the goods & services tax law · the goods & services tax law balakrishna consulting wilson...

The Goods & Services Tax Law

Balakrishna ConsultingWilson Garden, Bengalurubalakrishnaandco.com / balakrishnaconsulting.com 080 - 22221493

`

`

ASC Degree College, Bangalore

Learning GSTBasic concepts Scaling the peak!‣ Understanding ‘Supply’ under GST‣ Who should register?‣ Determination of GST

‣ Place of supply & Nature of supply‣ Time of supply‣ Valuation

‣ How to pay GST?‣ Input tax credit‣ Relevant rules

‣ How do I file returns?

‣ Transitional provisions‣ Invoice rules‣ Return rules‣ Sample questions

What is taxed in GST?Understanding concept of ‘taxable supply’

All forms of supply

made for a consideration

supplies made without

consideration

Supplies not covered under GST

of goods or services

in the course or furtherance of

business

What is taxed in GST?Supply without consideration

• Sale to related parties

• Import of services from related persons• Management services• Use of intellectual property, like brand owned

by parent• Use of software paid by related person

• Employer & employee are related!• Non monetary perks• Sale to employees• Gifts by employer to employee (>50k)• Employee loans• Facilities provided by employer?• Expense reimbursements?

• Sole agent / distributor also related!

Transactions between related persons

• Inter-branch transfers• Who is a distinct person?• Registration of each branch• Stock-transfers will now be taxable!• No F Forms

• Geographical tax planning• Support services to HO / branch

Transactions between distinct persons

• Permanent transfer of business asset, where ITC was availed

• Transactions between principal - agent

Other transactions

What is taxed in GST?Supplies not subject to GST

• Exempt supplies, i.e. those exempt by way of an exemption notification

• Certain goods or services that are outside the coverage of GST (Sch. III)

• Services by employee to employer• Sale of immovable property, i.e. land /

building subject to Sch. II• Services by any court or tribunal

established under law

Supplies not subject to GST

What is taxed in GST?Composite & Mixed supply

Composite Supply

‣ Comprises of two or more taxable supplies,

‣ that are naturally bundled and are supplied in conjunction with one another in the ordinary course of business

Treated as supply of principal supply

Mixed Supply

‣ Comprises of two or more individual supplies,

‣ that are are supplied in conjunction with one another.

‣ for a single price‣ & not a composite supply

Supply of goods / services taxed at the highest rate

Who is taxed in GST?Fundamental principles

Every supplier shall be liable to be registered under this Act in the State from where he

makes taxable supply…

… if his aggregate turnover in a financial year exceeds Rs. 20 lakhs

Multiple officesMandatory registration

Persons not liable to register

Voluntary registration

Vertical wise registration

Suo-moto registration

Who is taxed in GST?Who should register?

Agg.

Tur

nove

r of

curre

nt y

ear*

20 la

khs

10 la

khs

‣ Persons holding license under an existing law‣ Persons engaged in inter-state taxable supply‣ Casual taxable person & Non-resident taxable person‣ Persons required to pay tax on reverse charge basis‣ Agents‣ Input service distributors (in addition to regular

registration)

‣ E-commerce businesses‣ E-commerce operator required to deduct tax‣ Persons supplying through an e-commerce

operator‣ E-commerce operators required to pay GST

on reverse charge‣ Persons engaged in OIDAR

‣ Persons engaged in supply from specific states‣ Arunachal Pradesh‣ Assam‣ Manipur‣ Meghalaya‣ Uttarakhand‣ Himachal Pradesh

‣ Persons engaged in supply from other states

Aggregate Turnover

=

Taxable supply + Exempt supply +

Exports +Inter-branch transfers} Of persons with same

PAN on all India basis

Man

dato

ry

Who is taxed in GST?Procedure for registration

GST REG 01

Part A Part B

• Used to validate PAN, mobile number and email ID

• On successful validation an

application reference number

(ARN) will be generated

• ARN should be used to electronically submit Part B

• Acknowledgment of submission

of Part B shall be generated in

GST REG 02

GST REG 06 • On approval, GST REG 06 shall be generated

and GST Identification Number shall be issued

Who is taxed in GST?Sample questions

I have an office in Bangalore and Mangalore. Should I register them both?

I have an office in Bangalore and a support office in Chennai. Should I register them both?

I am an employee earning Rs. 15 L salary. I let out a property for Rs. 10 L.

I own a shop and sell vegetables (Rs. 15 L). I also sell aerated drinks (Rs. 6 lakhs)

Determining GSTHow is GST computed?

