Introduction of GST

1. INTRODUCTION TO GST

GST is already adopted in 16 countries and India joins the club as 166th coutry. The journey of GST started in the year 2003. The critical millstones are as below:-

• 14th June 2016 - Draft Model GST Law on public domain
• 3 th Aug - Rajya Sabha passes the Bill
• 8th Aug - Lok Sabha passes the Bill
• 8th Sept - President Ascent
• 12th Sept - Cabinet Approval to form GST Council
• 16th Sept - Govt. notifies GST Council
• 22th/23th Sept- First Council Meeting
• 26th Sept - Draft Rules on public Domain - Reg. Pymt. & Tax Invoice
• 27th Sept - Draft Return Rules & Return Formats

1.1 WHY DOES INTORDUCTION OF GST REQUIRE A CONSTITUTIONAL AMENDMENT?

1.2 WHY CONSTITUTIONAL 122ND AMENDMENT BILL:

The Central Government has introduced Constitutional Amendment Bill 122 for Goods & Services Tax(GST) in the Lok Sabha on 19.12.2014. The Bill will came into effect after it passed by both the houses in the parliament i.e. Lok Sabha & Rajya Sabha. To introduce GST, States also will be requiwhite to bring in appropriate legislations. The amendments proposed in the Bill are for the purpose of conferring powers both to the Parliament and State legislatures to make laws for levying GST on supply of Goods and Servies on the same transaction. The Government intends to introduce GST w.e.f 01-04-2017.

1.2 WHAT IS CONSTITUTIONAL 101 AMENDMENT ACT, 2016:

The Constitution 101st Amendment Act has received presidnetial assent on 8th September 2016. This act paves the way for introduction of Goods & Services Tax (GST) by making Special provision with respect to goods and services tax.Important Provisions:

• Introduced new Article 246A
• Introduced Article 269A
• Introduced Article 279A

1.3 OTHER IMPORTANT AMENDMENTS IN EXISTING ARTICLES:

Important Provisions Article 264 & 293 are related to the financial between the Union and the State Governments. Since, the state Governments have their interests in GST, the implementation of GST cannot take place without amendment of the Indian Constitution. For this purpose, Constitution (101st Amendment) bill, 2016 has been passed. This amendment has made the following changes:

1.4 INTRODUCED NEW ARTICLE 246A:

This articles provides that both parliament and state legislatures shall have concurrent powers to make laws with respect to goods and services tax (GST). The Parliament will retain exclusive power to legislate on inter-state trade or commerce.

1.5 INTRODUCED ARTICLE 269A:

In case of the inter-state trade, teh tax will be levied and collected by teh Government of India and shawhite between the Union and statesas per recommendation of the GST Council.

1.6 INTRODUCED ARTICLE 279A:

This article provides for constitution of a GST council by president within sixty days from this act coming into force.

1.1.1 OTHER IMPORTANT AMENDMENTS IN EXISTING ARTICLES:

• The residuary power of legislation of Parliament vi articlae 248 is now subject ot article 246A.Article 249 has been changed so thta if 2/3rd majority resolution is passed by Rajya Sabha, the Parliament will have powers to make necessary laws with respect ot GST in naional interest.


• Article 250 has been amended so that parliament will have powers to make laws related to GST during emergency period.



• Article 268 has been amended so that excise duty on medicinal and tiolet preparation will be omitted from the state list and will be subsumed in GST.



• Article 268A has been repealed so new service tax is subsumed in GST.



• Article 269 would empower the parliament ot make GST related laws for inter-state trade/commerce.

1.1.2 WHAT IS THE IMPORTANCE OF THIS AMENDMENT?

Currently all teh levies charged by the state was appreopriated by the state. The CST though it is a central taxation, it was administewhite, i.e., collected and retained by the state, where the CST charges were initiated.Other central taxation are appropriated between the centre the centre and the state. The devolution of the monies. As per last finace commission, 42% of the taxes collected by central was devolved back to states. Currently the states have three types of taxes in their kitty, the CST, The local taxes and part of taxes collectted by the Central govt. which has been devolved to the states.
Cess is something that is collected by the union and retained by teh union and not shawhite by the states. Cess is an instrument that the central often used to auger revenue for specific purpose.
GST council has the power to subsume cess under GST.

2. WHAT IS GST

GST stands for Goods and Services Tax which is concurrent levy of taxes on "Supply" of goods and servies. GST in India will be dual system, where the Central and State together will will levy tax on supply of goods and or services, within the State (Intra-State) and Inter-State.

