GST 2017

GST FAQ

Registration under Goods and Service Tax (GST) regime will confer following advantages to the business: • Legally recognized as supplier of goods or services. • Proper accounting of taxes paid on the input goods or services which can be utilized for payment of GST due on supply of goods or services or both by the business. • Legally authorized to collect tax from his purchasers and pass on the credit of the taxes paid on the goods or services supplied to purchasers or recipients.
No. A person without GST registration can neither collect GST from his customers nor claim any input tax credit of GST paid by him.
Where the application for registration has been submitted within thirty days from the date on which the person becomes liable to registration, the effective date of registration shall be date of his liability for registration. Where an application for registration has been submitted by the applicant after thirty days from the date of his becoming liable to registration, the effective date of registration shall be the date of grant of registration. In case of suomoto registration, i.e. taking registration voluntarily while being within the threshold exemption limit for paying tax, the effective date of registration shall be the date of order of registration.
Any supplier who carries on any business at any place in India and whose aggregate turnover exceeds threshold limit as prescribed in a year is liable to get himself registered. However, certain categories of persons mentioned in Schedule III of MGL are liable to be registered irrespective of this threshold. An agriculturist shall not be considered as a taxable person and shall not be liable to take registration. (As per section 9 (1))
As per section 2 (6) of the MGL, aggregate turnover includes the aggregate value of: (i) all taxable and non-taxable supplies, (ii) exempt supplies, and (iii) exports of goods and/or service of a person having the same PAN. The above shall be computed on all India basis and excludes taxes charged under the CGST Act, SGST Act and the IGST Act. Aggregate turnover does not include value of supplies on which tax is levied on reverse charge basis, and value of inward supplies.
As per paragraph 5 in Schedule III of MGL, the following categories of persons shall be required to be registered compulsorily irrespective of the threshold limit: a) persons making any inter-State taxable supply; b) casual taxable persons; c) persons who are required to pay tax under reverse charge; d) non-resident taxable persons; e) persons who are required to deduct tax under section 37; f) persons who supply goods and/or services on behalf of other registered taxable persons whether as an agent or otherwise; g) input service distributor; h) persons who supply goods and/or services, other than branded services, through electronic commerce operator; i) every electronic commerce operator; j) an aggregator who supplies services under his brand name or his trade name; and k) such other person or class of persons as may be notified by the Central Government or a State Government on the recommendations of the Council.
Any person should take a Registration, within thirty days from the date on which he becomes liable to registration, in such manner and subject to such conditions as may be prescribed.
No. Every person who is liable to take a Registration will have to get registered separately for each of the States where he has a business operation and is liable to pay GST in terms of Sub-section (1) of Section 19 of Model GST Law.
Yes. In terms of Sub-Section (2) of Section 19, 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.
Yes. In terms of Sub-section (3) of Section 19, a person, though not liable to be registered under Schedule III, may get himself registered voluntarily, and all provisions of this Act, as are applicable to a registered taxable person, shall apply to such person.
Yes. Every person shall have a Permanent Account Number issued under the Income Tax Act, 1961 (43 of 1961) in order to be eligible for grant of registration under Section 19 of the Model GST Law. However as per section 19 (4A) of MGL, PAN is not mandatory for a non-resident taxable person who may be granted registration on the basis of any other document as may be prescribed.
Yes. In terms of sub-section (5) of Section 19, where a person who is liable to be registered under this Act fails to obtain registration, the proper officer may, without prejudice to any action that is, or may be taken under the MGL, or under any other law for the time being in force, proceed to register such person in the manner as may be prescribed.
Yes. In terms of sub-section 7 of MGL, the proper officer can reject an application for registration after due verification. However, it is also provided in sub-section 8 of Section 19, the proper officer shall not reject the application for registration or the Unique Identity Number without giving a notice to show cause and without giving the person a reasonable opportunity of being heard.
Yes, the registration Certificate once granted is permanent unless surrendered, cancelled, suspended or revoked.
All UN bodies Consulate or Embassy of foreign countries and any other class of persons so notified would be required to obtain a unique identification number (UIN) from the GST portal. The structure of the said ID would be uniform across the States in conformity with GSTIN structure and the same will be common for the Centre and the States. This UIN will be needed for claiming refund of taxes paid by them and for any other purpose as may be prescribed in the GST Rules.
The taxable supplier supplying to these organizations is expected to mention the UIN on the invoices and treat such supplies as supplies to another registered person (B2B) and the invoices of the same will be uploaded by the supplier.
A unique identification number (ID) would be given by the respective state tax authorities through GST portal to Government authorities / PSUs not making outwards supplies of GST goods (and thus not liable to obtain GST registration) but are making inter-state purchases.
Casual Taxable Person has been defined in Section 2 (21) of MGL. It means a person who occasionally undertakes transactions in a taxable territory where he has no fixed place of business.
A taxable person residing outside India and coming to India to occasionally undertake transaction in the country but has no fixed place of business in India is a non-resident taxable person in terms of Section 2 (69) of the MGL.
The certificate of registration issued to a “casual taxable person” or a “non-resident taxable person” shall be valid for a period of ninety days from the effective date of registration. However, the proper officer, at the request of the said taxable person, may extend the validity of the aforesaid period of ninety days by a further period not exceeding ninety days.
Yes. While a normal taxable person does not have to make any deposit of money to obtain registration, 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 19, 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. If registration is to be extended beyond the initial period of ninety days, an advance additional amount of tax equivalent to the estimated tax liability is to be deposited for the period for which the extension beyond ninety days is being sought.
Yes. In terms of Section 20, the proper officer may, on the basis of such information furnished either by the registrant or as ascertained by him, approve or reject amendments in the registration particulars in the manner and within such period as may be prescribed. It is to be noted that permission of the proper officer for making amendments will be required for only certain core fields of information, whereas for the other fields, the registrant can himself carry out the amendments.
Yes. Any Registration granted under this Act may be cancelled by the Proper Officer, in circumstances mentioned in Section 21 of the MGL. The proper officer may, either on his own motion or on an application filed, in the prescribed manner, by the registered taxable person or by his legal heirs, in case of death of such person, cancel the registration, in such manner and within such period as may be prescribed.
Yes. The cancellation of registration under one Act (say CGST Act) shall be deemed to be a cancellation of registration under the other Act (i.e. SGST Act). (Section 21 (6))
Yes, in certain circumstances specified under section 21(2) of MGL, the proper officer can cancel the registration on his own. Such circumstances include not filing return for a continuous period of six months (for a normal taxable person) or three months (for a compounding taxpayer), and not commencing business within six months from the date of registration. However, before cancelling the registration, the proper officer has to follow the principles of natural justice. (Section 21 (4))
In such cases, the registration may be cancelled with retrospective effect by the proper officer. Section 21(3).
No. However the taxpayer has the option to register such separate business verticals independently in terms of Section 19(2) of MGL.
ISD stands for Input Service Distributor and has been defined under Section 2 (56) of MGL. It is basically an office meant to receive tax invoices towards receipt of input services and further distribute the credit to supplier units proportionately.
Yes. The ISD registration is for one office of the taxpayer which will be different from the normal registration.
Yes. Different offices of a taxpayer can apply for ISD registration.
The transferee or the successor shall be liable to be registered with effect from such transfer or succession and he will have to obtain a fresh registration with effect from such date. (Schedule III of MGL).
No. GSTN shall migrate all such assessees/dealers to the GSTN network and shall issue GSTIN number and password. They will be asked to submit all requisite documents and information required for registration in a prescribed period of time. Failure to do so will result in cancellation of GSTIN number. The service tax assessees having centralized registration will have to apply afresh in the respective states wherever they have their businesses.
No. Section 43A of MGL does not prescribe any such condition.
Yes. But only in cases where the job worker is registered or the principal declares the place of business of the job worker as his additional place of business.
Yes. The principal place of business and place of business have been separately defined under section 2(78) & 2(75) of MGL respectively. The taxpayer will have to declare the principal place of business as well as the details of additional places of business in the registration form.
In order to cater to the needs of taxpayers who are not IT savvy, following facilities shall be made available:- Tax Return Preparer (TRP): A taxable person may prepare his registration application /returns himself or can approach the TRP for assistance. TRP will prepare the said registration document / return in prescribed format on the basis of the information furnished to him by the taxable person. The legal responsibility of the correctness of information contained in the forms prepared by the TRP will rest with the taxable person only and the TRP shall not be liable for any errors or incorrect information. Facilitation Centre (FC): shall be responsible for the digitization and / or uploading of the forms and documents including summary sheet duly signed by the Authorized Signatory and given to it by the taxable person. After uploading the data on common portal using the ID and Password of FC, a print-out of acknowledgement will be taken and signed by the FC and handed over to the taxable person for his records. The FC will scan and upload the summary sheet duly signed by the Authorized Signatory.
Taxpayers would have the option to sign the submitted application using valid digital signatures (if the applicant is required to obtain DSC under any other prevalent law then he will have to submit his registration application using the same). For those who do not have a digital signature, alternative mechanisms will be provided in the GST Rules on Registration.
If the information and the uploaded documents are found in order, the State and the Central authorities shall approve the application and communicate the approval to the common portal within three common working days. The portal will then automatically 40 generate the Registration Certificate. In case no deficiency is communicated to the applicant by both the tax authorities within three common working days, the registration shall be deemed to have been granted [section 19(9) of MGL] and the portal will automatically generate the Registration Certificate.
If during the process of verification, one of the tax authorities raises some query or notices some error, the same shall be communicated to the applicant and to the other tax authority through the GST Common Portal within 3 common working days. The applicant will reply to the query / rectify the error / answer the query within a period informed by the concerned tax authorities (Normally this period would be seven days). On receipt of additional document or clarification, the relevant tax authority will respond within seven common working days.
In case registration is refused, the applicant will be informed about the reasons for such refusal through a speaking order. The applicant shall have the right to appeal against the decision of the Authority. As per sub-section (10) of section 19 of MGL, any rejection of application for registration by one authority (i.e. under the CGST Act / SGST Act) shall be deemed to be a rejection of application for registration by the other tax authority (i.e. under the SGST Act / CGST Act).
The applicant shall be informed of the fact of grant or rejection of his registration application through an e-mail and SMS by the GST common portal. Jurisdictional details would be intimated to the applicant at this stage.
In case registration is granted, applicant can download the Registration Certificate from the GST common portal. ]
The taxable event under GST shall be the supply of goods and / or services made for consideration in the course or furtherance of business. The taxable events under the existing indirect tax laws such as manufacture, sale, or provision of services shall stand subsumed in the taxable event known as ‘supply’.
The term ‘supply’ is wide in its import and includes all forms of supply of goods and / or 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 also includes import of service. The model GST law also provides for including certain transactions made without consideration within the scope of supply.
A ‘taxable supply’ means a supply of goods and / or services which is chargeable to good and services tax under the GST Act.
In order to constitute a ‘supply’, the following elements are required to be satisfied, i.e.- (i) supply of goods and / or services; (ii) supply is for a consideration; (iii) supply is made in the course or furtherance of business; (iv) supply is made in the taxable territory; (v) supply is a taxable supply; and (vi) Supply is made by a taxable person.
Yes. Under certain circumstances such as importation of service (Section 3(1) (b)) or supplies made without consideration, specified under Schedule-I of MGL, where one or more ingredients specified in answer to question no. 4 are not satisfied, it shall still be treated as supply under GST Law
Importation of goods is dealt separately under the Customs Act, 1962, wherein IGST shall be levied as additional duty of customs in addition to basic customs duty.
Inter-state self-supplies such as stock transfers will be taxable as a taxable person has to take state wise registration in terms of Schedule 1(5). Such transactions have been made taxable even if there is no consideration. However, intra-state self-supplies are not taxable.
Title as well as possession both have to be transferred for a transaction to be considered as a supply of goods. In case title is not transferred, the transaction would be treated as supply of service in terms of Schedule II (1). In some cases, possession may be transferred immediately but titled may be transferred at a future date like in case of sale on approval basis or hire purchase arrangement. Such transactions will also be termed as supply of goods.
No definition or test as to whether the activity is in the course or furtherance of business has been specified under the MGL. However, the following business test is normally applied to arrive at a conclusion whether a supply has been made in the course or furtherance of business: 1. Is the activity, a serious undertaking earnestly pursued? 2. Is the activity is pursued with reasonable or recognisable continuity? 3. Is the activity conducted in a regular manner based on sound and recognised business principles? 48 4. Is the activity predominantly concerned with the making of taxable supply for consideration/ profit motive? The test may ensure that occasional supplies, even if made for consideration, will not be subjected to GST.
No, because supply is not made by the individual in the course or furtherance of business. Further, no input tax credit was admissible on such car at the time of its acquisition as it was meant for non-business use.
Yes. As per Schedule-I (1) business assets put to a private or non-business use without consideration will be treated as supply.
Yes. Provision of facilities by a club, association, society or any such body to its members shall be treated as supply. This is included in the definition of ‘business’ in section 2(17) of MGL.
Inter-state and intra-state supplies have specifically been defined in Section 3 & 3A of IGST Act respectively. Broadly, where the location of the supplier and the place of supply are in same state it will be intra-state and where it is in different states it will be inter-state supplies.
Transfer of right to use goods shall be treated as supply of service because there is no transfer of title in such supplies. Such transactions are specifically treated as supply of service in Schedule-II of MGL
Transfer of right to use goods shall be treated as supply of service because there is no transfer of title in such supplies. Such transactions are specifically treated as supply of service in Schedule-II of MGL
Works contract and catering services shall be treated as supply of service as specified in Schedule-II of MGL.
Supply of goods on hire purchase shall be treated as supply of goods as there is transfer of title, albeit at a future date.
The time of supply fixes the point when the liability to charge GST arises. It also indicates when a supply is deemed to have been made. The MGL provides separate time of supply for goods and services.
Section 12 of the MGL provides for time of supply of goods. The time of supply of goods shall be the earliest of the following namely, (i) the date on which the goods are removed by the supplier, where the supply of goods require removal; or (ii) the date on which the goods are made available where the supply does not require removal; or (iii) the date on which the supplier issues invoices with respect to the supply where the above two situations do not apply; or (iv) the date on which the recipient shows the receipt of the goods in his books of accounts.
The time of supply of continuous supply of goods is; a) where successive statements of accounts or successive payments are involved, the date of expiry of the period to which such successive statements of accounts or successive payments relate. b) where there are no successive statements of account or successive payments involved, the date of issue of the invoice or the date of receipt of payment whichever is earlier.
In case of supply on approval basis, the time of supply shall be the time at which it is known whether a supply will take place or six months from the date of supply, whichever is earlier.
There is a residual entry in Section 12(7) as well as 13 (7) which say that if periodical return has to be filed, then the due date of filing of such periodical return shall be the time of supply. In other cases, it will be the date on which the CGST/SGST/IGST is paid.
Unlike goods, in the case of services, the time of supply is determined by the fact whether the invoice for supply of services has been issued within the prescribed period or beyond such prescribed period.
The time of supply of service in such cases shall be the earliest of the following: (i) date completion of the provision of service; or (ii) the date of receipt of payment.
The time of supply of service in such cases shall be the earliest of the following: (i) date of issue of invoice; or (ii) the date of receipt of payment.
It is the earliest of the date on which the payment is entered in the books of accounts of the supplier or the date on which the payment is credited to his bank account.
The time of supply shall be the date on which the recipient shows the receipt of services in his books of accounts.
No. The supply shall be deemed to have been made to the extent it is covered by the invoice or the part payment.
The time of supply will be the earliest of the following dates: a) date of receipt of services; b) date on which payment is made; c) date of receipt of invoice; d) date of debit in the books of accounts by supplier.
The time of supply shall be the due date of payment, if ascertainable from the contract. If not ascertainable, it will be earliest of date of receipt of payment or the date of issue of invoice or completion of event where payment is linked to completion of event.
The value of taxable supply of goods and services shall ordinarily be ‘the transaction value’ which is the actually the price paid or payable, when the parties are not related and price is the sole consideration. The MGL further elaborates various inclusions and exclusions from the ambit of transaction value. For example, the transaction value shall not include refundable deposit, discount allowed before or at the time of supply.
Transaction value refers to the price actually paid or payable for the supply of goods and or services where the supplier and the recipient are not related and price is the sole consideration for the supply. It includes any amount which the supplier is liable to pay but which has been incurred by the recipient of the supply.
No, section 15 is common for all three taxes and also common for goods and services.
Contract price is more specifically referred to as ‘transaction value’ and that is the basis for computing tax. 60 However, when the price is influenced by some factors like relationship of parties or certain transactions are deemed to be supply, which do not have a price, it is required to overcome these factors to determine the transaction value correctly.
No. Reference to Valuation Rules is required only in cases listed under section 15(4) i.e., where consideration payable is not money, or parties to the transaction are related.
Section 15(2) provides the list of adjustments that may be made to make the price of a transaction reliable for purposes of determining tax payable.
Yes, it can be accepted after examining for inclusions in section 15(2). Furthermore, the transaction value can be accepted even where the supplier and recipient are related, provided the relationship has not influenced the price. (Rule 3(4) of draft GST valuation rules)
Yes. Unless the post-supply discount is established as per the agreement and is known at or before the time of supply and specifically linked to relevant invoice.
No, provided it is allowed in the course of normal trade practice and has been duly recorded in the invoice.
Valuation Rules are applicable when (i) Consideration not in money terms; (ii) parties are related or supply by any specified category of supplier; and (iii) transaction value declared is not reliable.
