Payment of taxes under GST

 Payment of taxes under GST  Payment of taxes under GST
Feb 132017
 

Payment of taxes under GST

Payments that are to be made under GST (Sec 44):

  1. For any intra-state supply, taxes to be paid are the Central GST (CGST, going into the account of the Central Government) and
  2. The State GST (SGST, going into the account of the concerned State Government).
  3. 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:

  1. Tax Deducted at Source (TDS) and
  2. Tax Collected at Source (TCS).

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

The input tax credit as self-assessed in the return of a taxable person shall be credited to his electronic credit ledger, in accordance with section 36, to be maintained in the manner as may be prescribed.

Who is liable to pay the tax:

  1. Supplier: In general the supplier of goods or service is liable to pay GST.
  2. Recipient: In specified cases like imports and other notified supplies, the liability may be cast on the recipient under the reverse charge mechanism.
  3. Third person: In some cases, the liability to pay is on the third person, for example, in the case of e-commerce operator responsible for TCS or Government Department responsible for TDS).

When to make payment:

  1. For supply of goods: Liability to pay tax arises at the time of supply of Goods as explained in Section 12 and
  2. For supply of service: Liability to pay tax arises at the time of supply of services as explained in Section 13.

The time of supply is generally the earliest of one of the three events, namely:-

  1. Receiving payment,
  2. Issuance of invoice or
  3. Completion of supply.

Different situations envisaged and different tax points have been explained in the aforesaid sections.

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 Ledger 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.

Order of making payment from electronic cash ledger:

As per section 44(8) of the model GST law – the payment from electronic cash ledger shall have to make in the following order:

  1. Self-assessed tax, and other dues related to returns of previous tax periods;
  2. Self-assessed tax, and other dues related to return of current tax period;
  3. Any other amount payable under the Act or the rules made there under including the demand determined under section 66 or 67.

Features of Payment procedure:

The payment process proposed under GST regime will have the following features:

  • Electronically generated challan from GSTN Common Portal in all modes of payment and no use of manually prepared challan;
  • Facilitation for the taxpayer by providing hassle free, anytime, anywhere mode of payment of tax;
  • Convenience of making payment online;
  • Logical tax collection data in electronic format;
  • Faster remittance of tax revenue to the Government Account;
  • Paperless transactions;
  • Speedy Accounting and reporting;
  • Electronic reconciliation of all receipts;
  • Simplified procedure for banks;
  • Warehousing of Digital Challan.

When the payment is deemed to be made:

The date of credit to the account of the appropriate Government in the authorized bank shall be deemed to be the date of deposit in the electronic cash ledger. Appropriate government as defined under section 2(11) of model GST law means central government in case of the IGST and the CGST and the state government in case of the SGST.

Manner of making payment:

  1. Through debit of Credit Ledger of the taxpayer maintained on the Common Portal- ONLY Tax can be paid.
  2. Tax payers shall be allowed to take credit of taxes paid on inputs (input tax credit) and utilize the same for payment of output tax.
  3. No input tax credit on account of CGST shall be utilized towards payment of SGST and vice versa.
  4. The credit of IGST would be permitted to be utilized for payment of IGST, CGST and SGST in that order.
  5. 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:
    1. E-Payment (Internet Banking, Credit Card, Debit Card);
    2. Real Time Gross Settlement (RTGS)
    3. National Electronic Fund Transfer (NEFT);
    4. Over the Counter Payment in branches of Banks Authorized to accept deposit of GST.

Input service distributor under GST

 Input service distributor under GST  Input service distributor
Feb 082017
 

Input service distributor under GST

Who is input service distributor?

As per section 2(54) of the model GST law – “Input Service Distributor” means an office of the supplier of goods and / or services which receives tax invoices issued under section 28 towards receipt of input services and issues a prescribed document for the purposes of distributing the credit of CGST (SGST in State Acts) and / or IGST paid on the said services to a supplier of taxable goods and / or services having same PAN as that of the office referred to above;

Why there is need for separate provisions for Input Service Distributor?

