Monthly Archives: April 2017

13Apr/17

Goods & Services Tax (GST) in India 2017

Introduction

The introduction of Goods and Services Tax (GST) would be a very significant step in the field of indirect tax reforms in India. By amalgamating a large number of Central and State taxes into a single tax, it would mitigate cascading or double taxation in a major way and pave the way for a common national market. From the consumer point of view, the biggest advantage would be in terms of a reduction in the overall tax burden on goods, which is currently estimated to be around 25%-30%.

Introduction of GST would also make Indian products competitive in the domestic and international markets. Studies show that this would have a boosting impact on economic growth. Last but not the least, this tax, because of its transparent and self-policing character, would be easier to administer.

WHY GST : BENEFITS

To Trade

  • Reduction in multiplicity of taxes
  • Mitigation of cascading/ double taxation
  • More efficient neutralization of taxes especially for exports
  • Development of common national market
  • Simpler tax regime
    1. Fewer rates and exemptions
    2. Distinction between Goods & Services no longer required

To Consumers

  • Simpler Tax system
  • Reduction in prices of goods & services due to elimination of cascading
  • Uniform prices throughout the country
  • Transparency in taxation system
  • Increase in employment opportunities

EXISTING INDIRECT TAX STRUCTURE

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MAIN FEATURES OF GST

Taxable event:

 Tax on supply of goods or services rather than manufacture / production of goods, provision of services or sale of goods

 Powers to declare certain supplies as supply of goods or of services – Schedule II  Powers to declare certain activities/transactions as neither supply of goods nor of services – Schedule III

 On Intra-State supplies of goods or services – CGST & SGST shall be levied by the Central and State Government respectively, at the rate to be prescribed  Maximum rate ring fenced in law

 On Inter -State supplies of goods or services – IGST shall be levied by the Central Government, at the rate to be prescribed

 Maximum rate ring fenced in law

Determination of nature of supply:

 Elaborate Rules provided for determining the place of supply

 Intra-State supply of goods or services – where the location of the supplier and the place of supply are in the same State

 Inter-State supply of goods or services – where the location of the supplier and the place of supply are in different State

Liability to pay:

 Liability to pay tax arises only when the taxable person crosses the exemption threshold

Composition Scheme:

 Provision for levy of tax on fixed rate on aggregate turnover upto a prescribed limit in a financial year (Composition scheme) without participation in ITC chain 

Time & Value of supply:

 Elaborate principles devised for determining the time of supply of goods or services with following being crucial determinants with certain exceptions:

 Date on which supplier issues invoice

 Date on which supplier receives the payment, whichever is earlier

 Tax is to be paid on Transaction value (TV) of supply generally i.e. the price actually paid or payable for the supply of goods or services

Input Tax Credit (ITC):

 ITC is available in respect of taxes paid on any supply of goods or services used or intended to be used in the course or furtherance of business (i.e. for business purposes)

 Negative list approach for non-allowance of ITC

 ITC of tax paid on goods or services used for making taxable supplies by a taxable person allowed subject to four conditions:

 possession of invoice;

 receipt of goods or services;

 tax actually paid by supplier to government;

 furnishing of return

Input Tax Credit (ITC):

 Full ITC allowed on capital goods in one go

 Proportionate credits allowed in case inputs, inputs services and capital goods are partly used for business and partly for non-business purposes

 Proportionate credits allowed in case inputs, inputs services and capital goods are used for taxable including zero rated and exempt (including non-taxable) supplies

 ITC cannot be availed after filing of return for the month of September of next Financial Year or filing of Annual Return

 ITC available only on provisional basis for a period of two months until payment of tax and filing of valid return by the supplier

 Matching of supplier’s and recipient’s invoice details

 ITC to be confirmed only after matching of such information

 ITC to be reversed in case of mis-match

 Input Service Distributor mechanism for distribution of ITC of input services

Registration:

 PAN based Registration

 required to be obtained for each State from where taxable supplies are being made

 A person having multiple business verticals in a State may obtain separate registration for each business vertical

 Liability to be registered:

 Every person who is registered or who holds a license under an earlier law;

 Every person whose turnover in a year exceeds the threshold

 A person, though not liable to be registered, may take voluntary registration

 Certain suppliers liable for registration without threshold

 Registration to be given by both Central and State Tax Authorities on a common e-application

 Deemed registration after three common working days from date of application unless objected to

 Self –serviced Amendments except for certain core fields

 Provision for surrender of registration and also for suomoto cancellation by the tax authorities

Returns:

 Normal taxpayers, compositions taxpayers, Casual taxpayers, non-resident taxpayers, TDS Deductors, Input service Distributors (ISDs) to file separate electronic returns with different cut-off dates

 Annual return to be filed by 31st December of the following Financial Year along with a reconciliation statement

 Short-filed returns not to be treated as a valid return for matching & allowing ITC and fund transfer between Centre and States

 GST practitioners scheme to assist taxpayers mainly in filing of returns

Payment:

 System of electronic cash ledger and electronic ITC ledger

 Tax can be deposited by internet banking, NEFT / RTGS, debit/credit card and Over The Counter

 Date of credit to the Govt. account in the authorized bank is the date of payment for credit in electronic cash ledger

 Payment of Tax is made by way of the debit in the electronic cash or credit ledger

 Cross-utilization of ITC between CGST & IGST, between SGST/UTGST & IGST allowed

 Hierarchy for discharging payments of various tax liabilities

 Provision for TDS on certain entities

 E-Commerce Operators, facilitating supplies by other suppliers, to collect Tax at source (TCS), at the time of supply, out of payments to be made to such suppliers

Refund:

 Time limit for refund of tax or interest is two years

 Refund of accumulated ITC allowed in case of exports or where the credit accumulation is on account of inverted duty structure

 Refund to be granted within 60 days from the date of receipt of complete application

 Interest is payable if refund is not sanctioned within 60 days

 Refund claim along with documentary evidence to be filed online without any physical interface with tax authorities

 Immediate provisional sanction of 90% of refund claim on account of zero-rated supplies

 Tax refund will be directly credited to the bank account of applicant

Assessment and Audit:

 Self –assessment of tax

 Provisions for assessment of non-filers, unregistered persons & summary assessments in certain cases

 Provision for provisional assessment on request of taxable person – to be finalized in six months

 Audit to be conducted at the place of business of the taxable person or at the office of the tax authorities, after prior intimation to taxable person

 Audit to be completed within 3 months, extendable by a further period of 6 months

Demand:

 Adjudication order to be issued within 3/5 years of filing of annual return in normal cases & fraud / suppression cases respectively

 SCNs to be issued at least 3 months and 6 months prior to last date of passing adjudication order in normal cases and in fraud cases respectively

 Taxable person can settle demand at any stage, right from audit/investigation to the stage of passing of adjudication order and even thereafter

Power of officers and taxpayers right to appeal:

 Officers to have power of search & seizure with inbuilt safeguards

 Restricted power to arrest and for prosecution

 Elaborate provisions for appeals up to Supreme Court

Miscellaneous:

 Advance ruling mechanism

 Comprehensive transitional provisions for smooth transition to GST

 Provision for Job work provided

 System of GST Compliance rating provided

 Anti-profiteering provision made to dis-incentivize nonpassing of price reduction benefits to consumers

Reference : www.cbec.gov.in