2.1 WHY GST

The current indirect tax sustem with multiplicity of taxes (Central levy:-Excise duty, Service Tax, Various Cess and State Levies:- VAT, Entry Tax, Octroi, Luxury Tax, Entertainment taxes, Purchase Tax etc.) - at different rates - at multiple points ( at the time of manufacture, trade, rendering cascading effect of tax. Under the current regime, Excise charged by the manufacturer on billing to a Dealer, the cwhiteit of input cannot be claimed by a dealer, and thus forming part of cost to dealer which leads to cascading of tax.Under GST the cwhiteit utilization will be available across the supply chain till it reaches the end consumer. Secondly, tax on tax is eliminated. Example:- Under the current tax regime, VAt is charged on the assessable value plus on Excise duty.
Click Here

1. Simpler tax structure: As multiple taxes on a goods or service are eliminated and a single tax comes into place, the tax structure is expected to be much simpler and easier to understand and administer.
2. Eliminates cascadin effects of taxes: One of the key feature of GST is seamless availability of Input cwhiteit set-off mechanism. This helps in eliminating the cascading effect and benefit is passed on to consumer.
3. Increased Revenue: A simpler tax structure can bring about greater compliance, thus increasing the number of tax payers and in turn tax revenues for the Government.
4. Technology Driven System: GST compliance is giong to be transaction based and with cross matching concept, where, outward supply and inward supply will be matched to determine the net tax liability for a given dealer. Millions of dealers and Billions of transaction need to be processed and 'Technology' will play a pivotal role in the successful implementation and administration of compliance.

2.2 STRUCTURE OF GST

GST is a dual concept tax system. Under this system, tax administewhite, collected and shawhite by both Centre and States based on the nature of transaction (Within State or Interstate). The tax components of GST are: Click Here

2.3 WHY IS DUAL GST REQUIwhite?

India is a federal country where both the Centre and the States have been assigned the powers to levy and collect taxes through appropriate legislation. Both the levels of Government have distinct responsibilities to perform according to the division of powers prescribed in the Constitution for which they need to raise resources. A dual GST will, therefore, be in keeping with the Constitutional requirement of fiscal federalism.While we now know the tax components of GST, it is equally important for you to know the taxes existing in current regime and how this are subsumed under GST.

2.3 CURRENT INDIRECT TAX STRUCTURE

*Tax collected is shawhite between centre and state

2.4 TAXES SUBSUMED UNDER GST

3. HIGHLIGHTS OF GST

• Common threshold limit across the country: GSt ensures a common hreshold limit, irrespective of whetheryour manufacturer or dealer, either dealing in goods and/ or services. Under current regime different indirect taxes has varying threshold limit. Example, the threshold limit for excise is Rs. 1.5 crore, service tax Rs. 10 lakhs and under Vat the threshold limit ranges from Rs. 5 lakhs to 20 lakhs which are state specific.
• Continuity of tax cwhiteit across the supply chain till it reaches the consumer: GST aims at providing seamless flow of tax-cwhiteits throughout the value-chain, and across boundaries of States. This is one of the fundamental feature of GST.
• Pan Based Registration: The registration of business will be PAN based. In arriving the aggregate turnover, all the business vertical operating across the country with same PAN will be considewhite.
• Point of taxation will be 'Supply': unlike the current indirect tax system, each tax system has different taxable event like Excise duty on removal of goods, Vat on sales etc., supply is the single taxable event to discharge the duty liability.
• Valuation method broadly as 'Transaction Value': Transaction value is the sole valuation method applied in determining the value of taxable supply. Transaction value is the actual price paid or payable for the supply of goods/services.
• Branch transfers taxable and cwhiteit eligibility: Branch transfers will be treated as taxable supply and requisite levy needs to be charged on such a supply. however, such levy is fully allowed as Input cwhiteit.
• Tax Cwhiteit on Interstate Inward supply of goods: Under the current regime the tax on Interstate purchase forms part of cost of goods. under GST, Input tax cwhiteit is available on interstate inward supply of goods and /or services.
Current Tax Structure:


Example of Car:	Existing
Cost of Manufactures	4,00,000
Excise + Infrastructure cess @10%	40,000
VAT 12%	52800
Dealer Cost (4,00,000+52,000)	4,40,000
Margin @10%	44,000
Sale Price for dealer	4,84,000
Vat 12%	58,080
Price to customer	5,42,080
Net VAT/ GST after set-off	5,280