Practically who happens in case service providers, services are received by such service providers at the head office and they offer their services through large number of branches located at different location of the same state or of different states.

In such scenario, head office have huge sum of input tax accumulated but no tax liability to adjust such input tax as no supply is made from the head office. On the other hand, branches have large sum of tax liability to pay GST with no or minimal amount of input tax to adjust. So, proper mechanism with proper check and balance is required so that branches providing services may adjust input tax of services received at head office.

Manner provided under law to adjust such input:

(1) The Input Service Distributor shall distribute, in such manner as may be prescribed, the credit of CGST as CGST or IGST and IGST as IGST or CGST, by way of issue of a prescribed document containing, inter alia, the amount of input tax credit being distributed or being reduced thereafter, where the Distributor and the recipient of credit are located in different States.

Hence, there is no need to issue a tax invoice to distribute such credit. As per explanation to sec 28(8) – The expression “tax invoice” shall be deemed to include a document issued by an Input Service Distributor under section 21

The Input Service Distributor shall distribute, in such manner as may be prescribed, the credit of CGST and IGST as CGST, by way of issue of a prescribed document containing, inter alia, the amount of input tax credit being distributed or being reduced thereafter, where the Distributor and the recipient of credit, being a business vertical, are located in the same State.

Conditions as to distribution of credit (Sec 21):

  1. The credit can be distributed against a prescribed document issued to each of the recipients of the credit so distributed, and such document shall contain details as may be prescribed;
  2. The amount of the credit distributed shall not exceed the amount of credit available for distribution;
  3. The credit of tax paid on input services attributable to a recipient of credit shall be distributed only to that recipient;
  4. The credit of tax paid on input services attributable to more than one recipient of credit shall be distributed only amongst such recipient(s) to whom the input service is attributable and such distribution shall be pro rata on the basis of the turnover in a State of such recipient, during the relevant period, to the aggregate of the turnover of all such recipients to whom such input service is attributable and which are operational in the current year, during the said relevant period;
  5. The credit of tax paid on input services attributable to all recipients of credit shall be distributed amongst such recipients and such distribution shall be pro rata on the basis of the turnover in a State of such recipient, during the relevant period, to the aggregate of the turnover of all recipients and which are operational in the current year, during the said relevant period.

Manner of recovery of credit distributed in excess:

Where the Input Service Distributor distributes the credit in contravention of the provisions contained in section 21 resulting in excess distribution of credit to one or more recipients of credit, the excess credit so distributed shall be recovered from such recipient(s) along with interest, and the provisions of section 66 or 67, as the case may be, shall apply mutatis mutandis for effecting such recovery.

Manner of filing return:

Every taxable person registered as an Input Service Distributor shall, for every calendar month or part thereof, furnish, in such form and in such manner as may be prescribed, a return, electronically, within thirteen days after the end of such month.

Valuation of supplies under GST

 Valuation of supplies under GST  Valuation of supplies under GST
Feb 022017
 

Valuation of Supplies under GST

Significance of value under GST:

As per sec 8 of the GST act all supplies within the state are liable to be taxed at the notified rate on the value determined in accordance with the sec 15 of the act. Hence, correct valuation of supply of goods and / or service is necessary to determine the tax payable by the taxable person.

What is the value of the supply:

The value taken for calculation of GST is the price actually paid by recipient of goods / service to the supplier. This shall be taken if and only if:

  1. The supplier and the recipient of the supply are not related
  2. The price is the sole consideration for the supply

If any of the above conditions are not found to really exist, the price actually paid or payable will be disregarded and valuation will be done by as per the provisions of sec 15(4).