The reasons have been indicated in Rule 7(b) of the draft GST Valuation Rules. It is:- (i) comparable supplies are at significantly higher value; (ii) transaction is at significantly lower or higher than market value of supplies; and (iii) misdeclaration in parameters like description, quantity, quality, year of make etc. The list is indicative and not exhaustive.
Three methods are prescribed under GST Valuation Rules for determining the transaction value i.e., comparative method, computation method and residual method, which are required to be followed sequentially. Besides, some specific valuation methods have been specified like in case of pure agents and money changers. Further specific rules may later be notified in case of Insurer, Air travel Agent and distributor or selling agents of lottery.
The inclusions specified in Section 15(2) which could be added to Transaction Value are as follows: a) Any amounts paid by recipient that are obligation of supplier to pay; b) Money value of goods or services provided free or at concession by recipient; c) Royalties and license fees payable by recipient as a condition of supply; d) Taxes levied under any other law(s) (other than SGST / CGST or IGST); e) Expenses incurred by supplier before supply and charged separately; f) Subsidy realized by supplier on the supply; g) Reimbursements claimed separately by supplier; h) Discounts allowed ‘after’ supply except when known before supply; (Discounts allowed as a normal trade practice and reflected on the face of the invoice shall not be included).
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) and Tax Collected at Source (TCS). In addition, wherever applicable, Interest, Penalty, Fees and any other payment will also be required to be made.
In general the supplier of goods or service is liable to pay GST. However in specified cases like imports and other notified supplies, the liability may be cast on the recipient under the reverse charge mechanism. Further, in some cases, the liability to pay is on the third person (say in the case of e-commerce operator responsible for TCS or Government Department responsible for TDS).
At the time of supply of Goods as explained in Section 12 and at the time of supply of services as explained in Section 13. The time is generally the earliest of one of the three events, namely receiving payment, issuance of invoice or completion of supply. Different situations envisaged and different tax points have been explained in the aforesaid sections.
The payment processes under proposed 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.
Payment can be done by the following methods: (i) Through debit of Credit Ledger of the taxpayer maintained on the Common Portal- ONLY Tax can be paid. Interest, Penalty and Fees cannot be paid by debit in the credit ledger.. 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. However, no input tax credit on account of CGST shall be utilized towards payment of SGST and vice versa. The credit of IGST would be permitted to be utilized for payment of IGST, CGST and SGST in that order. (ii) 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, E-Payment (Internet Banking, Credit Card, Debit Card); Real Time Gross Settlement (RTGS)/ National Electronic Fund Transfer (NEFT); Over the Counter Payment in branches of Banks Authorized to accept deposit of GST.
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. As mentioned earlier, payment can also be debited from the Credit Ledger. Payment of taxes for the month of March shall be paid by the 20th of April. Composition tax payers will need to pay tax on quarterly basis. Timing of payment will be from 0000 Hrs to 2000 Hrs.
No, this is not permitted in case of self-assessed liability. In other cases, competent authority has been empowered to extend the time period or allow payment in installments. (Section 55 of MGL).
In such cases, the return is not considered as a valid return. Section 27 (3) of the MGL provides that the return furnished by a taxable person shall not be treated as valid return unless the full tax due as per the said return has been paid. It is only the valid return that would be used for allowing input tax credit (ITC) to the recipient. In other words, unless the supplier has paid the entire self-assessed tax and filed his return and the recipient has filed his return, the ITC of the recipient would not be confirmed. As per section 28, a taxable person who has not furnished a valid return shall not be allowed to utilize such credit till he discharges his self-assessed tax liability.
Electronic Ledgers or E-Ledgers are statements of cash and input tax credit in respect of each registered taxpayer. In addition, each taxpayer shall also have an electronic tax liability register. Once a taxpayer is registered on Common Portal (GSTN), 2 e-ledgers (Cash & Input Tax Credit) and an electronic tax liability register will be automatically opened and displayed on his dashboard at all times.
Tax Liability Register will reflect the total tax liability of a taxpayer (after netting) for the particular month.
The cash ledger will reflect all deposits made in cash, and TDS/TCS made on account of the taxpayer. The information will be reflected on real time basis. This ledger can be used for making any payment on account of GST.
Input Tax Credit as self-assessed in monthly returns will be reflected in the ITC Ledger. The credit in this ledger can be used to make payment of TAX ONLY and not other amounts such as interest, penalty, fees etc.
There will be real time two way linkage between the GSTN and the Core Banking Solution (CBS) of the Bank. CPIN is automatically routed to the Bank via electronic string for verification and receiving payment and a challan identification number (CIN) is to automatically sent by the Bank to the Common Portal confirming payment receipt. No manual intervention will be involved in the process by any one including bank cashier or teller or the taxpayer.
Yes, a taxpayer can partially fill in the challan form and temporarily “save” the challan for completion at a later stage. A saved challan can be “edited” before finalization. After the tax payer has finalized the challan, he will generate the challan, for use of payment of taxes. The remitter will have option of printing the challan for his record.
No. After logging into GSTN portal for generation of challan, payment particulars have to be fed in by the tax payer or his authorized person. He can save the challan midway for future updation. However once the challan is finalized and CPIN generated, no further changes can be made to it by the taxpayer.
Yes, a challan will be valid for fifteen days after its generation and thereafter it will be purged from the System. However, the taxpayer can generate another challan at his convenience.
CPIN stands for Common Portal Identification Number (CPIN) given at the time of generation of challan. It is a 14 digit unique number to identify the challan. As stated above, the CPIN remains valid for a period of 15 days.
CIN stands for Challan Identification Number. It is a 17 digit number that is 14-digit CPIN plus 3-digit Bank Code. CIN is generated by the authorized banks/ Reserve Bank of India (RBI) when payment is actually received by such authorized banks or RBI and credited in the relevant government account held with them. It is an indication that the payment has been realized and credited to the appropriate government account. CIN is communicated by the authorized bank to taxpayer as well as to GSTN.
Section 35(8) prescribes an order of payment where the taxpayer has tax liability beyond the current return period. In such a situation, the order of payment to be followed is: First self-assessed tax and interest for the previous period; thereafter self-assessed tax and interest for the current period; and thereafter any other amounts payable including any confirmed demands under section 51. This sequence has to be mandatorily followed.
E-FPB stands for Electronic Focal Point Branch. These are branches of authorized banks which are authorized to collect payment of GST. Each authorized bank will nominate only one branch as its E-FPB for pan India Transactions. The E-FPB will have to open accounts under each major head for all governments. Total 38 accounts (one each for CGST, IGST and one each for SGST for each State/UT Govt.) will have to be opened. Any amount received by such E-FPB towards GST will be credited to the appropriate account held by such E-FPB. For NEFT/RTGS Transactions, RBI will act as E-FPB.
TDS stands for Tax Deducted at Source (TDS). As per section 37, this provision is meant for Government and Government undertakings and other notified entities making contractual payments in excess of Rs. 10 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.
Any amount shown as TDS will be reflected in the electronic cash ledger of the concerned supplier. He can utilize this amount towards discharging his liability towards tax, interest fees and any other amount.
TDS Deductor will account for such TDS in the following ways: 1. Such deductors needs to get compulsorily registered under section 19 read with Schedule III of MGL. 2. 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. 3. The amount deposited as TDS will be reflected in the electronic cash ledger of the supplier. 4. They need to issue certificate of such TDS to the deductee within 5 days of deducting TDS failing which fees of Rs. 100 per day subject to maximum of Rs. 5000/- will be payable by such deductor.
This provision is applicable only for E-Commerce Operator under section 43C of MGL. Every E-Commerce Operator needs to withhold a percentage (to be notified later on the recommendation of the GST Council) of the amount which is due from him to the supplier at the time of making actual payment to the supplier. Such withheld amount is to be deposited by such E-Commerce Operator to the appropriate GST account by the 10th of the next month. The amount deposited as TCS will be reflected in the electronic cash ledger of the supplier.
Yes. The taxpayer would be required to pre-register his credit card, from which the tax payment is intended, with the Common Portal maintained on GSTN. GSTN may also attempt to put in a system with banks in getting the credit card verified by taking a confirmation from the credit card service provider. The payments using credit cards can therefore be allowed without any monetary limit to facilitate ease of doing business.
Section 43B(d) of the MGL defines an Electronic Commerce to mean the supply or receipt of goods and/ or services, or transmitting of funds or data, over an electronic network, primarily the internet, by using any of the applications that rely on the internet, like but not limited to e-mail, instant messaging, shopping carts, web services, universal description Discovery and integration (UDDI), File Transfer Protocol (FTP) and Electronic Data Interchange (EDI) whether or not the payment is conducted online and whether or not the ultimate delivery of the goods and/or services is done by the operator.
Section 43B(e) of the MGL defines an Electronic Commerce Operator (Operator) as every person who, directly or indirectly, owns, operates or manages an electronic platform which is engaged in facilitating the supply of any goods and/or services. Also a person providing any information or any other services incidental to or in connection with such supply of goods and services through electronic platform would be considered as an Operator. A person supplying goods/services on his own account, however, would not be considered as an Operator. For instance, Amazon and Flipkart are e-commerce Operators because they are facilitating actual suppliers to supply goods through their platform (popularly called Market place model or Fulfillment Model). However, Titan supplying watches and jewels through its own website would not be considered as an e-commerce operator for the purposes of this provision. Similarly Amazon and Flipkart will not be treated as e-commerce operators in relation to those supplies which they make on their own account (popularly called inventory Model).
Yes. Section 19 r/w Schedule-III of the MGL, provides that the threshold exemption is not available to e-commerce operators and they would be liable to be registered irrespective of the value of supply made by them.
No. Section 19 r/w Schedule-III of the MGL, provides that the threshold exemption is not available to such suppliers and they would be liable to be registered irrespective of the value of supply made by them.
Section 43B(a) of the MGL defines aggregator to mean a person, who owns and manages an electronic platform, and by means of the application and communication device, enables a potential customer to connect with the persons providing service of a particular kind under the brand name or trade name of the said aggregator. For instance, Ola cabs would be an aggregator.
Yes. Section 19 r/w Schedule-III of the MGL, provides that the threshold exemption is not available to aggregators and they would be liable to be registered irrespective of the value of supply made by them.
In terms of Section 43C(1) of the MGL, the e-commerce operator is required to collect (i.e. deduct) an amount out of the consideration paid or payable to the actual supplier of goods or services in respect of supplies of goods and / or services made through such operator. The amount so deducted/collected is called as Tax Collection at Source (TCS).
The timings for such collection/deduction are earlier of the two events: (i) the time of credit of any amount to the account of the actual supplier of goods and / or services; (ii) the time of payment of any amount in cash or by any other mode to such supplier.
In terms of Section 43C(3) of the MGL, the amount collected by the operator is to be paid to the credit of appropriate government within 10 days after the end of the month in which amount was so collected. Further, in terms of Section 43C(4) of the MGL, the operator is required to file a Statement, electronically, containing details of all amounts collected by him for the outward supplies made through his Portal, within 10 days of the end of the calendar month to which such statement pertains. The said statement would contain the names of the actual supplier(s), details of respective supplies made by them and the amount collected on their behalf. The Form and Manner of the said Statement would be prescribed in the GST Rules.
Such TCS which is deposited by the operator into government account will be reflected in the cash ledger of the actual registered supplier (on whose account such collection has been made) on the basis of the statement filed by the operator. The same can be used at the time of discharge of tax liability in respect of the supplies by the actual supplier.
Yes. In terms of section 43C(10), an officer not below the rank of Joint Commissioner may require the operator to furnish details relating to: (i) supplies of goods / services effected through the operator during any period; (ii) stock of goods held by actual supplier making supplies through such operator in the godowns or warehouses belonging to the operator and registered as additional place of business by the actual supplier. The operator is required to furnish the above information within 5 working days from the date of service of notice asking such information. In case of failure to furnish such information, the penalty could be extended to Rs. 25,000/- .
Yes, in terms of Section 43C (4), every operator is required to furnish a statement, electronically, of all amounts collected as TCS towards outward supplies of goods and/or services effected through it, during a calendar month within ten days after the end of such calendar month. The statement shall contain, inter alia, the details of the amount collected on behalf of each supplier in respect of all supplies of goods and/ or services effected through the operator and the details of such supplies during the said calendar month.
As per section 43C (6), the details of supplies and the amount collected during a calendar month, and furnished by every operator in his statement will be matched with the corresponding details of outward supplies furnished by the concerned supplier in his valid return filed under section 27 for the same calendar month or any preceding calendar month. Where the details of outward supply, on which the tax has been collected, as declared by the operator in his statement do not match with the corresponding details declared by the supplier the discrepancy shall be communicated to both persons.
As per section 43C (8), the value of a supply relating to any payment in respect of which any discrepancy is communicated and which is not rectified by the supplier in his valid return for the month in which discrepancy is communicated shall be added to the output liability of the said supplier, for the calendar month succeeding the calendar month in which the discrepancy is communicated. The concerned supplier shall, in whose output tax liability any amount has been added shall be liable to pay the tax payable in respect of such supply along with interest, at the rate specified under sub-section (1) of section 36 on the amount so added from the date such tax was due till the date of its payment.
Section 2(62) of the MGL provides that “job-work” means undertaking any treatment or process by a person on goods belonging to another registered taxable person and the expression “job-worker” shall be construed accordingly. This definition is much wider than the one given in Notification No. 214/86 – CE dated 23rd March, 1986 as amended, wherein job-work has been defined in such a manner so as to ensure that the activity of job-work must amount to manufacture. Thus the definition of jobwork itself reflects the change in basic scheme of taxation relating to job-work in the proposed GST regime.
No. It will not be treated as a supply. In terms of proviso to Para 5 of Schedule I of the MGL the supply of goods by a registered taxable person (principal) to jobworker, in terms of Section 43A, shall not be regarded as supply of goods. Therefore, it can be inferred that no GST shall be applicable on the goods supplied by the registered principal to a job-worker.
Yes. Section 43A of the MGL provides that the registered taxable person (principal) can send the taxable goods to a job-worker for job-work without payment of tax. He can further send the goods from one job-worker to another job-worker and so on subject to certain condition. It may be noted that provisions of Section 43A are not applicable if non-taxable or exempted goods are proposed to be sent for job-work.
Yes, as a Job-worker would be a supplier of services, he would be required to obtain registration if his aggregate turnover exceeds the prescribed threshold.
Yes but with a rider that the principal should have declared the premises of such job-worker as his additional place of business or where the job-worker is a registered person or where the goods have been notified.
The goods can be supplied directly from the place of business of job-worker without declaring it as additional place of business in two circumstances namely where the job-worker is a registered taxable person or where the principal is engaged in supply of such goods as may be notified in this behalf.
In the MGL, aspects relating to taking input tax credit in respect of inputs/capital goods sent for job-work have been specifically dealt in Section 16A, which provides that the credit of taxes paid on inputs or capital goods can be taken in the following manner: Principal shall be entitled to take credit of inputs sent to a job-worker if the said inputs, after completion of job-work are received back in 180 days from the date of being sent out. In case the inputs are sent directly to the job-worker, the date shall be counted from the date of receipt of inputs by job-worker. Further an amount equivalent to the input tax credit availed on such inputs has to be paid along with interest, in case the inputs are not received back within the specified time. The credit can be reclaimed when the inputs are actually received back.
No. The provisions relating to job-work are applicable only when registered taxable person intends to send taxable goods. In other words, these provisions are not applicable to exempted or non-taxable goods or when the sender is a person other than registered taxable person.
“Input tax” has been defined in section 2 (57) of the MGL and section 2 (1) (d) of the IGST Act. Input tax in relation to a taxable person, means the {IGST and CGST} in respect of CGST Act and {IGST and SGST} in respect of SGST Act, charged on any supply of goods and/or services to him which are used, or are intended to be used, in the course or furtherance of his business and includes the tax payable under sub-section (3) of section 7. Under the IGST Act, input tax is defined as IGST, CGST or SGST charged on any supply of goods and / or services.
It implies that input tax consists of IGST & CGST in CGST Act and IGST & SGST in SGST Act. In the IGST Act, input tax consists of all three taxes namely, IGST, CGST and SGST. It further implies that credit of all three can be used for discharging IGST liability, whereas only credit of IGST & CGST can be taken in CGST Act and that of IGST & SGST can be taken under SGST Act. Further the credit of CGST & SGST cannot be cross-utilized.
Yes. The definition of input tax includes the tax payable under sub-section (3) of section 7 (Reverse Charge). The credit can be availed if such goods and/or services are used, or are intended to be used, in the course or furtherance of his business.
Yes, in terms of section 2(54), 2(55) & 2(20) of the MGL respectively. It may be noted that credit of tax paid on capital goods also is permitted to be availed in one instalment.
He shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date from which he becomes liable to pay tax under the provisions of this Act. It may be noted that the credit on pre-registration stock would not be admissible if the registration has not been obtained within a period of 30 days from the date on which he becomes liable to registration.
As per section 16(2A) of MGL, the person who obtains voluntary registration is entitled to take the input tax credit of input tax on inputs in stock, inputs in semifinished goods and finished goods in stock, held on the day immediately preceding the date of registration.
As per section 16(6) of MGL, the input tax credit of goods and / or service attributable to only taxable supplies can be taken by registered taxable person. The amount of eligible credit would be calculated in a manner to be prescribed in terms of section 16(7) of the MGL read with GST ITC Rules (yet to be issued). It is important to note that credit on capital goods also would now be permitted on proportionate basis.
