TALLY WITH GST APPLICATIONS

FOR [Link] Computer Applications

POKET BOOK

UDAYA KIRAN VADREVU

[Link], M.B.A(F&M), RETAIL BANKING

Assistant Professor
DEPARTMENT OF COMMERCE & MANAGEMENT STUDIES
RAJIV GANDHI DEGREE AND PG COLLEGE

RAJAMAHENDRAVARAM

9963114818
Unit – 1

1) Explain the problems under pre GST tax structure?

Ans:

The following points highlight the eight major defects in the tax structure of India.

1. High Rate and Low Yield of Direct Taxes:

In India, as in other LDCs, the rate of direct tax is very high but the contribution to the total

tax revenue is very low.

In the 1950s, the rate of income tax in India was one of the highest in the world but the rev -

enue was very insignificant. This is because high tax rates encouraged tax evasion and

avoidance on a large scale. It may be noted in this context that tax avoidance refers to

arranging one’s financial affairs within the law so as to minimise taxation liabilities, as

opposed to tax-evasion which is failing to meet actual tax liabilities through, e.g., not

declaring income or profit. So the Government gradually reduced the tax rate over the years.

In spite of this, the rate of income tax in India is one of the highest in the world even today.

The higher tax rate (including surcharge) at present is 30% (plus surcharge of 2%).

2. Low Contribution of Income Tax:

Although the rate of income tax is the highest in India, the contribution from such is very

low. Tax evasion seems to be the primary reason. Another reason is the high exemption limit

in a country where per capita income is very low. In India, the exemption limit has been
raised from time to time, but the levels of national and per capita incomes have failed to

increase proportionately.

3. Double Taxation of Dividends:

Moreover, due to double taxation of dividend, the rate of domestic saving and capital

formation has failed to increase appreciably. Companies pay corporation and other taxes

(such as excess profit tax or surtax) to the Government. A portion of net profit after tax is

usually distributed among shareholders in the form of dividend. A portion of such dividend

income is again taxed away in the form of personal income tax.

4. Absence of Agricultural Income Tax:

Another feature of India’s tax system is that there is no tax on agricultural income.

Agriculture is the dominant sector of the Indian economy. The contribution of agriculture and

related activities to India’s GDP was 29.3% in 1999-00. Planned investment on agriculture

has also increased over the years. But agriculture has failed to make any contribution to the

introduction of the Government’s tax revenue. Since agriculture is a State subject, the

introduction of the agricultural income tax system at the Central level has not been possible.

This is another reason for undue reliance on indirect taxes.

5. Importance of Indirect Taxes:

In India, importance of indirect taxes has increased over the years which implies that the

importance of direct taxes has diminished. In absolute terms (i.e., in terms of rupee) the

contribution of direct taxes has increased but the percentage contribution of such taxes in

total tax revenue has declined.

6. Progressive Taxes on Income:

The Government has made the system of direct tax progressive and progressiveness is

considered desirable in the interest of equity and for reducing the disparities in the

distribution of income and wealth. But progressive taxes encouraged tax evasion and

avoidance and have failed to reduce inequalities of income and wealth.

7. Widening the Indirect of Tax Net:

Over the years, the indirect tax net has been spread wide. Almost all the commodities that we

buy bear high indirect taxes as sales tax, excise duty, customs duty, octroi, cess and so on. At

present, Central Government revenue from two main taxes, viz., union excise duties and

customs accounts for about 80% of the total revenue.

There is tax such as State sales tax on an item on which union excise duties has already been

paid. There is, for instance, not only excise duty or sales tax on finished cars but also on

tyres, tubes and other components. Due to the multiplicity of levies the cascading effect

cannot be avoided. Thus, indirect taxes have caused cost-push inflation in India.

8. Regressive Nature:

Moreover, indirect taxes have become more and more regressive over the years. Such taxes

are usually imposed on consumption goods. In general, poor people have a high propensity to

consume than the rich people. In fact, the marginal propensity to consume gradually

decreases with an increase in income.

Thus poor people, who spend the major portion of their small income on consumption goods,

pay the maximum amount of indirect taxes. Thus, over the years, the direct tax system has

become less and less progressive due to gradual reduction in the personal income tax rate,

while indirect taxes have become more and more regressive due to the inclusion of more and

more items in the excise net.

2) Explain GST model in India?

Ans:

Generally, GST consist three prime models:-

1. Central GST-(CGST)

2. States GST-(SGST)

3. Dual GST

• Non concurrent dual GST

• Concurrent dual GST

CGST: - Under this option, the two levels of government would combine their levies in

the form of a single National GST, with appropriate revenue sharing arrangements among

them. In the case of a Central GST (where all goods and services are taxed by the Central
government only), the Centre will collect most of the country’s total tax revenue, leaving

very little for the sub national Governments.

SGST: - The second model is to have a State GST in which the States alone levy GST

and the Centre withdraws from the field of GST or VAT completely. In this case, the

State GST will work as the redistributing mechanism. The loss to the Centre from

vacating this tax field could be offset by a suitable compensating reduction in fiscal

transfers to the States. This would significantly enhance the revenue capacity of the States

and reduce their dependence on the Centre.

Dual GST: - Non-Concurrent Dual GST: -Under this model, GST on goods can be levied

by the States only and on services by the Centre only. The States already have the power

to levy the tax on the sale and purchase of goods (and also on immovable property), and

the Centre for taxation of services. No special effort would be needed for levying a

unified Centre tax on interstate services. This model of dual GST would not be acceptable

to the Centre as well as the States. Hence, the Government has already announced its

intention to follow the Concurrent Dual GST.

Indian Model of GST – Concurrent Dual GST Indian GST model would be Concurrent

Dual GST consisting both the Central GST and State GST levied on same base. Under

this model, GST will be levied by both tiers of Governments concurrently. There will be

Central GST to be administered by the Central Government and there will be State GST

to be administered by State Governments. In this model, both goods and services would

be subject to concurrent taxation by the Centre and the States. All types of goods and

services will be brought under this proposed GST structure except few exceptions. For

Example, if a product have levy at a base price of Rs. 10,000 and rate of CGST and SGST
are 8% then in such case both CGST and SGST will be charged on Rs. 10,000 i.e. CGST

will be Rs 800 and SGST will be Rs.800. Features of Proposed Indian Dual

GST:-

• Single Registration:- There would a single registration or taxpayer identification

number, based on the Permanent Account Number (PAN) for direct taxation. Three

additional digits would be added to the current PAN to identify registration for the Centre

and State GSTs.

• Uniform Method:- Procedures for collection of Central and State GSTs would be

uniform. Moreover, tax payment challan might contain some additional information, e.g.,

amount of CGST paid on SGST challan, and vice-a-versa. Payment of tax might be only

online through net-banking.

• One Common Return:- There would be one common tax return for both taxes, with one

copy given to the Central authority and the other to the relevant State authority

electronically. Moreover, most likely, GST returns will be required to be filed online.

• Classification of goods & services:-HSN will form the basis of product classification

for Central GST and State GST.

• Administration:- States would collect the State GST from all the registered dealers. To

minimize the need for additional administrative resources at the Centre, States would also

assume the responsibility for administering the Central GST for dealers with gross

turnover below the current registration threshold of Rs 1.5 crores under the Central Excise

(CENVAT). They might collect the Central GST from such dealers on behalf of the

Centre and transfer the funds to the Centre.

 • For the purpose of assessment and administration of different assesses, following

categorization has been recommended:- Threshold limit (common for goods and services)

can be allowed somewhere between Rs. 10 lacs and Rs. 20 lacs. Gross turnover of goods

upto Rs. 1.5 Crores may be assigned exclusively to the State; Gross turnover of services

upto Rs. 1.5 Crores may be assigned exclusively to the Centre. Gross turnover of above

Rs. 1.5 Crores may be assigned to both the Governments – for the administration of

CGST to the Centre and for the administration of SGST to the State.

3) Explain silent features of GST?

Ans:

(i) The GST shall have two components: one levied by the Centre (hereinafter referred to as

Central GST), and the other levied by the States (hereinafter referred to as State GST). Rates

for Central GST and State GST would be prescribed appropriately, reflecting revenue

considerations and acceptability. This dual GST model would be implemented through

multiple statutes (one for CGST and SGST statute for every State). However, the basic

features of law such as chargeability, definition of taxable event and taxable person, measure

of levy including valuation provisions, basis of classification etc. would be uniform across

these statutes as far as practicable.

(ii) The Central GST and the State GST would be applicable to all transactions of goods and

services made for a consideration except the exempted goods and services, goods which are

outside the purview of GST and the transactions which are below the prescribed threshold

limits.
(iii) The Central GST and State GST are to be paid to the accounts of the Centre and the

States separately. It would have to be ensured that account-heads for all services and goods

would have indication whether it relates to Central GST or State GST (with identification of

the State to whom the tax is to be credited).

(iv) Since the Central GST and State GST are to be treated separately, taxes paid against the

Central GST shall be allowed to be taken as input tax credit (ITC) for the Central GST and

could be utilized only against the payment of Central GST. The same principle will be

applicable for the State GST. A taxpayer or exporter would have to maintain separate details

in books of account for utilization or refund of credit. Further, the rules for taking and

utilization of credit for the Central GST and the State GST would be aligned.

(v) Cross utilization of ITC between the Central GST and the State GST would not be

allowed except in the case of inter-State supply of goods and services under the IGST model

which is explained later.

(vi) Ideally, the problem related to credit accumulation on account of refund of GST should

be avoided by both the Centre and the States except in the cases such as exports, purchase of

capital goods, input tax at higher rate than output tax etc. where, again refund/adjustment

should be completed in a time bound manner.

