The Indian Taxation structure has witnessed many reforms since inception. The current taxation system streamlines two broad categorizations viz: Direct Taxation and Indirect Taxation. Among the two, Indirect Taxation has always been a matter of deportment because of the series of taxes involved therein such as Excise Duty, Service Tax, Value Added Tax, etc. Also these taxes have been divided into two subdivisions on the basis of the authority of levy viz: State Levy and Central Levy. This further creates a confusion and situation of ambiguity among the people. Further, implication of such taxes has somewhere lead to distortionary and cascading effect i.e. leviability of tax on tax, which eventually has been hard hitting on the pockets of the final consumers.
Considering all these facts and circumstances, the Government of India has finally made a move in the direction of substituting 17 indirect taxes into one Indirect Tax known as The Goods and Services Tax commonly known as GST. The GST structure has been designed and modeled as a value added tax, which will be levied on each stage of a transaction as the supply moves from one level to another. The tax paid at one level will subsequently be allowed as credit on another level.
4. (1.1) GST- Legal caricature…
The most sought after taxation reform, The Goods and Services Tax, has now lead on a path of
transferring the entire indirect tax regime to whole new paradigm. The One Hundred and Twenty- Second
Amendment Bill to the Constitution of India has now eventually been opened to the nation.
The Bill calls for the following constitutional reforms:
Article 246A: Concurrent jurisdiction for levy of GST by the Centre and the States regulated through
GST Council
Article 269A: Authority for Centre to levy and collection of IGST on supplies in the course of inter-
state trade or commerce including exports.
Article 366(12A): GST defined as any tax on supply of goods or services or both other than on alcohol
for human consumption. Five petroleum products to join later.
5. (1.2) How far have we reached..?
Bill passed by Rajya
Savha on 3rd August,
2016
Heading over, Lok
Sabha gave
consent on
August 8th, 2016
Bill to be ratified
by minimum 50%
of the states. 16
states including
have alreay ratified
the same.
Committee headed
by Chief Economic
Advisor has
suggested the arte
of tax at 17%-18%
Model GST law
has been
officiated on the
government
website in
June,2016
6. (1.3) What yet needs to be done
Notifications to roll
out by January, 2017
to achieve target of
implementing GST
by 1st April, 2017
States and
Centre to
approve the
model law
Recommendation
s of GST Council
for the model
GST law to bring
out the core areas
of concern
8. (2.1) GST- why a remarkable decree?
GST, the most awaited and most buzzed about law is remarkable as:
1.
Submergence of 17 indirect taxes into one
broad genre
2.
Reduce the cascading effect
3.
Shall imbibe the concept of Manufacture,
Sale and consumption of Goods and
Services on national level.
Taxes to be
subsumed
State Taxes : State VAT, Central Sales Tax, Purchase Tax, Luxury Tax,
Entry Tax (all forms), Entertainment Tax, Taxes on advertisements,
lotteries, betting and gambling, State cesses and surcharges
Central Taxes: Central Excise Duty, Additional Duties of Excise (goods of
special importance and textiles and textile products), CVD, SAD, Service Tax,
Cesses and surcharges
9. (2.2) Proposed Framework.
IGST
CGST
SGST
• Imposed by centre on import as
well as inter state supplies of
goods and services
• Levied by Centre on intra-state
supplies of goods and services.
• Levied by states on intra state
supplies of goods and services.
The taxation schema as has been propounded by the 122nd Constitutional Amendment Bill presents GST in three tier
structure:
10. (2.3) Levy of CGST, SGST, IGST.
The implication of CGST, SGST and IGST can be further elaborated with following examples:
Gurgaon
New YorkDelhi
ChennaiNoida
Kurukshetra
CGST+SGST
IGST
No Taxes
(Intra-State Sale)
(Export)
(Inter-State Sale)
11. IGST
BCD+IGST
(Import of Services)
(Import of Goods)
London
London
Delhi
Delhi
The taxes as defined above shall be applicable on such transactions and at such rates which shall be notified by the
Government in the Act.
Rules shall be framed by the Government to determine the Place of Supply of Services, on the basis of
which a transaction shall be class be classified as Inter-State, Intra-State, Import or Export.
13. (3.1) Taxable Event?
Supply- Concept and description
The taxable event for the levy of GST as propounded in the law is the Supply of Goods and Services. Term Supply as
defined in Section 3(1) of the Model GST Bill, includes all forms of supply of goods and 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. It shall also include
supplies which do not correspond a consideration. Thus, only a transaction, exhibiting the traits of being a supply will
be taxed under GST.
14. (3.2) Liability on whom?
Meaning of Supplier for the purpose of Supply.
In the previous slide it was clarified as to what shall be a transaction on which GST will be leviable.
Now arises the question that on whom the liability of GST will fall. As is apparent from the term Supply, the person
liable for GST will be Supplier.
As defined in the Model GST Law, a Supplier
in relation to any goods and/or services shall mean
• The person supplying the said goods and/or services
• And shall include an agent acting as such on behalf of such supplier
in relation to the goods and/or services supplied
That is to say, for the provision of Service, a Service provider will be the Supplier and in case of Goods, the Trader will
be the Supplier.
15. (3.3) When will liability arise?
Time of supply- Goods
The time of supply which mostly corresponds to point of taxation in the current tax regime defines as to when a
transaction will be considered taxable. In case of supply of goods, the time of supply shall be:
Direct Charge
Earlier of :
1. Date of Removal of goods.
2. Goods made available to
recipient.
