gold by a bank or Public Sector

Undertaking specified in the notification No. 50/2017-Customs, dated the 30th June 2017 (as amended) against AA.

The benefit and procedure in procurement of goods by above persons/units is summarized below: Benefit for Imports To provide immediate relief to the exporter from cash blockage, exemption from payment of IGST has been granted for the import of goods by the holder of AA/ EPCG (refer Notification No. 79/2017 Customs) and by an EOU (refer Notification No. 78/2017 Customs). This exemption is applicable w.e.f. 13 October 2017 till 1 October 2018. Though, this is a good relief granted to the exporter, another side of the coin is loopholes in the law and exporter must take care while using this exemption and should maintain proper record of utilization of imported material procured without payment of IGST.

Benefit for Domestic Procurements The supply of goods made to holder of AA / EPCG and EOU from DTA will be considered as deemed export. The deemed export neither covered zero rated supplies nor exempted from payment of GST. However, refund of GST paid on such deemed export is introduced by the Government. The refund can be claimed either by the supplier or recipient of the goods. The Rule 89 (1) of CGST Rules, 2017 has also been amended to incorporate the provision for claiming of refund by recipient as well as the supplier. Procedure for claiming refund In cases where supplier or recipient wishes to claim refund on the supply of goods made to EOU/EHTP/STP/BTP additional procedure as prescribed in Circular No. 14/14/2017 GST needs to be followed. The procedure given in the said circular is summarized below:

a) The recipient EOU/EHTP/STP/BTP unit is to give prior intimation in the format as prescribed in “Form-A” serially numbered, containing the details of description of goods to be procured, quantity of goods to be procured and value of goods, along with details of the supplier.

b) This “Form-A” is to be submitted to following parties:

i. The registered supplier ii. The jurisdictional GST Officer in charge

of such registered supplier iii. Its jurisdictional GST Officer

c) On receipt of the “Form A” the registered

supplier will supply the goods under tax invoice to recipient EOU/EHTP/STP/BTP unit.

DEEMED EXPORTS BENEFIT AND PROCEDURES

Author: CMA Ajay Kalani, B.Com ACMA Email: [email protected] Contact : +91 88306 56347

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d) On receipt of the such supplies, the recipient EOU/EHTP/STP/BTP units to send an endorsed copy of invoice to the all parties referred above in point number (b):

e) This endorsed copy of tax invoice will be considered as proof of deemed export

f) The recipient EOU/EHTP/STP/BTP must also maintain a record of such inward supplies procured from DTA from registered dealer in digital form in “Form-B”.

g) A digital copy of “Form-B” containing transaction for the month shall be provided to jurisdictional GST officer by 10th of following month in CD or pen drive along with the Form A required to be given as per Circular No. 35/2016 Customs for imported goods.

Where Recipient wants to claim refund In case recipient of deemed export supplies wishes to claim the refund then form GST RFD-01 needs to be filed on GSTN portal along with the statement containing the number and date of invoices. Recipient of deemed export supplies should pay to the supplier basic value of the goods with applicable GST. However, input tax credit (ITC) of GST amount should not be taken. In case recipient or supplier does not want to claim refund, recipient can avail ITC and utilise the same for payment of output liability. Where Supplier wants to claim refund In case supplier of deemed export supplies wants to claim refund then supplier is required to file GST RFD-01 Form on GSTN portal along with the statement containing the number and date of invoices. The the supplier of Deemed Export supplies also required to produce following evidences for claiming refund:

1. Acknowledgment by the jurisdictional Tax officer of the holder AA or EPCG towards receipt of goods; or A copy of the tax invoice duly signed by the recipient EOU that said deemed export supplies have been received by it.

2. An undertaking by the recipient of deemed export supplies that no input tax credit on such supplies has been availed of by him.

3. An undertaking by the recipient of deemed export supplies that he shall not claim the refund in respect of such supplies and the supplier may claim the refund.

Under this option the recipient of such supply should not pay GST amount to the supplier and only remit the basic value of the goods. Time of filling refund claim When refund of GST paid on deemed export should be filed has not been prescribed in law; whether it is transaction basis, monthly or quarterly is not specified, ideally it should be on monthly basis. However, GSTN should allow to file the refund after filling of GSTR 3B return. In nutshell, we can say the benefit of deemed export given for imports is really lucrative. However, the benefit for domestic procurement will not help much as the procedure of domestic procurement by EOUs is appears to be lengthy and increases the compliances. Bizsolindia is committed to provide you end to end services for obtaining any advance authorization & EPCG Authorization and also assist you in documentation and end to end compliance.

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Introduction Export Oriented Units (EOUs) scheme, introduced in early 1981, it enjoys the similar benefits of SEZ scheme under Indirect Tax with a wide option in locations, flexible in terms of operations. The main objectives of the EOU scheme is to increase exports, earn foreign exchange to the country. GST implementation has brought multi fold changes in the Indirect Tax regime. GST has also impacted the considerable changes in the custom duties as well as procedures therein. Though the Government has released the GST law / rules / procedure in advance, but the Government did not released the associated changes in the custom law / rules made thereunder or Foreign Trade policy. On late night on 30 June 2017, guidelines for changes in Customs Act and FTP under GST regime where brought in the public domain by way of various Notification, circulars and trade notice. It would be unfair on EOUs to note, understand and implement the changes as suggested in documents released by the Government. If these changes would have intimated earlier, the Unit could have developed their internal system for these compliances at the same time when they developed systems for embracing of GST. Prior to the mid-term review of Foreign Trade Policy 2015-20 effective from 5 December 2017, there were lot of restrictions like Domestic Tariff Area (DTA) sale is allowed for the goods similar to the goods exported with a limit of 50% of exports. However, post amendment such restrictions are removed therefore EOU scheme is now became more flexible and effective in implementation. Benefits and Advantages EOU scheme has following major benefits:

Ab-initio exemption for payment of custom duties on import of raw materials, consumables, spare parts and capital goods.

Second hand capital goods can also be imported without payment of custom duties.

Procurement from the domestic are regarded as “Deemed Exports”. The GST charged is entitled for refund or input tax credit.

Supplier are entitled for deemed export benefits like Advance Authorisation / duty drawback etc.