(vii) To the extent feasible, uniform procedure for collection of both Central GST and State

GST would be prescribed in the respective legislation for Central GST and State GST.

(viii) The administration of the Central GST to the Centre and for State GST to the States

would be given. This would imply that the Centre and the States would have concurrent

jurisdiction for the entire value chain and for all taxpayers on the basis of thresholds for

goods and services prescribed for the States and the Centre.
(ix) The present threshold prescribed in different State VAT Acts below which VAT is not

applicable varies from State to State. A uniform State GST threshold across States is

desirable and, therefore, it is considered that a threshold of gross annual turnover of Rs.10

lakh both for goods and services for all the States and Union Territories may be adopted with

adequate compensation for the States (particularly, the States in North-Eastern Region and

Special Category States) where lower threshold had prevailed in the VAT regime. Keeping in

view the interest of small traders and small scale industries and to avoid dual control, the

States also considered that the threshold for Central GST for goods may be kept at Rs.1.5

crore and the threshold for Central GST for services may also be appropriately high. It may

be mentioned that even now there is a separate threshold of services (Rs. 10 lakh) and goods

(Rs. 1.5 crore) in the Service Tax and CENVAT.

(x) The States are also of the view that Composition/ Compounding Scheme for the purpose

of GST should have an upper ceiling on gross annual turnover and a floor tax rate with

respect to gross annual turnover. In particular, there would be a compounding cut-off at Rs.

50 lakh of gross annual turn over and a floor rate of 0.5% across the States. The scheme

would also allow option for GST registration for dealers with turnover below the

compounding cut-off.

(xi) The taxpayer would need to submit periodical returns, in common format as far as

possible, to both the Central GST authority and to the concerned State GST authorities.

(xii) Each taxpayer would be allotted a PAN-linked taxpayer identification number with a

total of 13/15 digits. This would bring the GST PAN-linked system in line with the prevailing

PAN-based system for Income tax, facilitating data exchange and taxpayer compliance.
 (xiii) Keeping in mind the need of tax payer’s convenience, functions such as assessment,

enforcement, scrutiny and audit would be undertaken by the authority which is collecting the

tax, with information sharing between the Centre and the States.

4) Difference between GST and VAT?

Ans:

Several countries have adopted the new GST taxation system; which in full refers to Goods

and Service Tax. France was the first country to adopt this tax regime, today over 160

countries use it including India. VAT, which refers to Value Added Tax has been in existence

for a while now, and is adopted by more countries globally. Both VAT and GST tax regimes

are levied on values of sale or goods supply. There are however several differences between

the two, read on to find out what differentiates one from the other.

he key differences between VAT and GST are explained below using the following pointers:

1. Value Added Tax is a direct tax where the charges are levied from the state level,

within every production and distribution level of commodities and services. There is an

additional credit applicable from tax paid previously. Goods and Services Tax on the other

hand, is a singular tax charged on the supply of commodities and services which relies mostly

on the value addition concept.

2. VAT is charged at the sale point, GST is levied at the point of goods and services

supply.
3. Value Added Taxation is performed offline, whereas Goods and Services Tax is

performed purely online. The registration, returns filing and all other related functions are

fulfilled via a GST portal which is controlled and managed by a Goods and Services

Network.

4. The turnover determines which tax regime a supplier will fall into. For example, in

India, suppliers with a turnover above Rs. 10 lakhs is susceptible to register under the VAT.

Turnovers above 20 lakhs require the acquisition of registration under the GST.

5. GST is a transaction based tax system, whereas VAT is a summary based system. The

latter requires the seller to submit returns at the end of a particular period.

6. In the VAT system the seller is responsible for the collection of revenues, whereas in

the GST the revenue collection is performed by consumers.

7. Double taxation is present in the Value Addition Tax regime, where the manufacturer

pays tax on the excisable goods during production and VAT on sales made. The excise duty

within the Goods and Services Tax is subsumed up, double taxation is not possible on such

goods.

8. VAT system does not allow for the input tax credit during interstate sales. A good

example is where a manufacturer for shoes pays excise duty and an additional VAT on the

sale of the shoes within another state. Despite both the taxes being value addition taxes, tax

credit is not applicable as they are levied by different bodies, the central and state

governments. GST is based on the principle of ‘one nation one single tax”, so the tax credit

will be available during interstate trade.

5) Explain advantages and dis advantages of GST?

Ans:
Advantages of GST

The study of advantages and five disadvantages of GST shall be tabulated in the following

manner which shall help us in understanding about GST in its entirety.

 Wider the tax base, lower the tax rates: Currently, a no. of taxes and duties are

being imposed on the same item right from the stage of manufacture until the same is

consumed. These are levied in the form of import duty, excise duty, octroi, luxury tax,

service tax, VAT, etc.

The total of these taxes is around 35% - 40%; while the standard rate of GST is 12 %

and 18%. This is one of the key rationales of introducing GST.

 Removing cascading effects: The foundation of an indirect tax is kept keeping in

view the cascading effect and due provisions are framed to lower down the same.

However, more the no. of taxes, more the cascading effect.

When we talk of excise duty, service tax or VAT, there are Cenvat credit rules which

allow the credit of input tax/duty suffered by the material or service so used. Still,

there are cases where the cascading effect is clearly visible but there is no mechanism

in the law to deal with it for example: entry tax, octroi, etc.

Almost every goods are subject to these taxes but no credit is allowable as these are

collected normally by local bodies. Thus, ultimately these taxes form part of the cost

of the product which is further subject to excise duty or service tax or VAT. Thus, the

cascading effect do exists. This particularly happens when the same goods or service
 suffers a no. of taxes and no set-off facility is available.

With the insulation of GST in the tax system, there will be a drastic reduction in the

cascading effect as most of the indirect taxes prevailing at present will get subsumed

in GST and will also initiate availability of input tax credit.

 Resolution of classification related disputes: One major area of dispute is the

“classification of goods and/or services”. It would be interesting to know that there

have been cases where the litigation arose on the fact whether a particular

item/activity is goods (i.e. excise duty will be levied) or service (i.e. service tax will

be levied).

All these problems will come to an end after the implementation of GST.

 Rationalization of tax structure & simplification of compliance procedure: At

present, there are multiple indirect taxes which are levied by different bodies, Central

Government, State Government, Local bodies, etc.

All these governing bodies have their separate offices, rules and regulations. An

assessee has to move from one office to another for procedural formalities.

Goods and service taxes formal visit into the taxation system has brought in a

substantial reduction in these formalities as there would be only two governing bodies

namely Centre for CGST & State for SGST. This will save time, money and energy of

taxpayers.
  Reduction in duplicity of information and compliance costs: In the present

structure, the same information is to be filed at several places for the same

goods/service.

As a result, the cost to the assessee is increased and also the duplicity of information.

Not only assessees, the overall cost of government is also increased as the same

information is being stored at several places which have to be maintained by

employing man, money and energy. This ultimately leads to inefficient utilization of

nation’s resources.

 Increase in product competitiveness in the international market: With the

implementation of GST, in the long run, there will be a reduction in the overall cost of

products manufactured in India. This will make Indian products more competitive in

the international market.

It is worth mentioning here that many of our top competitors in the international

market have already switched to GST. Introduction of GST in India is a step forward

in making the product more cost-effective in the international market.

Disadvantages of GST

 Compensation to loss-making States for five years: Central Government will

compensate for the loss arising out to States on implementation of GST for a period of

five years.

The compensation will be on a tapering basis, i.e., 100% for the first three years, 75%
 in the fourth year and 50% in the fifth year. This has been done to make the States

affirmative towards the implementation of GST.

 Compliance: You need to file multiple returns in a month for every state in which

you operate.

 Decision-making process in GST Council: In the proposed GST Bill, one vote has

been assigned to each State in the GST Council. As per Government, this has been

done to ensure that small states should not lag behind in the GST Council.

Thus, while assigning the weightage to vote, the population has been made the prime

criteria. It is worthwhile to mention here that there are certain states which have very

less population but their share in taxes is on the much higher side. Such states, though

contributing more, will lag behind in the decision-making process taking place at GST

Council.

 Not friendly to important service sector like banks: It is much-hyped that GST will

bring Indian goods a step forward in the International market. The reasons so given

are that the GST will make Indian products cheaper in the long run and thus will

promote exports.

In this regard, it is to be noted that the banking sector plays an important role in exports.

Whether it is the export of service or export of goods, the role of banks is vital. It is

worthwhile to mention service tax @ 14% was levied on the banking transactions pre GST.
Post introduction of GST, this rate has jumped to 18%. This will ultimately increase the cost

of the transaction, particularly, in the case of imports and exports where a huge amount is

transacted.

Unit – 2

1) Explain important services exempted from GST?

Ans:

Exemptions from GST (Health Care Services)

1. Health care services provided by clinical establishments or medical practitioner or

paramedics are exempted under GST

2. Services provided by way of transportation of patients in an ambulance, other than

covered in (a).

Charitable and Religious Sector Exemptions from GST

1. Services by an entity registered under Section 12AA of the Income Tax Act, 1961 by way

of Charitable activities.

2. Religious activities by way of –

(a) Conduct of Religious ceremony

(b) Renting of precincts of religious place meant for general public, owned or managed by

an entity registered as a charitable or religious trust either under sec 12AA of the Income Tax

act, 1961 or a Trust or an institution registered under sec 10(23C)(v) or a body or authority

covered under sec 10(23BBA) of the Income Tax Act subject to some exceptions.