As per section 16(5) of the MGL, the input tax credit of goods and / or service attributable to only supplies effected for business purpose can be taken by registered taxable person. The amount of eligible credit would be calculated in a manner to be prescribed in terms of section 16(7) of the MGL read with GST ITC Rules (yet to be issued). It is important to note that credit on capital goods also would now be permitted on proportionate basis.
As per section 16(8) of the MGL, the transferor shall be allowed to transfer the input tax credit that remains unutilized in its books of accounts to the transferee provided that there is a specific provision for transfer of liabilities.
As per section 16(12) of the MGL, the registered taxable person who supplies goods and / or services which become absolutely exempt, has to pay an amount equivalent to the input tax credit in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date of such exemption. It has also been provided that after payment of the amount on such goods, the balance, if any available in electronic credit ledger would lapse. The amount, required to be paid, is to be calculated as per GAAP in terms of section 16(13) of the MGL.
As per section 16(12) of the MGL, the registered taxable person, who was paying tax under section 7 opts to pay tax under Compounding Scheme under Section 8, has to pay an amount equivalent to the input tax credit in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date of such switch over. It has also been provided that after payment of the amount on such goods, the balance, if any available in electronic credit ledger would lapse. The amount, required to be paid, is to be calculated as per GAAP in terms of section 16(13) of the MGL.
As per section 16(3) of the MGL, he can avail ITC in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date from which he becomes liable to pay tax under section 7.
Mr. B is eligible for input tax credit on inputs held in stock and inputs contained in semi-finished or finished goods held in stock as on 30th July,2017.
Mr. A is eligible for input tax credit on inputs held in stock and inputs contained in semi-finished or finished goods held in stock as on 21st June, 2017.
As per section 16(4) of the MGL, he cannot avail ITC after the expiry of one year from the date of issue of tax invoice relating to such supply.
Yes, the principal is eligible to avail the input tax credit on inputs sent to job worker for job work in terms of Section 16A(2) of the MGL.
Yes, the principal has to reverse the credit along with interest on inputs which have not been received back from job worker within 180 days but he can reclaim the credit on receipt of inputs.
Principal has to pay an amount equal to credit taken on such capital goods along with interest. But he can reclaim the credit on receipt of inputs.
No. As per section 16(9)(a) of the MGL, ITC on motor vehicles can be availed only if the taxable person is in the business of transport of passengers or goods or is providing the services of imparting training on motor vehicles.
As per Section 16(11) of the MGL, following four conditions are stipulated: (a) The registered taxable person should be in possession of tax paying document issued by a supplier; (b) The taxable person must have received the goods and / or services; (c) The tax charged on such supply has been actually paid to the government either in cash or through utilization of input tax credit; and (d) The taxable person should have furnished the return under section 27.
As per proviso to section 16(11) of the MGL, the registered taxable person shall be entitled to the credit upon receipt of the last lot or installment.
As per explanation clause to section 16(11) of the MGL, for this purpose of receiving the goods, it would be deemed that the taxable person has received the goods when the goods have been delivered to a third party on the direction of such taxable person. So ITC will be available to the person on whose order the goods are delivered to third person.
As per Section 16 (15) of the MGL, ITC cannot be taken beyond the month of September of the following FY to which invoice pertains or date of filing of annual return, whichever is earlier. The underlying reasoning for this restriction is that no change in return is permitted after September of next FY. If annual return is filed before the month of September then no change can be made after filing of annual return.
Section 16 (9) of the MGL provides for the negative list with respect to the admissibility of ITC. It has been provided that the ITC on following items cannot be availed: (a) motor vehicles, except when they are supplied in the usual course of business or are used for providing the following taxable services— (i) transportation of passengers, or (ii) transportation of goods, or (iii) imparting training on motor driving skills; (b) goods and / or services provided in relation to food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness center, life insurance, health insurance and travel benefits extended to employees on vacation such as leave or home travel concession, when such goods and/ or services are used primarily for personal use or consumption of any employee; (c) goods and/or services acquired by the principal in the execution of works contract when such contract results in construction of immovable property, other than plant and machinery; (d) goods acquired by a principal, the property in which is not transferred (whether as goods or in some other form) to any other person, which are used in the construction of immovable property, other than plant and machinery; (e) goods and/or services on which tax has been paid under section 8; and (f) goods and/or services used for private or personal consumption, to the extent they are so consumed.
In case of mismatch between the inward and outward details, the supplier would be required to rectify the mis-match within a period of two months and if the mis-match continues, the ITC would have to be reversed by the recipient.
As per section 16(15) of the MGL, in case of supply of capital goods on which input tax credit has been taken, the registered taxable person shall pay an amount equal to the input tax credit taken on the said capital goods reduced by the percentage points as may be specified in this behalf or the tax on the transaction value of such capital goods, whichever is higher.
As per section 16(16) of the MGL, the wrongly availed credit would be recovered from the registered taxable person in terms of section 51 of MGL.
As per Section 2(56) of MGL, ISD means an office of the supplier of goods and / or services which receives tax invoices issued under section 23 towards receipt of input services and issues tax invoice or such other document as prescribed 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. For the purpose of distributing the credit, ISD is deemed as supplier of services.
An ISD is required to obtain registration as a deemed supplier of services [section 19 read with para 5(vii) of Schedule III]. The threshold limit of registration is not applicable to ISD. The registration of ISD under the existing regime (i.e. under Service Tax) would not be migrated in GST regime. All the existing ISDs will be required to obtain fresh registrations under new regime in case they want to operate as an ISD.
The distribution of credit would be done subject to the following conditions: a. Credit should be distributed through tax invoice or other document as prescribed; b. Amount of credit distributed should not exceed the amount of credit available; c. Credit should be distributed only to such suppliers to whom such services are attributable; d. Credit in respect of services attributable to more than one supplier should be distributed proportionately on the basis of turnover of respective supplier during the preceding financial year.
Yes, as per Section 27(6) of MGL, ISD is required to file monthly return by 13th of the following month in form GSTR-6.
Yes, different offices like marketing division, security division etc. may apply for separate ISD.
Sections 18(1) and 18(2) provide for recovery of excess/wrongly distributed credit by initiating action against the ISD itself or against the recipient of credit so distributed under section 51 of the Model GST Law.
Yes, CGST credit can be distributed as IGST and IGST credit can be distributed as IGST by an ISD for the units located in different States (Section 17(1)).
Yes, an ISD can distribute SGST credit as IGST for the units located in different States.(Section 17(2)
Yes, CGST and IGST credit can be distributed as CGST credit by an ISD for the units located in same State.
Yes, ISD can distribute SGST and IGST credit for the units located in same State.
The document under which the credit can be distributed is yet to be prescribed. The Act provides that the credit can be distributed only through prescribed document.
The common credit used by all the units can be distributed by ISD on pro rata basis i.e. based on the turnover of each unit to the aggregate turnover of all the units to which credit is distributed.
Yes, excess credit distributed could be recovered along with interest from an ISD by the department.
The credit distributed in contravention of provisions of Act could be recovered from the unit to which it is distributed along with interest.
a) Mode for transfer of information to tax administration; b) Compliance verification program of tax administration; c) Finalization of the tax liabilities of the taxpayer within stipulated period of limitation; to declare tax liability for a given period; d) Providing necessary inputs for taking policy decision; e) Management of audit and anti-evasion programs of tax administration.
Every registered taxable person - who crosses the threshold limit for payment of taxes. A supplier needs to be registered when the aggregate turnover crosses Rs. nine lacs but he become taxable person ONLY when he crosses Rs. ten lacs. So he will be required to file returns when he crosses the threshold limit of Rs. ten lacs. There are some other class of persons who need to be registered and therefore will have to file returns like interstate suppliers, TDS deductors, e-commerce operators, suppliers supplying goods through e-commerce operators etc (reference Schedule-III and Question 6 of the Registration Chapter).
A normal registered taxpayer has to file the outward supply details in GSTR-1 in relation to various types of supplies made in a month, namely outward supplies to registered persons, outward supplies to unregistered persons (consumers), details of Credit/Debit Notes, zero rated, exempted and non-GST supplies, exports, and advances received in relation to future supply.
No, scanned copy of invoices is to be uploaded. Only certain prescribed fields of information from invoices need to be uploaded.
No. It depends on whether B2B or B2C plus whether Intra-state or Inter-state supplies. For B2B supplies, all invoices, whether Intra-state or Interstate supplies, will have to be uploaded. Why So? Because ITC will be taken by the recipients, invoice matching is required to be done. In B2C supplies, uploading in general may not be required as the buyer will not be taking ITC. However still in order to implement the destination based principle, invoices of value more than Rs.2.5 lacs in inter-state B2B supplies will have to be uploaded. For intra-state invoices below Rs. 2.5 lacs and all intra-state invoices, state wise summary will be sufficient.
No. In fact description will not have to be uploaded. Only HSN code in respect of supply of goods and Accounting code in respect of supply of services will have to be fed. The minimum number of digits that the filer will have to upload would depend on his turnover in the last year.
Yes. Not only value but taxable value will also have to be fed. In some cases both may be different. In case there is no consideration, but it is supply by virtue of schedule 1, the taxable value will have to be uploaded.
Yes, the recipient can himself feed the invoices not uploaded by his supplier. The credit on such invoices will also be given provisionally but will be subject to matching. On matching, if the invoice is not uploaded by the supplier, both of them will be intimated. If the mismatch is rectified, provisional credit will be confirmed. But if mismatch continues even after intimation, the credit provisionally allowed will be reversed.
While a large part of GSTR-2 will be auto-populated, there are some details that only recipient can fill like details of imports, details of purchases from non-registered or composition suppliers and exempt/non-GST/nil GST supplies etc.
If invoices in GSTR-2 do not match with invoices in counter-party GSTR-1, the ITC will be reversed if the mismatch continues even after it is made known to both and still it is not rectified. Mismatch can be because of two reasons. First, it could be due to mistake at the side of the recipient, and in such a case, no further action is required. Secondly, it could be possible that the said invoice was issued by supplier but he did not upload it and pay tax on it. In such a case, recovery action shall be taken against the supplier. In short, all mismatches will lead to proceedings if the supplier has made a supply but not paid tax on it.
At any stage, but before September of the next financial year, supplier can upload the invoice and pay duty and interest on such missing invoices in his GSTR-3 of the month in which he uploaded the invoice. The recipient will then automatically get ITC on that invoice. The interest paid by the recipient at the time of reversal will also be returned to the recipient through an automated system on the GSTN.
The special feature of GSTR-2 is that the details of supplies received by a recipient can be auto populated on the basis of the details furnished by the counterparty supplier in his GSTR-1.
If the supplier uploads the invoice at any time after the reversal but by September of the next financial year, the credit reversed earlier gets restored along with refund of the interest paid during reversal.
No. Composition tax payers do not need to file any statement of outward or inward supplies. They have to file a quarterly return in Form GSTR-4 by the 1st of the month after the end of the quarter. Since they are not eligible for any input tax credit, there is no relevance of GSTR-2 for them and since they do not pass on any credit to their recipients, there is no relevance of GSTR-1 for them. In their return, they have to declare summary details of their outward supplies along with the details of tax payment. They also have to give details of their purchases in their quarterly return itself, most of which will be auto populated.
No, the ISDs need to file only a return in GSTR-6 and the return has the details of credit received by them from the service provider and the credit distributed by them to the subsidiaries. Since their return itself covers these aspects, there is no requirement to file separate statement of inward and outward supplies.
Under GST, the deductor will be submitting the deductee wise details of all the deductions made by him in his return in Form GSTR-7 to be filed by 10th of the month next to the month in which deductions were made. The details of the deductions as uploaded by the deductor shall be auto populated in the GSTR-2 of the deductee. The taxpayer shall be required to confirm these details in his GSTR-2 to avail the credit for deductions made on his behalf. To avail this credit he does not require to produce any certificate in physical or electronic form. The certificate will only be for record keeping of the tax payer and can be downloaded from the Common Portal.
All taxpayers filing return in GSTR-1 to 3 other than casual taxpayers and taxpayers under composition scheme are required to file an annual return. Casual taxpayers, nonresident taxpayers, ISDs and persons authorized to deduct tax at source are not required to file annual return.
No. Annual Return has to be filed by every registered taxable person paying tax as a normal or a compounding taxpayer. Final Return has to be filed only by those registered taxable persons who have applied for cancellation of registration. This has to be filed within three months of the date of cancellation or the date of cancellation order.
In GST since the returns are built from details of individual transactions, there is no requirement for having a revised return. Any need to revise a return may arise due to the need to change a set of invoices or debit/ credit notes. Instead of revising the return already submitted, the system will allow changing the details of those transactions (invoices or debit/credit notes) that are required to be amended. They can be amended in any of the future GSTR- 1/2 in the tables specifically provided for the purposes of amending previously declared details.
Taxpayers will have various modes to file the statements and returns. Firstly, they can file their statement and returns directly on the Common Portal online. However, this may be tedious and time taking for taxpayers with large number of invoices. For such taxpayers, an offline utility will be provided that can be used for preparing the statements offline after downloading the auto populated details and uploading them on the Common Portal. GSTN has also developed an ecosystem of GST Suvidha Providers (GSP) that will integrate with the Common Portal.
One of the most important things under GST will be timely uploading of the details of outward supplies in Form GSTR-1 by 10th of next month. How best this can be ensured will depend on the number of B2B invoices that the taxpayer issues. If the number is small, the taxpayer can upload all the information in one go. However, if the number of invoices is large, the invoices (or debit/ credit notes) should be uploaded on a regular basis. GSTN will allow regular uploading of invoices even on a real time basis. Till the statement is actually submitted, the system will also allow the taxpayer to modify the uploaded invoices. Therefore, it would always be beneficial for the taxpayers to regularly upload the invoices. Last minute rush will make uploading difficult and will come with higher risk of possible failure and default. The second thing would be to ensure that taxpayers follow up on uploading the invoices of their inward supplies by their suppliers. This would be helpful in ensuring that the input tax credit is available without any hassle and delay. Recipients can also encourage their suppliers to upload their invoices on a regular basis instead of doing it on or close to the due date. The system would allow recipients to see if their suppliers have uploaded invoices pertaining to them. The GSTN system will also provide the track record about the compliance level of a tax payer, especially about his track record in respect of timely uploading of his supply invoices giving details about the auto reversals that have happened for invoices issued by a supplier. The Common Portal of GST would have pan India data at one place which will enable valuable services to the taxpayers. Efforts are being made to make regular uploading of invoices as easy as possible and it is expected that an enabling ecosystem will develop towards this objective. Taxpayers should make efficient use of this ecosystem for easy and hassle free compliance under GST.
No. A registered taxpayer person can also get his return filed through a Tax Return Preparer, duly approved by the Central or the State tax administration.
A registered taxable person who files return beyond the prescribed date will have to pay late fees of rupees one hundred for every day of delay subject to a maximum of rupees five thousand.
Every person registered under the Act shall himself assess the tax payable by him for a tax period and after such assessment he shall file the return required under section 27.
Yes, Explanation to Section 44 of MGL has such a provision. It provides that where goods received as an inward supply is returned by the recipient to the supplier within six months from the date of the relevant invoice, the tax payable on such supplies shall be equal to the input tax credit availed earlier on such inward supply. This provision essentially ensures that if the recipient returns the goods to the supplier within six months of the date of its original supply, his tax liability on such returned goods will be the same as was at the time of the original supply. If goods are returned after six months of the date of the original supply invoice, the rate of tax applicable will be the rate prevailing on date of such return.
As a taxpayer has to pay tax on self-assessment basis, a request for paying tax on provisional basis has to come from the taxpayer which will then have to be permitted by the proper officer. In other words, no tax officer can suomoto order payment of tax on provisional basis. This is governed by section 44A of MGL. Tax can be paid on a provisional basis only after the proper officer has permitted it through an order passed by him. For this purpose, the taxable person has to make a written request to the proper officer, giving reasons for payment of tax on a provisional basis. Such a request can be made by the taxable person only in such cases where he is unable to determine: a) the value of goods or services to be supplied by him, or b) determine the tax rate applicable to the goods or services to be supplied by him. In such cases the taxable person has to execute a bond in the prescribed form, and with such surety or security as the proper officer may deem fit.
The final assessment order has to be passed by the proper officer within six months from the date of the communication of the order of provisional assessment. However, on sufficient cause being shown and for reasons to be recorded in writing, the above period of six months may be extended: a) by the Joint/Additional Commissioner for a further period not exceeding six months, and b) by the Commissioner for such further period as he may deem fit.
Yes. He will be liable to pay interest from the date the tax was due to be paid originally till the date of actual payment.
If the taxable person does not provide a satisfactory explanation within 30 days of being informed (extendable by the officer concerned) or does not take corrective action within a reasonable period after accepting the discrepancies, the Proper Officer may take recourse to any of the following provisions: (a) Proceed to conduct audit under Section 49 of the Act; (b) Direct the conduct of a special audit under Section 50 which is to be conducted by a Chartered Accountant or a Cost Accountant nominated for this purpose by the Commissioner; or (c) Undertake procedures of inspection, search and seizure under Section 60 of the Act; or (d) Initiate proceeding for determination of tax under Section 51 of the Act.
As this provision relates to ‘best judgment assessment’, giving a notice to the taxable person is not required.
The proper officer has to first issue a notice to the defaulting taxable person under section 32 of MGL requiring him to furnish the return within a specified period of time, which has to be a minimum of fifteen days as per section 46 of MGL. If the taxable person fails to file return within the given time, the proper officer shall proceed to assess the tax liability of the return defaulter to the best of his judgement taking into account all the relevant material available with him. This power is given under section 46 of MGL.