TAX INVOICE

SupplierName, address and GSTIN

Bill toName, address and GSTIN

Date of issueInvoice number

Ship toName, address and GSTIN

Description of supply

HSN / SAC

Quantity (goods)

Taxable value

Tax Type Rate of tax

Goods

Services

TOTAL TAX XXX

1

2

1Understanding Place of Supply

2Understanding Nature of Supply

GST = Rate of GST * Value of taxable supply

Type of GST = f (Place of supply & Nature of supply)

4Rate fitment

43 3Determining the type of GST

Determining GSTUnderstanding Place of Supply

GST is a destination based consumption tax

I am a trader of goods in Bangalore. I am sending goods to my customer in Mangalore.

Example 1

I am a trader of goods in Bangalore. I am sending goods to my customer in Chennai.

Example 2

I run a hotel in Maharashtra. Guests from all over India come and stay in the hotel.

Example 3

Determining GSTUnderstanding PoS for Goods

A B

Entails movement of goods to the recipient

C

A B

Delivery to recipient at the instruction of third party

A B

Does not entail movement of movement of goods

• Location where the delivery of goods terminates

• Ship to Address

• Principal place of business of third party

• Bill to Address

• Location of goods terminates at the time of delivery

• Ship to Address

Determining GSTUnderstanding Nature of Supply

• Location of Supplier and Place of Supply are in same state.

CGST + SGST

• Location of Supplier and Place of Supply are in different states.

• Supplies to or by a SEZ to DTA.

• All international supplies, i.e. Imports & Exports

IGST

Inter-state SupplyIntra-state Supply

What if PoS is incorrectly determined? What happens then?

Determining GSTPlace of Supply for Services

General Rule

Specific scenarios (eg.)

If recipient is registered If recipient is unregistered but

address is available

If recipient is unregistered but

address is not available

Performance based services

Location of performance

Immovable property

Location of immovable

property

Banking & Financial services

Recipient based

EventsRecipient based

(if registered), else Event

based

Determining GSTValuation

Transaction value accepted when supplier and recipient are not related and price is sole

consideration

+ specific inclusions discounts-

Option available for supplies made to distinct or related persons

90% of price of goods IF : resold by recipient to unrelated persons

2

1 Value declared in invoice IF : recipient can take full input credit

General Rule of Valuation

1 Open market valuation

2 Value of like kind of goods / services

3 110% of cost

Supply of goods / services

• Date of removal of goods

• Date of issue of invoice if raised within 30 days

Determining GSTTime of supply

Receipt of advance

• Advances for goods shall be subject to GST

• Needs to be tracked carefully in books

+ 30 days

30 days from supply of services

• Date of provision of services

Liability to pay GST shall arise in the month when the supply is made in accordance with the Time of Supply provisions

Determining GSTSupplies taxable under Reverse Charge

Procurements from unregistered dealers

• Present URD purchase v/s

GST URD purchase

• URD purchase v/s COT

purchase

• Imports

• Limit of Rs. 5,000 per day

Goods & services notified by government

• All imports of services

• Services provided by GTA

• Services provided by

individual advocate or firm of

advocates to business entity

• Sponsorship services

• Services provided by director; etc.

Services not covered by RCM anymore (if supplier is regd.)

• Manpower & security

• Rent-a-cab

• Works contract

Purchase from Unregistered Dealers

✗

Notified goods / services

Determining GSTSummarising what we have learnt

FIRST QUESTIONIS THERE A TAXABLE SUPPLY?‣ Check coverage under meaning of ‘supply’‣ Be aware - supplies without consideration

between related parties would be supply!‣ Also check for levy under reverse charge

SECOND QUESTIONWHAT IS THE PLACE OF SUPPLY?‣ Identify place of supply of goods & services

for domestic as well as international supplies

THIRD QUESTIONWHAT IS THE NATURE OF SUPPLY?‣ Check the ‘location of supplier’ & ‘place of

supply’ to classify between Intra-state & Inter-state (incl. imports and exports)

FOURTH QUESTIONWHAT IS THE VALUE OF SUPPLY?‣ Determine the value of supply of goods /

services‣ Refer valuation rules in case of related

party transactions

GST = VALUE of supply * Applicable RATE

Payment of GSTThe fundamentals

Restricted credits for service providers

• CVD 3(5) on import of goods

• VAT / CST on goods used to provide services

Restricted credits for traders

• CVD 3(1) on import of goods

• CST on inter-state purchases

• Services tax on services consumed

Restricted credits lead to higher prices!