(c) Services provided by a specified organisation in respect of a religious pilgrimage

facilitated by the Ministry of the External Affairs of the Govt of India. (Kailash Mansarovar

and Haj Pilgrimage)

Exemptions from GST in Legal Sector

1. Services provided by an arbitral tribunal to any person other than a business entity or a

business entity with an aggregate turnover upto 20 lakh rupees (10 lakh in special category

states) in the preceding F.Y.

2. Services provided by a partnership firm of advocates or Individual as an advocate

other than senior advocate by way of legal services to –

> An advocate or partnership firm of advocates providing legal services,

> Any person other than a business entity or

> A business entity with an aggregate turnover of Rs 20 Lakh rupees (10 Lakh in special

category states) in the preceding F.Y.

3. A senior advocate by way of legal services to any person other than business entity or

business entity with an aggregate turnover upto 20 lakh (10 Lakhs rupees in the case of

special category states) in the preceding F.Y.

Exemptions related to Agriculture Services

1. Agriculture services which are exempt under GST are as follows –

(a) Cultivation of Plants

(b) Rearing of all life-forms of animals, for food, fibre, fuel, raw material, or other similar

products

(c) Except the rearing of horses.

2. Or Agriculture produce by way of –

(a) Agricultural operations directly related to production of any agricultural produce

including cultivation, harvesting, threshing, plant protection or testing.

(b) Supply of farm labour.

(c) Process carried out at an agriculture farm including tending, pruning, cutting,

harvesting, drying, cleansing, trimming, sun drying, fumigating, curing, sorting,

grading, cooling or bulk packaging and such like operations which do not alter essential

characteristics of agricultural produce but make it only marketable for the primary market.

(d) Renting or Leasing of agro machinery or vacant land with or without a structure

incidental to its use

e) Loading, Unloading, Packing, Storage or Warehousing of agriculture produce.

(f) Agricultural extension services i.e. research services.

(g) Services by any agricultural produce marketing committee or board of services provided

by commission agent for sale or purchase of agricultural produce.

3. Services by way of Loading, unloading, packing, storage or warehousing of rice.

4. Services by way of Pre – conditioning, pre – cooling, Ripening, waxing, retail packing,

labelling of fruits and vegetables which do not change or alter the essential

characteristics of the said fruits or vegetables.

5. Carrying out an Intermediate Production process as job work in relation to cultivation

of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre,

fuel, raw material, or other similar products or agriculture produce.

Exemptions from Transport Sector

1. Services of transportation of passengers, with or without accompanied belongings by –

(a) Railway in a class other than First Class or Air Conditioned coach.

(b) Metro, Monorail or Tramway,

(c) Inland Waterways

(d) Public Transport other than predominantly for tourism purpose, in a vessel (e)between

places located India; and

(f) Metered Cabs or Auto Rickshaws

2. Transport of Passengers with or without accompanied belongings by –

(a) Air Embarking from or terminating in an airport located in the state of Arunachal

Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at

Bagdogra located in West Bengal.

(b) Non – AC coach carriage other than radio taxi, for transportation of passengers,

excluding tourism, conducted tour, charter or hire or

(c) Stage carriage other than air-conditioned stage carriage.

Transportation of Goods Exemptions from GST

1. Services related to transportation of goods by road are exempt from tax except the services

of GTA (Goods Transport Agency) or Courier Agency.

2. Services related to transportation by way of inland waterways.

3. Services by way of transportation of goods by an aircraft from a place outside India

upto a custom station of clearance in India.

4. Transportation in relation of following goods by Rail, Vessel & GTA are –

(a)Agricultural Produce

(b)Milk, Salt and Food Grain, including floor, pulses, and rice

(c)Organic Manure

(d)Newspapers or Magazines registered with the registrar of Newspapers.

(e)Relief Material meant for the victims of natural or man-made disasters, calamities,

accidents or mishap.

(f) Defence or military equipments.

5. Transportation services by a Goods Transport Agency in relation to the following goods

are exempt from the tax –

(a)Goods where consideration charged for the transportation of goods on a consignment

transported in a single carriage does not exceed one thousand five hundred rupees. or

(b)Goods, where consideration charged for transportation of all such goods for a single

consignee does not exceed rupees seven hundred and fifty.

 6. Services provided by GTA to an unregistered Person including an unregistered casual

taxable person, other than the following recipients, namely –

(a) Any factory registered under or governed by the Factories Act, 1948.

(b) Any society registered under the Societies Registration Act, 1860 or under any other law

for the time being in force in any part of India.

(c) Any co-operative society established by or under any law for the time being enforce

Exemptions from GST relating to Renting of Immovable Property

 Services by way of renting of residential dwelling for use as residence.

 Services by way of a Hotel, inn, guest house, club or campsite by whatever name

called for residential or loding purposes, having declared tariff of a unit of

accommodation below Rs 1000/- per day or equivalent.

Exempted from GST related to Entertainment Sector

 Services by an artist by way of performance in folk or classical art forms of Music,

dance or theater if the consideration charged for such performance is not more than Rs

1,50,000 (Exemption not applicable to services provided by Brand Ambassador).

Exemptions Related to Banking and Financial Sector

 Services by way of –

o Extending deposits, loans or advances in so far as the consideration is

represented by way of interest or discount (other than interest in credit card services).

o Inter se sale or purchase of foreign currency amongst banks or authorised

dealers of foreign exchange or amongst banks and such dealers.

Exemptions from GST in Government Sector

 Services by way of access to a road or bridge on payment of toll charges

 Services by way of access to a road or a bridge on payment of annuity.

 Services provided by Reserve Bank of India. (Services to RBI is taxable).

 Services by a Foreign Diplomatic Mission located in India.

Exemptions from Services Provided by Government

 Services provided by the Central Govt. or the State Govt. or Union territory or Local

authority excluding the following services –

o Services provided by Department of Posts by way of speed post, express

parcel post, life insurance, and agency services provided to a person other than CG, SG or

Union territory.

o Services in relation to an aircraft or a vessel, inside or outside the precincts of

a port or an airport.

o Transport of goods or passengers or

o Any service other than the services covered under entries above, provided to

any business entity.

2) Explain GST registration process?

Ans:

Step-by-step procedure to complete GST Registration

The step-by-step procedure that individuals must follow to complete GST Registration is

mentioned below:

 First, individuals must visit the GST portal ([Link]

 Next, the individual must click on the ‘Register Now’ link which can be found under

the ‘Taxpayers’ tab.

 Next, the individual must select ‘New Registration’.

 On the same page, the individual must fill the below-mentioned details:

 Under the ‘I am a’ drop-down menu, select ‘Taxpayer’.

 Select the respective state and district from the drop-down menu.

 Enter the name of the business.

 Enter the PAN of the business.

 Enter the email ID and mobile number in the respective boxes. The entered

email ID and mobile number must be active as OTPs will be sent to them.

 Enter the image that is shown on the screen in the respective box and click on

‘Proceed’.

 On the next page, enter the OTP that was sent to the email ID and mobile number in

the respective boxes.

 Once the details have been entered, click on ‘Proceed’.

 Individuals will be shown the Temporary Reference Number (TRN) on the screen. It

is vital that they make a note of the TRN.

 Next, individuals must visit the GST portal again and click on ‘Register’ which is

present under the ‘Taxpayers’ menu.

 Next, select ‘Temporary Reference Number (TRN)’.

 Next, individuals must enter the TRN and the captcha details.

 Once the details have been entered, click on ‘Proceed’.

 Individuals will receive an OTP on their email ID and registered mobile number.

Enter the OTP on the next page and click on ‘Proceed’.

 The status of your application will be available on the next page. On the right side,

there will be an Edit icon, click on it.

 There will be 10 sections on the next page. All the relevant details must be filled, and

the necessary documents must be submitted. The list of documents that must be uploaded

are mentioned below:

 Photographs

 Address proof where the business is located.

 Bank details such as account number, bank name, bank branch, and IFSC

code.

 Authorisation form

 The constitution of the taxpayer.

 Once all the above-mentioned details have been entered, individuals must visit the

‘Verification’ page. Once individuals check the declaration, they must submit the

application by using one of the below mentioned methods:

 By using an Electronic Verification Code (EVC). The code will be sent to the

registered mobile number of the applicant.

 By using the e-Sign method. An OTP will be sent to the mobile number that

has been linked with the Aadhaar card.

 In case companies are registering, the application must be submitted by using

the Digital Signature Certificate (DSC).

 Once the above step is completed, a success message will be shown on the screen.

The Application Reference Number (ARN) will be sent to the registered mobile number

and email ID.

 Individuals can check the status of the ARN on the GST portal.
 Types of GST Registration

Under the GST Act, GST Registration can be of various types. It is vital that the taxpayer is

aware of the different types of GST Registration and selects the appropriate one. The

different types of GST Registration are mentioned below:

 Normal Taxpayer: Most of the businesses in India fall under this category. The

applicant need not provide any deposit in order to become a normal taxpayer. There is also

no expiry date for taxpayers who fall under this category.

 Casual Taxable Person: Individuals who wish to set up a seasonal shop or stall can

opt for this category. An advance amount that is equal to the expected GST liability during

the time the stall or seasonal shop is present must be deposited by the taxpayer. The

duration of the GST Registration under this category is 3 months and it can be extended or

renewed.

 Composition Taxpayer: Taxpayers who wish to obtain the GST Composition

Scheme can opt for this type of GST Registration. A flat GST rates must be deposited by

taxpayers who opt for GST Registration under this category. Input tax credit cannot be

obtained by taxpayers who come under this category.