Items to be included or excluded from the price paid or payable can be summarized as under:

Items to be included Items to be excluded
1.     Any taxes,
2.     Duties,
3.     Cesses,
4.     Fees and charges levied under any statute, if charged separately by the supplier to the recipient5.     Any amount that the supplier is liable to pay in relation to such supply but actually paid by the recipient and not specifically included in the price paid or payable6.     Incidental expensesa.     commission and packing charged by supplierb.     charged for anything done by the supplier in respect of the supply of goods and/or services at the time of, or before delivery of the goods or, as the case may be, supply of the services

7.     Interest

8.     Late fees

9.     Penalty for delayed payment of any consideration

10.  Subsidies directly linked to the price are included in the value of the supply of the supplier who receives the subsidy.

 1.     Fees and other charges  under {SGST Act/the CGST Act} and the Goods and Services Tax (Compensation to the States for Loss of Revenue) Act, 2016, if already charged in the price paid or payable2.     Subsidies provided by the Central and State governments3.     Subsidy directly linked to the price but received by any person other than actual supplier4.     Any discounta.     Given before or at the time of supply,b.     Recorded in the invoice issued in respect of such supply.

5.     Any discount given after the supply of goods / services if the conditions mentioned hereinafter is satisfied.

6.     Refundable deposits

Thus, formula for calculation of GST value can be written as below:

Value for calculation of GST
Particular of item sold HSN / SAC Qty Rate Amount
(A) (B) (c) (D) (E = C X D)
Item 1
Item 2
Item 3
Total SUM(Above)
Add:
Duties (if any)
Other taxes
Freight
Insurance, Packing etc
Total SUM(Above)
CGST @ __ %
SGST @ __ %
Total SUM(ABOVE)

Under what circumstance discounts given after supply will be deducted from taxable turnover of the taxable person: Any trade discount or cash discount given after supply have been affected, shall not be included in the value of supply if following conditions are satisfied:

  1. Discount is established in terms of an agreement
  2. Such agreement must be entered into at or before the time of such supply
  3. Discount shall specifically linked to the relevant invoice
  4. Input tax credit has been reversed by the recipient of the supply as is attributable to the discount

What methods shall be applied in case value can’t determined as per above provisions:

  1. Comparative method
  2. Computation method
  3. Residual method

The above methods shall be applied in the sequence as provided in the law.

Business Vertical under GST

 Business Vertical under GST  Business Vertical under GST
Jan 302017
 

Business Vertical under GST

Meaning of business vertical?

As per sec 2(18) of the revised model GST act, “business vertical” means a distinguishable component of an enterprise that is engaged in supplying an individual product or service or a group of related products or services and that is subject to risks and returns that are different from those of other business verticals.

Hence, any component of the whole business shall be a separate business vertical if it has following characteristics:

  1. It must be a distinguishable component of the whole enterprise. That means, component identified as a business vertical must be capable of transfer, close or otherwise deal with without affecting other of whole business.
  2. The distinguishable component may be engage in supplying individual product / services or the bundle of related product / services. Among other factors. following factors shall also be considered for determining the related goods or services:
    • The nature of products or services
    • The nature of production process
    • The type or class of customers for the products or services
    • The methods used to distribute the product or providing of services
    • The nature of regulatory environment, if applicable.
  3. The risk or rewards of products or services included in a business vertical must be same.

The law relating to business vertical is given below:

  1. Registration: As per provision of section 23(2) – Notwithstanding anything contained in sub-section (1), a person having multiple business verticals in a State may obtain a separate registration for each business vertical, subject to such conditions as may be prescribed. Hence, it is not obligatory but optional to register each of the business vertical of a business in a state.
  2. Codification of business verticals: The structure of GSTIN is made is such a way that it would incorporate upto 35 business verticals of the same legal entity having same PAN. 13th digit would be alpha-numeric (1-9 and then A-Z) and would be assigned depending on the number of registrations a legal entity (having the same PAN) has within one State.

          For example, a legal entity with single registration within a State would have „1‟ as 13th digit of the GSTIN.

