All About GST i.e. Goods & Services Tax

All About GST i.e. Goods & Services Tax

Journey to GST

Definition of GST

“Goods and services tax” means any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption. Article 366(12A) 

1. Goods - Includes all materials, commodities, and articles [Pre Existing Definition] [Article 366(12)]

2. Service - Anything other than goods [Introduced vide 101st Constitutional Amendment Act] [Ariticle 366(26A)]

3. State - With reference to articles 246A, 268, 269,269A and Article 279A includes a Union territory with Legislature. [Introduced vide 101st Constitutional Amendment Act] [Article 366(26B)]

“Goods and Services tax” law while having unique principles, has significant elements of prior Central and State laws; and is also inspired by VAT/GST legislation of EU, Australia, Malaysia etc. along with International VAT/GST guidelines of OECD

GST Law from a Constitutional Perspective 

* Bill passed by Rajya Sabha on 03.08.2016 & Lok Sabha on 08.08.2016

* Notified as Constitution (101st Amendment ) Act, 2016 on 08.09.2016

* Key Features:

• Concurrent jurisdiction for levy & collection of GST by the Centre & the States – Article 246A
• Centre to levy & collect IGST on supplies in the course of inter-State trade or commerce including imports – Article 269A
• Compensation for loss of revenue to States for five years on recommendation of GSTC – Clause 19
• GST on petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas & aviation turbine fuel to be levied from a later date on recommendations of GSTC 

Existing Indirect Tax Structure in India

Central Taxes

• Central Excise duty
• Additional duties of excise
• Excise duty levied under Medicinal & Toilet Preparation Act
• Additional duties of customs (CVD & SAD)
• Service Tax
• Surcharges & Cesses

State Taxes

• State VAT / Sales Tax
• Central Sales Tax
• Purchase Tax
• Entertainment Tax (other than those levied by local bodies)
• Luxury Tax
• Entry Tax (All forms)
• Taxes on lottery, betting & gambling
• Surcharges & Cesses

Constitution amended to provide concurrent powers to both Centre & States to levy GST (Centre to tax sale of goods and States to tax provision of services)

GST Council – Constitution (Article 279A of the Constitution)

• Chairperson – Union FM
• Vice Chairperson - to be chosen amongst the Ministers of State Government
• Members - MOS (Finance) and all Ministers of Finance / Taxation of each State
• Quorum is 50% of total members
• States - 2/3 weightage and Centre - 1/3 weightage
• Decision by 75% majority
• Council to make recommendations on everything related to GST including laws, rules and rates etc.

GST Council - Decisions

• Threshold limit for exemption to be Rs. 20 lac (Rs. 10 lac for special category States except J&K)
• Compounding threshold limit to be Rs. 1 Crore with -

Categories                      Tax Rate

Traders                               1%

Manufacturers                    2%

Restaurants                         5%

• Turnover limit recommended to be raised to Rs. 1.5 Cr in 23rd GST Council meeting - to be notified after necessary amendment in the Act
• Government may convert existing Area based exemption schemes into reimbursement based scheme – Already notified by Centre on 05.10.2017
• Four tax rates
• Cess over the peak rate of 28% on specified luxury and sin goods
• To ensure single interface – all administrative control over
• 90% of taxpayers having turnover below Rs. 1.5 cr would vest with State tax administration
• 10% of taxpayers having turnover below of Rs. 1.5 cr. would vest with Central tax administration
• taxpayers having turnover above Rs. 1.5 cr. would be divided equally between Central and State tax administration
• Power under the IGST Act shall also be cross-empowered on the same basis as under CGST and SGST Acts with few exceptions
• Power to collect GST in territorial waters delegated to the States
• Eighteen rules on composition, registration, valuation, input tax credit etc. have been recommended and notified
• Exemption from registration
• to suppliers of services making inter-State supply upto Rs. 20 lacs
• to suppliers providing services through an e-commerce platform provided their aggregate turnover does not exceed Rs. 20 lacs
• Exemption from Section 9(4) – Reverse Charge on purchase from unregistered persons
• No requirement on payment of tax on advance received for supply of goods by all taxpayers
• Exemption from tax for supplies from GTA to unregistered person
• Suspension of TCS / TDS provisions till 31.03.2018
• Introduction of nation-wide E-way bill for inter-state supplies from 01.02.2018 and for intra-state supplies latest by 01.06.2018.
• Introduction of E-Wallet Scheme for exporters from 01.04.2018 and till then relief for exporters in form of broadly existing practice 
• All taxpayers to file monthly GSTR-3B & pay tax on monthly basis
• Taxpayers with turnover upto Rs. 1.5 Cr to file quarterly GSTR – 1 returns – Monthly for other taxpayers
• Time period for filing GSTR-2 and GSTR-3 for the months of July, 2017 to March 2018 would be worked out by a Committee of Officers
• Late fee already paid but subsequently waived off to be re-credited to their Electronic Cash Ledger under “Tax” head instead of “Fee” head
• From October 2017 onwards, the amount of late fee payable by a taxpayer
• whose tax liability for that month was „NIL‟ will be Rs. 20/- per day instead of Rs. 200/- per day
• whose tax liability for that month was not „NIL‟ will be Rs. 50/- per day instead of Rs. 200/- per day
• Facility for manual filing of refund application
• Facility for manual filing of application for advance ruling
• Supply of services to Nepal and Bhutan exempted from GST if payment not received in foreign convertible currency – such suppliers to be eligible for input tax credit
• Centralized UIN to be issued to every Foreign Diplomatic Mission / UN Organization by the Central Government