 Non-Resident Taxable Person: In case individuals live outside India, but supply

goods to individuals who stay in India, must opt for this type of GST Registration. Similar

to the Casual Taxable Person type of GST Registration, taxpayers must pay a deposit that

is equal to the expected GST liability during the time the GST registration is active. The

duration for this type of GST registration is usually 3 months, but it can be extended or

renewed at the type of expiry.

 Non-Resident Online Service Provider

 Special Economic Zone Developer

 GST TDS Deductor – Government Entities

 UN Embassy/ Body/ other notified individuals

 Special Economic Zone Unit

 GST TDS Collector – E-commerce Companies

3) Define tally features?

Ans: F11 – Features of [Link] 9

Features of Tally

Before we directly jump on to the features of [Link] 9, let me show you where you can

exactly find the features we are going to discuss in this post are in Tally.

 Open up your Tally

 From Gateway of Tally, press F11 or click on Features which is situated at the

bottom right hand corner in the right hand side green bar.
Boom! You’ll find all the features of Tally here which I’ve explained below in this post in a

detailed way.

Salient Features of [Link] 9 – Point wise Explanation

There are many features of [Link] 9 so I have decided to split them up point wise because

that will be easy for you to understand as well as remember.

First feature that I am going to explain you is simple and you must be knowing this.

Accounting Features or Accounting Management in Tally

Accounting Features or Accounting Management in Tally

Tally is popularly known for its easy accounting worldwide and therefore it is used by

more than a million customers globally.

I always say that Tally is nothing but accounting in digital format. That’s completely true

for the accounting part of Tally.

In manual accounting, we write accounting entries as debit and credit. In Tally, we create

entries the same way.

There are some basic accounting vouchers in Tally which you can create and you will know

that passing accounting entries in Tally is almost same as writing accounting entries

manually.

In Tally, there are many other features like accounting entries which makes it even more

interesting. Here are they:

Outstanding Management in Tally

Outstanding

Management in [Link] 9

This accounting feature is used when you are doing business or handling accounting of your

client who buys and sells on credit.

It covers most of the businesses. Outstanding Management contains main feature called bill

wise details and interest calculation.

You can easily track all the bills in Tally which are on credit till they are finally no more

pending.

With interest calculation, you can set the interest rate and Tally will auto calculate the

interest if the bills are pending above the due date.

You can also calculate interest on loans given or taken in Tally. That’s pretty interesting,

right?

Let’s move on to the second Accounting Feature of Tally.

Cost / Profit Centres Management in [Link] 9

Cost Profit

Centres Management in [Link] 9

This is an advanced feature of [Link] 9 in which you can maintain payroll and use cost

centres for job costing.

Payroll is in itself is a big feature because you can maintain everything about your

employees.

You can maintain your employee records of salary details, payslips, employee provident

fund, leaves, attendance and so on.

Basically, you have to enter the details one time and then you just need to click a button for

creating entries related to payroll in Tally.

Next Accounting Feature in Features of Tally is Invoicing.

Invoicing in [Link] 9

Invoicing in [Link] 9

It is again counted as a basic functionality of Tally in which you can record purchases and

sales entries in Tally in invoice mode.

You can also manage debit and credit notes in Tally which is an essential part of any

business because people in business regularly issue credit and debit notes.

Do you remember that you said to a shopkeeper to give you credit of ₹500 and you returned500 and you returned

the item.

He immediately gave you a note and in there what was written was ₹500 and you returned500 due to you and

you can purchase anything from his shop for ₹500 and you returned500 using that written note.

That was a credit and a debit note in itself.

Budgets and Scenario Management in Tally

Budgets and

Scenario Management in [Link] 9

Did you know that you can actually create a budget in Tally? I am sure most of you do not.

But that’s why we are here to share our knowledge with each other. What you know, I may

not know and what I know, you might not know.

You can create budgets in Tally and then compare it with actual figures to know the

differences which in technical terms called variances.

You can also use Reversing Journals and Optional Vouchers in Tally which is in this

accounting feature apart from budgets.

Banking Features in Tally

Banking

Features in [Link] 9

With the latest banking features in [Link] 9, you can print cheques right away from

Tally. That’s cool!

You can also create post dated transactions in Tally with this feature. We regularly issue

post dated cheques and that’s where this feature will be useful.

You can easily do bank reconciliation in Tally too.

Other Features in Tally – Accounting Features

Other Features

– Accounting Features – [Link] 9

These are some other accounting features which are small in functionality but still are useful

for many people.

Other Features include:

 Zero-valued transactions – transactions with zero value – for example, donation

of land to a trust.

 Maintaining multiple mailing details is useful if you have multiple branches and

you issue bills from multiple branches.

 You can also enable Company Logo and put your own logo on the invoices.

Now, we will look at one other type of accounting features.

Inventory Features or Inventory Management in Tally

Inventory Features or Inventory Management in Tally

With inventory features, you can manage your stock in Tally. Whatever stock you have in

your business, you can easily manage that in Tally.

In fact, you can even maintain your stock in Tally if you are investing stock markets or

mutual funds.

Okay, without much ado, let’s directly jump on to individual features of Inventory in

Tally.
Storage and Classification in Tally

Storage and

Classification in Tally

If you have a godown or multiple godowns, you can manage them all with the help of this

inventory feature.

Some people have stock categories as well as batch wise manufacturing and that can also be

easily accounted for in Tally.

You can also set the expiry dates for batches.

You can also use separate actual and billed quantity columns in Tally if you have that kind

requirements in your or your client’s business.

What if you are working on the basis of orders? Well, that is the next feature we are

talking about.
Order Processing in Tally

Order

Processing in [Link] 9

By enabling this option, you can easily create and track orders in Tally as well as set the

order expiry dates.

With the use of this option, you can manage purchases and sales orders and then assign them

with actual sales and purchases as well as payments and receipts on the respective orders in

Tally.

For example, if you or your client takes a big order, receives a small token amount and

then starts working on the order. After the completion of the order, you receive the full

payment and then, you dispatch the goods from your shop or godown.

This all can be easily done in Tally.

nvoicing in Tally
Invoicing in [Link] 9 – Inventory Features – [Link] 9

With the help of invoicing in Tally, when you create a voucher in Tally, an invoice is

automatically created and you can print it if you require so.

With the help of this feature, you can also use Debit and Credit Notes in Tally which is

again a fantastic feature to have.

You can also use a separate discount column in invoices in Tally if you want. This will

display a column of discount while create a purchases and sales invoices.

There are two types of invoices in Tally. Accounting Invoice and Item Invoice.

Purchase Management in Tally

Purchase

Management in [Link] 9

With this option, you can track additional costs of purchases with in the inventory vouchers

in Tally.

Sales Management in Tally

Sales Management in [Link] 9

With this feature of Tally, you can use multiple price levels for sales in Tally.
Other Features in Tally – Inventory Features

Other

Features – Inventory Features – [Link] 9

Other Features in the Inventory Features include using tracking numbers for tracking

delivery and receipt notes.

Using rejection inward and outward notes is also one of the features of Tally that you can use

if you are having many rejections in inwards and outwards i.e. goods rejected and

returned.

If you or your client are in the business of manufacturing, then the option of material in

and out vouchers will come in quite handy to track the materials cycle efficiently.

If you want to go in more detailed costing of a stock item and you want to track the costs of

the stock item, you can also do that in Tally.

This way, you will be tracking the costs of the stock items as well as the same stock items in

Tally too.

Now, we will move on to third most important mega feature of Tally. It is called:
Statutory and Taxation or Tax Compliance in Tally

Statutory and Taxation or Tax Compliance in [Link] 9

You will be very much happy to know that you can create and almost file your or your

client’s GST returns in Tally.

Right from creating invoices with GST in Tally to entering your own details about GST in

Tally to creating GST returns to even printing them. Everything can be done in Tally.

Also, you can see the exceptions or errors in GST returns so that whenever you file a GST

return, it will be error free.

 4) How to create company in tally?

Ans:

Creating a New Company in [Link] 9

We can create a Company profile by using the following procedure :

Gateway of Tally  press ( Alt+F3)  company info Create Company

Lets take an example::

Enter The Company details in providing the following screen.

 Company Abc Ltd

 Address Rajamahendravaram

 State Andhra pradesh

 VAT TIN No. 12345678900

 PAN BLS123456 (Permanent Account No.)

Finally, confirm company creation by pressing the ENTER key (or) “Y” key to accept all

declaration for the Company. (or) Short cut key Ctrl + A.

To Enter Company Information follows these Steps:

Field Name Values

Directory :

Specify the path where the Company data will be stored. The Default data directory of

Tally9.0 is C:\Tally9.0\Data. If we want to keep our data in another location we can specify

the location, for example: If we want to keep our data in “D:\ drive”.
Name: Enter Name of the Company

Mailing Address: Address of the Company.

State: Select the State Name from the Pop-Up-List.

Pin Code: Enter our city Pin Code.

E-mail Address: Enter the E-mail Address of the Company.

Currency Symbol: Currency symbol will be displayed in which the account books of the

company are to be maintained. By default it shows As currency symbol.

Maintain: Depending on the activity of the company we can maintain the records in two

ways: 1. Accounts only 2. Accounts with Inventory.

Financial Year From: Enter the Starting date of the Financial Year for which we are

maintaining Company Accounts. However, it will never ask we to enter the Closing date of

the Financial period like other software. In Tally, we can maintain multiple Accounting Years

in the same company. For example, If we want to set up the Financial Period of a Company

fro the Year 2015-2016, the Start date should be 01-04-2017.

Books Beginning From: Enter a Date within the Financial Period, on which books have

been started. For example : In above mentioned period, the actual date of Financial

transaction begins at 01-12-2015, so in this field enter the date as 01-12-2015. Remember that

this date can be the same as starting date of the financial period or later, only for a new

Concern / Company.
Tally Vault Password: If we want to secure our company from other users, even from

selection, provide a Password here. A copy of the company will generate with encrypted

format in name.