Domestic Sales by Export Oriented Units (EOUs): Now there is no restriction of DTA Sale to the extent of 50% of FOB value of exports. It can be without any limit, so far EOU is achieving positive Net Foreign Exchange against Payment of custom duties actually saved (Basic duty + Social Welfare Surcharge + Anti-dumping Duties) on imported raw materials / parts used for goods sold in Domestic Obligation: Fulfilment of obligation by an EOU is very simple

over other promotional schemes under FTP. Mere positive Net Foreign Exchange is sufficient i.e. earning from exports to be greater that foreign exchange outgo.

Import Process Change Under the GST regime, exemption from GST on domestic procurement is not continued, whereas exemption from Customs duties are continued (IGST is exempted for specified period for time being). The process of import of the goods has been simplified. The principle notification 52/2003-Cus dated 31 March 2003 has been amended vide notification 59/2017-Cus dated 30 June 2017. As the revised notification, for claiming import duty exemption, the EOUs are required to follow the procedure prescribed under Rule 5 of Customs (Import of Goods at

EXPORT ORIENTED UNIT IN

GST REGIMEAuthor: CA Manoj Behede, FCA, ACMA, B.Com Email : [email protected] Contact: +91 98901 65004

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Concessional Rate of duties) Rules, 2017 (hereinafter referred IGCRD, Rules, 2017). By this amendment earlier the procedure of issuance of procurement certificate (PC) has been dispensed with. Further, the amendment states to follow the procedure prescribed under Rule of 5 of IGCRD, Rules, 2017, the plain reading of this suggests that other rules under IGCRD, Rules, 2017 are not applicable to EOUs, however, at many places customs authorities are interpreting it differently and asking assessees to comply other rules of IGCRD, Rules, 2017 as well. As the IGCRD Rules, the EOUs are expected to take below actions: 1. The import duty exemption by EOU will be monitored

by Jurisdictional Custom Officer. However, initially as per the circular 25/2017-Cus dated 30 June 2017, the responsibility of Custom Officer is bestowed on the current central excise officers and later the responsibility shifted to Customs in phase manner which lead to delays in obtaining permissions. Considering the delays in getting permission from authorities a good and simplified process of post import verification of details of imported goods has been introduced by the Government vide Circular No. 10/2018 Cus. dated 24th April 2018.

2. EOUs to identify the yearly/quarterly requirement of various capital goods, inputs required by it for manufacture of finished goods for exports as well as domestic sale. It is important to note that the above requirement needs to be mentioned separately for each port of import. In other words, port of import wise requirement list needs to be prepared.

3. The above information needs to be submitted to the

Jurisdictional Customs authorities and the same copy at the Customs Port.

4. Jurisdictional Customs authorities to verify the

application with list of goods approved by the Regulatory and forward the report to Customs Port. On receipt of report officer at Custom Station will reconcile the said list with items imported by EOU. In any imported items not matched with the said list duty demand would be initiated.

5. EOU can use its existing B-17 bond if the B-17 bond is not sufficient, in addition to that, the Unit will also

be required to be submit a “Continuity Bond” supported by Director’s surety or Bank Guarantee.

6. On receipt of goods in factory, EOU is required to be

submit intimation to jurisdictional customs office within 48 hours on receipt of the goods.

Return for reporting of Imported goods EOU who has availed the duty benefits is required to maintain bill of entry wise records and submit monthly return in FORM A by 10th day of subsequent month in terms of Circular No. 35/2016 dated 29 July 2016. Further, IGCRD Rules, 2017 stipulates to submit a quarterly return, in the prescribed format within 10 days of completion of the respective quarter. There is no clarity on submission of above returns, hence Customs authorities also insisting ot submit the both returns. As explained above, since the Rule 5 of IGCRD, Rules, 2017 are only made applicable to EOUs submission of quarterly return is not applicable to EOUs. The return is required to be submitted to the Deputy / Assistant Commissioner of Customs having jurisdiction over the premises where the imported goods shall be put to use for manufacture of goods or for rendering output service. Conclusion To summarize, it is important to note following point: a) No DTA Sale can be made until SION Norm or

ADHOC Norm is fixed and duty saved on inputs as stated in SION Norm / ADHOC Norm will have to be paid at the time of DTA Sale.

b) Recording of Bill of Entry wise receipt, consumption and stock in FORM-A.

c) The consumption for DTA Sale needs to be identified clearly so as to pay back the import duty exemption claimed at the time of imports.

d) Filing of the monthly return in the prescribed format. e) Developing controls and systems for correct

maintenance of records along with reporting requirement.

Though the exemption has been granted to EOUs and procedure has been simplified, the onus of correct maintenance of the records and its reporting is bestowed on the EOU. Therefore, one must be very careful in the era of self-assessment and monitoring. We at Bizsol are committed to our client to be compliant under EOU scheme, reach out to us for any assistance required in this regard.

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Implementation of Goods and Service Tax Act has brought various changes in Foreign Trade Policy 2015-2020. Implementing the principal of continuous chain of input tax credit in GST regime, various Customs notification pertaining to Advance Authorization, Export Promotion, MEIS and SEIS has been issued, thereby scheme of Advance Authorization, Export Promotion Capital Goods, Merchandise Export from India Scheme and Service Export from India Scheme has been significantly amended. CHAPTER 3 benefits: MEIS/SEIS

With the aim in making India’s products more competitive in the global markets, these schemes provide incentive in the form of duty credit scrip to the exporter to compensate for his loss on payment of duties. The incentive is paid as percentage of the realized FOB value (in free foreign exchange) for notified goods/services exported to notified markets.

Exporters may avail the benefit of Merchandise Export from India Scheme maximum up to 7% of export of goods and Service Export from India Scheme maximum up to 5% of export of services.

On introduction of GST, customs notification 26/2017 dated 29.06.2017 has been issued to ament the scheme of MEIS and SEIS. In GST, for items covered under the GST, scrips can be used for payment of Basic Custom Duty, Safeguard Duty, Transitional Product Specific Safeguard Duty, and Antidumping Duty. In other words scrips cannot be used for payment of IGST on import of goods or Services.

For items not covered under the GST (specified in Fourth Schedule to Central Excise Act 1944 covering specified petroleum products, tobacco etc.), in addition to the Basic Custom Duty, Safeguard Duty, Transitional Product Specific Safeguard Duty, and Antidumping Duty, scrips can also be used for payment of duties like central excise, CVD/ SAD.

