GST (Goods and Services Tax)
The Goods and Services Tax (GST) the
biggest reform in indirect taxation of India has been rolled out from 01st
July, 2017. It extends to whole of India. It is based on the principle of
destination-based consumption taxation.
By the Constitution amendments passed
in parliament and ratified by various state, now the Central and State
governments will have simultaneous powers to levy the GST on Intra-State
supply. Though the Parliament alone shall have exclusive power to make laws
with respect to levy of Goods and Services Tax on Inter-State supply. GST to be
levied by the Centre would be called Central GST (CGST) and that to be levied
by the States would be called State GST (SGST). An Integrated GST (IGST) would
be levied an inter-state supply of goods or services.
As the government wants to have unified tax
structure across the country the cooperation is required from every state on
various matter, so The Goods and Service Tax Council (GSTC) was formed. GSTC
comprises of the Union Finance Minister, the Minister of State (Revenue) and
the State Finance Ministers to recommend on the GST rate, exemption and
thresholds, taxes to be subsumed and other matters.
The whole GST system will be backed by a robust
IT system. In this regard, Goods and Services Tax Network (GSTN) has been set
up by the Government. It will provide front end services and will also develop
back end IT modules for States who opted for the same.
GST would apply on all goods and services except
Alcohol for human consumption. GST on five specified petroleum products (Crude,
Petrol, Diesel, and ATF & Natural Gas) would by applicable from a date to
be recommended by the GST Council.
Registration of GST (Meaning and Advantages)
Registration of business entity under
the GST Law implies obtaining a unique number
from the tax authorities for the purpose
of collecting tax on behalf
of the government and to
avail Input Tax Credit for the taxes on his inward supplies. Without
registration, a person can neither collect tax from his customers nor claim any
Input Tax Credit of tax paid by him.
Advantages of registration to a taxpayer:
• He is
legally recognized as supplier of goods or
services.
•
He is legally authorized to
collect taxes from his customers and pass on the credit of the taxes.
•
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.
•
Seamless flow of Input Tax Credit
from suppliers to recipients at the national level.
•
Increases the credibility of the
Business, thus helps in attracting more customers.
To give relief
to the small businessmen a threshold limit of Rs 20 lakhs has
been announced. Small businesses having all India aggregate turnovers below Rupees 20 lakh (10 lakh if business is in
Assam, Arunachal Pradesh, J&K, Himachal Pradesh, Uttarakhand, Manipur,
Mizoram, Sikkim, Meghalaya, Nagaland or Tripura) need not register.
The small businesses having turnover
below the threshold limit can voluntarily opt to register. But then then the liability
to pay GST shall arise immediately even if the threshold limit is not reached.
Further following persons are not required to take
the registration:
1.
Persons dealing in goods or
services or both that are not liable to tax or wholly exempt from tax. An agriculturist, to the extent of supply
of produce out of cultivation of land.
2.
Persons engaged in making
supplies the tax on which
is liable to be
paid on reverse charge basis by the
recipient. More detail will be discussed in Reverse charge topic.
Who is eligible
For GST Registration?
The GST law also enlists certain
categories of suppliers who are required to get compulsory registration irrespective of their turnover, i.e. no threshold limit shall apply.
Those are listed below:
• Inter-state suppliers of goods i.e. out of State.
•
A person receiving supplies on which tax is payable by recipient on reverse
charge basis
•
Casual taxable person who is not
having fixed place of business in the State or Union Territory from where he
wants to make supply.
•
Non-resident taxable persons who are not
having fixed place of business in India.
• A person who supplies on behalf of some other taxable person (i.e. an Agent of some
Principal)
•
Ecommerce operators, who provide
platform to the suppliers to supply through it like Flipkart, Amazon.
•
Suppliers who supply through an
e-commerce operator. Example – Person selling goods through Flipkart, Amazon.
• Notified Ecommerce operators – Housekeeping, Taxi and Hotels
Services.
• TDS
Deductor and Input Service Distributor.
•
Those supplying online information
and data base access or retrieval services from outside India to a
non-registered person in India.
(In Reverse Charge mechanism the liability to pay tax rest with the recipient of Supply of goods or services
instead of the supplier. The chargeability gets reversed that is why it is
called reverse charge. This topic has been covered in more detail in upcoming
chapter.)
Example: Ranbir, Mumbai
sold the goods to Rajni, Chennai for Rs 10,000.
GST rate is 18%.
Answer:
Value of goods – Rs 10,000 IGST – Rs 1800
Gross
Value – Rs 11,800
NEITHER A SUPPY OF GOODS NOR SERVICES
Further on few activities or
transactions government do not intend to charge the tax and hence they have listed activities or transactions which
shall not be treated as a supply of goods or services i.e. nontaxable supply:
1. Services by an
employee to the employer in the course of or in relation to
his employment. No GST has to be paid/collected while
paying salary.
2.
Services by any court or Tribunal
established under any law. As they help parties resolving the disputed matter.
To keep the justice at low cost this has been kept out of GST.
3.
The functions performed by the
Members of Parliament, Members of State Legislature, Members of Panchayats,
Members of Municipalities and Members of other local authorities.
4.
Services of funeral, burial,
crematorium or mortuary including transportation
of the deceased. The government is merciful and desire that death should be tax free and hence no GST once the
person lives this world.
5.
Sale of land and Sale of building
where the entire consideration has been received after completion certificate
is issued or after its first occupation. The relevant stamp duty and state
taxes needs to be paid. More will be discussed in upcoming chapters.
6.
Actionable claims, other than lottery, betting
and gambling. Actionable claim is a claim to any debt (except secured debts) which the
civil courts recognize as affording grounds of
relief.
Multiple GST
Number
Supplier has to register in each of such State or Union territory
from where he affects supply. In GST
registration, the supplier is allotted a 15-digit GST identification number
called “GSTIN”. Registration under GST is not tax specific, which
means that there is single
registration for all the taxes i.e. CGST,
SGST/UTGST, IGST and cesses.
A legal entity would have one GSTIN per State, which means an entity having its branches in multiple States
will have to take separate state-wise registration for the branches in each
different States.
Example
– SBI having branches in every
state. SBI has to take separate GST registration in every state. GSTIN will be
different in all the states.
Within a State, an entity with
different branches would have single registration wherein it can declare one
place as principal place of business and other branches as additional place of
business. Exception - A business entity having separate business verticals in a state
may obtain separate
registration for each of
its business verticals (see definition chapter to understand what a business
vertical is).
A person who has
obtained or is required to obtain more than one registration, whether in one or
more State shall, in respect of each such registration, be treated as Distinct
Persons for the purposes of GST law. All separately registered business
verticals of a person shall pay tax on supply made to another registered
business vertical of such person and issue a tax invoice for such supply.
Process and Documentation of GST Registration
An application for registration has to
be submitted online within thirty days from
the date when liability to register arise.
The Casual and Non-Resident taxable persons need to apply at least five days
prior to the commencement of the business along with the security deposit.
Documents required getting GST registration:
KYC means PAN and Aadhar Card/Passport/Driving
License.
The Proper Officer has to either
approve the registration or raise a query within three working days
failing which, registration would be considered as deemed to have been approved.
The registration shall be effective
from the date on which the person becomes liable to registration where the
application for registration has been submitted within a period of thirty days
from such date; otherwise the date of the grant of registration.
This
date is crucial because input tax credit can be claimed from this date.
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