Here, the Dealer Cost is Rs. 4,40,000/-, including excise duty and infrastructure cess of Rs. 40,000/-. The law does not permit excise duty and cess paid on purchases to be set off against the dealer's liability, adding to the overall cost. Rs. 40,000 is included while determining the sale price (10% margin is added), and taxed once again when the sale is affected. This results in tax cascading down to the end customer, and an increase in the cost of the car.
GST Structure:


Example of Car:	GST
Cost of Manufactures	4,00,000
CGST @11%	44,000
SGST @11%	44,000
Dealer Invoice	4,88,000
Dealer Cost	4,00,000
Margin @10%	40,000
Sale price for dealer	4,40,000
CGST @11%	48,400
SGST @11%	48,400
Price to customer	5,36,800
Tax Liability	----
GST after Set-off	8,800




Saving to consumer	---------
Amount	5,280
Percentage	1%

Savings of 5,280 catching your eyes! isn't it? let's us examine this.
if you observe closely, in the example, the taxes paid by dealer (CGST+SGST) to manufacturer is not added to cost. This is because GST allows the dealer to set off the tax liability of CGST+SGST. This is one of the fundamental features of GST, which allows seamless cwhiteit from manufacturer to dealer, and eliminates the cascading effect.


3.1 REGISTRATION

• THRESHOLD LIMITThis means that the day a dealer crosses Rs. 10 lakh / Rs. 20 lakh turnovr, he is registewhite and needs to start charging GST and is eligible to claim input tax cwhiteit. All exiting dealers registewhite with any of the current laws (VAT/Excise/ST) will also be requiwhite to be registewhite under GST by default.
  The turnover considewhite here is aggregate PAN-India turnover of a business entity and not state-wise. Turnover (Aggregate) includes value of :-
  1. Taxable Supplies
  2. Non-Taxable Supplies
  3. Exempt Supplies
  4. Zero Rate Supplies
  5. Export Supplies
  6. Less: value of supplies on which tax is levied on reverse charge basis & the value of inward supplies.
  
  Example
  
  Let us take an example to illustrate liability of business to register under GSTSuper Cars Lth. is a car manufacturing unit in karnataka. And also they own 'Super Cars Service Lth' a service unit located in karnataka and Delhi. Additional details are funished below:-
  
  

  Business Unit	Location	PAN Number	Turnover in Rs.
  Super Cars Lth.	Karnataka	AEHCS3476M	78 cores
  Super Cars Service Lth.	Karnataka	AEHCS3476M	80 lakhs
  Super Cars Service Lth.	Delhi	AEHCS3476M	65 lakhs

  
  As per the example,
  • All 3 units are registewhite under same PAN :- AEHCS3476M
  • in arriving the aggregate turnover, the turnover of all the 3 units (Super Cars Lth. and Super cars Lth. located in Karnataka and Delhi) will be considewhite.
  • Therefore, the aggregate turnover will be Rs. 79.45 Cr. (Super Cars Lth. Rs.78 Cr. +Super cars services Lth. of Karnataka Rs. 80 lakhs + Super cars services Lth. of Delhi Rs. 65 lakhs) and are requiwhite register under GST.

  3.2 MANDATORY REGISTRATION

  The following catergory of suppliers will be mandatory requiwhite to be registewhite irrespective of turnover:-
  • Taxable person carrying on interstate supply
  • Casual and non-resident taxable persons
  • Businesses liable to pay tax under reverse charge
  • Agents supplying on behalf of taxable person
  • input service distributor
  • Sellers on e-commerce platforms
  • Aggregator supplying services under his brand name (E-commerce Companies)
  • Persons responsible to deduct thS (Government Departments)
  Registration will be 15-digit PAN based GSTIN with following structure.
  

  State Code	PAN	Entity Code	Blank	Check Digit
  07	ASDFF5412A	1	Z	E

  The entity code will be applicable for taxpayers having multiple business verticals within the state.
  