CHAPTER 4 benefits: Advance Authorization At the time of implementation of GST Advance Authorization related various notifications were amended, so as to remove exemption of IGST on the goods imported into India against advance authorization. This has resulted in the working capital blockage of the exporters. Further exporters were not able to get the refund in time due to various issues including delay in filing of GST returns on account of technical glitches on GSTN portal. Hence there was a lot of hue and cry from the exporters’ community. Considering the grievances of the exporters, the Central Government amended various notifications related to the advance authorization scheme vide Notification No. 79/2017-Cus dated 13-10-2017. The goods imported against an advance authorization was exempted from the IGST up to 31st March 2018, the exemption has been further extended up to 1st October 2018. However, export obligation in case of such AA would be fulfilled by making physical exports alone. In short if a person has imported the goods by claiming the exemption from IGST under the advance authorization then he cannot fulfil his export obligation by way of deemed exports i.e. by

GST & FTP (Advance Authorization, EPCG,

MEIS & SEIS) Author : Mrs. Sunita Kulkarni Email : [email protected] Contact : 98607 91791

52


supplying the goods to anther advance authorization holder, EPCG holder or to an EOU etc. Further in case the person intends to avail the exemption from IGST under the advance authorization then such import will be subject to the condition of pre-import. The option of replenishment will not be available to such person. In other words, import under advance authorization without payment of IGST exemption has to be made prior to exports. If exports has been made and the imports are done for replenishment then, there is no exemption of IGST. Number of assessees have received the notices from the customs. Chapter 5: EPCG On implementation of GST various Customs Notification w.r.t. EPCG scheme has also been amended vide notification 26/2017-Cus dated 29-06-2017. Initially only Basic Customs Duty was exempted on imports of capital goods under EPCG scheme. However, considering the difficulties of exporters, IGST exemption was also provided on import of capital goods under EPCG scheme by virtue of notification 79/2017-Cus dated 13-10-2017. Such exemption is valid on imports made up to 1st October 2018 Conclusion: In GST regime most of the exemption of payment of IGST on import on goods under various Foreign Trade Policy Scheme were removed. Now IGST on import of goods cannot be debited to scrips issued under MEIS & SEIS. Only basic custom duty shall be debited to the scrip and the amount of IGST needs to be paid, input tax credit of IGST will be available in such case. Upon hue & cry of exporters due blockage of working capital & difficulties in getting refund, exemption of IGST on imports made under EPCG/Advance authorization scheme has been provided, however such exemption is valid only up to 01/10/2018.

It is to be noted that if an exporter wants to export first and then import the inputs as replenishment, then the exemption of IGST shall not be available. Further an exporter having physical exports & deemed export like supply to EOU/EPCG holder/Advance Authorization Holder, he needs to be pay IGST at the time of import and avail the input tax credit. Bizsolindia is committed to provide you end to end services for obtaining any advance authorization, EPCG Authorization, MEIS & SEIS and also assist you in documentation and end to end compliance.

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Please Contact Us For Advance Authorisation EPCG Authorisation Brand Rate Fixation Redemption of Advance

Authorisation Redemption of EPCG

Autorisation Obtaining MEIS & SEIS Scripts Obtaining Status Holder

Certification


Exporters are entitled to obtain the refund of CGST + SGST / UTGST or IGST paid on inward supplies, when such inward supplies are used for the purpose of export of goods or services or both. Similarly, exporters are also entitled to obtain the refund on IGST paid on exports on outward supplies of goods or services or both. It is ensured incidence of tax is not borne by the exporters.

Refund

IGST Paid on Outward Supplies

Rule 96

CGST + SGST / UTGT or IGST Paid on Inward

Supplies

Rule 89

Based on the Formula

Rule 89(4)

Refund claimed on ITC paid on Inward Supplies

(Deemed Exports)

Rule 89(4A)

Refund on claimed on ITC paid on Inward Supplies by EOU, Merchant Exporters & Advance Authorisation

Rule 89(4B)

Refund of GST paid by Exporters on Inward Supplies or Outward Supplies

Author: CA Preeti Kulkarni, ACA Email: [email protected] Contact : +91 98607 91783

Eligible for all exporters, who have not received the supplies from 1.Supporting manufacturer who has paid concessional rate of duty 2. Who has not received the supplies from Advance Authorization Holder or EPCG Holder or EOU Eligible for all exporters to get

the proportionate refund based on net ITC and total turnover and export turnover. Net ITC do not include the inward supplies on which refund has been availed under Rule 89 (4A) and Rule 89(4B).

Supplies made on payment of GST to Advance Authorization / EPCG Holder / EOU and recipient or supplier can get the refund of such amount paid against tax invoice. However, system has been designed only to claim refund of such amount paid on inward supplies of goods by recipient only.

Refund of GST paid on inward supplies by EOU who has claimed the benefit of exemption of Basic Custom Duty and IGST under Notification No 78/2017 Cus or Advance Authorization Holder claiming exemption of Basic Custom Duty & IGST under Notification No. 79/2017 Cus or Merchant Exporter receiving the goods at concessional rate of duty @0.1%

54


CBIC has issued the most awaited clarification vide circular number 45/19/2018 GST dtd. 30.05.2018. It is further clarified that LUT should not be insisted for zero rated supply of exempted on non-GST goods i.e. non-taxable goods

Taxpayer being Merchant Exporter

also Taxpayer having DTA Unit Taxpayer having EOU Unit

No refund of IGST paid on outward supplies under Rule 96

can be made, if inward supplies are received at concessional rate i.e.

0.1%

Taxpayer having DTA unit is entitled for refund of IGST paid on outward

supplies provided the inward supplies has not been received under Advance Authorisation otherwise such refund

under Rule 96 is available. Alternatively refund under Rule 89

can be claimed

Taxpayer having EOU Unit can claim the refund of IGST paid on exports

provided inward supplies has not been received under Advance

Authorisation, otherwise refund under Rule 89 only can be claimed.

Similarly, when supplies are received from EOU, Advance Authorisation

In all other cases, refund under Rule 96 will be entitled

If EOU wish to claim the refund of I GST paid on exports, then EOU will have to ensure that there is no inward supply claiming refund of GST or inward supply against advance authorization otherwise EOU will have to apply refund under Rule 89 only. Below chart provides more clarity.