Rs. 10input tax

Rs. 100base price

Rs. 116no ITC

with ITC

Rs. 105

Net GST Payable

Inputs

Input Services

Capital Goods

Eligible input credit

Output GST liability

CGST

SGST

IGST

5% margin

Payment of GSTInput tax credit

Registered person shall be entitled to take input tax credit on goods or services which are used by him in the course or

furtherance of his business

ITC is subject to following conditions

• Should be in possession of tax invoice / debit note

• Should have received goods / services

• Tax charged by supplier has been paid

• GSTR-3 has been filed

• Inward invoice should be in line with Invoice rules

• Payment to supplier has been made within 180 days from date of invoice

• Capital goods - ITC should not be claimed as depreciation

• Outer time limit to claim credit - September

ITC restrictions

• Personal consumption & exempt Supplies

• Motor vehicles

• Food, beverage, catering health services etc.

• Rent-a-cab

• Health insurance

• Works contract

• Goods lost, written-off, gifts or free samples

Payment of GSTPayment of tax

Output GST (forward charge)

eCasheCredit

Output GST (reverse charge)

eCash

Interest & Penalty

eCash

Electronic Cash Ledger

• Deposits made towards tax,

interest & penalty shall be

credited to the eCash Ledger

• eCash ledger of each type of tax

Electronic Credit Ledger

• ITC on provisional basis is

credited to this ledger

• eCredit ledger of each type of tax

CGST SGST IGST

CGST

SGST

IGST

Application of input credit

✗

✗

1st 2nd

1st 2nd

1st2nd 3rd

Recording transactionsPayments in GST

eLiability PMT 01

• Output GST (forward charge)

• Output GST (reverse charge)

• Interest, late fee, penalty etc.

eCredit PMT 02

eCash PMT 05

• Input tax credit (on provisional basis)

eCredit eCash

• Amount deposited through payment challan GST PMT 6

• Payment can be made through NEFT / debit card / credit card

• PMT 6 is valid for 15 days

eCash

eCash

• Input tax credit used to pay GST on forward charge

eLiability

• Payment of GST • on forward

charge• on reverse

charge• interest, late

fee, penalty etc.

eLiability

Filing returnsRules to offset GST

✔ Tax credit will be allowed on only those inputs that appear as outward supplies of your vendor

✔ The entire value chain has been linked through GST returns & any mismatch will be immediately reversed

✔ Taxable person has to discharge tax vis-a-vis input credit ‘wrongly’ availed together with interest

✔ If vendor subsequently rectifies his outward supply details, input credit can be re-availed and interest so paid will be refunded

GSTN

Supplier A ME Customer

Sells goods Resells goods

Outward suppliesGSTR1

GSTR2A Auto population of inputs

Confirmation of inputs GSTR2

Modification of suppliesGSTR1A

GSTR3Monthly returns

10th15th

17th

20th

GST ReturnsTypes of returns with due dates

R1, R1A

Details of outward supplies made & output tax

10, 17 R2, R2A

Details of inward supplies & ITC

15

R6, R8

Details furnished by ISD and e-commerce

13, 10 R3

Monthly return

20 R9, R9C

Annual return and Annual Audit Report

Sept.

Returns under GSTReturns to be filed

Apr - Jun

July

August

September

August September October

Service Tax 15 Aug

GSTR 3B 20 Aug

GSTR 1 5 Sept

GSTR 2 10 Sept

GSTR 3 15 Sept

GSTR 3B 20 Sept

GSTR 1 20 Sept

GSTR 2 25 Sept

GSTR 3 30 Sept

GSTR 1 10 Oct

GSTR 2 15 Oct

GSTR 3 20 Oct

Returns under GSTImportant contents of GSTR 3B

• Summarised returns• invoice wise details are not required to be disclosed• summarised / consolidated data to be submitted

Table 3.1 & 3.2

Outward supplies & inward supplies subject to RCM

• Outward taxable supplies• Zero-rated• NIL rated• Exempt, and• Others (i.e. subject to

regular GST)• Inward supplies subject to

reverse charge• Non-GST outward

supplies

This should match with your sales + expenses subject to RCM


Table 4

Eligible Input Tax Credit

• ITC available• Import of goods

(paid with customs) • Import of goods

(paid on reverse charge)

• Subject to RCM• From ISD• Others

• ITC reversed• Ineligible ITC• ITC eligible


Table 6.1 & 6.2

Payment of GST

• Tax payable, i.e.• CGST payable• SGST payable• IGST payable

• Amount paid through ITC• Tax paid in cash

Returns under GSTImportant contents of GSTR 1

Table 4

Taxable supplies made to registered persons

• Invoice wise disclosure• Outward supplies classified

into• Supplies made through

e-commerce operator (operator wise)