The best judgment order passed by the Proper Officer under section 46 of MGL shall automatically stand withdrawn if the taxable person furnishes a valid return for the default period (i.e. files the return and pays the tax as assessed by him), within thirty days of the receipt of the best judgment assessment order.
The time limit for passing an assessment order under section 46 or 47 is three or five years from the due date for filing the annual return.
Section 47 of MGL provides that in such a case, the proper officer can assess the tax liability and pass an order to his best judgment for the relevant tax periods. However, such an order must be passed within a period of five years from the due date of filing of the annual return for the financial year to which non-payment of tax relates.
As per section 48 of MGL, Summary Assessments can be initiated to protect the interest of revenue when: a) the proper officer has evidence that a taxable person has incurred a liability to pay tax under the Act, and b) the proper officer believes that delay in passing an assessment order will adversely affect the interest of revenue. Such order can be passed after seeking permission from the Additional Commissioner / Joint Commissioner.
A taxable person against whom a summary assessment order has been passed can apply for its withdrawal to the jurisdictional Additional/Joint Commissioner within thirty days of the date of receipt of the order. If the said officer finds the order erroneous, he can withdraw it and direct the proper officer to carry out determination of tax liability in terms of section 51 of MGL. The Additional/Joint Commissioner can follow a similar course of action on his own motion if the finds the summary assessment order to be erroneous (section 48 of MGL).
No. In certain cases like when goods are under transportation or are stored in a warehouse, and the taxable person in respect of such goods cannot be ascertained, the person in charge of such goods shall be deemed to be the taxable person and will be assessed to tax (section 48 of MGL).
As per section 49 of MGL, any officer of CGST or SGST authorized by his Commissioner by a general or specific order may conduct audit of a taxpayer. The frequency and manner of audit will be prescribed in due course.
Yes, prior intimation is required and the taxable person should be informed at least 15 days prior to conduct of audit.
The audit is required to be completed within 3 months from the date of commencement of audit or within a further period of a maximum of 6 months subject to the approval of the Commissioner.
The term ‘commencement of audit’ is important because audit has to be completed within a given time frame in reference to this date of commencement. Commencement of audit means the later of the following: a) the date on which the records/accounts called for by the audit authorities are made available to them, or b) the actual institution of audit at the place of business of the taxpayer.
The taxable person is required to: a) facilitate the verification of accounts/records available or requisitioned by the authorities, b) provide such information as the authorities may require for the conduct of the audit, and c) render assistance for timely completion of the audit.
The proper officer must without delay inform the taxable person about his findings, reasons for findings and the taxable person’s rights and obligations in respect of such findings.
A special audit can be instituted in limited circumstances where during scrutiny, investigation, etc. it comes to the notice that a case is complex or the revenue stake is high. This power is given in section 50 of MGL.
The Assistant / Deputy Commissioner is to serve the notice for special audit only after prior approval of the Commissioner.
A Chartered Accountant or a Cost Accountant so nominated by the Commissioner may undertake the audit.
The auditor will have to submit the report within 90 days or within the further extended period of 90 days.
The expenses for examination and audit including the remuneration payable to the auditor will be determined and borne by the Commissioner.
Based on the findings / observations of the special audit, action can be initiated under Section 51 of the MGL.
Refund has been discussed in section 38 of the MGL. “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 section 38(2).
Yes, but only in following cases as given in sub-section (2) of section 38:- (i) Exports of goods on which export duty is not payable; (ii) Exports of services; (iii) Where credit has accumulated on account of rate of tax on inputs being higher than the rate of taxes on Outputs.
It will be taxed, which later on can be claimed as refund by them. [The United Nations Organization and Consulates or Embassies are required to take a Unique Identity Number and purchases made by them will be reflected against their number in the return of outward supplies of the supplier and refunds of taxes can be granted. A separate process will be notified in the Rules. GST Sec.19 (6)].
The person concerned is required to file the application before expiry of two years from the relevant date, as given in the explanation to section 38 of MGL.
Yes, except in cases of exports and refund of unutilized ITC as referred to in sub-section (2) of section 38 (also refer to question no. 2 above).
Yes, however, the amount so determined shall be credited to the Consumer Welfare Fund.
Yes, it is 90 days in all cases, excepting in a case where the refund to the extent of 80% of the total amount claimed is refundable to certain categories of exporters referred to in sub-section (4A) of section 38. If refund is not sanctioned within the period of three months, interest will have to be paid by the department.
Yes, refund can be withheld in the following circumstances: • If the registered dealer has not submitted return(s), till he files the return(s); • If the registered taxable person is required to pay any tax, interest or penalty which has not been stayed by the appellate authority/Tribunal/ court, till he pays such tax interest or penalty; [The proper officer can also deduct unpaid taxes if any of the dealer from the refundable amount]. • Commissioner/Board can withhold refund, if, the Order of Refund is under appeal and he is of the opinion that grant of such refund will adversely affect revenue - (Sec.38(9) of MGL).
If as a result of appeal or further proceeding the taxable person becomes entitled to refund then he shall be also entitled to interest.
No refund shall be granted if the amount is less that Rs.1000/-. (Sec.38 (11) of MGL)
The refund arising out of earlier law will be paid as per the earlier law and will be paid in cash (under CGST) or as per the provisions of the earlier law (under SGST) and will not be available as ITC (Section 156, 157 and 158 of MGL).
For export refunds to notified category of dealers, 80% refund can be granted before verification subject to such conditions and restrictions as may be prescribed – section 38(4A).
Since the exporter has a time period of one year from the date of export for remitting of export proceeds, BRC may not be available at the time of refund application. But if export proceeds are received in advance BRC may be available. Thus, refund should be subject to submission of BRC details within a period of maximum one year or as extended by RBI. e-BRC module of DGFT will be integrated with GST module. However for export of services BRC would be required before sanction of refund.
The principle of unjust enrichment is not applicable in case of actual exports of goods or services as the recipient is located outside the taxable territory. However, in case of deemed exports it will be applicable.
The person concerned may furnish together with the application such document(s) or evidence(s) to establish that the amount of tax and interest, if any, paid on such tax or any other amount paid in relation to which such refund is claimed was not passed on by him to any other person – section 38(3)(b). Further, to provide relief to taxpayers the above sub-section also provides that where the refund amount, as claimed, is less than Rs 5 lakh a self-declaration will only be required.
No, there will be no such provision in GST. They will have to purchase goods upon payment of tax and claim refund of the accumulated ITC as discussed in section 38(2).
Under the GST regime exports will be zero rated which means that the export goods would not suffer any actual tax liability although inputs for such exports would be tax paid. Under GST, refund will be allowable on the accumulated inputs as well as on exported finished goods.
Section 51A in cases where there is no invocation of fraud/suppression/mis-statement etc and Section 51B where the ingredients of fraud/suppression/mis-statement etc are present.
Where the person to whom a notice has been issued under sub-section (1) of section 51A, pays the tax along with interest within 30 days of issue of notice, no penalty shall be payable and all proceedings in respect of such notice shall be deemed to be concluded.
The relevant date is the date of filing of annual return where such returns of actually filed or where such returns are not filed, the due date for filing of annual return.
There is no time limit to issue SCN. However the issuance of SCN and adjudication of the case has to be completed within the period of 3 years (for Section 51A cases) and 5 years (for Section 51B cases) from the relevant date.
Yes. Before issue of notice under sub section (1) or a statement under sub-section (2), a person chargeable with tax, shall have an option to pay the amount of tax along with interest and fifteen percent penalty, ascertained either on his own or informed by the proper officer, and on such payment, no notice shall be issued with respect to the tax so paid.
No if tax/interest and penalty has been paid. Where the person to whom a notice has been under sub-section (1) issued, pays the tax along with interest with twenty five percent penalty within 30 days of issue of notice all proceedings in respect of such notice shall be deemed to be concluded.
Yes. He needs to pay tax/interest and 50% of penalty within 30 days of communication of order. Where any person served with an order issued under sub-section (6) of Section 51B pays the tax along with interest and a penalty equivalent to fifty percent of such tax within thirty days of the communication of order, all proceedings in respect of the said tax shall be deemed to be concluded.
The Model GST Law provides for deemed conclusion of the adjudication proceedings if the order is not issued within three years as provided for in section 51A (7) or within five years as provided for in section 51B (7).
As per Section 52 of MGL, every person who has collected from any other person any amount as representing the tax under this Act, shall deposit the said amount to the credit of the Central or a State Government, regardless of whether the supplies in respect of which such amount was collected are taxable or not.
Notice to be issued. Principles of natural justice to be followed and order to be issued. It is to be noted that such order has to be invariably issued within 1 year of date of issue of notice. However there is no time limit for issue of show cause notice. Thus, in such cases duty can be recovered even after ten years.
No. There is no time limit. Notice can be issued on detection of such cases without any time limit. Once notice is issued, the order has to be passed within 1 year from the date of issue of notice.
The following options are available to the proper officer: a) The proper officer may deduct or may require any other specified officer to deduct the amount so payable from any money owing to such person; b) The proper officer may recover or may require any other specified officer to recover the amount so payable by detaining and selling any goods belonging to such person; c) The proper officer may, by a notice in writing, require any other person from whom money is due or may become due to such person or who holds or may subsequently hold money for or on account of such person, to pay to the credit of the Central or a State Government; d) The proper officer may, on an authorization by the competent authority, distrain any movable or immovable property belonging to or under the control of such person, and detain the same until the amount payable is paid; if the dues remains unpaid for a period of thirty days after any such distress, he may cause the said property to be sold and with the proceeds of such sale, may satisfy the amount payable and the costs including cost of sale remaining unpaid and pay the surplus amount, if any, to such person; e) The proper officer may prepare a certificate signed by him specifying the amount due from such person and send it to the Collector of the district in which such person owns any property or resides or carries on his business and on receipt of such certificate, the Collector shall proceed to recover from such person the amount specified as if it were an arrear of land revenue.
Yes, in cases other than self-assessed tax. The Commissioner/Chief Commissioner may extend the time for payment or allow payment of any amount due under the Act, other than the amount due as per the liability self-assessed in any return, by such person in monthly instalments not exceeding twenty four, subject to payment of interest under section 36 with such restrictions and conditions as may be prescribed. However, where there is default in payment of any one instalment on its due date, the whole outstanding balance payable on such date shall become due and payable forthwith and recovered without any further notice.
The notice of demand is required to be served only in respect of the enhanced dues. In so far as the amount already confirmed prior to disposal of appeal/revision, the recovery proceedings may be continued from the stage at which such proceedings stood immediately before such disposal.
Where any person liable to pay tax, transfers his business in whole/part, by sale, gift, lease, leave and license, hire, or in any other manner, then such person and the person to whom the business is transferred shall jointly and severally be liable to pay the tax, interest or penalty due from the taxable person up to the time of such transfer, whether such dues has been determined before such transfer, but has remained unpaid or is determined thereafter.
When any company is wound up and any tax or other dues determined whether before or after liquidation that remains unrecovered, every person who was a director of the company during the period for which the tax was due, shall jointly and severally be liable for payment of dues unless he proves to the satisfaction of the Commissioner that such non-recovery is not attributed to any gross neglect, misfeasance or breach of duties on his part in relation to the affairs of the company.
Partners of any firm shall jointly and severally liable for payment of any tax, interest or penalty. Firm/ partner shall intimate the retirement of any partner to the Commissioner by a notice in writing – liability to pay tax, interest or penalty up to the date of such retirement, whether determined on that date or subsequently, shall be on such partner. If no intimation is given within one month from the date of retirement, the liability of such partner shall continue until the date on which such intimation is received by the Commissioner.
Where the business in respect of which any tax is payable is carried on by any guardian / trustee / agent of a minor or other incapacitated person on behalf of and for the benefit of such minor/incapacitated person, the tax, interest or penalty shall be levied upon and recoverable from such guardian / trustee / agent.
Where the estate of a taxable person owning a business in respect of which any tax, interest or penalty is payable is under the control of the Court of Wards/Administrator General / Official Trustee / Receiver or Manager appointed under any order of a Court, the tax, interest or penalty shall be levied and recoverable from such Court of Wards/ Administrator General / Official Trustee / Receiver or Manager to the same extent as it would be determined and recoverable from a taxable person.
Yes. Any person aggrieved by any order or decision passed against him has the right to appeal. It must be an order or decision passed by an “adjudicating authority”. However, some decisions or orders (as provided for in Section 93) are not appealable.
No. The Commissioner of CGST cannot revise the order. In the model law, for CGST and SGST, there are different provisions in this regard. For CGST, as per Section 79(2), the Commissioner of CGST if he finds an order or decision (passed by an adjudicating authority) to be not legal or proper, can pass an order setting out the points for determination where he is of the view that the order is not legal and proper and directing a GSTofficer sub-ordinate to him to file an application to First Appellate Authority (FAA). Such application is then treated by the FAA as if it were an appeal.
The time limit is fixed as 3 months from the date of communication of order or decision.
Yes. It applies even for such applications filed which are to be treated as appeal and all the provisions of appeal are made applicable for such application as well.
Yes. He can condone a delay of upto one month from the end of the prescribed period of 3 months for filing the appeal (3+1), provided there is “sufficient cause” as laid down in the proviso to section 79(4).
Yes. He has the powers to allow additional grounds if he is satisfied that the omission was not wilful or unreasonable.
First appellate authority has to communicate the copy of order to the appellant and the adjudicating authority with a copy to jurisdictional Commissioner of CGST and SGST.
10% of amount in dispute (however, for SGST, there are additional provisions for which the model law may be referred to, see question no 12 and 13).
As per explanation to Section 79(6) of MGL, the expression “amount in dispute” shall include– (i) amount determined under section 46 or 47 or 48 or 51; (ii) amount payable under rule-------of the GST Credit Rules 201…; and (iii) amount of fee levied or penalty imposed.
The FAA is empoweredto pass an order enhancing the fees or penalty or fine in lieu of confiscation or reducing the amount of refund or input tax credit provided the appellant has been given reasonable opportunity of showing cause against the proposed detrimental order. (First Proviso to Section 79(10)). In so far as the question of enhancing the duty or deciding wrong availment of ITC is concerned, the FAA can do so only after giving specific SCN to the appellant against the proposed order and the order itself should be passed within the time limit specified under Section 51. (Second Proviso to Section 79(10).
10% of the amount in dispute has to paid before filing appeal. This is common for both CGST and SGST. However, for SGST, in addition to this 10%, the appellant has to also pay “ in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him” Further, if the Commissioner of SGST considers any case to be a “serious case”, the departmental authority can apply to the first Appellate Authority for ordering a higher amount of pre-deposit not exceeding 50% of the amount in dispute.
It is defined to mean a case involving a disputed tax liability of not less than Rs. 25 Crores and where the Commissioner of SGST is of the opinion (for reasons to be recorded in writing) that the department has a very good case against the taxpayer.
Yes. Section 80(1) of SGST Act authorises Commissioner to call for and examine any order passed by his subordinates and in case he considers the order of the lower authority to be erroneous in so far as it is prejudicial to revenue, he can revise the order after giving opportunity of being heard to the noticee.
Yes. The Commissioner shall not revise any order if (a) the order has been subject to an appeal under section 79 or under section 82 or under section 87 or under section 88; or (b) more than three years have expired after the passing of the decision or order sought to be revised. For details of these and some other “fetters”, please refer to Section 80 of the MDL.
In cases where the appeal involves – • tax amount or • input tax credit or • the difference in tax or • the difference in input tax credit involved or • amount of fine, • amount of fees or • amount of penalty ordered less than Rs. 1,00,000/-, the Tribunal has discretion to refuse to admit such appeal.(Section82(2) of MGL)
3 months from the date of receipt of the order appealed against.
Yes the Tribunal has powers to condone delay of any period of time beyond the period of 3 months provided sufficient case is shown by the appellant for such delay.
(i) The provisions under Section 82 of SGST Act for appeal by any person aggrieved by the order or decision passed against him by First Appellate Authority are essentially similar to provisions contained in Section 82 of CGST Act and discussions made therein are equally applicable to section 82 of SGST as well. (ii) In addition to the above the provision of Section 82 of SGST Act also covers an appeal to be filed to Appellate Tribunal against the revisionary order passed by Commissioner. (iii) However the provisions relating to appeal by the revenue against the order of first appellate authority as CGST Act is not provided in SGST Act since the revisionary powers (against the orders passed by the FAA, who in the states is likely to be “subordinate” to the Commissioner) is provided to Commissioner to SGST. (iv) In addition, the person aggrieved under SGST Act has to pre-deposit full deposit of admitted tax, interest, fine, fee and penalty arising from the impugned order.
Yes. As per Section 85 of MGL Where an amount deposited by the appellant under sub-section (6)/(4) of section 79 or under sub-section (10)/(7) of section 82 is required to be refunded consequent to any order of the First Appellate Authority or of the Appellate Tribunal, as the case may be, interest at the rate specified under section 39 shall be payable in respect of such refund from the date of payment of the amount till the date of refund of such amount.
High Court if the High Court is satisfied that such an appeal involves a substantial question of law. (Section 87(1)). However, if the order passed by the Tribunal relates to a matter where two or more States, or a State and Centre, have a difference of views regarding the treatment of a transaction(s) being intra-State or inter-State; or a matter where two or more States, or a State and Center, have a difference of views regarding place of supply, then appeal against such order shall lie to the Supreme Court and not High Court.
180 days from the date of receipt of the order appealed against. However, the High Court has the power to condone further delay on sufficient cause being shown.