Similarly, domestic unit wish to claim the refund of IGST paid on exports, then DTA will have to ensure that there is no inward supply claiming benefit of merchant exports and Inward supplies against Advance Authorization otherwise DTA will have to apply refund under Rule 89 only. Below chart provides more clarity:

EOU

Inward Supply claiming Deemed Export Benefits

Inward Supply claiming refund of

GST

Inward Supply against Advance

Authorisation

Inward Supply against Brand Rate

Drawback

Inward Procurement with Payment of

GST

Import with payment of GST or exemption

under Notification 78/2017

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Clarification is needed whether it is for individual supplies or exporters have been put to the exporters without any time limit for claiming refund under Rule 96 of CGST Rules 2017. Refund Under Inverted Duty Structure : When tax rate on outward supplies is lower than that of inward supplies, in such condition refund of inputs can be obtained under inverted duty structure. Maximum Refund Amount = {(Turnover of inverted rated supply of goods and services) x Net ITC ÷ Adjusted Total Turnover} - tax payable on such inverted rated supply of goods and services. Net ITC - mean input tax credit availed on inputs during the relevant period other than the input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) or both; Adjusted Total turnover - means the turnover in a State or a Union territory, as defined under clause (112) of section 2, excluding –

(a) the value of exempt supplies other than zero-rated supplies and 69 (b) the turnover of supplies in respect of which refund is claimed under sub-rules (4A) or (4B) or both, if any

Refund for wrong payment of duty: Application should be filed for claiming excess payment of duty or payment wrongly made of different tax in Form RFD-01. Refund for Deemed Exports: Refund of Deemed Exports also can be made either by supplier or recipient in RFD-01 but technology has been designed in such manner that only recipient can file the refund only after payment of invoice including GST to the supplier.

DTA

Inward Supplies claiming benefit

of Merchant Exports

Inward Supply from EOU

Purchase against Advance

AuthorisationImports

Against Advance Authorisation

With payment of Customs Duty

Inward Procurement with Payment of GST

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Introduction: GST is successfully implemented on 1st July 2017, and it’s now completion of one year period for GST and GSTN portal. At the time of implementation of GST, there was a view to implement E-way bill system for tracking of each and every movement of goods from 1st February, 2018. E-Way Bill is an electronic way bill for movement of goods which can be generated on the e-Way Bill Portal. In earlier tax regime i.e. VAT consignment used to accompany the goods by DELIVERY NOTE which was also known as Way Bill, and it was to be obtained from authorities which was a cumbersome task. So to avoid said cumbersome practices, this electronic e-way bill is passed. In this new system before movement of the goods to the recipient, the details of the transaction are given to tax authorities electronically so that it can be tracked and verified easily.

However the applicability of E-Way bill from 1st, February 2018 could not be successful, due to some technical problems and E-way bill system has been deferred by government. Afterwards re-introduction of E-Way bill applicability for inter-state movement of goods has been re-iterated by the government during 26th Council Meeting on 10th March, 2018. Accordingly revised E-Way Bill Rules are notified through Notification No. 12/2018-Central Tax and later confirmed the same through Notification No. 15/2018 – Central Tax, dated 23rd March, 2018, accordingly from 1st April 2018, E-way bill is applicable for all interstate movements of goods.

For intra-state movement of goods E-way applicability was planned by June 01, 2018 in phased manner. In the state of Maharashtra E-way bill becomes applicable w.e.f. 25th May 2018 on all intra-state movement of goods. Now all the states have made E-Way Bill mandatory for intra-state movement of goods with specified limits.

Applicability:

Every registered person who causes movement of goods having value exceeding fifty thousand rupees— (i) in relation to a supply; or (ii) for reasons other than supply; or (iii) due to inward supply from an-unregistered person, shall, before commencement of such movement, furnish information relating to the said goods in Part A of FORM GST EWB-01, electronically, on the common portal in the manner as stated in Rule 138 of CGST Rules, 2017 and vehicle number to be updated in Part B. E-way Bill can also be generated even if value is below Rs. 50,000 in following cases: Voluntary

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Author : CS Anita Patil ACS, M.Com, LLB Email : [email protected] Contact: +91 8600168215

E-Way Bill System

Under GST


Goods sent for/received from Job Work outside the state, e-way bill to be generated by principal or the registered job worker

In case of intra-state movement of goods different states have set up different limits and therefore E-Way Bill is required to be prepared after studying the limits of respective states. Special Cases where E Way Bill is mandatory irrespective of Value of consignment: Interstate movement of goods from Principal to Job Worker. Interstate movement of Handicraft Goods by a person who is exempted from requirement of registration under

clauses (i) and (ii) of section 24.

Particulars Who When Form & Part

Movement of Goods Every Registered person under GST OR Transporter having UID OR Recipient

Before movement of goods GST EWB-01 – Fill Part A

Movement of Goods with self transportation facility (owned or hired)

Registered person is consignor or consignee OR is recipient of goods OR Transporter having UID

Before movement of goods GST EWB-01 – Fill Part A & Part B

Movement of Goods through transporter details of conveyance known

Registered person is consignor or consignee OR Transporter having UID OR Recipient

Before movement of goods The registered person shall furnish the information relating to the transporter in Part B of FORM GST EWB-01

Movement of Goods where details of conveyance not known

Transporter of goods Before movement of goods Generate e-way bill on basis of information shared by the registered person in Part A of FORM GST EWB-01

Movement of goods from unregistered person to registered person

Registered recipient Before movement of goods GST EWB-01 – Fill Part A & Part B

E-way bill generation is not applicable in following cases:

Where the goods being transported are specified in Annexure to E-way Bill Rules. Movement in non-motorized vehicle. (Bullock cart, Cycle, Etc) Goods transported from Customs port, airport, air cargo complex or land customs station to Inland Container Depot

(ICD) or Container Freight Station (CFS) for clearance by Customs. Movement within the area notified by the government. For movement of exempted goods from GST except de-oiled cake Supply of goods which are not covered under GST Movement of Specified goods like Gems & Jewellery including precious stone, postal baggage transported by

Department of Post, Currency, Kerosene under PDS, LPG for house hold and exempted category, used personal and household effect, coral whether worked or otherwise

Transport of goods through transit cargo from or to Nepal & Bhutan.

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Movement of goods by Defense formation. Transport of goods by Rail when Consigner is Central or State Government or Local Authority Movement of goods from place of business of consigner to weighbridge up to distance of 20 KM & vise a versa do not

require E-way bill. E-way bill is not required to prepare for distance of up to 50 KM within State/UT for transport of goods from the place

of business of the transporter finally to the place of business of the consignee. Transport of empty container.

However, each State Govt. have notified separate list of exempting certain categories for preparation of E-Way Bill.

Acceptance by Recipient: The details of e-way bill generated under sub-rule (1) shall be made available to the recipient, if registered, on the common portal, who shall communicate his acceptance or rejection of the consignment covered by the e-way bill. If it has not been responded, it will be considered as Deemed acceptance which may lead to civil litigation for recovery.