Use Security Control: This Option enables we to restrict user-wise data access. Say

“Yes” to create “administrator” who has all rights. If we don’t wish to maintain security

control select “No”.

Base Currency Symbol: The currency symbol appearing against currency field will be

displayed here.

Formal Name: Full name of the currency is displayed here. For example, For currency

symbol Rs. The currency name is displayed as “Indian rupees”.

Number of Decimal Places: Decimal place of currency is shown here because it will not

allow we to lose part of an amount due to change of currency value.

Show Amount in Million Symbol :

This option maintains visual clarity of large amounts. If we want to show the amount in

millions, say “Yes”. To show in lakhs, say “No”.

Is Symbol Suffixed to Amount ?

To put currency Symbol before amounts say, “No”. to put after the amount , say “Yes”.

Keys Used for Saving Information :

 Enter (to save the information)

 Ctrl + A (save the record information directly from any field position).
 5) How to activating GST features in tally?

Ans:

To activate GST

1. Open the company for which you need to activate GST.

2. Press F11 > F3.

3. Enable Goods and Services Tax (GST) – Yes.

4. Set/alter GST details – Yes.

State: Displays the state you have selected for your company. Helps in identifying local and

interstate transactions. If you change the state, it will be updated in the company details.
5. Specify the GSTIN/UIN for the business. This can be printed in the invoices as required.

You can specify this later.

6. Specify Applicable from date. GST will be applicable for your transactions from this

date onwards.

You can record transactions using the ledgers with GST details, and print invoices with

GSTIN.

If required, deactivate other taxes like VAT, as applicable. For this, open the corresponding

tax details screen and specify the Deactivate from date.

6) How to set GST rates by using tally?

Ans:

GST Rate Setup

Quickly set up GST rates for your company, stock item-wise or stock group-wise, using

the GST Rate Setup option. You must enable GST in your company to provide GST

rates. You can set up GST rates at the company level, stock group level, stock item level,

account ledger group level, and ledger level. You can also set the GST rates for a

particular price range/slab for multiple stock items.

Set GST rates for stock groups and stock items

1. Go to Gateway of Tally > Display > Statutory Reports > GST > GST Rate Setup .
Note:

♦ Brackets indicate that tax rates are captured from the company or stock group level.

♦ When a union territory is selected as the state of a company, UT Tax column appears

along with other tax types in the GST Rate Setup screen.

2. Select the stock group or stock item, and press Alt+S to provide the applicable tax

rates. You can press Spacebar to select multiple stock groups or stock items. Set the

tax rates and save.

o The rate entered for integrated tax will be equally divided between central tax

and state tax.

 o To view the history of tax rate changes, press Alt + L .

o To specify further GST-related details, click F12: Configure .

In order to remove a tax rate, use the option Ctrl+C (Clear Rate). You can clear rate of

multiple items or groups by selecting them using Spacebar . You can also clear rate from

items under a group and automatically infer tax details recorded at group level to sub-

groups and items using the option F : Enforce Rate .

Update GST rates for stock groups and stock items

1. Go to the alteration screen of the stock groups or stock items in which the details need

to be updated.

2. Enable the option Set/alter GST Details .

3. In the GST Details screen, you can do any of the following:

● Enter the new Integrated Tax rate.

● Enter the Revised Applicability date in the Applicable from field, and save.

Or

● Click L : Tax Rate History .

● Enter the Applicable Date for the new rate in another row > enable Set/Alter Tax

Details .
 ● Enter the new Integrated Tax rate, and save.

7) How to create groups by using tally?

Ans:

CREATING A SINGLE GROUP

Group is a collection of Ledgers of the same nature, [Link] 9 allows us to create

groups as per our requirements.

Go to Gateway of Tally > Accounts Info. > Groups > Create under Single Group
The Group Creation screen is displayed as shown:

Name of Group: Enter the

name of the Group to be created.

For example �Administrative Expenses in the name field.

Alias: Enter an alias name to allow access to the group using the Alias in addition to its

name or leave it blank. For example, for Administrative expenses, we can enter Office

Expense or even an alphanumeric code, say E001, as an alias

Under: Specify under which existing (Parent) group the sub-classification is required.

Note: If it is a new primary group, select Primary (requirement of a new primary group is

very rare, but the option exists). Creation of new Primary Group is not allowed if Allow

Advanced entries in Masters is set to No in F12: Configure. We can also create a new

Parent Group by using Alt+C.

 8) How to create GST ledgers by using tally?

Ans:

1. From Gateway of Tally, go to Features by pressing F11 and you will see a menu as in

the picture below.

Company Features Menu in Tally

2. Go to Statutory & Taxation and you will see a screen which is called Company

Operations Alteration.
 Company Operations Alteration Screen in Tally

See name of the screen – Company Operations Alteration on the top left-hand corner in

above image.

3. You will be able to two options.

o Enable Goods and Services Tax (GST)

o Set/alter GST details

2. First, we will enable GST in Tally and then we will Set the GST Details.

3. Well, enabling is pretty easy.

4. Press Y in the option Enable Goods and Services Tax (GST) and press Enter.

5. DONE. You have enabled GST (Goods and Services) Tax in Tally.

This was just a simple step but without it you would not be able to go ahead and set the GST

details in Tally.

Enabling the GST in Tally will activate all the functions of GST in Tally. This includes

GST functions in ledgers, reports, returns and more.

 You may think it is just a small step, but trust me it is a big step which affects the whole

functioning of Tally.

Now, you will see GST option in almost every place in Tally which previously was not

available.

We will now see How to set and alter GST details in Tally.

You will need the following to set GST Details in Tally.

 a valid GSTIN – Goods and Services Tax Identification Number

 Rate of GST – for example – 28% IGST divided into 14% CGST and 14% SGST

 HSN Code – Harmonized System Nomenclature which is different according to the

product or service you sell.

You will have all the details if you have registered for GST on the GST Portal.

If you do not have any of the above details, it is perfectly okay. You can simply go through

this post to know the method to set GST details in Tally.

In fact, I will be using fake GSTIN and fake HSN for the explanation of this post.

After GST is Enabled, you will land to Company Operations Alteration screen.

 Press Y against the Set/alter GST details option and press Enter.

 You will see the Company GST Details screen as shown in the image below.
 sample figures for Blog purpose. Here GST number to be added

 First option is State – Choose your State or the state in which the business is located.

 Second option is Registration type – Regular

 GSTIN/UIN – Enter the GSTIN or UIN. It will be printed on the invoices later when

you create ledgers related to GST in Tally.

 Applicable from – This is date from which GST is applicable to you. Most probably

it will be 1st July, 2017.

 Set/alter GST rate details – This is where you will enter the rates of GST

according to the product you are selling.

 Press Y and press Enter to enter the rates and HSN details as in the picture below.

 GST Tax Rate Details in Tally

o Write the Description about the goods or services you sell on the basis of

your HSN Number.

o Enter HSN Number.

o In Tax Details, there are 3 options.

 Exempt

 Nil Rated
  Taxable

o select Taxable option because goods or services are taxable under the GST.

o Then select Integrated Tax under Tax Type. Tally calculates both the Central

and State Taxes exactly half for each of them.

So when you enter 28% Integrated Tax, it will be divided into 14% for CGST and 14%

for SGST automatically.

You can also enable Central and State Tax option if you want to see columns for both

of them instead of one integrated tax column. Here is how you can do it.

 Press F12 while remaining on the same screen which opens up

a Configuration menu.

GST Rate Configuration in Tally

 Select the last option Show all GST tax types to Yes and press

Enter and now you will see Central and State Tax option too as in the picture
 below. GST

Details with Central and State Taxes in Tally

 You can see different options for Central and State

Taxes along with Integrated Tax option.

 Enter the Cess percentage if your goods or services

have cess applicable to it.

 Press Enter.

 Now you will be out at the Company GST Details screen

from where we started.

 Next option is Enable GST Classifications. Leave it to No for

now because it is an advanced topic which will take another post for me to

explain. It will not affect your entries with GST in anyway as it is an additional

option which I will explain later.

 Last option is Provide LUT/Bond Details – If you have signed

a Bond or a letter of undertaking (LUT) with the GST Department, you can

provide the details about it as shown in the picture below.

 LUT-Bond

Details in Tally

 You will have to enter LUT or Bond number and

the Validity i.e. from a date to the date till the LUT or Bond is valid.

 Finally Press Enter and you will come at Company

Operations Alteration – right from where we started.

 Now, press CTRL+A to save all the details which we have

entered.

 Congratulations! You have successfully set GST details in

Tally.

As we all know there are four types of taxes in GSTregime. They are CGST(Central GST)

& SGST(State GST) for intrastate sale or local [Link] ( Integrated GST) for interstate

sale and UGST for sale in union terittory. In this tutorials we will learn how to create all

these GST tax ledgers in tally erp 9.

 From Gateway of Tally, go to Accounts Info.

 Select Ledgers

 Select Create under Single Ledger. Now the real fun starts.
 How to create Input CGST Ledger in Tally

Take a look at the picture above because that is exactly, how you will need to create

the Input CGST Ledger in Tally.

 The name will be Input CGST as it is input tax which we pay when we purchase

goods or services attracting GST.

 As I said, it will be under Duties and Taxes.

 Now, in Type of Duty/tax option, select GST.

 For Tax type, select Central Tax for now.

o You have to select State Tax for SGST and Integrated Tax for

IGST and Cess for Cess.