          If the same legal entity goes for a second registration for a second business vertical in the same State, the 13th               digit of GSTIN assigned to this second entity would be „2‟.

  1. Option to avail composition scheme: Option to avail composition scheme is person wise and PAN based. Hence, it is not possible to avail composition scheme for one vertical of the business and pay tax in regular manner for one or more of another vertical of the same business by the same PAN holder. Composition scheme would become applicable for all the business verticals/registrations which are separately held by the person with same PAN.
  2. Conditions for registering separate business vertical in the same state: In GST regime, multiple registrations within a State for business verticals of a taxable person would be allowed. This provision is subject to following conditions –
    • Input Tax Credit across the business verticals of such taxable persons shall not be allowed unless the goods or services are actually supplied across the verticals.
    • For the purpose of recovery of dues, all business verticals, though separately registered, will be considered as a single legal entity.

Taxable person in GST

 Taxable person in GST  Taxable person in GST
Jan 252017
 

Taxable person in GST

Who is taxable supplier under GST?

As per Sec 2(98) of model GST ACT – “taxable person’’ shall have the meaning as assigned to it in section 10;

As per sec 10(1) A person who is registered or liable to registered under schedule V of the GST act shall be a taxable person. As per sec 2(73) of the act the person shall include –

  • an individual;
  • a Hindu undivided family;
  • a company;
  • a firm;
  • a Limited Liability Partnership;
  • an association of persons or a body of individuals, whether incorporated or not, in India or outside India;
  • any corporation established or a Government company;
  • any body corporate incorporated by or under the laws of a country outside India;
  • a co-operative society registered under any law relating to cooperative societies;
  • a local authority;
  • government – means central government, State government or union territory or their respective department except where any such entity the accounts of which are not required to be kept in accordance with Article 150 of the constitution;
  • society as defined under the Societies Registration Act, 1860 (21 of 1860);
  • trust; and
  • every artificial juridical person, not falling within any of the preceding sub-clauses;

Hence, the definition of term taxable person includes wide range of person. Even gram panchayat or municipal council, central government or state government etc. can be taxable person if it is, either registered under the act or is liable to get registered as per schedule V of the act.

The provision of schedule V of the act may be summarized as under:-

Person liable to be registered

Person not liable to be registered
General rule:1.     Supplier whose aggregate turnover in a financial year exceeds rupees 20 lacs.2.     Every person who is registered under any of the earlier law – service tax, sales tax, etc.

3.     Transferee in case of business transfer

 1.     Person exclusively engaged in supplies not liable to tax or are wholly exempt from tax2.     An agriculturist, for the purpose of agriculture
Special category:In the below mentioned cases person is liable to get registered irrespective of the turnover –1.     Inter-State taxable supply

2.     Casual taxable

3.     Persons who are required to pay tax under reverse charge

4.     Electronic commerce operator

5.     Non-resident taxable person

6.     Person required to deduct TDS or collect TDS

7.     Person supplies on behalf of other taxable person

8.     Input service distributor

9.     Every person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered taxable person

Few important clarifications on taxable person:

  1. For liability to get registered under a particular state – rules shall apply state wise. For example – Mr. A have business entity in state A and state B. If Mr. A supplies from state A are chargeable and From state B non – chargeable then Mr. A is liable to get registered only in state A and not is state B. And if he meets other criteria then he is also liable to be registered under state A only.
  2. When to get registered – in the above example Mr. A is liable to get registered in state A only if his aggregate turnover in a financial year exceeds rupees 20 lacs, that means, the aggregate value of all taxable supplies, exempt supplies, exports of goods and/or services and inter-State supplies of Mr. A (having the same PAN), computed on all India basis and excluding taxes, if any, charged under the CGST Act, SGST Act and the IGST Act, as the case may be exceeds 20 lacs rupees.

