BROAD OVERVIEW OF GST
A. What is Goods and Service Tax
1. GST is a destination based tax on consumption of goods and services.
In other words the taxes will accrue to the state in which the consumer
consumes the goods and where the registered service receiver
receives the services.
2. GST is proposed to be levied at all stages right from manufacture up to
final consumption with credit of taxes paid at previous stages available
as setoff. In a nutshell, only value addition will be taxed and burden of
tax is to be borne by the final consumer.
B. Which of the existing taxes are proposed to be subsumed
under GST?
The GST would replace the following taxes:
i. Taxes currently levied and collected by the Centre:
a) Central Excise duty
b) Duties of Excise (Medicinal and Toilet Preparations)
c) Additional Duties of Excise (Goods of Special Importance)
d) Additional Duties of Excise (Textiles and Textile Products)
e) Additional Duties of Customs (commonly known as CVD)
f) Special Additional Duty of Customs (SAD)
g) Service Tax
h) Central Surcharges and Cesses so far as they relate to supply
of goods and services
ii. State taxes that would be subsumed under the GST are:
a) State VAT
b) Central Sales Tax
c) Luxury Tax
d) Entry Tax (all forms)
e) Entertainment and Amusement Tax (except when levied by the
local bodies)
f) Taxes on advertisements
g) Purchase Tax
h) Taxes on lotteries, betting and gambling
i) State Surcharges and Cesses so far as they relate to supply of
goods and services
What type of GST is proposed to be implemented?
It would be a dual GST with the Centre and States simultaneously
levying it on a common tax base.
The GST to be levied by the Centre on within-State supply of goods
and / or services would be called the Central GST (CGST) and that to
be levied by the States would be called the State GST (SGST).
Similarly Integrated GST (IGST) will be levied and administered by
Centre on every inter-state supply of goods and services
How will the goods and services be classified under GST regime?
HSN (Harmonized System of Nomenclature) code shall be used for
classifying the goods under the GST regime.
Services will be classified as per the Services Accounting Code (SAC)
What is the taxable event under GST?
Supply of goods ;
Provision of services;
Even inter-state stock transfer of goods is a taxable event;
What is the scope of composition scheme under GST?
Small taxpayers with an aggregate turnover in a financial year up to [Rs. 50 lakhs]
shall be eligible for composition levy (reduced rate of tax).
Under the scheme, a taxpayer shall pay tax as a percentage of his turnover during
the year without the benefit of ITC.
A tax payer opting for composition levy shall not collect any tax from his
customers.
Tax payers making inter- state supplies or paying tax on reverse charge basis shall
not be eligible for composition scheme.
What is the time limit for taking a Registration under Model GST Law?
Any person has to take a Registration, within thirty days from the date on which he
becomes liable to registration.
If a person is operating in different states, with the same PAN number, whether he can
operate with a single Registration?
No. Every person who is liable to take a Registration will have to get registered
separately for each of the States where he has a business operation and is liable to pay
GST
Whether all assessees/dealers who are already registered under existing central
excise/service tax/ vat laws will have to obtain fresh registration?
No. GSTN shall migrate all such assessees/dealers to the GSTN network and shall issue
GSTIN number and password.
They will be asked to submit all requisite documents and information required for
registration.
After submitting the documents and information they will be allotted the GST
registration number for those states.
SUPPLY
Inter-state self-supplies such as stock transfers are taxable;
o Stock transfer say from IM-Maharashtra to IM- UP are taxable and GST will have to be
paid on it.
Intra-state self-supplies are not taxable if the such premises are covered within the same
registration
o Stock transfer within the same state say from IM- Lucknow to IM- Noida are not taxable
and no GST is required to be paid
SUPPLY
When does the liability to pay GST arise in respect of supply of goods?
The liability to pay GST shall arise at the time of supply of goods
The time of supply of goods generally shall be the earliest of the following namely:-
(i) the date of issue of invoice or the last day on which the prescribed time limit for issuance of invoice
expires; or
(ii) The date on which the supplier receives the payment with respect to the supply
SUPPLY
When does the liability to pay GST arise in respect of supply of services?
The liability to pay GST shall arise at the time of provision of services
The time of provision of services generally shall be the earliest of the following namely:-
(i) the date of issue of invoice or the last day on which the prescribed time limit for issuance of invoice
expires; or
(ii) the date on which the supplier receives the payment with respect to the service
SUPPLY
What does “date of receipt of payment” mean mentioned in bytes 6&7 ?
It is the earliest of the date on which the payment is entered in the books of accounts of the supplier or
the date on which the payment is credited to his bank account.
Valuation
What is the value of taxable supply to be adopted for the levy of GST?
The value of taxable supply of goods and services shall ordinarily be ‘the transaction value’ which
is the actually the price paid or payable, when the parties are not related and price is the sole
consideration.
SUPPLY
Inter-state self-supplies such as stock transfers are taxable;
o Stock transfer say from IM-Maharashtra to IM- UP are taxable and GST will have to be
paid on it.
Intra-state self-supplies are not taxable if the such premises are covered within the same
registration
o Stock transfer within the same state say from IM- Lucknow to IM- Noida are not taxable
and no GST is required to be paid
Valuation
Whether pre-supply discounts allowed before or at the time of supply are includible in the
transaction value?
Pre-supply discounts are not included in the transaction value, provided it is allowed in the
course of normal trade practice and has been duly recorded in the invoice.
INPUT TAX CREDIT
What are the conditions necessary for obtaining ITC?
The following four conditions are stipulated:
(a) The registered taxable person should be in possession of tax paying document issued by a
supplier;
(b) The taxable person must have received the goods and / or services;
(c) The tax charged on such supply has been actually paid to the government either in cash or
through utilization of input tax credit; and
(d) The taxable person should have furnished the return under section 34.
INPUT TAX CREDIT
Can the customer who buys from a taxable person who is under the composition scheme claim
composition tax as input tax credit?
No, customer who buys goods from taxable person who is under composition scheme is not
eligible for composition input tax credit because a composition scheme supplier cannot issue a
tax invoice.
INPUT TAX CREDIT
On which supplies, the input tax credit will not be eligible?
Input tax credit shall not be available in respect of the following:
(a) motor vehicles and other conveyances except when they are used
(i) for making the following taxable supplies, namely
(A) further supply of such vehicles or conveyances ; or
(B) transportation of passengers; or
(C) imparting training on driving, flying, navigating such vehicles or conveyances;
(ii) for transportation of goods.
(b) Supply of goods and services, namely,
(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and
plastic surgery except where such inward supply of goods or services of a particular category is
used by a registered taxable person for making an outward taxable supply of the same
category of goods or services;
(ii) Membership of a club, health and fitness center;
(iii) rent-a-cab, life insurance, health insurance except where the Government notifies the
services which are obligatory for an employer to provide to its employees under any law for
the time being in force; and
(iv) Travel benefits extended to employees on vacation such as leave or home travel
concession.
(c) works contract services when supplied for construction of immovable property, other than
plant and machinery, except where it is an input service for further supply of works contract
service;
(d) goods or services received by a taxable person for construction of an immovable property on
his own account, other than plant and machinery, even when used in course or furtherance of business.
INPUT TAX CREDIT
Order for utilization of input tax credit in GST
The credit mechanism under GST have certain rules like Input CGST should be used for paying
Output CGST first and only then it is allowed to be utilised against Output IGST Liability.
Similarly, Input SGST can be used for paying Output SGST first and only then it is allowed to be
utilised against Output IGST Liability.
Further Input IGST should be used first for output IGST liability, then it should be used against
output CGST liability and at last it should be used against SGST liability