Quick Guide to GST Bill/ Invoice Numbering

Invoice matching is a unique and critical requirement of the GST regime. Therefore, we can understand that the businesses are worried about how to handle GST Bill Numbering under GST regime.

What does the law say about bill numbering?

The law requires you to maintain continuous numbering for your documents and not repeat the utilized numbers in a financial year. These rules apply to all documents such as Sales Invoice, Credit Notes, and Debit Notes.

However, the law permits you to have a different book series number for different nature of bill or bill of different branches within the state having same GSTIN numbers.

For example, you can have a different book series number for B2B Invoices, B2C Invoices, Invoices for Reverse Charge and so on.

On the other hand, a Head Office in Mumbai and a branch in Pune with the same GSTIN may choose to manage their data centrally or decentralize it. In such a scenario, they should maintain different series numbers for their bill by which they can easily identify the bills. For e.g. Bills in Mumbai can have a series as Mum/001/17-18 and in Pune the series number can be Pun/001/17-18.

Do you need to start fresh numbering for your GST Invoices after July 1?

The law does not mandate this. Therefore, you are free to start the numbering from any number as long as the numbering is continuous and not repeated in the same financial year.

Tally’s GST-ready software is flexible and allows you to choose whether to continue with existing numbering or start fresh numbering from July 1.

However, what is really important to note is that the number has to be continuous. Therefore, you should avoid deletion and insertion.

Instead of deleting bills, you can choose to cancel the bill and issue a new bill with same or revised bill number. Reporting of cancelled bills is required while filing GST returns.

What happens if bills are deleted or inserted?

Let us understand the challenges that you may encounter on deletion of bills, and the things you need to do in order to ensure that your books match the returns that you submitted:

  1. Let us assume you have created Invoice no. 234 and uploaded to GSTN. Signing and filing is still pending. Now if you decide to delete it from your books, then you will need to ensure deletion of the same from the GSTN portal as well. At the same time, you will need to ensure that voucher numbering for the rest of the bills do not change.
  2. You created an invoice, uploaded to GSTN and signed the return. However, the buyer has not accepted the invoice. Subsequently, you deleted this invoice in the books. In such a case, you will have to upload a zero valued invoice showing the amendment of the invoice value, which was uploaded in the previous month.
  3. You created a bill, uploaded it to GSTN and signed the return. Your buyer accepts the sale. Do not delete such bills in the books. You will have to issue a credit note for full value to nullify the effect.
  4. Since you are required to maintain continuous or consecutive numbering, we do not recommend insertion of bills. If you insert a bill in between a series, it will not match with what you report to the department. For example, if you inserted invoice No. 3A between invoice No. 3 and 4, this will increase the count of bills reported.

Notes:
Invoices are matched based on Counterparty GSTIN, Invoice Number and invoice date.
Tax Invoices, debit note, credit note etc. are defined in Central GST act section no. 31 and the rules governing invoices are available on CBEC website.

Article Courtesy: Tally Solutions

GST Rollout Went Well, Fears On Introduction Unwarranted: Foreign Media

A country rarely praised for its efficient bureaucracy, India has managed its biggest administrative reform in years pretty well. Its new goods-and-services tax, replacing 40 other taxes and levies, came into force earlier this month without undue disruption. This policy deserves to be a great success — but to make the most of it, the government still has work to do.

Prime Minister Narendra Modi’s previous big idea — declaring 86 percent of India’s banknotes void overnight — took the public by surprise and caused the economy to seize up. Employers couldn’t pay wages and workers couldn’t buy even basic staples. The full cost of the disruption is still being calculated.

After that, fears about the GST roll-out ran high. Too high, as it turned out. It helped that the plan was not a shock: Successive administrations had debated the idea for years. The government also adjusted the rules to appease various constituencies, and gave businesses a two-month cushion to comply.

Partly for that reason, though, the project is far from finished. In excluding certain goods from the scheme, the central government has given state governments discretion to raise taxes on them at any time. Some states have already tried to impose taxes and fees on products already taxed under GST, including automobiles and movie tickets. The infamous customs posts where truck drivers had to halt and fill out paperwork before crossing a state line have begun to come down — but local officials can still clog the roads by demanding inspections or fees.