As per section 94 of Model CGST/SGST Law, ‘advance ruling’ means a written decision provided by the authority to an applicant on matters or on questions as enumerated in section 97 and appeals thereon (section 99).
Advance Ruling can be sought for the following matters: (a) classification of any goods or services under the Act; (b) applicability of a notification issued under provisions of the Act having a bearing on the rate of tax; (c) the principles to be adopted for the purposes of determination of value of the goods or services under the provisions of the Act; (d) admissibility of input tax credit of tax paid or deemed to have been paid; (e) determination of the liability to pay tax on any goods or services under the Act; (f) whether applicant is required to be registered under the Act; (g) whether any particular thing done by the applicant with respect to any goods or services amounts to or results in a supply of goods or services, within the meaning of that term.
The broad objective for setting up such an authority is to: i. provide certainty in tax liability in advance in relation to an activity proposed to be undertaken by the applicant; ii. attract Foreign Direct Investment (FDI); iii. reduce litigation; iv. pronounce ruling expeditiously in transparent and inexpensive manner.
‘Authority for advance ruling’ (AAR) shall comprise one member CGST and one member SGST. They will be appointed by the Central and State government respectively. Their qualification and eligibility condition for appointment will be prescribed in the Model GST Rules. (Section 95).
Appellate authority for advance ruling (AAAR) will hear appeal against advance ruling given by the AAR. This will comprise of two members namely Chief Commissioner of CGST designated by the Central Board Excise and Customs (CBEC) and Commissioner of SGST having jurisdiction over the applicant. (Section 96).
There will be one AAR and AAAR for each State (sections 95 and 96).
Section 102 provides that an advance ruling pronounced by AAR or AAAR shall be binding only on the applicant and on the jurisdictional tax authority of the applicant. This clearly means that an advance ruling is not applicable to similarly placed taxable persons in the State. It is only limited to the person who has applied for an advance ruling.
The law does not provide for a fixed time period for which the ruling shall apply. Instead, in section 102, it is provided that advance ruling shall be binding till the period when the law, facts or circumstances supporting the original advance ruling have changed.
Section 103 provides that an advance ruling shall be held to be ab initio void if the AAR or AAAR finds that the advance ruling was obtained by the applicant by fraud or suppression of material facts or misrepresentation of facts. In such a situation, all the provisions of the CGST/SGST Act shall apply to the applicant as if such advance ruling had never been made (but excluding the period when advance ruling was given and up to the period when the order declaring it to be void is issued). An order declaring advance ruling to be void can be passed only after hearing the applicant.
Section 97 and 98 deals with procedure for obtaining advance ruling. Section 97 provides that the applicant desirous of obtaining advance ruling should make application to AAR in a prescribed form and manner. The format of the form and the detailed procedure for making application will be prescribed in the Model GST Rules. Section 98 provides the procedure for dealing with the application for advance ruling. The AAR shall send a copy of application to the officer in whose jurisdiction the applicant falls and call for all relevant records. The AAR may then examine the application along with the records and may also hear the applicant. Thereafter he will pass an order either admitting or rejecting the application.
Application has to be invariably rejected in certain situations as prescribed under section 98 (2) which are enumerated as below: (a) if the question raised in the application is already pending in the applicant’s case before any First Appellate Authority, the Appellate Tribunal or any Court; (b) if the question raised in the application is the same as in a matter already decided by the First Appellate Authority, the Appellate Tribunal or any Court; (c) if the question raised in the application is the same as in a matter already pending in any proceedings in the applicant’s case under any of the provisions of the Act; (d) if the question raised in the application is the same as in a matter in the applicant’s case already decided by the adjudicating authority or assessing authority, whichever is applicable. If the application is rejected, it should be by way of a speaking order giving the reasons for rejection.
If the application is admitted, the AAR shall pronounce its ruling within ninety days of receipt of application. Before giving its ruling, it shall examine the application and any further material furnished by the applicant or by the concerned departmental officer. Before giving the ruling, AAR must hear the applicant or his authorized representative as well as the jurisdictional officers of CGST/SGST.
If there is difference of opinion between the two members of AAR, they shall refer the point or points on which they differ to the AAAR for hearing the issue. If the members of AAAR are also unable to come to a common conclusion in regard to the point(s) referred to them by AAR, then it shall be deemed that no advance ruling can be given in respect of the question on which difference persists at the level of AAAR.
The provisions of appeal before AAAR are dealt in section 99 and 100 of Model GST Law. If the applicant is aggrieved with the finding of the AAR, he can file an appeal with AAAR. Similarly, if the prescribed or jurisdictional officer of CGST/SGST does not agree with the finding of AAR, he can also file an appeal with AAAR. The word prescribed officer of CGST/SGST means an officer who has been designated by the CGST/SGST administration in regard to an application for advance ruling. In normal circumstances, the concerned officer will be the officer in whose jurisdiction the applicant is located. In such cases the concerned officer will be the jurisdictional CGST/SGST officer. Any appeal must be filed within thirty days from the receipt of the advance ruling. The appeal has to be in prescribed form and has to be verified in prescribed manner. This will be prescribed in the Model GST Rules. The Appellate Authority must pass an order after hearing the parties to the appeal within a period of ninety days of the filing of an appeal. If members of AAAR differ on any point referred to in appeal, it shall be deemed that no advance ruling is issued in respect of the question under appeal.
Yes. Section 101 of the Act gives power to AAR and AAAR to amend their order to rectify any mistake apparent from the record within a period of six months from the date of the order. Such mistake may be noticed by the authority on its own accord or may be brought to its notice by the applicant or the prescribed or the jurisdictional CGST/SGST officer. If a rectification has the effect of enhancing the tax liability or reducing the quantum of input tax credit, the applicant must be heard before the order is passed.
The basic objectives of setting up of the Settlement Commission are:- i. to provide an alternate channel for dispute resolution for the taxpayer; ii. to expedite payment of GST involved in disputes by avoiding costly and time consuming litigation process; iii. to provide an opportunity to tax payers to come clean who may have evaded payment of tax; iv. to serve as a forum for the taxpayer to apply for settlement of their cases, on the basis of true and complete disclosure of their tax liability; v. to encourage quick settlement of disputes and save the business from the worries of prosecution in certain situations.
In the Model GST Law, the provisions for Settlement Commission are incorporated only under the IGST Act (sections 11 to 26). This implies that cases cannot be settled in relation to tax liability pertaining to intra-state transactions. However, there is a possibility that those state tax administrations which want to constitute Settlement Commission can do so on the basis of the template provided under the IGST Act and the CGST Act can have an enabling provision drawing from the IGST Act for such states.
As per Section 11, Case means any proceeding under the IGST Act for levy, assessment and collection of IGST before an IGST officer or before a First Appellate Authority in connection with such levy, assessment or collection of IGST pending on the date on which an application for settlement is made. Case will also mean an order passed by an adjudicating authority for which the period of appeal has not expired. It is clarified in the definition that an appeal filed after the expiry of the period of appeal or a case remanded by a higher judicial authority to a lower one will not be treated as a proceeding pending and therefore no application for settlement can be made in such cases.
Every application for settlement shall be heard by a bench presided over by the State Chairman and shall consist of two other members. The State Chairman shall be a sitting or a retired judge of a High Court. The other two members will be Technical members drawn from the CGST administration.
Section 14 of the IGST Act provides that where the members of a bench of Settlement Commission differ on any point, the decision shall be taken on the basis of the majority opinion. It is provided that a decision can also be taken by a bench consisting of only two members, if the third member is not available due to factors like absence, illness or vacancy. If there is a difference of opinion between such two members, the matter will then be referred to a third member, and decision will be taken by the majority opinion.
As per section 15 of the IGST Act, any taxable person can apply for settlement of a case in relation to which he has been issued one or more show cause notice(s) under the IGST Act and the same is pending before the adjudicating authority or the First Appellate Authority.
The settlement application should contain full and true disclosure of: i. tax Liability which has not been disclosed to the proper officer of IGST; ii. manner of deriving such tax liability; iii. additional amount of tax which he accepts to be payable; iv. other particulars such as misclassification, exemption notification because of which he admits to short payment.
As per section 15 of the IGST Act, the following conditions must be fulfilled before an application for settlement of a case can be accepted: (a) the applicant has furnished the return(s), which he is or was required to furnish under the IGST Act or this requirement has been waived by the Settlement Commission after recording the reasons that it was satisfied that certain valid circumstances existed for not filing the return(s); (b) the applicant has received a show cause notice for demand of tax or has received an order confirming the demand of tax issued by the IGST officer and the same is pending before the First Appellate Authority; (c) the additional amount of tax accepted by the applicant in his application exceeds five lakh rupees; and (d) the applicant has paid the additional amount of tax accepted by him along with the interest due thereon under section 36 of the CGST Act.
As per section 15 of the IGST Act, in the following circumstances, Settlement Commission will not accept an application for settlement: i. If the case involved in the application is pending with the Appellate Tribunal or any Court; ii. If the application involves determination of any question having a bearing on the rate of tax or determination of liability to pay tax on goods and/or services; iii. If the fees as prescribed has not been paid.
No. As per section 15 of IGST Act, once an application has been made, it cannot be allowed to be withdrawn by the applicant.
Settlement Commission shall pass an order providing for terms of settlement which shall include: i. the amount of tax, interest, fine or penalty that is payable by the applicant (if this amount is not paid within thirty days or a further extended period of three months, it shall be recovered along with interest as sums due to Central Government in accordance with section 54 of CGST Act ); (section 16) ii. manner in which the sums due under the settlement shall be paid; (section 16) iii. granting immunity from prosecution for any offence under the IGST Act if no proceedings for prosecution were instituted on the date of receipt of the application and if the Settlement Commission is satisfied that the applicant has made a full and true disclosure of his tax liability; (section 20) iv. granting immunity from imposition of penalty either in full or part under the IGST Act; (section 20) v. Order provisional attachment of property of the applicant during the pendency of any proceeding before it. Such provisional attachment shall cease to have effect, once sums due to the Central Government for which attachment order was made, stands discharged and the evidence to this effect is submitted to the Settlement Commission; (Section 17) vi. Send a case back to the jurisdictional IGST officer or the First Appellate Authority if it is of the opinion that the applicant has not cooperated with the Settlement Commission. In such case, the relevant adjudicating authority is entitled to use all material and information produced by taxable person before the Settlement Commission or the results of an inquiry held by the Settlement Commission; (section 21) vii. Reopen any proceeding connected with the case concluded earlier and pass appropriate order. This can be done only after taking concurrence of the applicant and if five years have not expired for the concluded proceeding , counting from the date of application for Settlement. ( Section 18)
(i) Order of Settlement Commission shall be void if it is later found that it was obtained by fraud or misrepresentation of facts. Thereafter proceedings covered by the settlement shall stand revived from the stage at which the application was allowed to be proceeded with by the Settlement Commission and shall be concluded by the relevant original or appellate authority within two years from the date of receiving such communication from the Settlement Commission. (Section 16) (ii) Order of Settlement Commission granting immunity from prosecution or payment of penalty can be withdrawn where it finds later that the applicant had concealed any facts or had given any false evidence or if he has failed to pay the sum specified in the settlement order in the prescribed time. (Section 20)
The following persons cannot avail of the facility of Settlement Commission? i. No person can avail the facility of settlement more than twice. (section 23) ii. A person cannot apply for settlement in any other matter where after passing of a settlement order, a person was convicted of any offence under the IGST Act in relation to that case or where due to lack of cooperation from the applicant, the Settlement Commission has sent back the case to the relevant adjudicating authority. (section 23)
The powers and procedures of Settlement Commission are given in sections 25 and 26 of IGST Act. It is vested with the powers of a civil court under the Code of Civil Procedure, 1908, for discovery and inspection, enforcing the attendance of a person and examining him on oath, and compelling production of books of account and other records. Settlement Commission is deemed to be a civil court for the purposes of section 195 of the Code of Criminal Procedure, 1973. Any proceeding before it shall be deemed to be a judicial proceeding under section 193 and 228 and for the purpose of section 196, of the Indian Penal Code, 1860. The Settlement Commission also has the power to regulate its own procedure. Section 193 of IPC, 1860 contains penal provision for giving false evidence during the proceedings and section 228 of IPC, 1860 contains penal provisions for intentionally insulting or interrupting the Officer sitting in settlement proceedings. Accordingly these provisions of IPC can be invoked where the person gives false evidence or interrupts the proceedings of the Settlement Commission. Section 24 of the IGST Act gives power to Settlement Commission to amend its order to rectify any mistake apparent from the record within a period of three months from the date of the order. Such mistake may be noticed by the Settlement Commission on its own accord or may be brought to its notice by the applicant or the jurisdictional IGST officer. If a rectification has the effect of enhancing the tax liability or reducing the quantum of input tax credit, the applicant must be heard before the order is passed.
As per law dictionary and as noted in different judicial pronouncements, the term ‘search’, in simple language, denotes an action of a government machinery to go, look through or examine carefully a place, area, person, object etc. in order to find something concealed or for the purpose of discovering evidence of a crime. The search of a person or vehicle or premises etc. can only be done under proper and valid authority of law.
‘Inspection’ is a new provision under the MGL. It is a softer provision than search to enable officers to access any place of business of a taxable person and also any place of business of a person engaged in transporting goods or who is an owner or an operator of a warehouse or godown.
As per Section 60 of MGL, Inspection can be carried out by an officer of CGST/SGST only upon a written authorization given by an officer of the rank of Joint Commissioner or above. A Joint Commissioner or an officer higher in rank can give such authorization only if he has reasons to believe that the person concerned has done one of the following: i. suppressed any transaction of supply; ii. suppressed stock of goods in hand; iii. claimed excess input tax credit; iv. contravened any provision of the CGST/SGST Act to evade tax; v. a transporter or warehouse owner has kept goods which have escaped payment of tax or has kept his accounts or goods in a manner that is likely to cause evasion of tax.
No. Authorization can be given to an officer of CGST/ SGST to carry out inspection of any of the following: i. any place of business of a taxable person; ii. any place of business of a person engaged in the business of transporting goods whether or not he is a registered taxable person; iii. any place of business of an owner or an operator of a warehouse or godown.
An officer of the rank of Joint Commissioner or above can authorize an officer in writing to carry out search and seize goods, documents, books or things. Such authorization can be given only where the Joint Commissioner has reasons to believe that any goods liable to confiscation or any documents or books or things relevant for any proceedings are hidden in any place.
Reason to believe is to have knowledge of facts which, although not amounting to direct knowledge, would cause a reasonable person, knowing the same facts, to reasonably conclude the same thing. As per Section 26 of the IPC, 1860, “A person is said to have ‘reason to believe’ a thing, if he has sufficient cause to believe that thing but not otherwise.” ‘Reason to believe’ contemplates an objective determination based on intelligent care and evaluation as distinguished from a purely subjective consideration. It has to be and must be that of an honest and reasonable person based on relevant material and circumstances.
Although the officer is not required to state the reasons for such belief before issuing an authorization for search, he has to disclose the material on which his belief was formed. ‘Reason to believe’ need not be recorded invariably in each case. However, it would be better if the materials / information etc. are recorded before issue of search warrant or before conducting search.
The written authority to conduct search is generally called search warrant. The competent authority to issue search warrant is an officer of the rank of Joint Commissioner or above. A search warrant must indicate the existence of a reasonable belief leading to the search. Search Warrant should contain the following details: i. the violation under the Act, ii. the premise to be searched, iii. the name and designation of the person authorized for search, iv. the name of the issuing officer with full designation along with his round seal, v. date and place of issue, vi. serial number of the search warrant, vii. period of validity i.e. a day or two days etc.
As per section 70 of Model GST Law, goods become liable to confiscation when any person does the following: (i) supplies any goods in contravention of any of the provisions of this Act or rules made thereunder leading to evasion of tax; (ii) does not account for any goods on which he is liable to pay tax under this Act; (iii) supplies any goods liable to tax under this Act without having applied for the registration; (iv) contravenes any of the provisions of the CGST/ SGST Act or rules made thereunder with intent to evade payment of tax.
An officer carrying out a search has the power to search for and seize goods (which are liable to confiscation) and documents, books or things (relevant for any proceedings under MGL) from the premises searched. During search, the officer has the power to break open the door of the premises authorized to be searched if access to the same is denied. Similarly, while carrying out search within the premises, he can break open any almirah or box if access to such almirah or box is denied and in which any goods, account, registers or documents are suspected to be concealed. He can also seal the premises if access to it denied.
Section 60(8) of MGL prescribes that searches must be carried out in accordance with the provisions of Code of Criminal Procedure, 1973. Section 100 of the Code of Criminal Procedure describes the procedure for search.
The following principles should be observed during Search: • No search of premises should be carried out without a valid search warrant issued by the proper officer. • There should invariably be a lady officer accompanying the search team to residence. • The officers before starting the search should disclose their identity by showing their identity cards to the person in-charge of the premises. • The search warrant should be executed before the start of the search by showing the same to the person in-charge of the premises and his signature should be taken on the body of the search warrant in token of having seen the same. The signatures of at least two witnesses should also be taken on the body of the search warrant. • The search should be made in the presence of at least two independent witnesses of the locality. If no such inhabitants are available /willing, the inhabitants of any other locality should be asked to be witness to the search. The witnesses should be briefed about the purpose of the search. • Before the start of the search proceedings, the team of officers conducting the search and the accompanying witnesses should offer themselves for their personal search to the person in-charge of the premises being searched. Similarly, after the completion of search all the officers and the witnesses should again offer themselves for their personal search. • A Panchnama / Mahazar of the proceedings of the search should necessarily be prepared on the spot. A list of all goods, documents recovered and seized/detained should be prepared and annexed to the Panchnama/Mahazar. The Panchnama / Mahazar and the list of goods/ documents seized/detained should invariably be signed by the witnesses, the in-charge/ owner of the premises before whom the search is conducted and also by the officer(s) duly authorized for conducting the search. • After the search is over, the search warrant duly executed should be returned in original to the issuing officer with a report regarding the outcome of the search. The names of the officers who participated in the search may also be written on the reverse of the search warrant. • The issuing authority of search warrant should maintain register of records of search warrant issued and returned and used search warrants should be kept in records. • A copy of the Panchnama / Mahazar along with its annexure should be given to the person incharge/ owner of the premises being searched under acknowledgement.