 The option Inventory Values are affected will be set to No because it has no use for

this ledger.

 Percentage of calculation should be set to 0%. It is because Tally takes the

percentages from your configuration or the stock items or the classification.

This is crucial to know because if you set the percentage here you will not get the amount

automatically calculated while creating an entry which includes GST.

 Rounding method that I have selected is Normal Rounding. However, you can

select the method as per your choice.

 Rounding limit is set to zero. Again, it is my choice. You can select a different

number.

 Now, just press Enter till you save the ledger.

 Congo! You have created a GST ledger, specifically an Input CGST ledger in

Tally.

You can easily create all the GST Ledgers as in the list above by following this method.

Just change the name, the Tax Type and you are done with creating all the ledgers. Repeat

the same method and in no time you will have all the six ledgers required for passing the GST

accounting entries in Tally.

 Now that you have created all the GST tax ledgers, we need to make sure that certain other

ledgers are configured for GST applicability otherwise they won’t work as required.

Those ledgers are important for passing GST Accounting Entries in Tally. They are:

 Sales and Purchases Ledger

 Stock Items Ledger

 Sundry Debtor and Sundry Creditors Ledger

Unit – 3

1) How to maintain inventory features by using tally?

 Ans:

Inventory Features in Tally ERP 9

Inventory features in Tally consists configurations / functions related to inventory

transactions and reports.

Inventory features in tally are furthered sub-divided into 7 functions, such as

1. General

2. Storage and Classification

3. Order processing

4. Invoicing

5. Purchase Management

6. Sales Management

7. Other features

How to start inventory features in Tally ERP 9

 Path: Tally Main –> Gateway of Tally –> F11: Features –> Company Features –>

Inventory Features or click on F2: Inventory.

How to enable inventory features in Tally ERP 9

By using inventory features, you enable or disable the options for day to day business

transactions. The following screen displays after executing the inventory features.
On company alteration screen, update the following details

General

 Integrate accounts and inventory: Choose this option as Yes to include stock or

inventory balances in inventory records.

 Enable zero value transactions: Choose this options as Yes to allow the zero value

transactions.

Storage and classification

 Maintain multiple godowns: Enable this option if you have more than one storage

location and godowns for storing the materials.

 Maintain stock categories: Enable this to define or maintain stock categories

  Maintain batch wise details: Enable this option to maintain batch wise details for

stock items

 Set expiry dates for batches : Enable this option for maintaining expire dates

for batches

 Use separate actual and billed quantity columns

Order Processing

 Enable purchase order processing : Enable this option to define purchase orders

 Enable sales order processing: Enable this option to define sales orders

 Enable job order processing: Enable this option to define job orders.

Invoicing

 Enable Invoicing:

 Record purchases in invoice mode

 Use debit and credit notes

 Record credit notes in invoice mode

 Record debit notes in invoice mode

 Use separate discount column in invoices

Purchase Management

 Track additional costs of purchases

Sales management

 Use multiple price levels

Other Features

 Use tracking numbers (enables delivery and receipt notes)

 Use rejection inward and outward notes

 Use material in and out vouchers

 Use cost tracking for stock item

2) Explain the conditions related to GST invoice?

Ans:

Under the GST regime, an “invoice” or “tax invoice” means the tax invoice referred to in

section 31 of the CGST Act, 2017. This section mandates issuance of invoice or a bill of

supply for every supply of goods or services. It is not necessary that only a person

supplying goods or services need to issue invoice. The GST law mandates that any

registered person buying goods or services from an unregistered person needs to issue a

payment voucher as well as a tax invoice. The type of invoice to be issued depends upon

the category of registered person making the supply. For example, if a registered person is

making or receiving supplies (from unregistered persons), then a tax invoice needs to be

issued by such registered person. However, if a registered person is dealing only in

exempted supplies or is availing of composition scheme (composition dealer), then such a

registered person needs to issue a bill of supply in lieu of invoice. The invoice should

contain description, quantity and value & such other prescribed particulars (in case of

supply of goods) and the description and value & such other prescribed particulars (in

case of supply of services). An invoice or a bill of supply need not be issued if the value

of the supply is less than Rs. 200/- subject to specified conditions.

Importance of tax invoice under GST Under GST

a tax invoice is an important document. It not only evidences supply of goods or services,

but is also an essential document for the recipient to avail Input Tax Credit (ITC). A

registered person cannot avail input tax credit unless he is in possession of a tax invoice

or a debit note. GST is chargeable at the time of supply. Invoice is an important indicator

of the time of supply. Broadly speaking, the time of supply of goods or services is the

date of issuance of invoice or receipt of payment whichever is earlier. However, a special

procedure for payment of tax has been prescribed for registered persons (other than

composition dealers) supplying goods. Such category of persons (suppliers of goods

other than composition dealers) need to pay GST only at the time of issue of invoice

irrespective of when they receive payment.

Thus the importance of invoice under GST cannot be overemphasised. Suffice it to say,

the tax invoice is the primary document evidencing the supply and vital for availing input

tax credit.

Contents of invoice

There is no format prescribed for an invoice, however, Invoice rules makes it mandatory

for an invoice to have following fields (only applicable field are to be filled):

(a) name, address and GSTIN of the supplier; (b) a consecutive serial number, in

one or multiple series, containing alphabets or numerals or special characters

hyphen or dash and slash symbolised as “-” and “/” respectively, and any

combination thereof, unique for a financial year; (c) date of its issue; (d) name,

address and GSTIN or UIN, if registered, of the recipient; (e) name and

address of the recipient and the address of delivery, along with the name of

State and its code, if such recipient is unregistered and where the value of

taxable supply is fifty thousand rupees or more; (f) HSN code of goods or

Accounting Code of services; (g) description of goods or services; (h) quantity

in case of goods and unit or Unique Quantity Code thereof; (i) total value of

supply of goods or services or both; (j) taxable value of supply of goods or

services or both taking into account discount or abatement, if any; (k) rate of

tax (central tax, State tax, integrated tax, Union territory tax or cess); (l)

amount of tax charged in respect of taxable goods or services (central tax,

 State tax, integrated tax, Union territory tax or cess); (m) place of supply along

with the name of State, in case of a supply in the course of inter-State trade or

commerce; (n) address of delivery where the same is different from the place

of supply; (o) whether the tax is payable on reverse charge basis; and (p)

signature or digital signature of the supplier or his authorized representative.

3) Explain the gateway of tally menu?

Ans:

Gateway of Tally Screen

( Accounts-Only ) in [Link] 9

The Gateway of Tally menu of an Accounts Only company appears as shown below:

[Img-31]

The Gateway of Tally screen is separated into 2 sections – Main Area (Ctrl+M) and the
Button Bar.

Main Area

The left side of the Main Area gives information on:

1. Current Period – which is the currently loaded company's accounting period.

2. Current Date – This is the date of the last Voucher Entry for the selected

company.

3. List of Selected Companies – This displays the name of the loaded company.

The Main Area gives information on:

1. Creation of Accounting Masters and Importing Master information

2. Creation of Accounting Vouchers and Importing transaction information

3. Viewing and printing financial reports using the information given in Masters and

Transactions.

Button Bar

The Button Bar Contains two sections:

1. Top Button Bar

2. Right Side Button Bar

Top Button Bar Contains:

Buttons Shortcut Usability

Key

Print Alt + P Navigate to Print Menu

Export Alt + E As it is not used from Main Screen, these

 buttons are disabled

E-Mail Alt + M

Upload Alt + O

Language Alt + G To change the Language

Keyboard Alt + K To change the Keyboard Language

Control Centre Ctrl + K Login to Control Centre

Support Centre Ctrl + H To post the queries of the product.

Right Side Button Bar Contains:

Buttons Shortcut Usability

Key

Select Cmp F1 To select a company

Shut Cmp Alt + F1 To shut or close the company

Date F2 To change the current date

Period Alt + F2 To change the period

Company F3 To select a different company which is

already loaded. (If one company is Loaded in

Gateway of Tally, this button is disabled)

Company Info Alt + F3 To access the Company Info. Menu

Connect F4 To connect companies on [Link]

Disconnect Alt + F4 To disconnect companies from [Link]

Features F11 To access the Company features for a

company

Configure F12 To access the configuration settings

 Note: You cannot load companies with the same name at the same time.

The loaded or selected company will have to be shut first in order to

load the other company.

4) How to create GST vouchers?

Ans:

Create Voucher Types

You can customise the voucher by creating a voucher class.

To create a voucher type

1. Go to Gateway of Tally > Accounts Info. or Inventory Info. > Voucher Type >

Create .

2. Enter the Name of the voucher.

3. Select the type of voucher.

4. Enter the abbreviation in the Abbreviation field, if required.

5. Select the Method of voucher numbering from the Methods of Numbering list,

which appears as shown below:

 Click here for more information about the Methods of Numbering available.

6. Enable Use effective dates for vouchers to enter effective dates for vouchers.

Note: Select this option if you have a transaction under consideration for overdue/ageing

analysis recorded currently but will come into effect on another date. If the effective

date is entered, the overdue/ageing will be considered from the effective date and not

from voucher date.

7. Enable Make this voucher type 'Optional' by default to set your voucher to

optional voucher by default.

Note: For Memorandum and Reversing Journal voucher the option Make this voucher

type 'Optional' by default is not available.

8. Enable Allow narration in voucher to give a common narration for voucher. A

common narration screen for voucher appears as shown below:

 9. Enable Provide narration for each ledger in voucher ? if you want to give a

separate narration for each entry of a voucher. This would be applicable for a

multiple entry voucher where you want separate details for each entry. The narrations

for each entry appears as shown below:

For Delivery Note, Receipt Note, Sales order, Purchase order, Physical Stock, Stock

Journal, Rejection In and Rejection Out, the option Provide narration for each

ledger in voucher ? is not available.

