Goods and Service Tax – Improving Ease of Doing Business
By: – CSSANJAY MALHOTRA
Goods and Services Tax – GST
Dated:- 5-9-2016
Goods and Service Tax – “Improving Ease of Doing Business”
Long awaited Constitutional (122nd) Amendment Bill has been passed by Rajya Sabha on August 3, 2016 and by Lok Sabha on August 8, 2016. The same has been ratified by more than 50% of the states in India as on Sep 04, 2016 and will be forwarded to President for his assent for amendment in constitution. GST Council will be formed accordingly to finalise the GST rates. GST Council is to be headed by Union Finance Minister and consists of State Finance Minister or their representatives. GST Bill will be introduced in the winter session of Parliament in Nov-Dec'2016 and after the passage of same, will be sent to President for his approval and subsequently will become GST Act.
Govt. of India is working very closely with all the stakeholders i.e. States Govt's, Industry, Council, and Professi
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n Transaction Costs, Reduction in Compliance Costs, Uniform Tax Structure i.e. One Tax Rate across nation, Digital Environment moving to paperless regime, etc…..
Cascading impact of taxes adds to the business inefficiency and Goods and Service Tax will do away with the same as the CGST/SGST/IGST would be calculated on common base.
GST Glance : Worldwide
Country
Year
Dual Structure
Single Structure
GST Rate
France
1954
√
20%
South Korea
1977
√
10%
New Zealand
1986
√
15%
Japan
1989
√
5%
Canada
1991
√
5%
Singapore
1994
√
7%
China
1994
√
17%
Australia
2000
√
10%
European Union
2006
√
15%
Malaysia
2015
√
6%
Levy of Taxes under GST
Central Indirect Taxes i.e. Central Excise Duty, Countervailing Duty on Imports, Special Additional Duty, Service Tax, Surcharges & Cesses, will be subsumed into CGST (Central Goods and Service Tax).
State Taxes i.e. VAT, Entry Tax, Surcharges, Taxes on
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oods. Reduction in tax cost will be ultimately passed on to the consumers.
Goods and Service Tax will take away the present set of exemptions which would give all the businesses level playing field in the competitive environment.
GST is going to be a major shift in moving to Digital environment as all the Tax Payments, CENVAT Ledgers, returns, Refunds will be processed online over internet. The same will also result in Reduction in Compliance cost as all the required will be available online similarly to Income Tax i.e. Form 26AS, Returns, Refunds…..
Impact of GST on Industry
Goods and Service Tax is not only the change in the Indirect Tax Structure but would be ” Business Transformation” as it would have impact on Accounting Systems, Supply Chain Systems, Information Technology Systems, Restructuring of Business Models for Direct Sale / Distributors sale / Warehouse transfer.
Warehouses are set up in various states to leverage out the benefits in terms of CST Cost, which would
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t in sourcing from inter-state to intra-state and vice-versa as CST (Central Sales Tax) would be done away with and Input Tax credit is eligible irrespective of Inter/Intra State Purchases.
Cost of Collection of Taxes for the Central / State Govt. will come down as the all the payments, returns, Input Tax Credit ledgers are maintained online over internet.
End of Tax Exemptions Era
Goods and Service Tax will have barely minimum goods and services under Tax Exemption and may cover only those which may pertain to Life saving drugs, agricultural produce…….
Area Based Exemptions will also put to an end in GST Regime and everyone will have level playing field in the market. This would also put an end and control over the tax leakages in the system thereby adding to the Growth in GDP. Tax compliances would increase leading to reduction in litigations. If exemptions continue, Govt. may bring in policy for levy of GST on supplies and may refund back tax collected or define % of refund
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ducts in GST regime would eventually lower down the cost of inputs for various products.
Added advantage in the GST is that even the wholesalers / distributors who are not eligible to avail the Input Tax Credit for Central Excise Duty would now be eligible under GST regime for Central Taxes such as CGST / IGST, which can be further set off against their output tax liability.
Registration under GST – (Section 19)
Separate Registration is required at present under Central (Excise, Service Tax) and State Acts (VAT, CST). In GST, single registration is required, which is common for both CGST/SGST. Registration No will consists of 15 digits, wherein first 2 digits represent State Code, next 10 digits represents PAN No. , next two Entity code of the Applicant and remaining left blank intentionally for future use.
Persons falling under Schedule III to Model GST Law are required to be registered under the GST Law. This includes Persons having Aggregate Turnover > ₹ 9 Lacs during F.Y
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hall be given Registration for 90 days which may be further extended to 90 days. (These persons does not have fixed place of business in the state where they undertake assignment for short duration of time).
Casual Taxable Person and Non-Resident Person shall have to deposit the estimated Tax Liability at the time of seeking Registration under GST.