• Supplies attracting RCM• Other taxable supplies

• Data to be disclosed• GSTIN of recipient• Invoice details• Rate• Taxable value• PoS, and• Amount of tax

Table 5 & 7

Taxable supplies to unregistered persons

• Invoice wise disclosure where invoice value is more than Rs. 2.5 lakhs

• Consolidated rate wise disclosure if• intra-state supply, • inter-state supply of

value < Rs. 2.5 lakhs

Table 6

ZRS & Deemed Exports

• Invoice wise disclosure

Table 12

HSN wise summary of outward supplies

• HSN & description (optional)

• Total quantity• Taxable value• Amount of tax

NIL rated, exempted & non-GST supplies

• Consolidated disclosure

Table 8

Table 13

Documents issued during the period

• Serial number (from / to)• Total documents• Cancelled• Net issued

• Invoice for outward supply and inward supply from URP

• DN / CN• Receipt voucher• Payment voucher etc.


Table 3 & 4

Inward supplies - forward & reverse charge

• Invoice wise details• GSTIN of supplier where

registered• Invoice details• Taxable value• Amount of tax• PoS• Whether input tax credit is

ineligible?• Amount of ITC available

Table 5

Inputs received from overseas / SEZ

• GSTIN of supplier• Details of Bill of Entry• Rate and amount of IGST• Whether input tax credit is

ineligible• Amount of ITC available

Table 7

Supplies from COT, NIL rated, exempt etc.

• To be segregated between inter-state & intra-state

Table 11

Input tax credit reversal

• Where consideration has not been paid in 180 days

• ITC used partly for business and partly for other purposes etc.ISD credit

received

• ISD credit received and amount eligible

Table 8

Table 12

Modifications on account of mismatch

• ITC mismatch• ITC claimed twice, i.e.

duplication• Reclaim on account of

rectification of mismatched invoices

Table 10

Consolidated statement of advances

• Advance amount paid for reverse charge supplies

• Advance paid in earlier period but invoice received in current period

HSN summary of inward supplies

Table 13


Table 3

Turnover (auto-populated)

• Taxable,• ZRS on payment of IGST• ZRS without payment of IGST• Exempted, NIL rated, Non-

GST

Table 4

Outward supplies

• Inter-state outward supplies

• Intra-state outward supplies

• Amendments with respect to outward supplies

Table 5

Inward supplies subject to RCM

Table 8, 10 & 11

Total tax liability, interest & late fee

• On outward supplies,• On inward supplies

subject to RCM• ITC reversal or mismatch• Interest payable• Late fee payable

Input tax credit summary

• Segregated between inputs, input services and capital goods

Table 6 Table 12 & 13

Tax / interest etc. payable & paid

• Amount paid through ITC,• Amount paid in cash

Refund claimed in eCash ledger

Table 14Table 7

Modifications on account of mismatch

• Similar to GSTR 2

Transition ProvisionsWhy do we need transition provisions?

30th June 1st July

Stock purchased Stock sold

VAT @ 10% Rate VAT

Purchase price 100 10

Final price 110

Without TP GST @ 15% Rate GST

Purchase price 110 16.5

Final price 126.5

With TP GST @ 15% Rate GST

Purchase price 100 15

Final price 115

Impact = Rs. 11.5!

1 Transitional credits in returns 2 Transitional credits

embedded in stock 3 Transaction related provisions

Transition ProvisionsTransitional provisions on Credit

I am a trader. My VAT 100 for June has excess VAT input after paying all output VAT

CENVAT / VAT balance in last returns

• Balance of CENVAT / VAT in last returns can be carried forward

• Conditions • Person should not be availing

composition benefit • Returns for last 6 months should

be filed • Such credit should be eligible as

ITC under GST • No c/f of VAT credit to the extent

CST Forms not available!

I had purchased fixed assets on which I have not utilised full CENVAT credit

Unutilised CENVAT / VAT on capital goods

• Unutilised CENVAT / VAT on capital goods can be carried forward

Transition ProvisionsUnderstanding credits contained in stock

Manufacturer

Retail showroom

Super stockist

12.5% ED + 2% CST

5.5% VATWholesale dealer

5.5% VAT

Purchase Sale

Price 42,600 47,400

VAT 2,400 2,600

Total 45,000 50,000

12.5% ED + 5.5% VAT Sale

Price 39,000

VAT 11,000

Total 50,000

28% GST

Profit Rs. 5,000

Loss Rs. 3,600

Transition ProvisionsTransitional provisions on credit embedded in stock

I am a trader paying VAT. With GST subsuming excise duty, will I get any credit on my stock?