Main Features of the GST Act

• Concurrent jurisdiction for levy & collection of GST by the Centre (CGST) and the States (SGST)
• Centre to levy and collect IGST on supplies in the course of interState supplies & imports
• Compensation for loss of revenue to States for five years
• All transactions and processes only through electronic mode – Nonintrusive administration
• PAN Based Registration
• Registration only if turnover more than Rs. 20 lac (Rs. 10 lacs for special category States except J&K)
• Option of Voluntary Registration
• Composition threshold shall be Rs. 100 lakh
• Composition scheme shall not be available to inter-State suppliers, service providers (except restaurant service) and specified category of manufacturers
• Deemed Registration in three working days
• Input Tax Credit available on taxes paid on all procurements (except few specified items)
• Set of auto-populated Monthly returns and Annual Return
• Composition taxpayers to file Quarterly returns
• Automatic generation of returns
• GST Practitioners for assisting filing of returns
• GSTN and GST Suvidha Providers (GSPs) to provide technology based assistance
• Tax can be deposited by internet banking, NEFT / RTGS, Debit / credit card and over the counter
• Concept of TDS for certain specified categories (to be brought in force wef 01/04/18)
• Concept of TCS for E-Commerce Companies (to be brought in force wef 01/04/18)
• Nation-wide introduction of E-way bill for all inter-state supplies with effect from 01.02.2018 and for all intra-state supplies with effect from 01.06.2018
• Refund to be granted within 60 days
• Provisional release of 90% refund to exporters within 7 days
• Interest payable if refund not sanctioned in time
• Refund to be directly credited to bank accounts
• Comprehensive transitional provisions for smooth transition of existing tax payers to GST regime
• Special procedures for job work
• System of GST Compliance Rating
• Anti-Profiteering provision – National Anti-Profiteering Authority being set up
• Standing Committee on Anti-Profiteering to be set up
• State level Screening Committee to be set up

Benefits of GST 

1 Reduction in Cascading of Taxes           Decrease in Inflation

2 Overall Reduction in Prices

3 Common National Market                      Ease of Doing Business

4 Benefits to Small Taxpayers

5 Self-Regulating Tax System                   Decrease in “Black” Transactions

6 Non-Intrusive Electronic Tax System

7 Simplified Tax Regime                            More informed consumer

8 Reduction in Multiplicity of Taxes

9 Consumption Based Tax                           Poorer States to Gain

10 Abolition of CST

11 Exports to be Zero Rated                        Make in India

12 Protection of Domestic Ind. - IGST

Goods and Service Tax Network

• Incorporated in March 2013 as Section 25 private limited company with paid up capital of Rs. 10 crore
• Equity Holders
• Central Government - 24.5%
• EC and all States together - 24.5%
• Financial Institutions – 51%
• To function as a Common Pass-through portal for tax payers 
• submit registration application
• file returns
• make tax payments
• To develop back end modules for 28 States (MODEL –II)
• Infosys appointed as Managed Service Provider (MSP)
• Appointed multiple GST Suvidha Providers (GSPs)

Role of CBEC

• Role in Policy making: Drafting of GST Law, Rules & Procedures – CGST, UTGST & IGST Law
• CBEC is responsible for administration of the CGST and IGST law.
• Assessment, Audit, Anti-evasion & enforcement under CGST, UTGST & IGST Law
• Levy & collection of Central Excise duty on products outside GST – Petroleum Products & Tobacco
• Levy & collection of Customs duties
• Developing linkages of CBEC - GST System with GSTN
• Training of officials of both Centre & States
• Outreach programs for Trade and Industry
• Director General of Safeguards, CBEC has been mandated to conduct detailed enquiry on anti-profiteering cases

Source : CBEC
[ https://cbec-gst.gov.in/pdf/01012018-Updated%20PPT-on-GST.pdf ]