Two GST registrations shall always be treated as different person:

  1. In the following case a person is required to hold more than one GST registrations:
    • More than one registration in each of the state from when he makes taxable supplies
    • If the person applies for registration for each of his business vertical
    • Two establishments of person and such person apply for different registrations under different states.
  2. For the purpose the act, all registrations under the act shall be treated as different person. Hence, all sale and purchase between such persons shall be accounted at market price and provisions of input tax credit shall apply accordingly.
  3. The registration under the GST is PAN based. Hence, for the same business vertical by same person (means PAN holder), in same state two registrations are not possible.

INPUT TAX CREDIT UNDER GST

 INPUT TAX CREDIT UNDER GST  INPUT TAX CREDIT UNDER GST
Jan 242017
 

INPUT TAX CREDIT UNDER GST

What is input tax credit?

Sec 2(56) “input tax credit” means credit of ‘input tax’ as defined in sub-section (55);

Sec 2(55) “input tax” in relation to a taxable person, means the IGST, including that on import of goods, CGST and SGST charged on any supply of goods or services to him and includes the tax payable under sub-section (3) of section 8, but does not include the tax paid under section 9;

In essence a taxable person may take input of following taxes paid under GST:

  • IGST (Integrated goods and service tax) – paid on domestic procurement as wells as overseas procurement
  • CGST (Central goods and service tax)
  • SGST (State goods and service tax)
  • GST paid under reverse charge mechanism

However GST paid under composition scheme is not eligible for input tax. Further, input of GST paid to composition supplier, by mistake or otherwise, is not eligible.

When a registered taxable person is eligible for taking input tax credit?

Following are the eligible criteria for taking input tax credit:

  1. Input tax shall be charged on any supply of goods or services to him
  2. Such goods or services are used or intended to be used in the course or furtherance of his business
  3. He had complied with all conditions precedent to eligibility of input tax.

If the above two conditions are met, the eligible amount shall be credited to the electronic cash ledger (ECL) of such person.

When input tax shall be credited to electronic cash ledger?

The input tax shall be credited to ECL provisionally as provided under sec 36 of act. Every registered taxable person shall, be entitled to take credit of input tax, as self-assessed in his return.

Such amount shall be credited, on a provisional basis, to his electronic credit ledger to be maintained in the manner as may be prescribed.

The credit referred above shall be utilized only for payment of self-assessed output tax liability as per the return. That means input tax may only be utilized only for payment of out tax liability which is assessed by taxable person himself. In any other sum due to pay, e.g., tax liability under any order of department, penalty, fees and any other sum shall be paid by him in cash through online banking.

How to utilized input available in ECL by a taxable person?

Provisions related to utilization of input available in ECL are given in sec 44(5) and summarized in below table:

Input tax credit on account of Priority of utilization
IGST SGST CGST
IGST (1) (3) (2)
SGST (2) (1) x
CGST (2) x (1)

What if, in ECL, there is still left a balance in credit side after setting off the input tax?

The balance in the cash or credit ledger after payment of tax, interest, penalty, fee or any other amount payable under the Act or the rules made there under may be refunded in accordance with the provisions of section 48 and the amount collected as CGST/SGST shall stand reduced to that extent.

What are the other requirements which a taxable person must complied with before availing of input tax credit?

  1. He must have a tax invoice / debit note / such other taxpaying document(s) evidencing the payment of tax claimed as input
  2. He must have actually received the goods
  3. Tax claimed as input must have actually been paid to appropriate government. The payment to government may be done in either of the following mode:
    1. In cash, means online transfer through challan
    2. By way of utilization of input tax credit.
  4. He must have furnished the return for the concern period.

Casual Taxable Person under GST

 Casual Taxable Person under GST  Casual Taxable Person under GST
Jan 202017
 

Casual Taxable Person under GST

Who is casual taxable person?

As per sec 2(20) of revised model GST law – A casual taxable person means a person who occasionally undertakes transactions involving supply of goods and/or services in the course or furtherance of business whether as principal, agent or in any other capacity, in a taxable territory where he has no fixed place of business.