3. Date of Invoice.
4. Date of receipt of payment.
5. Date of receipt of goods as
per books.
Reverse Charge
Earlier of :
1. Date of receipt of
goods
2. Date of Invoice.
3. Date of payment.
4. Date on which the
books are debited.
16. Time of Supply- Services
Transactions relating to provision of services are also to be taxed on a certain point of time i.e. time of supply needs to be
considered herein as well to determine as to when a transaction shall be exigible to GST. The manner of determining time of
supply in case of services has been defined as follows:
Earlier of
• Invoice Date Or
• Payment Date
OR Earlier of
• Date of Completion
of Service OR
• Date of receipt of
payment
Else TOS will be
• Date of Completion
of Service
17. Time of Supply- Continuous supply of Goods and Services
Continuous Supply of Goods and Services means transactions wherein:
• Provision of Goods or Services is provided on a continuous or recurrent basis; and
•The period exceeds 3 months.
Though the transactions of Supply which shall be considered as Continuous shall be notified by Government
specifically. The manner of determining the time of supply in case of continuous supply has been laid down in the
law as follows:
GOODS SERVICES
Earlier of Earlier of
Date of
Expiry of
sub sequent
period
Date of
Invoice
Date of
Payment
Date
specified by
contract
Date of
invoice or
payment
Date of
Completion
in case of
event
19. (4.1)Value of Taxable Supply i.e. Transaction value
For the purpose of levying GST, Taxable Value of Supply has been taken as the Transaction Value i.e. the value against which
goods or services has been supplied. In addition to the actual price paid by the recipient to the supplier, following shall be
included:
20. (4.2) Input Tax Credit- Availment
Credit of Inputs and Input Services to be available, which shall include provisions relating to Input Service
Distributor.
Inputs are defined as any goods other than capital goods subject to exceptions as may be prescribed, used or
intended to be used by a supplier for making an outward supply in the course or furtherance of business.
Input Services defined to mean any service subject to exceptions as may be prescribed, used or intended
to be used by a supplier for making an outward supply in the course or furtherance of business.
21. (4.2) Utilization of Input Tax Credit
The credit of inputs and input services to be utilized as follows, only if the tax has been paid to the government:
IGST CGST SGST
IGST 1st 2nd 3rd
CGST 2nd 1st
SGST 2nd 1st
23. (5.1) Compliances required under GST
The provisions of any law, require adherence to numerous compliance procedures
which include registration requirements, filing of returns, issuance of invoices,
debit notes etc.
Similarly, under the GST aspect of Indirect taxation, various compliances need to
be adhered by an assessee who is supplier of goods and services.
Further, an entirely new aspect of filing returns has been brought in by the GST
bill, which involves filing of 8 returns, which has been elaborated in the
forthcoming slides.
Although the compliances under GST are set to cost heavy to the assessees.
24. (5.2) Registration/ other compliances:
Separate State wise registration for making supplies from more than one state. Registration mandatory if there
are inter-state supplies and reverse charge transactions.
Electronic payment challan to be generated form GST portal and separate accounting codes for
CGST/IGST/SGST
Separate return for each registration and return to be submitted through online mode only.
HSN Codes upto four digits for goods and accounting codes for services would be required on invoices
Revision of returns by earlier of : 1) Filing of return for the month of September of next year or 2) Filing of
relevant annual return.
26. (6.1) Returns Under GST
Return Name Return Type Due Date of Filing
GSTR -1 Outward supplies made by taxpayer (other than
compounding taxpayer and ISD)
10th of next month
GSTR-2 Inward supplies received by a taxpayer (other than
compounding taxpayer and ISD)
15th of next month
GSTR-3 Monthly return(other than compounding taxpayer and
ISD)
20th of next month
Corresponding to the compliances part, another important aspect to be covered is the returns which need to be filed by
every registered dealer as follows:
27. GSTR- 5
Periodic return by Non-Resident Foreign Taxpayer
Last day of registration
GSTR- 6
Return for Input Service Distributor (ISD) 15th of the next month
GSTR- 7 Return for Tax Deducted at Source 10th of the next month
GSTR- 8
Annual Return By 31st December of next FY
Herein, Compounding Taxpayer means an assessee who opts for payment of tax under compounding scheme
i.e. payment on total value of supply at a specified rate.
29. As the government has urged on the nation to the new scheme of Indirect Reforms, a plethora of issues need consideration
which majorly pertain to transition from existing law to the new law. The Government in the Draft bill has elaborately defined
some of the issues and the view to be taken which mostly benefit the assessee. Some of the transitional provisions are:
(7.1) Old law to new law- transition
1. Persons registered under earlier laws to be registered
on provisional basis for a period of 6 months.
2. Eligible CENVAT Credit/VAT Credit balances under
earlier laws shall be available as credit
4. No tax shall be payable on return of goods within 6
months from appointed date (whether cleared as
dutiable or as exempted under earlier laws)
3. Goods cleared to job worker must be returned within
6 months (two months extension on sufficient cause)
from the appointed date or else the tax shall be payable
under GST by job worker and manufacturer.
Transitional Provisions
31. (8.1) GST & the Economy- pros and cons
Cons
Pros
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Core Team Members
35. Shweta Goyal - B.Com, ACA
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Swati Agarwal- B.Com, ACA
Swati, an Associate member of the Institute of Chartered Accountants of India, specializes in the area of internal audits,
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him deep insight of various indirect tax related issues and advisory services.
Core Team Members
