GST Overview - Know All About GST Smart Taxation System in India

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GST Overview: Know about goods and service tax smart Taxation System in India. Learn about GST, Indirect Tax structure in India before GST, GST Rates, GST Compensation Cess, Input Tax Credit, GST Composition Scheme, GST Return, TCS in GST eWay Bill and GST Audit through our PPTs and PDFs.

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Meaning Goods and Services Tax (GST) is a value added tax and a comprehensive tax levy which is levied on the supply of goods and services all across the country. It will be levied only on the value added as against tax levied at each stage.

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Indirect Tax structure in India before GST The earlier indirect tax framework in India suffered from various shortcomings. Under the earlier indirect tax structure, the various indirect taxes being levied were not necessarily mutually exclusive. Example: When goods were manufactured and sold, both Central Excise Duty (CENVAT) and State Level VAT were levied. Though both were essentially value added taxes but set off of one against the credit of another was not possible as CENVAT was a central levy and VAT was a state levy.

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Issues in Pre-GST regime Cascading effect Complexity Lack of uniformity Corruption (Under GST tax payers and department's dealing reduced radically) Tax Evasion ( GST introduced dual checks for Central Government and State Governments) Complexity in determining the nature of transaction (eg. restaurant services)

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The Cascading Effect Producer / Manufacturer Cost of input Value of output Tax rate Selling price including tax rate Tax burden Producer A -- 1000 10% 1100 (1000 + 10% of 1000) 100 Producer B 1100 1500 10% 1650 (1500 + 10% of 1500) 150 Producer C 1650 2000 10% 2200 (2000 + 10% of 2000) 200

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Constitutional Amendments Introduction of the GST required amendment in the Constitution so as to enable integration of the central excise duty including additional duties of customs, state VAT and certain state specific taxes and service tax levied by the center into a comprehensive GST and to empower both center and the state to levy and collect it. Consequently, Constitution (101st Amendment Act), 2016 was passed.

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Taxes subsumed in GST Service Tax Excise Duty VAT/Sales Tax CVD and SAD Octroi and Entry Tax Additional Excise duty Excise duty under medicinal Act Entry tax other than levied by local bodies

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Acts governing the GST regime The Central Goods and Services Tax Act, 2017 The Integrated Goods and Services Tax Act, 2017 The Union Territory Goods and Services Tax Act, 2017 The State Goods and Services Tax Act, 2017 (for each State) The Goods and Services (State Compensation) Tax Act, 2017

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Taxable event: Supply One of the very important features of the GST regime is the complete change in the taxable event. The taxable event in the GST would be the supply of goods and/or services. Continued...

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Taxable event: Supply (Contd.) Supply includes: (a) all forms of supply of goods and/or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business, (b) importation of services, for a consideration whether or not in the course or furtherance of business, and (c) a supply specified in Schedule I, made or agreed to be made without a consideration.

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Goods and Services Tax Network (GSTN) GSTN is the backbone of the Common Portal which is the interface between the taxpayers and the government. The entire process of GST is online starting from registration to the filing of returns. The GSTN will handle: Invoices Various returns Registrations Payments & Refunds

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Types of taxes and cess under GST CGST: To be levied on all intra-state supplies. SGST/UTGST: To be levied on all intra-state/UT supplies IGST: To be levied on all inter-state/UT supplies and import of goods and services. GST Compensation CESS: would be applicable on both supply of goods or services that have been specified luxury and demerit goods such as pan masala, tobacco, aerated waters, and motor cars etc.

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Goods kept outside the purview of GST Alcoholic liquor for human consumption (will continue to cover under State Excise and VAT/CST ). Petroleum Products (will come under the GST purview from a date notified by the GST Council ).

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GST on Import and Export Countervailing Duty (CVD) and Special Additional Duty (SAD) on imports have been replaced with IGST. Any supply made by a registered dealer as an export or supply to an SEZ qualifies for Zero Rated Supplies in GST. The rate of tax on such supplies is ‘Zero’ or we can say the supplies are tax-free.

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GST World Wide France was the first country to implement GST in 1954.Within 64 years of its advent, about 160 countries across the world have adopted GST. India, Canada and Brazil have adopted dual GST model. The World Banks says, India has most complex GST structure in the world with not only highest tax rates but also a number of tax slabs. But, it will boost the GDP as well.

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Introduction GST Council is a constitutional body for making recommendations to the Union and State Government on issues related to Goods and Services Tax. GST Council is a joint forum of the Center and the States, shall consist the following members: Union Finance Minister; Union Minister of State in charge of Revenue or Finance; Minister in charge of Finance or Taxation or any other Minister nominated by each State Government.

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Role of GST Council GST Council shall make recommendations to the Union and the States on the following matters: taxes, cesses , and surcharges levied by the Union, the States and the local bodies which may be subsumed in the GST; goods and services that may be subjected to, or exempted from the GST; threshold limit of turnover below which goods and services may be exempted from goods and services tax; continued...