The essential elements for being a casual taxable person are:

  • Occasional transactions in a specified state jurisdictions, i.e., he does not do his business in a single place for whole of the year and needs to frequently change his place of business. Eg. Circus business etc.
  • He may have a fixed place of business

Section 24 of revised GST Model law specified some special provision for casual taxable person which are reproduced below:

24. Special provisions relating to casual taxable person and non-resident taxable person

(1) The certificate of registration issued to a casual taxable person or a non-resident taxable person shall be valid for a period specified in the application for registration or ninety days from the effective date of registration, whichever is earlier

and such person shall make taxable supplies only after the issuance of the certificate of registration:

PROVIDED that the proper officer may, at the request of the said taxable person, extend the aforesaid period of ninety days by a further period not exceeding ninety days.

(2) Notwithstanding anything to the contrary contained in this Act, a casual taxable person or a non-resident taxable person shall, at the time of submission of application for registration under sub-section (1) of section 23, make an advance deposit of tax in an amount equivalent to the estimated tax liability of such person for the period for which the registration is sought:

PROVIDED that where any extension of time is sought under sub-section (1), such taxable person shall deposit an additional amount of tax equivalent to the estimated tax liability of such person for the period for which the extension is sought.

(3) The amount deposited under sub-section (2) shall be credited to the electronic cash ledger of such person and shall be utilized in the manner provided under section 44.

From the above provisions following are broad compliances which a casual taxable person needs to be complied with:

  1. Such person shall be required to obtain registration in each of the state in which he undertakes supplies.
  2. A casual taxable person shall apply for registration at least five days before the commencement of business in a taxable territory where he has no fixed place of business.
  3. Such certificate of registration shall be valid for a period of maximum 90 days subject to validity period in registration certificate.
  4. On request above validity period may be extended for a period not more than 90 days. Under no circumstances registration is allowed for more than 180 days.
  5. Such person shall deposit its estimated tax liability in advance at the time of registration.
  6. Such advance tax shall be utilized in the manner provided under sec 44.
  7. Any excess advance tax paid may only be refunded only when such person has file all returns for the validity period his registration certificate.
  8. Such people need not to file annual return.

However a casual taxable person needs to file annual return in the state where he has fixed place of business.

Refunds of Tax paid under GST

 Refunds of Tax paid under GST  Refunds of Tax paid under GST
Jan 182017
 

Refunds of Tax paid under GST

What is refund under GST?

As per explanation 1 to section 48 of the revised GST model law- “refund” includes refund of tax on goods and/or services:

  • Exported out of India or
  • On inputs or input services used in the goods and/or services which are exported out of India, or
  • Refund of tax on the supply of goods regarded as deemed exports, or
  • Refund of unutilized input tax credit as provided under sub-section (3).

Refund may be allowed on certain specific aspects of taxable turnover and that too subject to certain conditions. This may be analyze from the below table:

Taxable turnover for which refunds shall be allowed:1)    Refund of any balance in the electronic cash ledger.2)    Unutilized input tax credit accumulated due to:

a)    Exports including zero rated supplies

b)    Credit has accumulated on account of difference rate of tax on inputs and output supplies.

3)    Purchases made by Embassies or UN be taxed or exempted – Sec 49 and etc..

 Taxable turnover for which refunds shall be not allowed at all:

1)    Refund amount is less than 1000/- rupees.2)    ITC of goods lying in stock at the end of the financial year. ITC related to such goods can be carry forward.
Conditions subject to which refunds shall be allowed:1.     Refund of unutilized input tax credit may be claim at the end any tax period subject to conditions mentioned in sec 48(10).2.     No refund shall be allowed in cases:

2.1.   Where goods exported out of India are subjected to export duty.

2.2.   Supplier of goods or services claims refund of output tax paid under IGST Act, 2016.

Process to be followed for claiming refunds of GST paid:

Step 1: Any person can make application in prescribed from and manner for refund of following amounts:

  1. GST
  2. Interest, if any, paid on such GST
  3. Any other amount paid by himStep 2: The above application shall be made before the expiry of two years from the relevant date.Step 3: Refund of any balance in the electronic cash ledger may be claimed in refund filled by him. No separate application for this is required.