The new tax is also giving rise to new kinds of regulation. An “anti-profiteering” clause threatens companies with fines or closure if they don’t pass GST-related savings on to consumers.

India’s Aspirations

All this undermines the whole purpose of GST — to simplify a complex and fractured system. The design of the tax itself makes things worse. Long negotiations have produced a convoluted structure. Goods are divided into four or five different tax brackets (some are subject to additional “sin” charges as well), in ways that don’t always make sense. Hotel rooms are charged at different rates depending on how expensive they are; food at restaurants with air-conditioning is taxed at a higher rate than at those without. This will encourage companies to game the system and agitate for shifting their goods into lower brackets.

To head this off, the government should keep working on simplifying the system — narrowing exemptions as far as possible and reducing the number of tax brackets to one or two. Officials say that this is their eventual goal, but too much delay could be fatal. The longer tax preferences are in place, the harder they’ll be to dislodge. Companies will fight to keep their products in lower brackets, and tax officials will resist efforts to curtail their powers.

The roll-out went well. But if the government wants this reform to be a lasting success, it can’t afford to relax.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Article Courtesy: NDTV

International best practices – GST Compliance

International best practices in relation to GST compliance- Is India compliant?

M S Mani and Amit Sarker (with technical inputs from Krupa Shah)

In the world of digitized supplies and electronic commerce, one of the fundamental principle that any jurisdiction wishes to adopt is effectiveness and fairness in taxation system thereby acting as a support for businesses. In addition, the potential for tax evasion and avoidance needs to be minimized while keeping counteracting measures proportionate to the risks involved.

In the above context, the framework, administration and compliances under the much awaited Goods and Services Tax (‘GST’) of India, would be expected to achieve a fair balance of ‘minimum government and maximum governance’ to develop as a progressive system of taxation. Let us look at some key aspects of compliances as proposed in the model GST Law in backdrop of requirements prescribed by some nations where GST has already been implemented.

Registration:

As prescribed by various nations, India too proposes a minimum threshold for obtaining registration for a GST Taxpayer. In the present indirect tax regime, the Central laws prescribe different threshold for goods and services, while the threshold in the State VAT laws vary from state to state. In this backdrop, the proposal for a uniform threshold for goods and services across India (with an exception for certain economically backward states) is a paradigm shift from the present regime.

While the practices for voluntary registration, due date and mode for registration as proposed under Model GST Law are similar to that of many nations, the categories as recognized for GST registration in countries such as Canada and Australia are aligned to business status for income tax/business tax purposes e.g. most businesses, charities & public institutions, public service bodies, non-residents, etc.

A common threshold for all GST Tax payers could be easier to understand, however, it could also induce the requirement of complex web of compliances even for small business and not for profit organizations. In the global context, countries such as, Canada, UK, and Australia provide separate threshold for category of tax payers and nature of business activity as a facilitation measure. A case in point is Australia which prescribes a separate threshold for non- profitable organizations. Further, Canada has also defined separate categories for charitable and non-profit organizations for GST compliance.

In order to simplify the compliance requirements for such organizations, the GST legislation could define different categories of GST tax payers and prescribe simplified compliances for such categories of tax payers.

A unique feature of Indian GST is the proposition of business vertical-wise registration. This added feature may enable the registrants to undertake segment-wise reporting of GST and also understand trends and movements for each segment.

Further, the model law has adopted the feature of compulsory registration in case of non-residents, whereas Canada provides a threshold for such non-residents for obtaining registration.

Tax Payment & Credits:

Tax Payment process proposed under GST envisages a methodology of generating draft challans and filling up necessary details and thereafter executing payment. Upon payment, final challan would be generated containing 14 digit CPIN. Draft challan would be valid for 7/ 30 days once created based on mode of payment. Preparation of draft challan is a unique feature of the proposed payment process for the GST regime when compared to the GST Laws of other nations.