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Role of GST Council (Contd.) Any special rate or rates for a specified period, to raise additional resources during any natural calamity or disaster; Special provision with respect to the States of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand; Council shall recommend the date on which GST be levied on petroleum products.

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Introduction GST Compensation Cess is an additional cess levied on certain notified goods in addition to GST applicable on it. Due to the implementation of GST many states faced a decrease in revenue as it is a consumption based tax. Thus, states which were manufacturing oriented faced a loss in revenue. To compensate these states, an additional tax by the name GST compensation cess is levied. It is imposed on certain notified goods and revenue collected from it is distributed amongst these states. This Cess will be levied for 5 years from the date of implementation of GST.

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Goods liable for GST Cess Pan Masala Tobacco and tobacco products Cigarettes Coal Aerated water Motor vehicles

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ITC not available on the following items: Motor vehicle except when they are used for making the following taxable supplies: - Further supply of such vehicles or conveyances or - Transportation of passenger or - Imparting training on driving such vehicles - Used for transportation of goods Goods or services on which the tax is paid under composition scheme. Goods or services used for personal consumption. Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples. Certain other supplies.

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Tax Invoices and Vouchers “Tax Invoice” (For sale of goods or services) “Bill of Supply” (Other than Tax Invoice) “Receipt Voucher” (For Advance Payment) “Refund Voucher” (For returning) “Invoice for Purchase” from Unregistered Person “Payment Voucher” for purchase from Unregistered Person

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Composition Scheme: Introduction It is a simple and easy scheme for small taxpayers whose turnover is less than Rs. 1.50 crore. Persons ineligible for this scheme: Supplying exempt goods/services Supplier of services other than restaurant related services Manufacturer of ice cream, pan masala, or tobacco Casual taxable person or a non-resident taxable person Supplier of goods through e-commerce operator.

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Composition Scheme: Conditions ITC cannot be claimed Cannot issue tax invoice Cannot make any inter-state supply of goods. Cannot supply GST exempted goods Taxpayer has to pay tax at normal rates for transactions under Reverse Charge Mechanism (RCM) If a taxable person has different segments of businesses under the same PAN, then all such businesses under the scheme collectively or opt out of the scheme. Taxpayer has to mention the words ‘composition taxable person’ on every notice or signboard displayed prominently at their place of business. Taxpayer has to mention the words ‘composition taxable person’ on every bill of supply issued by him.

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Who is liable to be registered? Any business whose annual turnover is Rs. 20 lakhs (Rs. 10 Lacs for special category states) Anyone registered under the previous regime, for example, VAT or Service Tax. Casual taxable person Non-Resident taxable person who doesn’t have a fixed place of business Taxable person under reverse charge Input service distributor Continued...

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Who is liable to be registered? (Contd.) E-commerce operator Inter-State supplier of goods Suppliers who supply through an e-commerce operator A person who supplies on behalf of some other taxable person (i.e. an agent of a principal). TDS Deductor Supplier of online information and database access or retrieval (OIDAR) services from outside India to a non-registered person in India any person may voluntarily obtain registration.

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Aadhaar card Address proof of the place of business Bank account statement/cancelled cheque Identity and Address proof of Promoters/Director with photographs Digital Signature Proof of business registration or incorporation certificate PAN Card of the Business or Applicant Letter of Authorization/Board Resolution for Authorized Signature Documents Required for GST Registration

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Types of Returns GSTR - 1: Outward Return GSTR - 2: Inward Return GSTR - 3: Monthly Return GSTR - 3B: Summary Return GSTR - 4: For composition dealer GSTR - 5: For NRTP GSTR - 6: For ISD GSTR - 7: For Tax Deductor GSTR - 8: For Tax Collector GSTR - 9: Annual Return GSTR - 10: Final Return GSTR - 11: For persons having UIN Abbreviations: NRTP: Non-resident Taxable Person ISD: Input Service Distrbutor UIN: Unique Identification Number

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Due Dates of Returns Types of GST Returns Due Date GSTR - 1 10th of the next month GSTR - 2 15th of the next month GSTR - 3 20th of the next month GSTR - 3B 20th of the next month GSTR - 4 18th of the month following the end of the quarter GSTR - 5 20th of the next month GSTR - 6 13th of the next month GSTR - 7 10th of the next month GSTR - 8 10th of the next month GSTR - 9 31st December of the end of the financial year GSTR -10 within 3 months of the cancellation of the registration GSTR - 11 28th of the month following the month in which inward supply received

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Challenges under GST Lack of clarity on GST provisions and rules. Robust and efficient IT infrastructure is required to manage the central database. E-commerce giants like Flipkart, Amazon also have not escaped the after effects of GST roll-out. Multiple returns are required to be filed. Small Scale Industries suffered at the initial stage of introduction.