Yes. Access can also be obtained in terms of Section 64 of MGL. This provision of law is meant to allow an audit party of CGST/SGST or C&AG or a cost accountant or chartered accountant nominated under section 50 of CGST/SGST Act, access to any business premises without issuance of a search warrant for the purposes of carrying out any audit, scrutiny, verification and checks as may be necessary to safeguard the interest of revenue. However, a written authorization is to be issued by an officer of the rank of Additional/Joint Commissioner of CGST or SGST. This provision facilitates access to a business premise which is not registered by a taxable person as a principal or additional place of business but has books of accounts, documents, computers etc. which are required for audit or verification of accounts of a taxable person.
Search without a valid search warrant (i.e. issued by other than a competent authority or without a search warrant) results in an illegal search without authority of law. However, due to this reason, the accused cannot get benefit. Accordingly, evidence collected even during an illegal search and seizure is considered admissible in trial and adjudication proceedings.
The term ‘seizure’ has not been specifically defined in the Model GST Law. In Law Lexicon Dictionary, ‘seizure’ is defined as the act of taking possession of property by an officer under legal process. It generally implies taking possession forcibly contrary to the wishes of the owner of the property or who has the possession and who was unwilling to part with the possession.
Yes, under Section 69 of MGL, an officer has power to detain goods along with the conveyance (like a truck or other types of vehicle) transporting the goods. This can be done for such goods which are being transported or are stored in transit in violation of the provisions of MGL. Goods which are stored or are kept in stock but not accounted for can also be detained. Such goods and conveyance can be released after payment of applicable tax or upon furnishing security of equivalent amount.
Denial of access to the owner of the property or the person who possesses the property at a particular point of time by a legal order/notice is called detention. Seizure is taking over of actual possession of the goods by the department. Detention order is issued when it is suspected that the goods are liable to confiscation. Seizure can be made only on the reasonable belief which is arrived at after inquiry/investigation that the goods are liable to confiscation.
Certain safeguards are provided in section 60 of Model CGST/SGST Law in respect of the power of search or seizure. These are as follows: i. Seized goods or documents should not be retained beyond the period necessary for their examination; ii. Photocopies of the documents can be taken by the person from whose custody documents are seized; iii. For seized goods, if a notice is not issued within sixty days of its seizure, goods shall be returned to the person from whose possession it was seized. This period of sixty days can be extended on justified grounds up to a maximum period of six months; iv. An inventory of seized goods shall be made by the seizing officer; v. Certain categories of goods to be specified under Model GST Rules (such as perishable, hazardous etc.) can be disposed of immediately after seizure; vi. Provisions of Code of Criminal Procedure 1973 relating to search and seizure shall apply. However, one important modification is in relation to sub-section (5) of section 165 of Code of Criminal Procedure – instead of sending copies of any record made in course of search to the nearest Magistrate empowered to take cognizance of the offence, it has to be sent to the Principal Commissioner/ Commissioner of CGST/ Commissioner of SGST .
Under section 61 of MGL, a person in charge of a transport vehicle may be required to carry a prescribed document in respect of such consignments whose value is more than fifty thousand rupees.
The term ‘arrest’ has not been defined in the Model GST Law. However, as per judicial pronouncements, it denotes ‘the taking into custody of a person under some lawful command or authority’. In other words a person is said to be arrested when he is taken and restrained of his liberty by power or colour of lawful warrant.
The Commissioner of CGST/SGST can authorize a CGST/SGST officer to arrest a person if he has reasons to believe that the person has committed an offence attracting a punishment prescribed under section 73 (1)(i), 73 (1)(ii) and 73 (2) of the CGST/SGST Act. This essentially means that a person can be arrested only where the tax evasion is more than fifty lakhs rupees or where a person has earlier been convicted for an offence under section 73 of the Model CGST/SGST Act.
There are certain safeguards provided under section 62 for a person who is placed under arrest. These are: i. If a person is arrested for a cognizable offence, he must be informed in writing of the grounds of arrest and he must be produced before a magistrate within 24 hours of his arrest; ii. If a person is arrested for a non-cognizable and bailable offence, the Deputy/ Assistant Commissioner of CGST/SGST can release him on bail and he will be subject to the same provisions as an officer incharge of a police station under section 436 of the Code of Criminal Procedure, 1973; iii. All arrest must be in accordance with the provisions of the Code of Criminal Procedure, 1973 relating to arrest.
The provisions of the Code of Criminal Procedure, 1973 (2 of 1974) relating to arrest and the procedure thereof must be adhered to. It is therefore necessary that all field officers of CGST/SGST be fully familiar with the provisions of the Code of Criminal Procedure, 1973. One important provision to be taken note of is section 57 of Cr.P.C., 1973 which provides that a person arrested without warrant shall not be detained for a longer period than, under the circumstances of the case, is reasonable but this shall not exceed twenty four hours (excluding the journey time from place of arrest to the Magistrate’s court). Within this period, as provided under section 56 of Cr.P.C., the person making the arrest shall send the person arrested without warrant before a Magistrate having jurisdiction in the case. In a landmark judgment in the case of D.K. Basu v. State of West Bengal reported in 1997 (1) SCC 416, the Hon’ble Supreme Court has laid down specific guidelines required to be followed while making arrests. While this is in relation to police, it needs to be followed by all departments having power of arrest. These are as under: i. The police personnel carrying out the arrest and handling the interrogation of the arrestee should bear accurate, visible and clear identification and name tags with their designations. The particulars of all such police personnel who handle interrogation of the arrestee must be recorded in a register. ii. The police officer carrying out the arrest shall prepare a memo of arrest at the time of arrest and such memo shall be attested by at least one witness, who may be either a member of the family of the arrestee or a respectable person of the locality from where the arrest is made. It shall also be counter signed by the arrestee and shall contain the time and date of arrest. iii. A person who has been arrested or detained and is being held in custody in a police station or interrogation center or other lock up, shall be entitled to have one friend or relative or other person known to him or having interest in his welfare being informed, as soon as practicable, that he has been arrested and is being detained at the particular place, unless the attesting witness of the memo of arrest is himself such a friend or a relative of the arrestee. iv. The time, place of arrest and venue of custody of an arrestee must be notified by the police where the next friend or relative of the arrestee lives outside the district or town through the Legal Aid Organization in the District and the police station of the area concerned telegraphically within a period of 8 to 12 hours after the arrest. v. An entry must be made in the diary at the place of detention regarding the arrest of the person which shall also disclose the name of the next friend of the person who has been informed of the arrest and the names and particulars of the police officials in whose custody the arrestee is. vi. The arrestee should, where he so requests, be also examined at the time of his arrest and major and minor injuries, if any present on his/her body, must be recorded at that time. The ‘Inspection Memo’ must be signed both by the arrestee and the police officer effecting the arrest and its copy provided to the arrestee. vii. The arrestee should be subjected to medical examination by the trained doctor every 48 hours during his detention in custody by a doctor on the panel of approved doctors appointed by Director, Health Services of the concerned State or Union Territory, Director, Health Services should prepare such a panel for all Tehsils and Districts as well. viii. Copies of all the documents including the memo of arrest, referred to above, should be sent to the Magistrate for his record. ix. The arrestee may be permitted to meet his lawyer during interrogation, though not throughout the interrogation. x. A police control room should be provided at all district and State headquarters where information regarding the arrest and the place of custody of the arrestee shall be communicated by the officer causing the arrest, within 12 hours of effecting the arrest and at the police control room it should be displayed on a conspicuous notice board.
Decision to arrest needs to be taken on case-tocase basis considering various factors, such as, nature and gravity of offence, quantum of duty evaded or credit wrongfully availed, nature and quality of evidence, possibility of evidences being tampered with or witnesses being influenced, cooperation with the investigation, etc. Power to arrest has to be exercised after careful consideration of the facts of the case which may include: i. to ensure proper investigation of the offence; ii. to prevent such person from absconding; iii. cases involving organized smuggling of goods or evasion of customs duty by way of concealment; iv. master minds or key operators effecting proxy/ benami imports/exports in the name of dummy or non-existent persons/IECs, etc; v. where the intent to evade duty is evident and element of mensrea/guilty mind is palpable; vi. prevention of the possibility of tampering with evidence; vii. intimidating or influencing witnesses; and viii. large amounts of evasion of duty or service tax at least exceeding one crore rupees.
Generally, cognizable offence means serious category of offences in respect of which a police officer has the authority to make an arrest without a warrant and to start an investigation with or without the permission of a court.
Non-cognizable offence means relatively less serious offences in respect of which a police officer does not have the authority to make an arrest without a warrant and an investigation cannot be initiated without a court order.
In section 73 (4) of MGL, it is provided that the offences relating to taxable goods and /or services where the amount of tax evaded exceeds Rs. 2.5 crores, shall be cognizable and non-bailable. Other offences under the act are non-cognizable and bailable.
Section 63 of MGL gives powers to a duly authorized CGST/SGST officer to call upon a person by issuing a summon to present himself before the officer issuing the summon to either give evidence or produce a document or any other thing in any inquiry which an officer is making. A summons to produce documents or other things may be for the production of certain specified documents or things or for the production of all documents or things of a certain description in the possession or under the control of the person summoned.
A person who is issued summon is legally bound to attend either in person or by an authorized representative and he is bound to state the truth before the officer who has issued the summon upon any subject which is the subject matter of examination and to produce such documents and other things as may be required.
A. The proceeding before the official who has issued summons is deemed to be a judicial proceeding. If a person does not appear on the date when summoned without any reasonable justification, he can be prosecuted under section 174 of the Indian Penal Code (IPC). If he absconds to avoid service of summons, he can be prosecuted under section 172 of the IPC and in case he does not produce the documents or electronic records required to be produced, he can be prosecuted under section 175 of the IPC. In case he gives false evidence, he can be prosecuted under section 193 of the IPC. In addition, if a person does not appear before a CGST/ SGST officer who has issued the summon, he is liable to a penalty upto twenty five thousand rupees under section 66(3)(d) of MGL.
The Central Board of Excise and Customs (CBEC) in the Department of Revenue, Ministry of Finance has issued guidelines from time to time to ensure that summons provisions are not misused in the field. Some of the important highlights of these guidelines are given below: i. summons are to be issued as a last resort where assesses are not co-operating and this section should not be used for the top management; ii. the language of the summons should not be harsh and legal which causes unnecessary mental stress and embarrassment to the receiver; iii. summons by Superintendents should be issued after obtaining prior written permission from an officer not below the rank of Assistant Commissioner with the reasons for issuance of summons to be recorded in writing; iv. where for operational reasons, it is not possible to obtain such prior written permission, oral/ telephonic permission from such officer must be obtained and the same should be reduced to writing and intimated to the officer according such permission at the earliest opportunity; v. in all cases, where summons are issued, the officer issuing summons should submit a report or should record a brief of the proceedings in the case file and submit the same to the officer who had authorized the issuance of summons; vi. senior management officials such as CEO, CFO, General Managers of a large company or a Public Sector Undertaking should not generally be issued summons at the first instance. They should 206 be summoned only when there are indications in the investigation of their involvement in the decision making process which led to loss of revenue.
The following precautions should generally be observed when summoning a person:- (i) A summon should not be issued for appearance where it is not justified. The power to summon can be exercised only when there is an inquiry being undertaken and the attendance of the person is considered necessary. (ii) Normally, summons should not be issued repeatedly. As far as practicable, the statement of the accused or witness should be recorded in minimum number of appearances. (iii) Respect the time of appearance given in the summons. No person should be made to wait for long hours before his statement is recorded except when it has been decided very consciously as a matter of strategy. (iv) Preferably, statements should be recorded during office hours; however an exception could be made regarding time and place of recording statement having regard to the facts in the case.
Under section 65 of MGL, the following officers have been empowered and are required to assist CGST/SGST officers in the execution of MGL. The categories specified in MGL are as follows: i. Police; ii. Customs; iii. Officers of State/Central Government engaged in collection of GST; iv. Officers of State/Central Government engaged in collection of land revenue; v. All village officers; vi. Any other class of officers as may be notified by the Central/State Government.
Yes. Duty Drawback scheme with certain modifications will continue under the GST regime. The changes in the said scheme are as follows: • The Drawback shall be available only of Customs duties on imported inputs and Central Excise duty on items specified in the Fourth Schedule to the Central Excise Act 1944 (specified petroleum products, tobacco etc.) used as inputs or fuel for captive power generation. • As an export facilitation measure, for the transition period of 3 months, from July to September, 2017, Drawback at higher composite rates will continue to be granted subject to certain safeguards i.e. for claiming the higher rate of drawback, the exporter has to make a declaration and certificate is required that no Input Tax Credit (ITC) of CGST/IGST is claimed, no refund of IGST paid on export goods is claimed and no CENVAT credit is carried forward. • In absence of such certification, drawback will be restricted to the customs portion of drawback.
This will make Indian exports competitive in the international market.
Yes. The procedures relating to export have been simplified so as to do away with the paper work and intervention of the department at various stages of export. The salient features of the scheme of export under GST regime are as follows: • The goods and services can be exported either on payment of IGST which can be claimed as refund after the goods have been exported, or under bond or Letter of Undertaking (LUT) without payment of IGST. • In case of goods and services exported under bond or LUT, the exporter can claim refund of accumulated ITC on account of export. • In case of goods the shipping bill is the only document required to be filed with the Customs for making exports. Requirement of filing the ARE 1/ARE 2 has been done away with. • The supplies made for export are to be made under self-sealing and self-certification without any intervention of the departmental officer. • The shipping bill filed with the Customs is treated as an application for refund of IGST and shall be deemed to have been filed after submission of export general manifest and furnishing of a valid return in Form GSTR- 3 by the applicant.
The concept of merchant or manufacturer exporter would become irrelevant under the GST regime. The procedure in respect of the supplies made for export is same for both merchant exporter and a manufacturer exporter.
Yes, supplies made to an SEZ unit or a SEZ developer are zero rated. The supplies made to an SEZ unit or a SEZ developer can be made in the same manner as supplies made for export: • either on payment of IGST under claim of refund; • or under bond or LUT without payment of any IGST.
Supplies to SEZ unit or SEZ developer have been accorded the status of inter-State supplies under the IGST Act. Under the GST Law, any supplier making inter-State supplies has to compulsorily get registered under GST. Thus anyone making a supply to a SEZ unit or SEZ developer has to necessarily obtain GST registration.
(a) In case of refund of tax on inputs used in exports: • Refund of 90% will be granted provisionally within seven days of acknowledgement of refund application. • Remaining 10% will be paid within a maximum period of 60 days from the date of receipt of application complete in all respects. • Interest @ 6% is payable if full refund is not granted within 60 days. (b) In the case of refund of IGST paid on exports: Upon receipt of information regarding furnishing of valid return in Form GSTR-3 by the exporter from the common portal, the Customs shall process the claim for refund and an amount equal to the IGST paid in respect of each shipping bill shall be credited to the bank account of the exporter.
Export of goods to Nepal or Bhutan fulfils the condition of GST Law regarding taking goods out of India. Hence, export of goods to Nepal and Bhutan will be treated as zero orated and consequently will also qualify for all the benefits available to zero rated supplies under the GST regime. However, the definition of ‘export of services’ in the GST Law requires that the payment for such services should have been received by the supplier of services in convertible foreign exchange.
Deemed export has been defined under Section 2(39) of CGST Act, 2017 as supplies of goods as may be notified under section 147 of the said Act. Under section 147, the Government may, on the recommendations of the Council, notify certain supplies of goods manufactured in India as deemed exports, where goods supplied do not leave India, and payment for such supplies is received either in Indian rupees or in convertible foreign exchange. However, till date, the government has not notified any supply as deemed export.
EOU is like any other supplier under GST and all the provisions of the GST Law will apply. However, the benefit of Basic Customs Duty exemption on imports will continue.
The duty free imports under GST regime will be restricted to Basic Customs Duty. Exemption from the additional duties of Customs, if any, under section 3(1), 3(3) and 3(5) of the Customs Tariff Act, 1975 and exemption from Central Excise duty will be available for goods specified under the fourth Schedule to the Central Excise Act. IGST or CGST plus SGST will be payable by the suppliers who make supplies to the EOU. The EOU will be eligible, like any other registered person, to take Input Tax Credit of the said GST paid by its suppliers.
• Under the GST Law, IGST or CGST plus SGST will be payable by the suppliers who make supplies to the EOU. The EOU will be eligible to take Input Tax Credit of the said GST paid by its suppliers. • The supplies from EOU will not be exempted from GST, except in the case of zero rated supplies defined under section 16 of the IGST Act, i.e. supplies made by EOU in the form of physical export or supplies to a SEZ Unit or SEZ Developer for authorized operations.
To avail such import benefits, EOUs will have to follow the procedure under the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017.