Input Tax Credit (Section 16)
In the current tax structure, CENVAT Credit is linked to inputs, input services, capital goods used in or in relation to the manufacture of Taxable final products, whereas in case of GST, Input Tax Credit is admissible on any supply of goods and / or services which are used or intended to be used in the course or furtherance of business and includes tax payable under sub-section (3) of Section 7 i.e. Reverse charge.
Input Tax credit is admissible until and unless the goods / services are specifically exempted under the GST Rules / Act.
Input Tax Credit is to be availed within a period of 1 year from the dat
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n 16(9) of Model GST Law which includes mainly goods acquired in relation to construction of Immoveable property, goods under Composition levy, goods or services relating to food and beverages, outdoor catering, beauty treatment, life insurance, health insurance, travel benefits, leave / home travel concession, motor vehicles until they are into such business, goods and services consumed for personal consumption…..
Composition Levy of Tax-(Section 8)
Composition Levy of Tax shall be applicable in respect of registered person whose aggregate turnover in a financial year within the state does not exceed ₹ 50 Lacs. These persons are liable to pay Composition Levy on their turnover at the rate to be decided by the GST Council and the tax levy should not be reflected on the invoice. Furthermore, these persons are not eligible to avail any Input Tax credit against the Input/Input services / Capital Goods. Furthermore no Tax charged is to be shown on Invoice; rather the document to
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ve been made very simple and easy for an assessee to comply with. Refund is admissible under GST in the following situations:
* Excess Payment due to mistake.
* Refund of Carry forward of Input Tax Credit. (Due to Inverted Tax Structure)
* Export (Including Deemed Export).
* Refund on Year End Volume Discounts.
* Refund of Pre-Deposit in case of Appeal / Investigation.
* Refund for Tax Payment in respect of supplies to CSD canteens, Un Bodies, Para Military forces…
Refund is to be submitted online and the same shall be submitted within 2 years from the Relevant Date which is defined separately under the Act for each of category, wherever refund arises.
Refund can be withheld by the department if the taxable person has defaulted in furnishing of returns, defaulted in making of tax payment / interest / penalty which has not been by the Court / Appellate authorities.
Payment of Tax- (Section 35)
Tax payment can be made by Internet Banking/ Debit Cards / Credit Cards / RT
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ds in the books of account.
In case of continuous supply of goods where successive account statements / payments are involved, the time of supply shall be the expiry of period to which successive statement of accounts / payment relate.
In case tax is liable to be paid under Reverse charge, then earliest of date of receipt of goods or date on which payment is made or date of receipt of Invoice or date of debit in the books of accounts.
Liability to pay CSGT/SGST arises at the time of Supply of Services which shall be earliest of the following:
* Date on Issue of Invoice or Date of Receipt of Payment whichever is earlier in case the Invoice is issued within prescribed period.
* Date of completion of provision of service or Date of Receipt of Payment if invoice is not issued within prescribed period.
In case of continuous supply of service “where payment is ascertainable” from contract, the date on which payment is liable to be made OR “where payment is not ascertainable” each tim
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oods terminates for delivery to recipient.
* If the goods are delivered by supplier or any other person on direction of third person, then Place of Supply shall be the Location of such person.
* Where Goods are assembled at site, Location shall be the Place of Installation of such assembly.
* If the goods are supplied on board or conveyance i.e. vessel or aircraft, then place of supply shall be the location at which such goods are taken on board.
Place of Supply of Services (Section 6)
Wherever Services are rendered to Registered Person, then the Location of such person is considered as Place of supply of goods.
In case services are rendered to a person other than registered person, POS shall be the location of supplier but if the address of service recipient exists in the records of service provider, then the POS shall be the location of recipient, where the address on record exists.
Section 4 to 14 of the IGST Draft Law defines POPS for various services for the purpose of d
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e returned on or after the appointed day (No Tax payable)
* Supplementary Invoices, Debit Notes / Credit Notes can be issued for change in price and Tax to be paid as per GST Rates.
* Pending Refund Claims as on the date of Implementation of GST to be processed under earlier law.
* Claim of CENVAT to be disposed off as per Law existing prior to GST Regime.
* Where any semi-finished goods are removed for Job Work & returned on or after appointed day, No Tax shall be payable if Goods after processing are returned within period of 6 months.
* Where any Finished goods are removed for processing not amounts to manufacture, No Tax shall be payable if Goods after processing are returned within period of 6 months.
All the above stated factors in GST would go a long way in making India a “Digital India”, Uniform Market across Nation for Goods & Services, Reduction in Logistics Cost, Transaction Cost, Cost of Production besides increasing efficiencies in operational processes”
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