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Introduction and Applicability Normally, the supplier of goods or services pays the tax on supply. In the case of Reverse Charge, the receiver becomes liable to pay the tax i.e. the chargeability gets reversed. Reverse Charge is applicable in the following 3 cases: Supply from an Unregistered dealer to a Registered dealer (Suspended till Sept 30th, 2018) Services through an e-commerce operator Supply of certain goods and services specified by CBIC (formerly known as CBEC).

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National Anti-Profiteering Authority (NAA) If NAA finds that entity has not passed on GST benefits, it will either direct entity to pass on benefits to consumers or if beneficiary cannot be identified, it will ask the entity to transfer amount to ‘consumer welfare fund’ within specified timeline. NAA has power to cancel registration of any entity or business if it fails to pass on to consumers benefit of lower taxes under GST regime, but it will probably be last step against any violator. NAA will suggest return of undue profit earned from not passing on reduction in incidence of tax to consumers along with an 18% interest, and also impose penalty.

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HSN & SAC Harmonized System of Nomenclature (HSN) and Service Accounting Code (SAC) will be new concepts for most businesses, even though they have been borrowed from existing systems. Businesses need to determine the HSN and or SAC of the goods and services that they sell, since these are mandatory fields in a GST compliant invoice. It is a multipurpose international product nomenclature developed by the World Customs Organization (WCO). HSN is assigned to goods by organizing them in a hierarchical manner and is 8 digits long. Depending on the turnover or nature of sale, a business might be required to quote a 2-digit HSN, a 4-digit HSN or an 8-digit HSN (mandatory for exports). Continued...

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HSN & SAC (Contd.) Small businesses under composition scheme will not be required to mention HSN codes in their invoices. A business whose turnover is less than INR 1.5 crore need not quote HSN in the invoice A business with turnover between INR 1.5 crore and INR 5 crore will need to quote a 2-digit HSN A business with turnover equal to or greater than INR 5 crore will need to quote a 4-digit HSN All exports will need to quote 8-digit HSN in the invoice SAC is the nomenclature adopted by the GST Council for identifying services delivered under GST. This is similar to the classification that was in existence under the Services Tax regime.

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Introduction and Applicability (suspended till Sept 30th, 2018) TDS is one of the ways to collect tax based on certain percentages on the amount payable by the receiver on goods/services. Tax so deducted need to deposited with the revenue authority by the due dates so prescribed. Following persons are liable to deduct TDS: A department or an establishment of the Government; or Local authority; or Governmental agencies; or Such persons or category of persons as may be notified. (Such as Societies, PSUs etc.)

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When will the liability to deduct TDS be attracted? What is the rate of TDS? TDS is to be deducted at the rate of 2 per cent (CGST +SGST) on payments made to the supplier of taxable goods and/or services, where the total value of such supply, under an individual contract, exceeds Rs. 250,000/-. No deduction of Tax is required when the location of supplier and place of supply is different from the State of the registration of the recipient. (refer chart)

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TCS compliance for e-commerce sector (suspended till Sept 30th, 2018) A clause has been inserted under GST law for all the e-commerce aggregators. E-commerce aggregators are made responsible under the GST law for deducting and depositing tax at the rate of 2% (CGST+SGST) from each of the transaction. Any dealers/traders selling goods/services online would get the payment after deduction of 2% tax. Continued...

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TCS compliance for e-commerce sector (Continued) It is a significant change which would increase a lot of compliance and administration cost for online aggregators like Flipkart, Snapdeal, Amazon etc. They would need to deposit the tax deducted by the 10th day of the next month. All the traders/dealers selling goods/services online would need to get registered under GST even if their turnover is less than 20 Lakhs for claiming the tax deducted by Ecommerce operators.

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Introduction E-Way Bill is an electronic way bill for movement of goods which can be generated on the E-Way Bill Portal. Transport of goods of more than Rs. 50,000 (Single Invoice/bill/delivery challan) in value in a vehicle cannot be made by a registered person without an e-way bill. E-Way bill can also be generated or cancelled through SMS, Android App and by Site-to-Site Integration(through API). When an e-way bill is generated a unique e-way bill number (EBN) is allocated and is available to the supplier, recipient, and the transporter.

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Who should Generate an E-Way Bill? Registered Person: E-Way bill must be generated when there is a movement of goods of more than Rs. 50,000 in value to or from a Registered Person. A Registered person or the transporter may choose to generate and carry e-way bill even if the value of goods is less than Rs. 50,000. Unregistered Persons: Unregistered persons are also required to generate e-Way Bill. However, where a supply is made by an unregistered person to a registered person, the receiver will have to ensure all the compliances are met as if they were the supplier. Transporter: Transporters carrying goods by road, air, rail, etc. also need to generate e-Way Bill if the supplier has not generated an e-Way Bill.

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