Supply of goods from one EOU to another EOU will be treated as any other supply under GST Law. An EOU can send goods for job work as per section 143 of the CGST Act, 2017 and rule 45 of the CGST Rules, 2017 and the tax liability shall be discharged accordingly.
Under IGST law a person engaged in export of goods which is an exempt supply is eligible to avail input stage credit for zero rated supplies. Once goods are exported, refund of unutilized credit can be availed under Section 16(3)(a) of IGST Act, 2017 and Section 54 of the CGST Act, 2017 and the rules made thereunder.
Taxable event in the GST regime is supply of goods. Exports being inter-State supply, you would be required to obtain GST registration. The manufacturer would be supplying you the goods on the payment of IGST or CGST and SGST/ UTGST as applicable. You may avail of input stage credit of the tax paid on goods and services and export the goods under bond/LUT. Unutilized credit can be availed as refund. Alternatively, you may export the goods on payment of integrated tax and refund of integrated tax would be available to you.
A transition period of three months has been provided for availing of drawback. For exports during this period, higher rate of duty drawback (composite AIR) shall be available subject to conditions that no ITC of CGST/IGST is claimed, no refund of IGST paid on export goods is claimed and no CENVAT credit is carried forward.
There is no change except for the fact that if drawback is claimed by DTA supplier, the claim needs to be filed with the jurisdictional Customs Authorities.
Yes, an EOU can clear goods in DTA in accordance with the provisions laid in the Foreign Trade Policy.
In case of supply by an unregistered person (including unregistered job workers), the registered person i.e., exporter shall be liable to pay GST under reverse charge mechanism. However the exporter can avail ITC of such GST paid and either utilise the ITC or claim refund of the same.
Yes. Since commission is received by agents in India, and the place of supply of service is in India, GST will be payable.
GST stands for Goods and Services Tax, which is levied on supply of goods or services. “Supply” is a legal term which has very broad sweep and various types of economic activities are covered by it. For example, sale of goods is a type of supply.
GST is levied on all types of supplies which are – (i) made for a consideration and (ii) are for the purpose of furtherance of business. There are some exceptions when these conditions are not met, yet supply is considered to have been made, for example, interstate stock transfer of goods even without consideration or importation of services even if not in the furtherance of business.
No, GST will not be levied on alcohol for human consumption. GST on Crude, Motor Spirit (Petrol), High Speed Diesel, Aviation Turbine Fuel and Natural Gas will be levied with effect from a date to be decided by the GST Council. Electricity and sale of land and building are exempted from levy of GST. Securities are neither goods nor services for the purposes of the CGST Act, 2017 and therefore supply of securities is not taxable.
GST is a dual levy to be simultaneously levied by both Centre and State. On every supply within a State/ Union Territory without legislature (intra-State supply), GST levied will have two components - Central Tax and State Tax/ Union Territory Tax popularly called CGST and SGST/UTGST. On every supply across States (inter-State), Integrated Tax popularly called IGST will be levied. The rate of CGST and SGST/UTGST would be equal. IGST would be levied at a rate equal to the sum total of CGST and SGST/UTGST.
No, a registered person will have to approach only one tax authority for all practical purposes. Each registered person would have one tax administration office, either of the Centre or of the State. Legal provisions (called crossempowerment) have been made to ensure that one officer can discharge all functions under CGST, SGST and IGST Act. The registered person would be informed of the tax administration concerned with him. A single registration is granted for the purposes of CGST, SGST/UTGST and IGST.
A person doing business will be purchasing goods/ availing services for making further supplies in the course or furtherance of business. When such purchases are made by him, tax would have been charged by his supplier and collected from him. Since tax is collected from him, he can avail credit of the tax paid by him to his supplier (that is to say, he can use this amount for making payment of tax due from him on further supply made by him). This is known as input tax credit for the recipient.
No. On the contrary GST will result in streamlining of processes and reduction of compliance burden. GST is a simple tax which uniformly applies across the country. GST has been designed to have minimal human interface and would be implemented through strong IT platform run by GSTN. Also, in the earlier regime there were multiple compliances required for taxes such as Central Excise, Service tax, VAT etc. with Centre and State. GST makes it single and uniform compliance for indirect taxes across the country. Under GST, there is just one interface with no face-to-face meeting between taxpayers and tax authorities and practically every activity will be done online.
A person having business which has aggregate turnover of more than Rs. 20 lakhs calculated for a given PAN across the country would need to register under GST. There are some exceptions to this rule as mentioned in section 24 of the CGST Act, 2017. Aggregate turnover is defined in section 2(6) of the said Act. For example, assume that a taxable person’s business is in many States on same PAN. All supplies are below Rs. 10 lakhs but collectively they are above Rs. 20 lakhs. He would be required to register under GST.
No. An agriculturist, to the extent of supply of produce out of cultivation of land, is not liable to registration.
An MSME availing threshold exemption should not make any inter-State supply whatsoever, though the MSME may receive supply from other States.
You should apply for registration at the earliest on the GST common portal and obtain application reference number (ARN). You need not disrupt your business and may continue to make supplies on invoices without GSTIN. The application for registration must be made within 30 days of the turnover crossing Rs.20 lakhs or attracting any of the conditions mentioned in section 24 of the CGST Act, 2017. After registration, you can issue revised invoices as permitted under section 31(3)(a) of the said Act. These supplies should be shown in the return and taxes paid on them.
Application for fresh registration is to be made electronically on the GST common portal (www.gst.gov.in) in FORM GST REG-01. If the details and documents are in order, registration will be granted within 3 working days, except in cases where an objection has been raised within this period in which case registration will be granted within a maximum period of 17 days.
No. Existing registrants of VAT having valid PAN have been issued Provisional ID and password. If you have not received provisional ID, please contact your tax administration to obtain the same. This Provisional Identity Number (PID) would eventually be your GSTIN, when the migration process is completed.
Provisional GSTIN (PID) would eventually be your final GSTIN. The number would remain the same. Yes, you can use this PID on invoice for making supply without waiting for final GSTIN.
No. A person dealing with only exempted supplies is not liable to registration irrespective of his turnover. Section 23(1)(a) of the CGST Act, 2017 refers.
Yes. If you obtain voluntary registration despite the turnover being below Rs. 20 lakhs, you would be treated as a normal taxable person and would need to pay tax on supplies even if they are below the threshold for registration. You will also be entitled to take input tax credit.
The taxpayer can himself download the certificate of registration online from the GST common portal (www.gst.gov.in).
Yes, request for amendment has to be made online. All amendments in registration particulars, except some core fields, can be amended in the system without the intervention of any official by merely filing the details of the amendment. Also for some amendments, approval may be needed. Examples of fields which require approval are- legal name of business, address of the place of business and addition, deletion or retirement of partners or directors etc. responsible for day to day affairs of the business. Examples of fields which can be amended without any approval are- change of telephone number, email ID, bank account etc.
A person liable to be registered has to apply for registration in each State from where he makes or intends to make outward supplies under GST. Within each State, generally only one registration is required to be obtained.
No, there is no provision requiring that a manufacturer irrespective of threshold or nature of supply to register himself under GST. For example, a manufacturer dealing only in exempted goods or where his turnover is only intra-State and below Rs. 20 lakhs, is not required to be registered.
Every registered person (other than a registered person availing the benefit of composition or a registered person supplying exempted goods or services) supplying goods or services or both is required to issue ‘tax invoice’. Invoice should be issued in triplicate in case of supply of goods. The original copy is meant for buyer, duplicate for transporter and triplicate copy for record of the seller. A registered person under composition scheme or supplying exempted goods or services shall issue a bill of supply instead of a tax invoice.
The tax invoice shall contain details as specified in the rule in this regard. The key details specified in the rules are - name, address and GSTIN of the supplier and the recipient (if registered), a unique number of the invoice and the date of issue, description of goods, value of goods, rate of tax, amount of tax and signature.
A registered person may not issue a tax invoice if the value of the goods/services supplied is less than Rs.200/-, subject to the condition that the recipient is not a registered person and the recipient does not ask for such invoice (if the recipient asks for the invoice then the same must be issued, irrespective of the value). In such cases, the registered person shall issue a consolidated invoice at the end of the day in respect of all such supplies.
Tax invoice for goods shall be issued on or before the time of removal/delivery of goods. In case of continuous supply of goods, it shall be issued on or before the time of issue of statement of accounts /receipt of payment.
No. In such cases, the registered person shall issue a Bill of Supply and not a tax invoice. The bill of supply is different from a tax invoice both in name and details contained. While most of the details to be provided in a bill of supply are similar to tax invoice, the bill of supply does not contain the rate of tax and the amount of tax charged as the same cannot be collected.
When goods are transported in semi-knocked down condition, the complete invoice shall be issued before dispatch of the first consignment. Delivery challan shall be issued for subsequent consignments. Original copy of invoice shall be sent along with the last consignment.
Yes. Composition levy is an alternative method of levy of tax designed for small taxpayers whose turnover is up to Rs. 75 lakhs (Rs.50 lakhs for special category States, excluding J&K and Uttrakhand). It is a kind of turnover tax. The objective of the scheme is to provide a simplified tax payment regime for the small tax payers. The scheme is optional and is mainly for small traders, manufacturers and restaurants.
Composition scheme is a scheme for payment of GST available to small taxpayers whose aggregate turnover in the preceding financial year did not cross Rs.75 Lakhs. In the case of 9 special category States, the limit of turnover is Rs.50 Lakhs in the preceding financial year, namely - Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Himachal Pradesh. However, if you are a manufacturer of ice-cream, pan masala or tobacco or tobacco products or if you are a service provider other than a restaurant, you are not eligible for composition scheme.
Composition scheme is optional and intimation that option has been availed should be made electronically in FORM GST CMP-01 by the migrating taxable person. A person who has already obtained registration and opts for payment under composition levy subsequently needs to give intimation electronically in FORM GST CMP-02.
Composition rate for manufacturers is 2% (1% CGST and 1% SGST).
A registered person will have to pay GST on monthly basis on or before 20th of the succeeding month and if he has opted for composition levy he will have to pay GST on a quarterly basis on or before the 18th day of the month after the end of the quarter.
No. The option to pay tax under composition scheme shall lapse from the day on which his aggregate turnover during the financial year exceeds Rs. 75 Lakhs/ 50 Lakhs. Once he crosses the threshold, he shall file an intimation for withdrawal from the scheme in FORM GST CMP-04 within seven days of the occurrence of such event. He shall also furnish a statement in FORM GST ITC-01 containing details of the stock of inputs and capital goods as per the rules in this regard. This would help him join the input tax credit chain and avail credit of tax that he has paid on his inputs/goods lying in stock on the day he crosses over.
Aggregate turnover shall be computed on the basis of turnover on all India basis. It includes aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number but excludes GST and cess.
No, a taxable person opting to pay tax under the composition scheme is out of the credit chain. He cannot take input tax credit on the supplies received.
A manufacturer opting to pay tax under the composition scheme cannot issue a tax invoice to his buyer but would issue a Bill of Supply. He cannot collect any tax supplies made by him on his Bill of Supply and is required to show only the price charged for the supply. Consequently, the registered person buying goods from a composition manufacturer cannot take input tax credit.
GST will have to be paid on inputs and input services received by such manufacturer under reverse charge at normal rates and not at the composition rates. Purchase from a person under the composition scheme is purchase from a registered person and hence will not attract tax under reverse charge under section 9(4) of the CGST Act, 2017. Any person migrating from the existing law to a composition scheme and holding stock of goods purchased from unregistered persons is required to pay tax on such goods.
An intimation that composition scheme has been availed in one State shall be deemed to be an intimation in respect of all other places of business registered on the same Permanent Account Number in other States.
There can be three situations with respective effective dates as shown below: Situation Effective date of composition levy Persons who have been granted provisional registration and who opt for composition levy (Intimation is filed under Rule 3(1) in FORM GST CMP-01) 1st July, 2017. Persons opting for composition levy at the ti me of making application for new registration in the same registration application itself (The intimation under Rule 3(2) in FORM GST REG-01) Effective date of registration; Intimation shall be considered only after the grant of registration and his option to pay tax under composition scheme shall be effective from the effective dat of registration. Persons opting for composition levy after obtaining registration (The intimation is filed under Rule 3(3) in FORM GST CMP-02) The beginning of the next financial year.
The option exercised by a registered person to pay tax under the composition scheme shall remain valid so long as he satisfies all the conditions specified in the law. The option is not required to be renewed.
Such person is required to furnish the details of stock, including the inward supply of goods received from unregistered persons, held by him on the 30th day of June, 2017 electronically, in FORM GST CMP-03, on the common portal, either directly or through a Facilitation Centre notified by the Commissioner, within a period of sixty days from the date on which the option for composition levy is exercised or within such further period as may be extended by the Commissioner in this behalf. Further, if on 1st July, 2017 such person holds in stock goods that have been received from outside the State or imported from outside the Country, he is not eligible to opt for composition scheme.
Yes, the registered person who intends to withdraw from the composition scheme can file a duly signed or verified application in FORM GST CMP-04. In case he wants to claim input tax credit on the stock of inputs and inputs contained in semi-finished or finished goods held in stock by him on the date of withdrawal, he is required to furnish a statement in FORM GST ITC-01 containing the details of such stock within a period of thirty days of withdrawal.
Yes. Any intimation or application for withdrawal in respect of any place of business in any State or Union territory, shall be deemed to be an intimation for withdrawal in respect of all other places of business registered on the same Permanent Account Number.
No, because exports and supplies to SEZ from Domestic Tariff Area are treated as inter-State supply. A person paying tax under composition scheme cannot make inter-State outward supply of goods.
Job-work is a supply of service and not eligible for composition scheme. Any manufacturer or processor who wishes to carry out job-work for others would not be eligible for composition scheme.
A registered person under composition scheme would not have input tax credit and he would make all his tax payments by debit in the electronic cash ledger maintained at the common portal. The taxpayer can deposit cash anytime in the electronic cash ledger at his convenience. The payment in electronic cash ledger can be made through all modes available like e-payment through net-banking, credit card and debit card, over the counter of banks, RTGS or NEFT.
registered person under the composition scheme will not pay taxes every month. He would file return and pay taxes on a quarterly basis i.e. for each quarter of the financial year. Due date for payment of tax for them would be on or before the 18th day after the end of such quarter.
Rules on Accounts and Records provide details of the accounts to be maintained. They are maintained under normal course of business by any small manufacturer. The details to be maintained in accounts inter-alia consists of goods supplied, inward supplies attracting reverse charge, invoices, bills of supply, delivery challans, credit notes, debit notes, receipt vouchers, payment vouchers, refund vouchers etc.
No, registered person under the composition scheme will not pay taxes every month. He would file return and pay taxes on a quarterly basis i.e. for each quarter of the financial year. Due date for payment of tax for them would be on or before the 18th day after the end of such quarter.
Rules on Accounts and Records provide details of the accounts to be maintained. They are maintained under normal course of business by any small manufacturer. The details to be maintained in accounts inter-alia consists of goods supplied, inward supplies attracting reverse charge, invoices, bills of supply, delivery challans, credit notes, debit notes, receipt vouchers, payment vouchers, refund vouchers etc.
No, the requirement to maintain detailed accounts of stocks in respect of goods received and supplied, work in progress, lost, destroyed etc. does not apply to a manufacturer under the composition scheme. Such a person shall maintain a true and correct account of production or manufacture of goods, inward and outward supply of goods, stock of goods, tax payable and paid.
A manufacturer under the composition scheme need not maintain account of input tax, input tax credit claimed etc. as he is neither allowed to avail of input tax credit nor can he issue an invoice showing tax using which buyer can avail input tax credit.
Yes, a manufacturer under the composition scheme can maintain his accounts in registers serially numbered and also issue bill of supply manually following the conditions specified in rules in this regard.
No, a registered person under the composition scheme would not need to specify HSN code of their products in bill of supply or return.
A registered person under the composition scheme of GST is required to furnish quarterly return called GSTR-4 between the 11th day and 18th day of the month succeeding the quarter.
GSTR-4 may be referred for details required to be filled in the return. It is a very simple return containing consolidated details of outward supplies, details of import of services or other supplies attracting reverse charge and inward supplies which shall be auto-populated. Note: Reference to CGST Act, 2017 includes reference to SGST Act, 2017 and UTGST Act, 2017 also.
You can send your inputs or capital goods to a job-worker for job work without payment of tax and also bring back the same, after completion of job work, within one year or three years respectively. You can also supply the inputs or capital goods from the place of business of the job worke subject to the condition condition that you have to declare the place of business of the job-worker as your additional place of business if the job-worker is not a registered person. However, if the inputs or the capital goods, other than moulds and dies, jigs and fixtures or tools, which have been sent to the job-worker are not received back within the specified time period, it shall be deemed that you have supplied the inputs or capital goods on the day when you have sent it to the job-worker and you have to pay tax on such supply accordingly.
Since the goods you are dealing with are exempted from tax under the State Act, you will not be eligible to avail input tax credit as SGST under the SGST Act, 2017 on your stock of goods lying on the appointed day. But, you will be eligible to enjoy CENVAT credit as Central Tax on your stock if you have invoices or other prescribed documents evidencing payment of excise duty under the existing law and such invoices/prescribed documents were issued not earlier than twelve months immediately preceding the appointed day.