10. Enable Print voucher after saving to print every voucher after entering it.

Note: Depending on the Type of Voucher selected to create or alter, different printing

features appear in this field. For example, if you select Receipt as Type of Voucher ,

the option Print Formal Receipt after saving will be displayed.

11. Set Use for POS invoicing to Yes to use the sales invoice as POS invoice.

12. Set the Default title to print on invoice to print the same title for POS invoice.
Note : Default print Title option will appear only in Sales Voucher Type.

13. Select the bank in Default bank option to print the default bank ledger when the

option Print Bank Details is enabled in a Sales voucher.

14. Enter the Default jurisdiction to be printed on the invoice, if required.

15. Create a voucher class in the Name of Class field, if required.

The completed Voucher Type Creation screen appears as shown below:

16. Press Enter to save.

Manufacturing Journal Voucher Type

While creating a Stock Journal Voucher Type , the option Use Manufacturing Journal

is enabled. The Voucher Type Creation screen appears as shown below:

Unit – 4

1) Explain the conditions for allowing input tax credit?

Ans:

For all business entities; Input Tax Credit, its availment and use is a key focus area. It is

because the amount of Input Credit available is equivalent to hard cash. Any admission or

rejection of claim of Input Tax Credit hits the Cash Flows and the Working Capital

Requirements. So let us discuss all about Input Tax Credit as we move towards the dawn of a

new taxation era, The GST era.

Chapter-V: Input Tax Credit

Chapter-V of the CGST Act talks about Input Tax Credit and contains seven sections detailed

as follows:

Section 16 Eligibility and conditions for taking input tax credit

Section 17 Apportionment of credit and blocked credits

Section 18 Availability of credit in special circumstances

Section 19 Taking input tax credit in respect of inputs sent for job work

Section 20 Manner of distribution of credit by Input Service Distributor

Section 21 Manner of recovery of credit distributed in excess

I shall only be discussing Section 16 here.

Section 16: Eligibility and conditions for taking input tax credit

Section 16(1) says that every registered person shall, subject to such conditions and

restrictions as may be prescribed and in the manner specified in section 49, be entitled to

take credit of input tax charged on any supply of goods or services or both to him which
 are used or intended to be used in the course or furtherance of his business and the said

amount shall be credited to the electronic credit ledger of such person.

♦ Interpretation:

Section 16(1) can be interpreted as the sub-section enabling entitlement to:

 all registered persons

 in the manner specified in Section 49 (further linked to Section 41)

 shall be allowed to take credit for tax paid on any goods purchases and services

availed

 if used or intended to be used for business purposes

 and such credit shall be credited in the electronic credit ledger of the assessee.

♦ Change from Existing Laws:

Under the existing Central Excise Act, Service Tax Rules and DVAT Act, eligibility was

allowed if input goods or services are used “in or in relation to” manufacture/outward service/

sale. These words have been deleted here, thereby widely increasing the scope of eligible

inputs.

♦ Issues:

(1) The author is of the opinion that the words “input tax charged” should have been written

as “input tax incurred”. The reason is that the tax charged in the invoice is always referred to

the Output tax. Input tax charged refers to a situation where the assessee is under obligation

of Reverse Charge Mechanism of tax payment.

Section 16(2) says that notwithstanding anything contained in section 16, no registered

person shall be entitled to the credit of any input tax in respect of any supply of goods and/or

services to him unless—

(a) He is in possession of a tax invoice or debit note issued by a supplier registered under this

Act, or such other taxpaying document(s) as may be prescribed,

(b) He has received the goods and/or services,

Explanation: For the purposes of this clause, it shall be deemed that the registered person has

received the goods where the goods are delivered by the supplier to a recipient or any other

person on the direction of such registered person, whether acting as an agent or otherwise,

before or during movement of goods, either by way of transfer of documents of title to goods

or otherwise

(c) Subject to provisions of Section 41, the tax charged in respect of such supply has been

actually paid to the Government, either in cash or through utilization of input tax credit

admissible in respect of the said supply, and

(d) He has furnished the return under section 39.

Provided that where the goods against an invoice are received in lots or instalments, the

registered person shall be entitled to take credit upon receipt of the last lot or installment.

Provided further that where a recipient fails to pay to the supplier of goods or services or

both, other than the supplies on which tax is payable on reverse charge basis, the amount

towards the value of supply along with tax payable thereon within a period of one hundred

and eighty days from the date of issue of invoice by the supplier, an amount equal to the input

tax credit availed by the recipient shall be added to his output tax liability, along with interest

thereon, in such manner as may be prescribed.

PROVIDED ALSO that the recipient shall be entitled to avail of the credit of input tax on

payment made by him of the amount towards the value of supply of goods or services or both

along with tax payable thereon.

♦ Interpretation:

Section 16(2) can be interpreted as the sub-section laying down conditions for taking input

tax credit, which have to be cumulatively complied with, as follows:

(a) possession of tax invoice/debit note/any other prescribed document

(b) receipt of goods or services

(c) tax must have been paid the supplier

(d) purchaser must file his return

♦ Change from Existing Laws:

The number of conditions has been reduced and only four conditions have been laid down

which provides clarity and ease.

♦ Issues:

(1) The author is of the opinion that the First Proviso is laying down a restrictive condition

and that the input tax credit shall be allowed as and when any lot is received. The author finds

no reason to defer the availability to the receipt of the last lot.

(2) Moreover, the above would also create a hindrance while filing of returns as the inputs

and outputs of the buyer and supplier would not match. There is no clarity on its treatment.

(3) A welcome amendment has been done over the Model GST Law that the reclaim of input

tax credit is allowed if payment is made after one hundred and eighty days to the supplier.

Section 16(3) says that where the registered person has claimed depreciation on the tax

component of the cost of capital goods under the provisions of the Income Tax Act, 1961, the

input tax credit shall not be allowed on the said tax component.

♦ Interpretation:
It is a self-explanatory literal interpretation.

♦ Change from Existing Laws:

No change from existing laws.

♦ Issues:

No.

Section 16(4) says that a registered person shall not be entitled to take input tax credit in

respect of any invoice or debit note for supply of goods or services or both after the due

date of furnishing of the return under section 39 for the month of September following the

end of financial year to which such invoice or invoice relating to such debit note pertains

or furnishing of the relevant annual return, whichever is earlier.

2) Explain the process of GST return?

Ans:

Return being the documentary evidence and a mode of communication between the

government department and registered taxable person. With digitalization playing an

important role in the GST regime the return system and formats need to be perfectly built for

smooth transition from current scheme to the new scheme. The matching concept of taking

credit and the importance of returns that would now hold to avail benefit of credit. Here we

would be throwing light on how the return system would function and the sync of returns

with other provisions of GST.

Different types of return:-

Outward

GSTR-1- Every registered taxable person other than Input Service Distributor

(ISD)/Compound levy u/s-8/TDS u/s-37 person shall file by 10th of succeeding month.

Inward

GSTR-2- Every registered taxable person other than ISD/Section-8/Section-37 person shall

file by 15th of succeeding month.

Monthly
GSTR-3- Every registered taxable person other than ISD/Section-8/Section-37 person shall

file by 20th of succeeding month.

GSTR-4 – Quarterly return for compounding taxpayer u/s 8 by 18 th of the month next to

quarter.

GSTR-5 – Periodic return by Non-Resident Foreign taxpayer by last day of registration.

GSTR-6 – Return for Input Service Distributor(ISD) by 15th of the next month.

GSTR-7 – Return for Tax Deducted at Source u/s 37 by 10thof the next month.

Annual Return

GSTR-8 Annual return needs to be filed by 31st December following the end of financial

year.

Final Return

Every registered taxable person who applies for cancellation of registration shall furnish a

final return with 3months of the date of cancellation or date of cancellation order.

Matching concept

This is the most interesting part of GST where returns would be matched by both ends before

the credit is passed. It would ensure that both parties keep their invoices updated on the portal

to avail credit.

Firstly, GSTR-1 return where outward supplies would be filed by 10th of the succeeding

month.

Secondly, while filing GSTR-2 return for inward supplies the taxable person would get to

verify the details which were filed in GSTR-1 return by the seller.
 ⇓

Now, if the details of the both the parties do not tally u/s 29 of matching, reversal and reclaim

of input credit then the defaulter would be liable to pay additional tax with interest.

No rectification after filing the return u/s 27 for the month of September following the end of

financial year OR annual return whichever is earlier.

Different types of Ledger:-

 ITC Ledger of taxpayer continuous

 Cash Ledger of taxpayer continuous

 Tax Ledger of taxpayer continuous

Important Points

 Registered taxable person shall not be allowed to file monthly return if previous

return is not filed.

 Notice would be issued to defaulting parties.

 Default in filing GSTR-1/2 or final return would result in levy of late fee 100 per day

from the day of default to maximum 5000.

 Default in filing GSTR-8 would result in levy of late fee of 100 per day from the day

of default subject to maximum of ¼% of aggregate turnover.

Thus, GST system of filing return would help to avoid the last minute rush to file the return

with regular update for claiming credit. It would also encourage taxpayer to not default as the

defaulting parties would not be able to pass on credit which would guard their

customer/clients to not work with them. Also with technology playing an important role here

all the work would be done from the desk of the tax payer it would avoid the futile wastage of

time and energy which can be utilized in advancing the business.

 3) How to filling GST return in tally?