In case of an amount paid in excess in view of error in total, tax payer can claim refund or carry forward such excess to next period. There appear to be mechanisms laid down in country such as UK for adjustment of erroneously paid GST amounts to the tune of certain threshold prescribed in addition to refund mechanism.

An interesting element is the criteria incorporated under current GST regime for credit availment subject to payment of GST by the supplier. This appears to be a deviation as against the practices adopted by nations such as Canada, UK and     Australia which do not prescribe such stringent condition for availment of credits to bonafide buyer. It is worthwhile to note that Canadian GST even permits ITC availment on purchases/ expenses which are invoiced on the buyer but not paid.

Similarly, the time limit for availing credit is generally prescribed as 4 years from date of invoice in countries such as Canada and Australia whereas Indian model law restricts the availment up to one year.

Returns:

If we look at return filing related procedures, it is evident that GST evolved nations such as Canada and Australia provide for slabs to determine periodicity of the return. This is an administrative convenience which was also built in Indian VAT compliance system for States like Maharashtra in India to facilitate simplified compliance. Another interesting feature added by the Canadian system is that of an optional reduction of periodicity for tax payers, i.e. an annual return filer can choose a quarterly or monthly filing upon request to the revenue authorities. I Further, UK VAT has prescribed a fixed quarterly periodicity of return to build a compliance convenient structure for businesses. India, as compared to these nations, has proposed compulsory monthly return filing for all tax payers and in addition also proposes other returns such as for tax deduction at source, input service distributors, etc. This is expected to increase the compliance burden for small and medium scale businesses.

One of the important feature which has been currently missing in the proposed GST model of India is the facility to file a rectified or revised return. Country like Canada, facilitates the tax payer to make a request in this regard through online mode or by way of a letter. UK VAT system enables an amendment in return in certain circumstances such as not exceeding 4 years, not on account of deliberate mistake and below a prescribed threshold. Similarly, Australian GST also permits a rectification within 4 years. While the present indirect tax legislations do provide a facility for revision of returns, continuance of the same facility could enable tax payers to rectify errors creeping in the returns.

The Indian GST Law envisages a year-end compliance through annual GST return. Such a requirement has its roots in the current VAT legislations of India. The concept has been expanded to Service Tax and Excise from the current year. While this could be an added compliance for business, it could also enable a reconciliation upon closure and enable timely validation and rectifications in reporting.

The model GST law has also proposed to follow the current trend in VAT legislations of many of the States such as Maharashtra, Karnataka, etc. in filing a listing of inward and outward supplies (both party-wise and invoice-wise) as a part of return filing procedure. The due for such filings is prescribed in advance after which the final monthly return would be filed. Such feature is again unique to India when compared to countries such as Canada, UK, Australia, and Malaysia. The origin of such practice was the need for matching of buyer and seller supplies to prevent tax evasions. It is observed that restrictions are proposed to be cast in case of non-matched or reconciled supplies in terms of GST Input Tax Credits. While this feature faces its own inherent challenges such as monthly cut-offs, inadvertent misreporting by seller, implications on genuine / bonafide buyers, this could possible plug the revenue leakage for the Government and could  encourage businesses for strict adherence to compliances by all supply partners in a supply chain to ensure seamless credit chain.

Refund:

Indian GST model law provides mechanism to file refund claim in prescribed situations such as export of goods/ services, input tax credit accumulation, finalization of provisional assessment, pre-deposits, wrong payments due to specific errors prescribed. Such refund claims are required to be filed within two years from prescribed dates. On similar lines, rebate provisions are available in Canada whereby instances such as amount paid in excess than liability, amount paid in error on goods/ services procured, goods exported out of Canada, etc. are covered. The timeline of two years is provided for claiming such rebate. Thus, it can be observed that proposed law has adopted certain best practices from GST evolved nations whereby current one year limitation period for refund claims have been liberalized to a longer time frame.

Conclusion

In the context of above discussion it is worthwhile to mention that OECD framework urges its member nations to adopt principles of good tax administration. One of the guiding principle in this regard encourages revenue authorities to ensure that the compliance costs are kept at minimum level and at the same time ensure optimum administration to avoid tax evasion.