    Step 4.    Application shall be accompanied by:
    a.    Such documentary evidence to established (In case claim amount is more than rupees five lacs):
    i.     Refund is due to applicant
    ii.    The amount of tax, interest or other amount was collected from or paid by him
    iii.    Incidence of such tax, interest and has not been passed by him.
    b.    In case claim amount is less than rupees 5 lacs, it is sufficient if he file a declaration to the effect that the incidence of tax and interest had not been passed on to any other person.

    Step 5: If proper officer is satisfied the whole or any part of tax / interest / amount as claimed is refundable – he may make an order and the amount so determined shall be credited to the fund.

    Step 6: Order of refund in step 5 shall be made within 60 days from the date of receipt of complete application.

In what situations refundable amount be paid to applicant?

  • Refund of tax on goods and/or services exported out of India or
  • Refund of tax on inputs or input services used in the goods and/or services which are exported out of India;
  • Refund of unutilized input tax credit under sub-section (3)
  • Refund of tax paid on a supply which is not provided, either wholly or partially, and for which invoice has not been issued;
  • Refund of tax in pursuance of section 70, i.e., Tax wrongly collected or deposited with Central or State government
  • The tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the incidence of such tax and interest to any other person
  • Other class of applicants as the Central or a State Government may notify.

What is refund on provisional basis?

  1. The proper officer may refund on a provisional basis, 90% of the total amount so claimed in the manner and subject to such conditions, limitations and safeguards as may be prescribed
  2. This facility will be available – in the case of any claim for refund on account of export of goods and/or services made by registered taxable persons, other than such category of registered taxable persons as may be notified in this behalf,
  3. Thereafter make final settlement of the refund claim after due verification of documents furnished by the applicant.

TDS Procedure under GST act

 TDS Procedure under GST act  TDS Procedure under GST act
Jan 162017
 

TDS Procedure under GST Act

GST Payment regime:

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). Here, we will try to understand procedures related to TDS under revised model law.

What is TDS?

Sec 46 of revised GST law: (1) notwithstanding anything contained to the contrary in this Act, the Central or a State Government may mandate, –

(a) a department or establishment of the Central or State Government, or

(b) Local authority, or

(c) Governmental agencies, or

(d) such persons or category of persons as may be notified, by the Central or a State Government on the recommendations of the Council,

[hereinafter referred to in this section as “the deductor”], to deduct tax at the rate of one percent from the payment made or credited to the supplier [hereinafter referred to in this section as “the deductee”] of taxable goods and/or services, notified by the Central or a State Government on the recommendations of the Council, where the total value of such supply, under a contract, exceeds five lakh rupees.

This provision is meant for Government and Government undertakings and other notified entities making contractual payments in excess of Rs.5 Lakhs to suppliers. While making such payment, the concerned Government/authority shall deduct 1% of the total payable amount and remit it into the appropriate GST account (either of central government or state government as may be applicable to deductor).

Value of supply on which TDS shall be deducted:

The value of supply shall be taken as the amount excluding the tax indicated in the invoice. This means TDS shall not be deducted on the CGST, SGST or IGST component of invoice.