Ans:

Currently, there are 3 types of GST returns in [Link] 9. They are:

1. GSTR-1 – which includes Sales

2. GSTR-2 – which includes Purchases

3. GSTR-3B – which includes both Sales and Purchases

For accessing the returns in [Link] 9, you have to follow simple steps.

1. From Gateway of Tally, go to

2. Then go to Statutory Reports.

3. Now, select GST and you will see all the 3 returns.

Although Tally calls it reports, but in general they are called returns.

Let us start by first GST Return in [Link] 9 which is GSTR-1

GSTR-1 in [Link] 9

GSTR-1 is a return which includes all the GST Sales entries in Tally. In simple words,

whenever you sell something, it has to be included in GSTR-1.

Let us look at the picture below which shows GSTR-1 return. I have passed one entry of sales

for your better understanding.

There are 2 parts of the return. First one is the Returns Summary which is at the top and

second one is the one which consists of different tables or rows.

Let’s analyze the Returns Summary.

GSTR-2 in [Link] 9

GSTR-2 is for Purchases. It will include all the purchase vouchers that you enter in

[Link] 9 for the purposes of GST.

It is easy in [Link] 9, to pass the purchases entries with GST and all that entries will be

reflected in GSTR-2.

Have a look at the picture below in which I have passed one voucher for a purchase of

₹500 and you returned40,000 along with a CGST and SGST of ₹500 and you returned5600 each.
As you can see, everything is almost same as GSTR-1. There are minor differences which we

are going to talk about.

GSTR-3B in [Link] 9

It is a summary return. It shows the summary of sales and purchases and the amount of tax

payable or refundable to you.

You can easily just look at the GSTR-3B and you will have all major details regarding GST

at a glance.

Have a look at the picture below to understand GSTR-3B in Tally in a better way.

The return shows in summary about the amount of GST you have to pay, amount of credit

you have and the other purchases that you have made on which GST is not applicable.

In short, it is a short summary of the taxation your business attracts.

These were the three GST returns in [Link] 9 and they are prepared automatically as and

when you pass the necessary vouchers.

You can export them in the Excel format to further upload your return. This will save your

time since the returns are automatically prepared in [Link] 9.

Unit – 5

1) Explain the making payment under GST?

Ans:

In the GST regime, for any intra-state supply, taxes to be paid are the Central GST (CGST,

going into the account of the Central Government) and the State GST (SGST, going into the

account of the concerned State Government). For any inter-state supply, tax to be paid is

Integrated GST (IGST) which will have components of both CGST and SGST. In addition,

certain categories of registered persons will be required to pay to the government account Tax
Deducted at Source (TDS) and Tax Collected at Source (TCS). In addition, wherever

applicable, Interest, Penalty, Fees and any other payment will also be required to be made.

In general the supplier of goods or service is liable to pay GST. However in specified cases

like imports and other notified supplies, the liability may be cast on the recipient under the

reverse charge mechanism. Further, in some cases, the liability to pa is o the third person

(say in the case of e-commerce operator responsible for TCS or Government Department

responsible for TDS).

The payment processes under proposed GST regime will have the following features:

1. Electronically generated challan from GSTN Common Portal in all modes of payment and

no use of manually prepared challan;

2. Facilitation for the taxpayer by providing hassle free, anytime, anywhere mode of payment

of tax;

3. Convenience of making payment online;

4. Logical tax collection data in electronic format;

5. Faster remittance of tax revenue to the Government Account;

6. Paperless transactions;

7. Speed Accounting and reporting;

8. Electronic reconciliation of all receipts;

9. Simplified procedure for banks;

10. Warehousing of Digital Challan.

Payment can be done by the following methods:

1. Through debit of Credit Leger of the taxpayer maintained on the Common Portal – Only

Tax can be paid. Interest, Penalty and Fees cannot be paid by debit in the credit ledger.

Tax payers shall be allowed to take credit of taxes paid on inputs (input tax credit) and utilise

the same for payment of output tax. However, no input tax credit on account of CGST shall

be utilised towards payment of SGST and vice versa. The credit of IGST would be permitted

to be utilised for payment of IGST, CGST and SGST in that order.

2. In cash by debit in the Cash Ledger of the taxpayer maintained on the Common Portal.

Money can be deposited in the Cash Ledger by different modes, namely, E-payment

(Internet Banking, Credit Card, Debit Card); Real Time Gross Settlement (RTGS) / National

Electronic Fund Transfer (NEFT); over the Counter Payment in branches of Banks

Authorised to accept deposit of GST.

Payment of taxes by the normal taxpayer is to be done on monthly basis by the 20th of the

succeeding month. Cash payments will be first deposited in the Cash Leger and the taxpayer

shall debit the ledger while making payment in the monthly returns and shall reflect the

relevant debit entry number in his return. As mentioned earlier, payment can also be debited

from the Credit Ledger. Payment of taxes for the month of March shall be paid by the

20th of April. Composition tax payers will need to pay tax on quarterly basis. Timing of

payment will be form 0000 Hrs to 2000 Hrs.

No time limit for payment of tax can be extended or paid in monthly instalments. In fact this

is not permitted in case of self-assessed liability. In other cases, competent authority has

been empowered to extend the time period or allow payment in instalments. (Section 55 of

model GST law).

2) Explain reverse charge mechanism?

Ans:

REVERSE CHARGE MECHANISM OF SERVICE TAX (RCM) With effect from 1-7-

2012, the central government has notified the new partial reverse charge mechanism for

the payment of service tax in respect of certain taxable services. the present write up tries

to make an investigative study of this new scheme. The Liability To pay service Tax:

Service tax is an indirect tax, where the service provider has to collect the tax from the

service receiver and had to pay to deposit in to Government account. As per Sec68(1) of

Finance act 1994, every person providing taxable service to any person is liable to pay

service tax. Hence the liability to pay service tax is on the service provider. However an

exception to the above said rule has been provided under sub section (2) of 68 of the Act.,

in terms of which the central government has the powers to notify services in respect of

which even the service receiver shall be liable to pay service tax wholly or partially. This

is termed as REVERSE CHARGE MECHANISM. Since in respect of some services both

the service provider and service receiver are liable to pay service tax proportionately, it is

termed as "partial reverse charge mechanism" Services covered under partial reverse

charge mechanism: By the virtue of powers conferred under sub section(2) of Sec 68 of

the Act, The Central Govt. has issued notification dated 1-7-2012 notifying the following

services which shall be covered under the partial reverse charge mechanism.

They are:

1. Insurance agent's Services.

2. Services Provided by a goods transport agency in respect of transportation of goods by

road, where person liable to pay freight

3. Sponsorship services Provided to anybody Corporate or Partnership Firm located in

Taxable Territory

4. Services of Arbitral Tribunal provided to any business entity located in India. Here The

term Business Entity has been defined Under Clause 17 of Sec 65B, which means any

person carrying out any activity relating to Industry , Commerce or any other business or

profession. Hence, even an Individual , a proprietary firm or partnership Firm shall be

construed as a business entity if such person carries out any activities relating to Industry ,

Commerce or Profession.

5. Legal Services provided by Individual advocates or by a firm of Advocates to any

business entity located In Indian Territory.

6. Support services Provided by Government or local authority to any business entity

located in taxable territory , excluding the following:

1. Renting Of Immovable Property

2. Services of Department of Post, Express Post, Life Insurance and agency Services

Provided to person other than Government.

3. Services in relation to an aircraft or a vessel.

7. Renting of a motor vehicles designed to carry passengers, to any person who is not in

the similar line of business.

8. Supply of Man power for any purpose or Security Services.

9. Service Portion In the Execution Of Works Contract

10. Services Provided By a person who is located In a non taxable Territory To any

person located in the Taxable Territory

[Link] Provided By a Director of a company to the said Company.

Payment Of Tax Under Reverse Charge Mechanism: Where Service tax is payable under

reverse charge mechanism, it is required to be paid in cash only. In other words benefit of

Cenvat cannot be availed for discharging the service tax liability on reverse charge

mechanism. Cenvat Credit on Service Tax paid on reverse Charge Mechanism: Any

service recipient paying the service tax under reverse charge mechanism may take the

Cenvat credit of Service Tax paid by him and utilize the same towards the discharge of

Central Excise Duty payable on Manufacture of Final Products or towards payment of

Service Tax on Other Output Services., on the basis of Copy of GAR-7 Challan.

Threshold exemption of Upto Rs.10 Lac is not applicable: By Virtue Of notification

33/2012 , the aggregate value of taxable services upto Rs. 10lacs has been exempted from

service Tax., However, it has been provided that the benefit of the threshold exemption is

not applicable to those cases where the service tax is payable under reverse charge

mechanism. As Per the Proviso to the said Notification, the benefit of threshold

exemption does not apply to such value of Taxable services in respect of which service

tax shall be paid by such person and in such manner as specified under sub section (2) of

Section 68 of the Act. A plain reading of the above said provision suggests that the

benefit of threshold exemption is not applicable in respect of services specified under

notification No.33/2012,irrespective of whether the service tax is payable, wholly or

partially by the service provider or service receiver . Refund of Unutilised Cenvat Credit

to Service Recipients: The Central Government has inserted a new rule 5B under Cenvat

Credit Rules, 2004, providing for the refund of the Service tax paid under reverse
mechanism. According to this rule, if the Service provider is unable to utilize the Cenvat

credit availed of Inputs and Input services, he shall be allowed refund of such un utilized

Cenvat credit subject to safeguards, conditions and limitations. It may be noted that the

refund under the above rule is available for the Provider of service who pays service tax

on reverse charge mechanism. In other words, the refund shall not be allowed to service

recipients who pay service tax under reverse charge wholly or Fully..