While some of the compliance propositions under model GST Law appear to be aligned to international practices, there are significant exceptions to mitigate risks of tax evasion. Further, it also appears that some of the proposed compliances are prescribed with a mindset to minimize non compliances and evasion. The present indirect tax regime which has been in vogue for decades now, has been dependent on manual processes and procedures. However, the proposed GST processes being completely automated the pitfalls of the manual regime can be easily curbed. The Government thus may need to move away from the earlier mindset of designing processes to prevent tax avoidance and adopt international best practices for a modern and automated indirect tax regime which would significantly increase India’s status amongst the nations which have implemented GST.

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Check Restaurant Bill Before You Pay. GST Rates Clarified

Check Restaurant Bill Before You Pay. GST Rates Clarified

No restaurant can charge GST at 28 per cent, the tax department reiterated

HIGHLIGHTS

  1. Taxman clarifies on rates of GST for restaurants
  2. Food served at restaurants attract tax at two rates of 12%, 18% under GST
  3. GST rates for restaurants include both CGST and SGST

Next time you dine at a restaurant, do check your bill to see if the proper GST or goods or services tax rate has been levied. The tax department has come out with clarifications on rates of GST for restaurants. The clarification comes in the wake of many people flooding the social media, seeking clarity over the new tax regime. The government has also launched an app, called GST Rate Finder, to help people find out the GST rate on the particular goods/services. GST, which came into force from July 1, replaced a multitude of central and state taxes including VAT, service tax and cesses.

Food served at restaurants attract tax at two rates under GST – 12 per cent and 18 per cent – depending on whether it is an AC restaurant or whether the restaurant has the licence to serve alcohol.

It should also be noted that the GST rates of 12 per cent and 18 per cent include both CGST (Central GST) and SGST (State GST). For the GST tax rate of 12 per cent, it is split at 6 per cent Central GST (which goes to the Centre’s kitty) and 6 per cent State GST (which goes to the state’s kitty). So happens for the 18 per cent GST rate, which is split at 9 per cent Central GST and 9 per cent State GST.

The tax department has reiterated that no restaurant can charge GST at 28 per cent.

The tax department has also clarified that “the actual GST incidence will be lesser due to increased availability of input tax credit.” Many input credits which were hitherto not available would be available now to be utilised against GST liability, says Sandeep Sehgal, director-tax and regulatory at Ashok Maheshwary & Associates LLP.

It has also been clarified that restaurants up to an aggregate turnover of Rs. 75 lakh that opt for the composition scheme will charge GST at the rate of 5 per cent. The lower limit of Rs. 50 lakh is applicable for the states of Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Tripura, Sikkim and Himachal Pradesh, the tax department said. (Restaurants with annual turnover up to Rs. 75 lakh can opt for the composition scheme, which enables them to pay tax at a flat rate without input credits.)

Non-AC restaurants serving no alcohol

 

The tax department said restaurants without air-conditioning in any part thereof and not serving liquor will pay GST at the rate of 12 per cent.

AC restaurants or those serving alcohol

Restaurants with partial or full air-conditioning or those serving liquor will attract GST rate of 18 per cent.

Pre-packed food

The rate of tax on parcel of pre-packed and pre-cooked namkin sold from restaurants will attract tax at 12 per cent. Also, in case of food parcel cooked as per order, GST rates will be applicable according to service of such food in the restaurant, it noted.

The tax department has also launched the app GST Rate Finder. Available on Google Play platform for Android handsets, the app enables users to find the applicable GST rates on goods and services. The rates can also be accessed on the tax department’s website.

Refund under GST

Refund can be claimed in Goods and Services Tax (GST) in the Following Situations

1) Export of Goods or Services ( Including Deemed Export)
2) Refund of Unutilized Input Tax Credit
3) Refund from Manufacturing / Generation/ Production – tax free supplies
4) Excess payment due to mistake and inadvertence
5) Finalization of Provisional Assessment
6) Refund for Tax payment on transactions by UN bodies,CSD Canteens, Para-military forces canteens, etc
7) Refund of pre deposit in case of Appeal.