Eligible duties of inputs in stock, embedded in WIP & FG

• Specific category of persons entitled to this benefit. Possible litigations here

• Eligible duties embedded in stock of inputs, work-in-progress & finished goods can be claimed,

• Conditions • Inputs should be used to make

taxable supplies in GST • Should be in possession of duty

paying documents • Such document should not be

issued earlier than 12 months • Supplier of services should not be

entitled to abatement

Great! But what if I buy from another trader & do not have duty paying documents?

Deemed credit scheme for Inputs in stock, WIP & FG

• Persons other than manufacturers / service provider entitled to this benefit

• Deemed credit available as follows • 60% of CGST output when goods /

services are in rate band 18% and above

• 40% of CGST output when goods / services are in rate band below 18%

• Benefit to be passed on to customers

• This benefit is only for 6 months

• Credit Transfer Document!

Tax Invoice, Debit Note & Credit NoteGST compliant documents

Time limit for the issuance of invoice, & types of documents

• For Goods • If goods have to move - issue

before removal, • Other cases - before making

goods available to recipient

• For Services • Within 30 days from date of

provision of services

1 Tax invoice 2 Bill of Supply 3 Credit Note

4 Debit Note 5 Receipt Voucher 6 Payment

Voucher

7 Delivery Challan

Invoice rules

• Should contain requisite particulars

• Manner of issuing invoices • 3 copies for goods for recipient,

transporter and supplier, • 2 copies for services

• Advances - If rate of tax and nature of supply is unknown?

• Reverse charge & invoices

• e-Way bill

• HSN

Zero Rated SuppliesConcept & procedure

Understanding Zero Rated Supplies

• No output liability ; but can claim ITC refund

• Exports and Supplies to SEZ covered

• Procedure • Supply without payment of IGST by

furnishing LUT or Bond - claim credit refund

• Else, pay IGST using ITC & then claim tax refund

Understanding Export of service

conditions to qualify

• Supplier should be in India • Recipient should be outside India • Place of Supply is outside India • Consideration is received in convertible

foreign exchange

conditions not satisfied

Will not be an export. Subject to IGST!

conditions satisfied

Will be an export. Entitled to ITC refund

Claiming refunds

• No documentary evidence if refund < Rs. 200,000

• Refund within 60 days; else entitled to 6% interest

Procedure

• LUT / Bond to be used; eligibility defined for LUT

• LUT for financial year; bond is running bond

Sample questionsPart 1

• Why do we need GST?

• What are the taxes that have been subsumed by GST?

• What is the scope of coverage of GST? Explain what is

taxed in GST?

• Explain the impact of GST on the following transactions

• Employer providers rent free accommodation

facility to employees

• Employer gives a gift of Rs. 20,000 to his

employees

• I sell my personal car for Rs. 15 lakhs

• I sell my business car for Rs. 15 lakhs

• I forego my business furniture & interiors worth Rs.

10 lakhs for NIL. I had claimed input tax credit on

them previously

• Explain valuation principles under GST

• State the time of supply in the following circumstances

• Goods have been supplied from factory on 10-Aug

but reach customer location on 15-Sept.

• Payment for supply of goods received in advance

on 25-Sept and goods have been supplied on 10-

Oct

• Services made available on 15-July, and invoice

raised on 10-Aug

• Services made available on 15-July, and invoice

raised on 25-Aug

• Explain the change in time of taxation between the

GST law and the existing laws

Sample questionsPart 2

• Explain the concept of reverse charge in GST

• Explain how payments are made in GST? What would

the net amount of GST be payable in the following

cases

• Input CGST: Rs. 10,000; SGST: Rs. 10,000; IGST:

Rs. 15,000

• Output CGST: Rs. 25,000; SGST: Rs. 12,000;

IGST: Rs. 20,000

• Balance in PMT 05 CGST: Rs. 2,000; SGST: Rs.

1,000 and IGST: Rs. 2,000

• How do returns work in GST? Explain the various

returns to be filed with their timelines

• What are the important contents of GSTR-1, GSTR-2

and GSTR-3

• What is GSTR-3B? Why was it introduced?

• What are transitional provisions and why do we need

them?

• Explain the concept of deemed credit? Why is it

needed and what are the norms around it?

• How to generate an invoice in GST? Explain 5 crucial

contents on the GST compliant invoice

• How are exports subjected to tax under GST?

• What is the procedure to make zero-rated supplies

without payment of integrated tax?