To whom TDS shall be paid:

TDS shall be paid within 10 days from the end of the month in which tax is deducted. The payment shall be made to appropriate government. As per sec 2(11) of revised GST model law appropriate Government means the Central Government in case of the IGST and the CGST, and the State government in case of the SGST. Further following procedural compliances shall be done by deductor:

  1. Such deductors needs to get compulsorily registered under section 23 read with Schedule IV of revised Model GST Law.
  2. Such deductor shall have TAN issued under income tax act to get registered under the act.
  3. They need to remit such TDS collected by the 10th day of the month succeeding the month in which TDS was collected and reported in GSTR 7.
  4. The amount deposited as TDS will be reflected in the electronic cash ledger of the supplier.
  5. They need to issue certificate of such TDS to the deductee within 5 days of deducting TDS mentioning therein the contract value, rate of deduction, amount deducted, amount paid to the appropriate Government and such particulars as may be prescribed.
  6. Non deduction / short deduction / non payment or short payment of TDS is on offence under the act for which a minimum penalty of Rs 10000/- is prescribed under the act.

How deductee can claim benefit of TDS:

The deductee shall claim credit, in his electronic cash ledger, of the tax deducted and reflected in the return of the deductor furnished under sub-section (3) of section 34, in the manner prescribed. Any amount deducted as TDS and reported in GSTR – 7 will automatically reflected in electronic cash ledger.

Refund of excess amount deducted:

  1. In case amount is claim by deductee in electronic cash ledger:

Refund to deductor is not possible such case. However, deductee can claim refund of tax subject to refund provisions of the act. Practically it is not possible to claim any erroneous deduction of TDS by deductor.

  1. In case amount is not so claimed by deductee.

Refund of erroneous excess TDS deducted is possible to deductor subject to refund provision and procedure of the act.

e–Commerce under GST

 e–Commerce under GST  e–Commerce under GST
Jan 132017
 

e–Commerce under GST

What is e-Commerce under GST?

As per section 2(41) of revised GST model law electronic commerce means supply of goods and/or services including digital products over digital or electronic network. This means all kind of supplies which completed over digital network is covered under GST regime. This may include transaction done digital network on prepayment basis such as flipkart, first-try etc.

Under GST regime e-Commerce operator is classified under two head:

  • e-Commerce operator as an taxable entity
  • e-Commerce operator as on tax collection entity

Class 1. As taxable entity:

Central government or state government, as the case may be, may specify categories of services under this class. If such services are provided by e-Commerce operator by digital means, whether on its own account or as an agent of other supplier, it is always presumed that same are supplied by e-Commerce operator.

Now the consequences of e-Commerce operator supplying such specified services are below:

  1. The turnover of such supplies shall be included in the turnover of e-commerce operator and not in the turnover of the actual supplier.
  2. E commerce operator is liable to pay tax on such supplies.
  3. No threshold limit is specified for such e-Commerce business. Such e-Commerce supplier has to obtain GST registration for every rupee of transaction.
  4. e-Commerce business has to apply for registration in each of the state where it affects its supplies.
  5. The original supplier, who supplies the services to e-Commerce operator, shall apply for registration in case his aggregate turnover exceeds Rs 25 lacs.

Class 2. As tax collection entity:

  1. Every electronic commerce operator, not being an agent, shall collect an amount calculated at the rate of one percent of the net value of taxable supplies made through it where the consideration with respect to such supplies is to be collected by the E-commerce operator.
  2. Calculation of net value of taxable supplies:
  3. e-Commerce operator need not to collect tax in case where it is working as an agent.
  4. In such case, e-Commerce operator, which deducting its service charges from the amount payable to supplier, shall also collects 1% of value of taxable supplies and deposited it to appropriate government.
  5. The above collection shall be deposited by e-Commerce operator to appropriate government within 10 days from the end of the month in which collection is made.
  6. No threshold limit is specified for such e-Commerce operator.
  7. The actual supplier which filling GST return shall submit supply to tax and claim the credit of tax collected by e-Commerce operator.
  8. e-Commerce operator shall be taxed on its service charge collected from supplier separately if its supply of services falls in terms of levy under the act.

Thus, in essence, every e-Commerce operator has to apply for registration in every state from where it affects its supplies. Every e commerce operator needs to collect 1% of taxable supplies from the actual supplier and deposited the same to appropriate government. This is done to broaden the tax base and transparency in GST compliance.

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