Cancellation of E-way Bill: Where an e-way bill has been generated under this rule, but goods are either not transported or are not transported as per the details furnished in the e-way bill, the e-way bill may be cancelled electronically on the common portal, either directly or through a Facilitation Centre notified by the Commissioner, within 24 hours of generation of the e-way bill. Provided that an e-way bill cannot be cancelled if it has been verified in transit in accordance with the provisions of rule 138B.

Validity of E-way Bill:

Distance Validity Period

Up to 100 km 1 day in cases other than Over Dimensional Cargo.

For every 100 km. or part thereof thereafter.

1 additional day in cases other than Over Dimensional Cargo

Up to 20 km 1 day in cases Over Dimensional Cargo.

For every 20 km. or part thereof thereafter.

1 additional day in cases Over Dimensional Cargo

•GSTIN of recipient • Place of Delivery (PIN Code) • Invoice / challan no • Invoice / challan date • Value of goods • HSN code • Reason for transportation* • Transport document no (GRN, RR, AWB, BL )

Details in Part A• Vehicle Number

Details in Part BREASON FOR TRANSPORTATION • Supply • Export Import • Job-Work • SKD or CKD • Recipient not known • Line Sales • Sales Return • Exhibition or Fairs • For own use • Others

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Where goods cannot be transported within validity period of E-way bill under exceptional circumstances, transporter may extend validity period. However, it has to be ensured that there should not be any receipt of goods against invalid e-way bill.

Checking & Verification of Documents: The Commissioner or an officer empowered by him in this behalf may authorise the proper officer to intercept any conveyance to verify the e-way bill or the e-way bill number in physical form for all inter-State and intra-State movement of goods. However, Central Govt. & State Govt have formed the state wise committee which will decide the verification process and day & time. They have also developed the Mobile APP for physical verification of conveyance mainly with the object keeping in the mind ease of doing business and to avoid the harassment.

In case vehicle is detained for more than 30 minutes: Where a vehicle has been intercepted and detained for a period exceeding thirty minutes, the transporter may upload the said information in FORM GST EWB-04 on the common portal. Till the time, technology is updated transporter is supposed to carry the physical inspection report during transit. Detailed circular w.r.t. physical verification search & seizer has been issued by CBIC.

Penal Provisions related to E-Way Bills: Each taxpayer, supplier & recipient will have to ensure that goods are moved only against valid e-way bill & similarly, any goods received or moved without valid e-way bill may be confiscated and penalty will be attracted. Supplier & recipient will have to pay the tax amount. Whereas transporter will have to pay value of receipt + tax. Utmost care needs to be taken for ensuring compliance of E-way bill.

Conclusions:

Online E-way bill system is now started smoothly; accordingly each and every movement of goods is tracked through online e-way bill portal. Earlier ‘chalta hai’ attitude will no more in existence now. It is time to be fully complied with all GST provisions including E-way bill generation for all the movement of goods. So be prepared and be aware.

We, Bizsolindia have expertise in assisting tax payers for GST as well as for generation of all India PAN Based E-Way bills with our dedicated, experienced E-way bill cell which is available 24/7. E-Way bill will be prepared maximum within 15 min. with lowest range of prices. You may approach us if required any assistance in this respect.

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Bizsol E-way Bill SMART Solution

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Pricing starts from Rs.10 per E-way bill plus GST Flexible billing packages as per requirements, depending of line items per invoice

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[email protected]


GST is instrumental to make HR policies simpler and reduce the reimbursement and increased in the salary under the heads of “Income from Salary” in accordance with Income Tax Act 1961. It is also likely stated that Human Resource Department has been involved in implementation of new taxation system for statutory compliances also. Let us understand various aspects of employee cost vis-à-vis recovery from employees and impact on GST. In accordance with Section 7 of CGST Act 2017, “Meaning & Scope of Supply” clearly mentions the inclusion / exclusion of employee providing services to employer or employer is providing services to employee as well as the relation with each other. We give below the brief thereof. 1. Employee providing services to the employer in the course of employment is neither goods nor services. (Schedule

III to Section 7-Sr. 1) 2. Employee and employer are related (Explanation (a) (iii) to subsection (5) of section 15 of CGST Act 2017. 3. Supply to related person even without consideration is taxable supply (Schedule I to Section 7 – Sr. 2) 4. Gift to employees exceeding Rs. 50,000/- per employee per year even without consideration is taxable supply.

(Schedule I Section 7 – Proviso to Sr. 3) In view of the above, it is important to analyze any payment made to an employee or any recovery made from employee to ensure 100% statutory compliance under the GST Era.

Covered under Salary & Wages included in Form 16

Gift below Rs. 50,000/- is exempt & Gift above Rs. 50,000/- is Taxable

Non-Taxable

Salary / Wages included in Form 16

Gift in any form other than uniform, safety shoes, goggle etc.

Stipend to Graduate/post graduates and Expenses related to them

Food Card to Employees Reimbursement of Training & other reimbursements Higher Education/Certificate Course

Creche Charges

Recognition Trips for Area Office Candidate Interview Expenses: Referral Bonus Professional Membership Fees Uniform, T-Shirts, Jackets,

Mugs, Diaries etc. or such goods given to employees for specific occasions or on yearly basis:

HUMAN RESOURCES PRACTICES & GST

Author: Mr. Pravin Arote, MBA Email: [email protected] Contact : +91 9860791795

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Covered under Salary & Wages included in Form 16

Gift below Rs. 50,000/- is exempt & Gift above Rs. 50,000/- is Taxable

Non-Taxable

Health Check Up Expenses (Incurred by Employee & reimbursed by company)

Relocation Expenses

Per Day Allowance during travel Issue of Petrol Card / Fuel Coupon to employees

Personal Accident Policy Recovery

Reimbursement of Expenses incurred for the purpose of official use

Group Medical Insurance recovery Awards to Employees

However, there will be some deduction as recovery from the salary of the employee. In such cases, it will be considered as employer has provided the services to employee, which are taxable. Some of the type of recoveries have been mentioned below : Canteen:

Number of companies / factories will have the canteen premises. If such canteen premises is used for cooking and service of the food to the employees at the subsidized value or free, still GST will be payable as follows :

Particular Option 1

When food is prepared by outdoor caterer and served at the premises of factory /

company

Option 2 When food is prepared by

outdoor caterer and served at the leased / rented premises owned by factory / company