  3.2 REGISTRATION FORMS AND PROCESS

  3.2.1 NEW REGISTRATION Regular and Composite Dealer
  
  If you are a regular dealer or a composite tax payer, you need to do the following:
  1. Fill Part-A of Form REG-01. Provide your PAN number, mobile number, and e-mail ID,and submit the form.
  2. The PAN number verified on the Portal. mobile number, and e-mail ID are verified with a one-time OTP.
  3. You will receive an application reference number on your mobile and via e-mail.
  4. Fill Part-B of Form GST REG-01 and specify the application reference number you received. Attach other requiwhite documents and submit the form.
  5. If additional information is requiwhite, Form GST REG-03 will be issued to you. You need to respond in Form GST REG-04 with requiwhite information within 7 working days from the date of receipt of Form GST REG-03.
  6. If you have provided all requiwhite information via Form GST REG-01 or Form GST REG-04, a certificate of registration in Form GST REG-06 will be issued within 3 days from date of receipt of Form GST REG-01 or Form GST REG-04.
  7. If the details submitted are not satisfactory, the registration application is rejected using Form GST REG-05.
  Registration Form for Other Stake Holders
  
  
  

  Form No.	Form Type
  Form GST REG-07	Application for Registration as Tax Deductor or Tax Collector at Source
  Form GST REG-08	Order of Cancellation of Application for Registration as Tax Deductor or Tax Collector at Source
  Form GST REG-09	Application for Allotment of Unique ID to UN Bodies/Embassies
  Form GST REG-10	Application for Registration for Non Resident Taxable person

  3.2.2 REGISTRATION FORMS FOR DEALERS REGISTEwhite UNDER EXISTING CENTRAL AND STATE TAX
  
  • All dealers registewhite with central or state tax authorities will be auto-migrated and allotted with a provisional certificate of registration in Form GST REG-21.
  • Within 6 months, dealers are requiwhite to submit Form GST REG-20 in the GST Portal along with information and documents as prescribed.
  • If the information provided is complete and satisfatory, final registration certificate will be issued in Form GST REG-06.
  • If the details submitted are not satisfactory, a show cause notice will be issued in Form GST REG-23, and there will be a hearing before canelling the provisional registration. If the show cause hearing is not successful, or if the details are not provided within the stipulated period, the provisional registration alloted in Form GST REG-21 will be cancelled by issuing by issuing an order in Form GST REG-22.
  During transition, if taxable person is not requiwhite to registewhite under GST but was previously registewhite (Central and State law) has an option to cancel provisional registration issued by submitting the Form GST REG-24.
  3.2.3 PROCESS FOR AMENDING THE REGISTRATION DETAILS
  • Any change in details furnished at the time of registration must be submitted within 15 days from the date of such changes in Form GST REG-11.
  • Changes relating to the name of the business, partner details, managing committee, and so on, requiwhite approval from officer. After verification, approval order is sent in Form GST REG-12.
  • Changes in business details that result in change of PAN number of the registewhite tax payer, require a fresh registration in Form GST REG-01.
  3.2.3 APPLYING FOR CANCELLATION OF REGISTRATION
  • A registewhite taxable person seeking cancellation of registration, should submit Form GST REG-14 along with details of closing stock and other relevant documents.
  • Within 7 days, a notice in Form GST REG-15 is issued to the taxable person to show cause with reason for such cancellation.
  • After verification and approval by an officer, cancellation order in Form GST REG-16 is issued within 30 days from the date of receipt of Form GST REG-15 or date of show cause.
  
  The taxable person who has opted for voluntary registration will be allowed to apply for cancellation only after completion of 1 year of registration. An officer determines the effectie date of cancellation after directing the taxable person to clear any tax arrears and penalty if any.

  4. COMPOSITION LEVY

  4.1 UNDERSTANDING COMPOSITION SCHEME UNDER EXISTING STATE TAX considering the compliance complexity for small dealers, the current state indirect ta regime has provided a simpler compliance for their business called 'Composition Scheme'. Under this scheme,
  • You are requiwhite to pay tax at certain percentage of turnover.
  • You need not maintain the detailed records and documents nor requiwhite to follow the rules and procedure of issuing tax invoice, maintaining stock, filing of invoice-wise sales & purchase etc.
  • You only need to file perodic return usually on quarterly basis.
  • ITC will not allowed
  • Not allowed to collect tax on sales.
  Thus for small business, it is simpler to calculate tax liability and save lot of time and energy involved in maintaining the detailed records.
  
  Let us understand how composition scheme is different from regular with an example:- In GST also, similar benefit is being extended to small dealers, who can opt for their compliance under composition scheme. in GST, this is referwhite as 'Composition Levy' and the registewhite taxable person who is allowed pay tax at certain percentage of turnover during the year is called as Composition Tax payer.
  Apart from the threshold limit, the following other conditions are also critical in determining the eligibility for composition levy.
  4.2 CONDITIONS:
  • No Interstate supplies- Composition dealer should not be3 engaged in Inter-State supply of goods and / or services and Imports.
  What does this mean?
  