Export of Goods or Services (Including Deemed Export)

A. In case of exports of goods and! or services out of India on which export duty is not payable then tax paid inputs and claiming refund of the paid taxes at the time of export.

B. In case of exports of goods and! or services out of India on which export duty is payable then availing the input tax credit of duty paid inputs and exporting finished goods after payment of duty (after utilizing such input tax credit) and thereafter claiming the rebate of the duty paid on export. Refund of the unutilized input tax credit can’t be claimed.

Refund of Unutilized Input Tax Credit

Refund of the unutilized input tax credit can be claimed at the end of any tax period If rate of tax on inputs is higher than the rate of tax on outputs.

Refund from Manufacturing / Generation/ Production/creation of tax free supplies Refund of tax paid on inputs used for the Manufacturing ! Generation! Production!creation of tax free supplies.

Excess payment due to mistake and inadvertence

Refund of Excess payment of tax either by mistake or by inadvertence resulting in more payment of tax than due to the Government.

Finalization of Provisional Assessment

When assesse will be entitled to Refund in the consequent to the order for finalAssessment.

Refund for Tax payment on transactions by UN bodies, CSD Canteens, Para-military forces canteens etc.

Supply to UN Bodies, Embassies, CSD Canteens and Para-military forces canteen will be taxed, which later on can be claimed as refund by them.

UN Bodies, Embassies, CSD Canteens and Para-military forces canteen will be required to take a Unique Identity Number and purchases made by them will be reflected in the return of outward supplies of the supplier and refunds of taxes can be granted.

Refund of pre deposit in case of Appeal

Where an amount deposited by the appellant for appeal is required to be refunded consequent to any order of the First Appellate Authority or of the Appellate Tribunal.

Relevant Date for Claiming Refund

For claiming refund, application shall be made within 2 years from the relevant date. If refund of tax and interest has been paid under protest then the limitation of 2 years shall not be apply.⁠⁠⁠⁠

Why GST is akin to driving a car in traffic?

By MS Mani

When a person is driving a car and is in traffic, what does the speed of their car depend on? The traffic ahead of them or the immediate car in front of them?

The above example is illustrative of GST wherein the cars behind you in traffic are like vendors to your business and the cars ahead of you are like your clients.

Similarly, if the person is surrounded in a sea of traffic, can they move without all the cars around them moving? That is exactly the GST ecosystem and the way traffic on the roads move is similar to how things will move on the GSTN portal. For each of us, our ability to do anything depends on our customers on the front and on the vendors at the rear.

If a vendor at the backend is not prompt in whatever he or she does, whether it is uploading the data on time, taking a registration in time, ensuring that the registration depicts the correct value on the invoice and dispatches the goods that are mentioned in the terms of the classification – this will have a material impact on us. Anything that our vendor did until now did not affect us directly.

However, we can always say that anything that a car behind us does now may affect us and, therefore, when we drive, we will need to keep an eye on our rear view mirror. Every act that our vendor does has the ability to create a financial loss for us.
One may lose the tax credit if our vendor has not complied. On the other hand, every time one deals with good vendors and people who take registrations, upload returns in time, and go ahead and take all the precautions necessary to undertake, the benefit will invariably go to us.
Similarly if one is not GST compliant, it will affect the car in front of us – your customer.

In the post GST world, if one becomes a non-compliant vendor, will our customer deal with us? Except one or two businesses where we may still have a slightly monopolistic situation, in majority of businesses there are many suppliers and few buyers who typically dictate terms. At that stage, our ability to be compliant and do all the things correctly is actually a life saver.

When we think of taking registrations and ensuring that the returns are loaded in time, this is akin to wearing a seatbelt in the car that protects us. In certain cars there are airbags. Now those airbags in a GST system are referred to as compliance ratings.

Every time we deal with a vendor, we check the vendor’s compliance ratings because if the vendor’s compliance rating is not good, we may suffer. So when we deal with any vendor in GST, we start by checking the vendor’s compliance rating on a scale of 1 to 10.

The writer is Senior Director and Partner, Deloitte India.