Option 3 When food is cooked in the factory / company premises by contractor and served the

food at the premises of factory / company

Input Tax Rate 18% 5% 5%

Output Tax Rate

5% (without ITC) 5% (without ITC) 5% (without ITC)

Value on which tax is payable

Open Market Value i.e. Value of Inputs or recovery

whichever is higher

Open Market Value i.e. Value of Inputs or

recovery whichever is higher

Open Market Value i.e. Value of Inputs or

recovery whichever is higher

Cost to the Company

No Input Tax Credit i.e. 18% and 5% on value of

Inputs or recovery whichever is higher i.e. min

23% of Input value


Inputs or recovery whichever is higher i.e. min 10% of Input value


Inputs or recovery whichever is higher i.e. min 23% of Input value

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It is always better to act as a pure agent for payment to outdoor caterer on behalf of the employee and recovery thereof from the employee. In such circumstances, the cost can be reduced to 18% and if the place is given on rent to outdoor caterer and then he serves the food, payment is made to outdoor caterer on behalf of employees and recovery thereof from the employees, then cost can be reduced to 10%.

Following recoveries are also taxable @18% & invoice to be prepared as B2C and to be reported in GSTR-1

HR Department needs to appreciate the legal requirement and frame the HR policy which is in the legal framework of labour law as well as GST Law.

**********

Recovery of balance in food card in case of Full & Final Settlement:

Canteen Expenses - Recovery from Contract Employees:

Transport Recovery from Employees:

Transport Recovery from Other than Employees:

Notice Pay Recovery - F&F Settlement :

Access Card Lost recovery

Recovery from employees against loss of uniforms, safety kits. Etc

Recovery of Relocation Expenses (In case of discontinuance)

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Assessment In India, one of the sea change in the mind set was shift of inspector raj to self-assessment. In earlier Indirect tax system ‘self-assessment’ mechanism is followed both at Centre and State level. Government trusts on the tax payers and believe that tax payer should assess their tax and observe the compliances under tax laws. Under Central Goods and Services Act, 2017, (CGST Act) following ways of assessment of tax has been provided: Self-assessment (sec. 59) Provisional assessment (sec.60) Scrutiny of returns (sec.61) Assessment of non-filers of returns (sec. 62) Assessment of unregistered persons (sec. 63) Summary assessment in certain special cases (sec. 64)

It is expected that every registered person himself assess the tax and pay the same and furnish the return. In case any ambiguity in value or rate of tax, tax payer can request for provisional assessment to the authority and authority may allow to pay tax on provisional basis after execution of bond by the tax payer. The final assessment to be completed within six months. The authority further can complete the assessment in a ways stated above.

GST law, similar to earlier Indirect tax laws, also provides for audits of following kinds:

Annual audit by CA/CMA Audit by Tax authority Special audit CAG audit

Audit is an important aspect of any tax law to ensure correctness of assessment and compliances by the tax payers and there should not be any revenue leakages.

Adjudication

During the assessments and audits often some errors, omissions are being noticed which results into non-

payment or short payment of tax, interest liability or late fees. For recovery of said government dues adjudication process has been prescribed under GST law. The process has mainly divided in two categories:

a) Demand on account of reasons other than fraud or any willful misstatement or suppression of facts (Section 73):

b) Demand on account of reasons on account of fraud or any willful misstatement or suppression of facts (Section 74):

Section 73 of the CGST Act deals with the cases where taxes are not paid or short paid, without involvement of fraud by the tax payer. In such case below are the time frame specified for the adjudication: The adjudication of the case should be done within 3

years from the date of filing of annual return for the relevant FY.

If the assessee received an erroneous refund, the case must be adjudicated within 3 years from the date on which such refund was credited to the tax payer’s account.

The taxpayer shall be issued a notice well in advance if the tax authorities identify a default in tax payment. The notice must be issued at least 3 months before the date for adjudication of case or issue of order.

Section 74 of CGST Act, deals with cases where are not paid or short paid by the tax payer and the authorities find willful suppression of facts or misstatement or fraud is involved. The time frame specified for the adjudication of such cases are as under:

The adjudication of the case should be done within 5 years from the date of filing of annual return for the relevant FY.

Advance Ruling, Assessments, Adjudications & Appeals

Author: Adv. Kiran Sawale, B.Com, LL B. Email: [email protected] Contact : +91 98600 71411

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If the assessee received an erroneous refund, the case must be adjudicated within 5 years from the date on which such refund was credited to the tax payer’s account.

The taxpayer shall be issued a notice well in advance if the tax authorities identify a default in tax payment. The notice must be issued at least 3 months before the date for adjudication of case or issue of order.

Appeals

Appeal under any law is an application to a higher judicial authority for a reversal of the decision of a lower authority. Appeals arise when there are any legal disputes which may be on account of tax related or procedure related.

A tax payer who his aggrieved by the order of adjudicating authority, the tax payer has right to refer an appeal before higher authority. Below is the summary of hierarchy of judicial authorities:

Appeal level

Orders passed by Appeal to be preferred to

1 Adjudicating Authority

First Appellate Authority

2 First Appellate Authority

Appellate Tribunal

3 Appellate Tribunal High Court

4 High Court Supreme Court

An appeal should be filed by the tax payer to the only one jurisdictional tax authority and appeal is not required to be filed before State or UT and Centre tax authority, both authorities are empowered to adjudicate the dispute Central or State GST law.

Advance Ruling

Advance ruling tax is a written interpretation of tax laws by the tax authorities. When tax payer is not sure about any interpretation of provisions or not clear on certain procedures, tax payer can seek clarification from tax authority by filling an application to the advance ruling authority.

The GST law provides more flexible and easy process of advance ruling. Further the order of advance ruling authority is also appealable before higher authority.

The advance ruling is binding on the applicant and the jurisdictional tax authority of applicant. The advance ruling is a machinery which helps in clarification of specific tax issues of the tax payers and reduces the litigation. There are 79 advance ruling has been issued so far by the different state advance ruling authorities.

Conclusion

Taxation are the main source of revenue to the Government. Taxes are collected to fulfil legitimate objective of the Government and serve the people of nation in better manner. To ensure the collection of proper and correct revenue mechanism of assessments, audits, adjudication has been provided. It is being said that the Government is a largest litigant and this is because collection of collection of revenue and avoidance of evasion.

We at Bizsol are always prompt to serve our client in effective manner so as to avoid litigation and there is a separate legal cell formed to represent before any adjudicating authorities including Tribunal.