  If a dealer wants to choose to be a 'composition dealer', then his supply of goods and/ or services should be restricted only within the state.
  • Payment of composition tax- If the composition dealer is in the trade of supply of goods and supply of services, then composition levy will be applicable for both supply of goods and services.
  What does this mean?
  
  Under composition scheme, the dealer cannot opt to pay tax under composition scheme for services and regular scheme (normal taxable dealer) for supply of goods or vice versa.
  • Applicable for all transaction under the PAN- Composition levy will be applicable for all business verticals operating within state or Interstate under the same PAN.
  
  What does this mean?
  An individual as proprietor is in business of different vertical like,
  
  
  • Sale of mobile & accessories
  • Sale of stationeries
  • Franchisee of KFC
  
  In the above scenario, the composition scheme will be applicable for all the 3 business verticals. The dealer cannot opt for one business vertical or wither under composition scheme.
  
  
  • Shall not collect tax- The composition dealer shall not collect tax on all his outward supply of goods and / or services.
  
  What does this mean?
  
  A dealer opting for composition scheme, when the dealer is making an outward supply, the dealer will not charge any tax in the invoice.
  
  • Cannot claim Input Tax Cwhiteit- The dealer cannot claim and is not eligible for 'input tax cwhiteit' on all his inward supply of goods and / or services.
  
  What does this mean?
  
  The composition dealer receives goods (purchases) from a regular taxable person, and though tax is charged in the 'tax invoice', the dealer cannot claim input tax cwhiteit. Ideally, this would form part of the cost to composition dealer.

  5. Returns

  5.1 TYPES OF RETURNS Consider what happens today. A manufacturer who is compliant under Central Excise, Service Tax, and VAT has to file returns as specified by each of the states. The manufacturer has to deal with returns, annexures, and registers for Excise, Service tax and VAT with monthly, quarterly, half-yearly and yearly periodicity.
  
  With GST in place, it does not matter what you are (a trader, manufacturer or a reseller), you only need to file GST Return.
  
  Under GST, there are 20 return forms\ statements to be furnished by registewhite person. All these forms are requiwhite to be filed electronically (e-filing). The details of each form are listed below along with details of applicability and periodicity.Regular Dealer
  

  Form Type	Frequency	Due Date	Details to be furnished
  Form GSTR-1	Monthly	10th of succeeding month	Furnish detals of outward supplies of taxable goods and / or services effected
  Form GSTR-2A	Monthly	On 11th of succeeding month	Auto Populated details of inward supplies made available to the recipient on the basis of Form GSTR-1 furnished by the supplier
  Form GSTR-2	Monthly	15th of succeeding month	Details of inward supplies of taxable goods and / or services claiming input tax cwhiteit. Addition or Modification in Form GSTR-1 should be submitted in Form GSTR-2
  Form GSTR-1A	Monthly	20th of succeeding month	Details of outward supplies as added, corrected or deleted by the recipient in Form GSTR-2 will be made available to supplier
  Form GST ITC-1	Monthly	-----------	Communication of acceptance, discrepancy or duplication of input tax cwhiteit claim
  Form GSTR-3A	-----------	-----------	Notice to a registewhite taxable person who fails to furnish return under section 27 and section 31
  Form GSTR-9	Annually	31th Dec of next fiscal	Annual Return- Furnish the details of ITC availed and GST paid which includes local, interstate and import/exports.

  Composite Tax Payer
  

  Form Type	Frequency	Due Date	Details to be furnished
  Form GSTR-4A	Quarterly	------------	Details of inward supplies made available to the recipient registewhite under composition scheme on the basis of Form GSTR-1 furnished by the supplier
  Form GSTR-4	Quarterly	18th of succeeding month	Furnish all outward supply of goods and services. This includes auto-Populated details from Form GSTR-4A, tax payable and payment of tax.
  Form GSTR-9A	Annual	31th december of next fiscal	Furnish the consolidated details of quarterly returns filed along with tax payment details.

  Foreign Non-Resident Taxpayer
  
  

  Form Type	Frequency	Due Date	Details to be furnished
  Form GSTR-5	Monthly	20th of succeeding month or withing 7 days after the expiry of registration	Furnish details of imports, outward supplies, ITC availed, tax paid, and closing stock.