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Records to be maintained by registered persons 1. Records to be maintained at principal place of

business 2. If more than one place of business - accounts relating

to each place of business shall be kept at such places of business concerned

3. Separate records to be maintained for each activity – manufacturing, services, inward & outward supplies and import & exports.

4. Each volume of books of account to be serially numbered (if manually maintained)

5. Records can be maintained in electronic form, duly authenticated.

6. Audit trail for corrections / proper attestation should be available

Records to be maintained by registered persons (as applicable) 1. Goods or services imported 2. Goods or services exported 3. Supplies attracting payment of tax 4. Supplies attracting payment of tax on reverse charge 5. Stock of goods supplied / received - opening balance,

receipt, supply, goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples including raw materials, finished goods, scrap and wastage thereof

6. Monthly production accounts with quantitative details of raw materials or services used in the manufacture and quantitative details of the goods so manufactured including the waste and by products thereof

7. Quantitative details of goods used in the provision of each service, details of input services utilised and the services supplied

8. Advances received, paid and adjustments made thereto – Refund Vouchers / Payment Vouchers

9. Details of tax payable, tax collected and paid, input tax, input tax credit claimed

10. Register of tax invoice, credit note, debit note, delivery challan issued or received during any tax period

11. Names and complete addresses of suppliers / customers / recipients

12. Complete addresses of the premises where the goods are stored by him, including goods stored during transit along with the particulars of the stock stored therein

13. Relevant documents viz invoices, bills of supply, delivery challans, credit notes, debit notes, receipt vouchers, payment vouchers, refund vouchers and e-way bills, etc.

Records / account to be maintained by Agent separately for each principal 1. Authorization received by him to receive or supply

goods or services 2. Description, value and quantity, etc. of goods or

services received 3. Description, value and quantity, etc. of goods or

services supplied 4. Details of accounts furnished 5. Tax paid on receipts or on supply of goods or services

effected

Records / account to be maintained by person having custody over the goods in the capacity of a carrier / clearing & forwarding agent for delivery or dispatch thereof

ACCOUNTS & RECORDS

Author : Ms. Deepali Dabke, MBA Email : [email protected] Contact : +91 99238 83790

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1. Records in respect of goods handled by him on behalf of registered person Records / account to be maintained by works contractor for each works contract 1. Names and addresses of the persons on whose

behalf the works contract is executed 2. Description, value and quantity of goods or

services received for the execution of works contract

3. Description, value and quantity of goods or services utilized in the execution of each works contract

4. Details of payment received in respect of each works contract and

5. Names and addresses of suppliers from whom he has received goods or services

Records to be maintained by owner or operator of godown or warehouse and transporters

1. Submit details of business in FORM GST ENR-01 (if not registered) on common portal.

2. Further amendment, if any, to original details is also to be made through this form

3. Unique enrollment number will be allocated 4. Only one enrolment is required even if branches

in more than one state 5. Storage of goods should be owner wise item wise

to facilitate physical verification 6. Records to be maintained:

Goods transported, delivered and goods stored in transit by him and for each of his branches

Books of accounts w.r.t. the period for which particular goods remain in the warehouse, including the particulars relating to dispatch, movement, receipt, and disposal of such goods

Period of retention of accounts:

1. Normal situation: 72 months from the due date of filing of annual return for the respective year

2. Appeal or revision or any other proceeding:

One year after final disposal of such appeal or revision or proceeding or 72 months from the last date of filing of annual return, whichever is later Audit:

1. Specified category of taxable person will be required to get his accounts audited by Chartered Accountant / Cost Accountant before filing annual return.

2. Statement reconciling value of supply declared in return and audited annual accounts need to be submitted.

Conclusion : Each taxpayer will have to ensure the compliance of law and Bizsolindia provides necessary services of ensuring records are properly maintained and also provides the services w.r.t. periodical audit.

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Chartered Accountants & Professionals in practice or trade & industry are finalizing books of accounts. Thereafter Chartered Accountants / Cost Accountants, as the case may be, will have to finalise following audit before the due date specified in the table.

Financial Audit / Financial Statements 180 days from the date of end of Financial Year Cost Audit 180 days from the date of end of Financial Year Tax Audit under Income Tax Act 1961 30th September (30th November when Transfer Pricing is

applicable) Annual GST Audit (GSTR-9B Certification) 31st December

Compliance under GST is required to be considered in above reports and necessary care has to be taken while reporting. Check-list for Taxpayer & Auditor:

Taxpayer & Auditor will have to scrutinize the transactions separately for the following period :

1st April to 30th March 2017 Ensure Compliances under earlier Tax Regime. Central Excise, Service tax, Central Sales Tax, State VAT Act, etc.

1st July 2017 to 13th October 2017 Ensure tax liability is discharged for the procurement of goods & services from unregistered tax payers.

1st July 2017 to 15th Nov 2017 Ensure tax liability is discharged on advances collected against the future supplies for goods.

Transactions before change of Tax Rate

Ensure the tax liability is correctly discharged on outward supplies including rejection of inward supplies.

Reconciliation of GSTR-3B and GSTR-1 for Tax liability: Taxpayers were required to file GSTR-3B and GSTR-1 from 1st July 2017. However, no utility was provided to make the correction in GSTR-3B for any errors and omissions. Correct tax liability to be ascertained from the analysis of each accounting entry appearing on the credit side of ledgers, which needs to be reflected as outward supply and proper reconciliation is required to be done with general ledgers, GSTR-3B and GSTR-1. No books of accounts can

ACCOUNTS FINALIZATION & AUDITS

Author: CMA Ashok Nawal, ACMA, B.Com Email: [email protected] Contact : +91 98901 65001

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be closed for the year without such reconciliation. If there is excess tax paid and reported in GSTR-3B, refund application to be made under Section 89 of CGST Act 2017. If there is a short payment of tax, it has to be reported as other debit. Information required to be filled in the tables of GSTR-1 & GSTR-3B is given below :

Reconciliation of GSTR-2A with goods and services inwards and invoices booking: CBEC has issued Circular vide F. No. 349/164/2017/-GST dated 01st September 2017, advising to reconcile GSTR 2A with GSTR 2. However, GSTR 2 is discontinued and responsibility is casted on the tax payer who is availing Input tax credit. ITC only will be allowed in the following circumstances: - 1. Tax invoice is in possession 2. Supplier has uploaded the invoice on GSTN and reported in its GSTR 1.

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3. Such invoices of respective suppliers are appearing in 2A of the tax payer and there is 100 % with respect to invoice number, GST number, quantity, taxable value, tax amount and tax type.

4. Supplier should pay the tax and file the return 3B. 5. Receipt of Goods and services. 6. Payment has been made with 180 days.

Therefore, tax payer will have to ensure 100% matching after removing the mismatch with the support of supplier. If this exercise is not done, then such ITC will be treated as provisional credit and if mismatch is not removed by September end then reversal of ITC credit and interest is to be paid. However, at the time of finalization of accounts, statutory auditors may insist for making appropriate provision and until reversal is made GSTR 9B mat not get certified Chartered Accountant/ Cost Accountant.

Reversal of Input Tax Credit: 1. Reversal of ITC is required in the following circumstances: - a. Reversal on account of Section 17(5) of CGST Act which is produced below

(a) motor vehicles and other conveyances except when they are used–– (i) for making the following taxable supplies, namely:—

(A) further supply of such vehicles or conveyances ; or (B) transportation of passengers; or (C) imparting training on driving, flying, navigating such vehicles or conveyances;

(ii) for transportation of goods; (b) the following supply of goods or services or both—

i. food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where an inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;

ii. membership of a club, health and fitness centre; iii. rent-a-cab, life insurance and health insurance except where––

(A) the Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; or (B) such inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply; and

iv. travel benefits extended to employees on vacation such as leave or home travel concession;

(c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service; (d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business. Explanation: For the purposes of clauses (c) and (d), the expression “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property; (e) goods or services or both on which tax has been paid under section 10;

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(f) goods or services or both received by a non-resident taxable person except on goods imported by him; (g) goods or services or both used for personal consumption; (h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and (i) any tax paid in accordance with the provisions of sections 74, 129 and 130.

Further the amount of ineligible credit has to be captured from the system and also to be reported in Table No.4 of GSTR3B. The person having ISD registration will have to also distribute ineligible credit along with eligible credit in accordance with prescribed formula.

2. Reversal of ITC of Inputs and Input services and Capital Goods in accordance with Rule 42 and Rule 43 of CGST Rule 2017 which is given below: While calculating Exempted supply and Non-taxable supply, Non-GST Supplies and exempt supplies also needs to be captured from respective ledgers and it has to be ensured that monthly correct reversal has been made, otherwise monthly differential amount to be calculated and reversal needs to be reworked out and payment to be made along with interest or refund to be applied for excess reversal.

3. Reversal of excess credit distributed by ISD registered person in terms of Section 21 of CGST Act, 2017. A registered person who has obtained ISD registration should distribute ISD credit each month without leaving any balance based on the prescribed formulae. It has to be ensured that correct credit is distributed if not proper reversal of input tax credit along with interest has to be made.

4. Reversal of ITC if suppliers are not paid within 180 days from the date of invoice. Tax payer has to ensure

payment has been made to the supplier within 180days. If not paid, ITC will be required to be reversed along with interest and if paid after 180days still it has to be reversed along with interest and re-credit to be taken when payment is made to supplier.

5. While calculating depreciation, it has to be ensured that amount of CGST & SGST / IGST has not been included value of the capitalization otherwise reversal of ITC will be required.

Reconciliation of material sent on Job Work CBEC has issued detailed clarification on job work activities vide circular number 38/2018 dtd. 26.03.2018. Tax payers have to ensure that they have filed ITC-04 on monthly basis and reconciled material sent and received from the job worker. Tax payers also will have to ensure when waste & scrap is not brought back from the job worker, they will discharge liability to pay GST on such waste & scrap supplied from the job worker’s premises. They will have to ensure that they are strictly following the provisions of law with clarifications issued by the CBEC.

HSN Code on the Invoice GSTR-1 return should contain HSN wise summary of outward supplies in Table 12. It has to be ensure that HSN mentioned on the invoice of the suppliers is also matching with master maintained by the company. Though, at present matching of HSN is not envisaged. It is always better to be ready with the system.

Before preparing first invoice in the new financial year, taxpayers should check the turnover for the year 2017-18. Taxpayers whose turnover is above Rs. 1.5 crores but below Rs. 5 crores shall use 2 digits code and the taxpayers

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whose turnover is Rs. 5 crores and above shall use 4-digit code. Taxpayers whose turnover is below Rs. 1.5 crores are not required to mention HSN Code in their invoices.

GSTR TRAN 2:

Last date of filing the TRAN-2 for entitlement of availment of ITC to the extent of 40% or 60% of CGST paid or 20% or 30% of IGST paid at the time of supplies out of the stock declared in TRAN-1 – Table (7a) & (7b) is on 31st March 2018 and not likely to be extended. IT has to be ensured that whatever stock has been declared in TRAN-1 and been supplied through tax invoice, appropriate information has to be filed.

VAT & CST Assessment: VAT & CST Assessment for the period ending upto 31st March 2017 are in progress and assessment for the period ending 31st March 2014 to be completed before 31st March 2018.

Impact of the changes

GST Council was very proactive for understanding of the grievances of the trade & industries and also due to lot of technology problem, it was necessary to issue various notifications for changing the provisions of the Rules and change in rate of Tax. It has to be ensured that tax payers has correctly discharged the tax liability and if short paid then tax has to be paid alongwith interest and if excess paid, appropriate refund claim to be made.

Refund

Number of exporters have accumulated ITC on account of exports made under LUT and therefore they will have to apply for refund under Rule 89 of CGST Rules 2017 from the month of July 2017 onwards. Similarly, number of exporters have paid the IGST on exports of goods and their refunds could not be sanctioned on account of various errors including tax invoice and commercial invoice as appearing in the shipping bill is not matching and other errors as elaborately clarified in the Circular Number 5/2018, 6/2018 & 8/2018 CUS dtd. 23.02.2018, 16.03.2018, 23.03.2018 respectively. Number of exporters still not corrected the errors. Until errors are rectified no refund will be granted.

Similarly, where input tax rate is higher than that of output tax rate. In such circumstances tax payer will have to file refund for inverted duty structure under the Rule 89 of CGST Rules 2017.

Reconcile Electronic Cash Ledger, Credit Ledger and liability ledger as available on GSTN with books of accounts. It has to be ensured that electronic ledger reflected on GSTN is matching with state wise / registration wise books of accounts maintained by the tax payers. However, there may be a difference for which reconciliation has to be made with valid reasons. It will also require by the statutory auditors to make appropriate provisions for finalization of accounts.

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