(a) You can issue a credit note in respect of the goods returned and adjust your tax liability if the person returning the goods has reversed the credit availed by him at the time of original supply. Such credit note cannot be issued after September of the fol lowing year or filing of annual return whichever is earlier. (b) Full credit of the tax paid on the stock would be available if the documents evidencing tax pay ment are available. However, if only documents relating to procurement are available with no documents evidencing tax payment, deemed credit would be admissible in respect of textiles only if the goods were taxable under the Central Excise Act. Such credit would be available after the tax has been paid on supply of these goods. This facility is available for 6 months period only or till the date of sale of such stock whichever is earlier and is limited to 40% of the central tax paid by you. As per the second proviso to Section 16(2)(d) of the CGST Act, 2017 if a recipient of the supply does not pay to its supplier the value of the supply along with the tax within 180 days from the date of issue of invoice by the supplier, the amount of ITC availed proportionate to the unpaid amount would be added to the output tax liability of the recipient of the supply along with the interest thereon. The credit so reversed can be reclaimed when the value is paid to the supplier along with the tax thereon. Thus the government is not assuring payment within 180 days. (d) A normal invoice has to be issued irrespective of whether the buyer is under composition scheme or not. The difference would be only when you receive supplies from the person registered under the composition scheme. (e) Relaxation in filing of returns for the month of July and August, 2017 has already been provided as per which for the first two months of GST implementation, the tax would be payable based on a simple return (Form GSTR- 3B) containing summary of outward and inward supplies which will be submitted before 20th of the succeeding month. However, the invoice-wise details in regular GSTR – 1 would have to be filed for the month of July and August, 2017 as per the timelines given below:
As per Chapter 53 heading 5303 of the GST rate schedule, raw jute has been kept at the NIL rate slab. Thus, it is presumed that suppliers dealing only in raw jute are not required to register themselves under GST. But Jute Mills are asking their raw jute suppliers to mandatorily register themselves else their supplies would not be accepted. Please clarify whether raw jute suppliers are liable for registration?
Raw jute has been kept at NIL rate of GST i.e. there would be no tax on raw jute. Therefore, as per Section 23 (1) (a) of the CGST Act, 2017 the suppliers dealing only in raw jute are not required to register. Jute mills are not required to pay tax under Reverse Charge Mechanism (RCM) as mentioned under Section 9(4) of the CGST Act, 2017 because both the goods have been kept at NIL rate of duty. Similarly, Raw Silk has also been kept at NIL rate of GST i.e. there would be no tax on raw silk. Therefore, the suppliers dealing only in raw silk are also not required to register.
As per Section 23(1)(b) of the CGST Act, 2017 an agriculturist, to the extent of supply of produce out of cultivation of land is not liable to registration.
As the cotton under heading 5201 and 5203 has been placed under 5% rate and the cotton farmer is not liable to registration, the buyers of raw cotton (who are registered persons) from the farmers are required to pay tax on reverse charge basis as per Section 9 (4) of the CGST Act, 2017.
As per the rate schedule, all goods of sale value not exceeding Rs.1000/- per piece would be taxed at 5% and the goods of sale value exceeding Rs.1000/- per piece would be taxed at 12%. Therefore, it is the sale value i.e. the transaction value on which the tax has to be paid and not the MRP.
You will be eligible for full ITC of Rs. 18/- paid on your inputs i.e. yarn but whatever credit remains unutilized will remain in your electronic credit ledger and no refund of the same will be allowed. Your product was not unconditionally exempt from the whole of the duty of excise under the Central Excise Tariff. If you do not possess invoices/other documents evidencing payment of excise duty in respect of your stock of goods, you will be allowed to avail input tax credit on goods held in stock on the appointed day at the rate of 40% of the central tax on your intra-State supply of goods after the appointed day or 20% of the integrated tax on your inter-State supply of goods after paying central tax/integrated tax on such supply. You are allowed to enjoy the scheme for six months from the appointed day or till such stock is sold out, whichever is earlier, and tax paid by you shall be credited as central tax in your electronic credit ledger.
(a) When you make supplies out of this stock after 1st July, 2017 you will be liable to pay tax as applicable to the goods sold by you. (b) GST rate on fabric is flat 5% irrespective of composition. (c) Upto Rs. 1.5 cr turnover, no HSN code is required to be mentioned. For those having turnover of Rs. 1.5 to 5 Cr, first 2 digits of the HSN code are required i.e. the chapter number. Only those who have turnover above Rs. 5 Cr are required to mention 4 digits of the HSN code. You will start getting the HSN code in your supplier's invoice, so it would not cause any issues once the supplies under new regime take place. (d) ITC would be admissible as per the Transitional provisions of GST Law. (e) Rate of tax linked to the sale value applies only to garments and not for sarees and suilengths which are fabrics.
The services provided by you fall under the category of job work by virtue of the definition of job work provided under Section 2 (68) of the CGST Act, 2017. The rate for job work in relation to trouser, which is a wearing apparel, is 18%.
(a) Yes. You would be eligible for credit of tax paid on material used for job work. (b) No.You are not required to raise two different invoices. You would be raising one invoice similar one to what you have been doing till now and GST at the applicable rate will be charged on the invoice value. You can pay your tax liability by using Input Tax Credit (ITC). However, invoice should carry all the details as required by the CGST Act, 2017 and the CGST Rules.
The woven fabrics are classifiable under the various headings depending upon their composition. The knitted or crocheted fabrics fall under Chapter 60. Polyester fabrics fall under Chapter 54 and 55 and Coated fabrics fall under Chapter 59.
The rate of 5% would be chargeable on the job process relating to the textile yarns (other than Man Made Fibre/ Filament) and fabrics. Sarees are treated as fabrics and a saree remains fabrics only as no new item emerges having distinct name, character and use. Stitching of two or more different kinds of fabrics also does not take away its classification. Therefore, the sarees whether embroidered or not would be taxed at the same rate at which the fabric is taxed.
Embroidery strips/ badges (narrow woven fabrics) are classified under heading 5810 and chargeable to tax at 12%.
Shawls fall in the category of articles of apparel and clothing accessories and are classified under heading 61.17, if knitted or crocheted and under heading 62.14, if not knitted or crocheted. The rate of tax is 5% if the sale value of shawl does not exceed Rs.1000/- per piece and the rate is 12% if the sale value exceeds Rs.1000/- per piece.
Dress sets are classified under heading 6307 and the rate of tax on the dress materials/patterns is similar to the apparels i.e. for dress material of sale value not exceeding Rs.1000/-, tax at 5% would be charged and for dress material of sale value exceeding Rs.1000/-, tax at 12% would be charged.
Under HSN, the classification of yarn is on predominance basis. So the yarn having predominance of wool would fall under Chapter 51. If all kinds are in equal proportion i.e. no fibre is predominant, it will get classified in the chapter covering the fibre last in the numerical order, so Chapter 54 or 55 in case MMF are present.
While committing an act, a “culpable mental state” is a state of mind wherein- • the act is intentional; • the act and its implications are understood and controllable; • the person committing the act was not coerced and even overcomes hurdles to the act committed; • the person believes or has reasons to believe that the act is contrary to law.
Yes. Section 77 of the MGL provides that every person who was in-charge of or responsible to a company for the conduct of its business shall, along-with the company itself, be liable to be proceeded against and punished for an offence committed by the company while such person was in-charge of the affairs of the company. If any offence committed by the company— • has been committed with the consent/ connivance of, or • is attributable to negligence of— any officer of the company then such officer shall be deemed to be guilty of the said offence and liable to be proceeded against and punished accordingly.
Section 320 of the Code of Criminal Procedure defines “compounding” as to forbear from prosecution for consideration or any private motive.
Yes. As per section 78 of the MGL, any offence, other than the following, may upon payment of the prescribed (compounding) amount be compounded and such compounding is permissible either before or after the institution of prosecution: • Offences numbered 1 to 7 of the 12 major offences (outlined in Q. 16 above), if the person charged with the offence had compounded earlier in respect of any of the said offences; • Aiding/abetting offences numbered 1 to 7 of the 12 major offences, if the person charged with the offence had compounded earlier in respect of any of the said offences; • Any offence (other than the above offences)under any SGST Act/IGST Act in respect of a supply with value exceeding Rs.1 crore, if the person charged with the offence had compounded earlier in respect of any of the said offences; • Any offence which is also an offence under NDPSA or FEMA or any other Act other than CGST/SGST; • Any other class of offences or persons that may be prescribed in this behalf. Compounding is to be permitted only after payment of tax, interest and penalty and compounding shall not affect any proceeding already instituted under any other law.
Yes. The lower limit for compounding amount is to be the greater of the following amounts:- • 50% of tax involved, or • Rs.10,000. The upper limit for compounding amount is to be greater of the following amounts:- • 150% of tax involved or • Rs.30,000.
Sub-section (3) of section 77 provides that on payment of compounding amount no further proceeding to be initiated under this Act and criminal proceeding already initiated shall stand abated.
“Integrated Goods and Services Tax” (IGST) means tax levied under the IGST Act on the supply of any goods and/ or services in the course of inter-State trade or commerce.
A supply of goods and/or services in the course of inter-State trade or commerce means any supply where the location of the supplier and the place of supply are in different States. (Section 3(1) and 3(2) of the IGST Act)
IGST shall be levied and collected by Centre on inter-state supplies. IGST would be broadly CGST plus SGST and shall be levied on all inter-State taxable supplies of goods and services. The inter-State seller will pay IGST on value addition after adjusting available credit of IGST, CGST, and SGST on his purchases. The Exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The Importing dealer will claim credit of IGST while discharging his output tax liability in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST. The relevant information is also submitted to the Central Agency which will act as a clearing house mechanism, verify the claims and inform the respective governments to transfer the funds.
The draft IGST law contains 33 sections divided into 11 Chapters. The draft, inter alia, sets out the rules for determination of the place of supply of goods. Where the supply involves movement of goods, the place of supply shall be the location of goods at the time at which the movement of goods terminates for delivery to the recipient. Where the supply does not involve movement of goods, the place of supply shall be the location of such goods at the time of delivery to the recipient. In the case of goods assembled or installed at site, the place of supply shall be the place of such installation or assembly. Finally, where the goods are supplied on board a conveyance, the place of supply shall be the location at which such goods are taken on board.
The major advantages of IGST Model are: a. Maintenance of uninterrupted ITC chain on inter-State transactions; b. No upfront payment of tax or substantial blockage of funds for the inter-State seller or buyer; c. No refund claim in exporting State, as ITC is used up while paying the tax; d. Self-monitoring model; e. Ensures tax neutrality while keeping the tax regime simple; f. Simple accounting with no additional compliance burden on the taxpayer; g. Would facilitate in ensuring high level of compliance and thus higher collection efficiency. Model can handle ‘Business to Business’ as well as ‘Business to Consumer’ transactions.
All imports/exports will be deemed as inter-state supplies for the purposes of levy of GST (IGST). The incidence of tax will follow the destination principle and the tax revenue in case of SGST will accrue to the State where the imported goods and services are consumed. Full and complete set-off will be available as ITC of the IGST paid on import on goods and services. (Section 2(c) of the IGST Act).
Yes, Section 27 of the IGST Act provides that various provisions as mentioned therein shall apply under IGST Act as they apply in relation to levy under the CGST Act.
The IGST payment can be done utilizing ITC or by cash. However, the use of ITC for payment of IGST will be done using the following hierarchy, o First available ITC of IGST shall be used for payment of IGST; o Once ITC of IGST is exhausted, the ITC of CGST shall be used for payment of IGST; o If both ITC of IGST and ITC of CGST are exhausted, then only the dealer would be permitted to use ITC of SGST for payment of IGST. Remaining IGST liability, if any, shall be discharged using payment in cash. GST System will ensure maintenance of this hierarchy for payment of IGST using the credit.
There would be settlement of account between the centre and the states on two counts, which are as follows- • Centre and the exporting state: The exporting state shall pay the amount equal to the ITC of SGST used by the supplier in the exporting state to the Centre. • Centre and the importing state: The centre shall pay the amount equal to the ITC of IGST used by a dealer for payment of SGST on intra- state supplies. The settlement would be on cumulative basis for a state taking into account the details furnished by all the dealer in the settlement period. Similar settlement of amount would also be undertaken between CGST and IGST account.
The basic principle of GST is that it should effectively tax the consumption of such supplies at the destination thereof or as the case may at the point of consumption. So place of supply provision determine the place i.e. taxable jurisdiction where the tax should reach. The place of supply determines whether a transaction is intra-state or inter-state. In other words, the place of Supply of Goods is required to determine whether a supply is subject to SGST plus CGSTin a given State or else would attract IGST if it is an inter-state supply.
Goods being tangible do not pose any significant problems for determination of their place of consumption. Services being intangible pose problems w.r.t determination of place of supply mainly due to following factors: (i) The manner of delivery of service could be altered easily. For example telecom service could change from mostly post-paid to mostly pre-paid; billing address could be changed, billers address could be changed, repair or maintenance of software could be changed from onsite to online; banking services were earlier required customer to go to the bank, now the customer could avail service from anywhere; (ii) Service provider, service receiver and the service provided may not be ascertainable or may easily be suppressed as nothing tangible moves and there would hardly be a trail; (iii) For supplying a service, a fixed location of service provider is not mandatory and even the service recipient may receive service while on the move. The location of billing could be changed overnight; (iv) Sometime the same element may flow to more than one location, for example, construction or other services in respect of a railway line, a national highway or a bridge on a river which originate in one state and end in the other state. Similarly a copy right for distribution and exhibition of film could be assigned for many states in single transaction or an advertisement or a programme is broadcasted across the country at the same time. An airline may issue seasonal tickets, containing say 10 leafs which could be used for travel between any two location in the country. The card issued by Delhi metro could be used by a person located in Noida, or Delhi or Faridabad, without the Delhi metro being able to distinguish the location or journeys at the time of receipt of payment; (v) Services are continuously evolving and would thus continue to pose newer challenges. For example 15-20 years back no one could have thought of DTH, online information, online banking, online booking of tickets, internet, mobile telecommunication etc.
The various element involved in a transaction in services can be used as proxies to determine the place of supply. An assumption or proxy which gives more appropriate result than others for determining the place of supply, could be used for determining the place of supply. The same are discussed below: (a) location of service provider; (b) the location of service receiver; (c) the place where the activity takes place/ place of performance; (d) the place where it is consumed; and (e) the place/person to which actual benefit flows
In respect of B2B transactions, the taxes paid are taken as credit by the recipient so such transactions are just pass through. GST collected on B2 B supplies effectively create a liability for the government and an asset for the recipient of such supplies in as much as the recipient is entitled to use the input tax credit for payment of future taxes. For B2B transactions the location of recipient takes care in almost all situations as further credit is to be taken by recipient. The recipient usually further supplies to another customer. The supply is consumed only when a B2B transaction is further converted into B2C transaction. In respect of B2C transactions, the supply is finally consumed and the taxes paid actually come to the government.
The place of supply of goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient. (Section 5(2) of IGST Act)
It would be deemed that the third person has received the goods and the place of supply of such goods shall be the principal place of business of such person. (Section 5(2A) of IGST Act)
In respect of goods, the place of supply shall be the location at which such goods are taken on board. (Section 5(5)of IGST Act) However, in respect of services, the place of supply shall be the location of the first scheduled point of departure of that conveyance for the journey. (Section 6(11)of IGST Act)
The terms used in the IGST Act are registered taxpayers and non-registered taxpayers. The presumption in case of supplies to registered person is the location of such person. Since the recipient is registered, address of recipient is always there and the same can be taken as proxy for place of supply.
In respect of unregistered recipients, the usual place of supply is location of recipient. However in many cases, the address of recipient is not available, in such cases, location of the supplier of services is taken as proxy for place of supply.
Where the immovable property is located in more than one State, the supply of service shall be treated as made in each of the States in proportion to the value for services separately collected or determined, in terms of the contract or agreement entered into in this regard or, in the absence of such contract oragreement, on such other reasonable basis as may be prescribed in this behalf. (The Explanation clause to section 6(5) of the IGST Act)
In case of an event, if the recipient of service is registered, the place of supply of services for organizing the event shall be the location of such person. However, if the recipient is not registered, the place of supply shall be the place where event is held. Since the event is being held in multiple states and a consolidated amount is charges for such services, the place of supply shall be taken as being in each state in proportion to the value of services so provided in each state. (The Explanation clause to section 6(8) of the IGST Act)
In case the recipient is registered, the location of such person shall be the place of supply. However, if the recipient is not registered, the place of supply shall be the place where the goods are handed over for transportation.
If the person is registered, the place of supply shall be the location of recipient. If the person is not registered, the place of supply for the forward journey from Mumbai to Delhi shall be Mumbai, the place where he embarks. However, for the return journey, the place of supply shall be Delhi as the return journey has to be treated as separate journey. (The Explanation clause to section 6(11) of the IGST Act)
In the above case, the place of embarkation will not be available at the time of issue of invoice as the right to passage is for future use. Accordingly, place of supply cannot be the place of embarkation. In such cases, the default rule shall apply. (The proviso clause to section 6(10) (b) of the IGST Act)
The location of supplier of mobile services cannot be the place of supply as the mobile companies are providing services in multiple states and many of these services are inter-state. The consumption principle will be broken if the location of supplier is taken as place of supply and all the revenue may go to a few states where the suppliers are located. The place of supply for mobile connection would depend on whether the connection is on postpaid or prepaid basis. In case of postpaid connections, the place of supply shall be the location of billing address of the recipient of service. In case of pre-paid connections, the place of supply shall be the place where payment for such connection is received or such pre-paid vouchers are sold. However if the recharge is done through internet/e-payment, the location of recipient of service on record shall be the taken as the place of service.
The place of supply shall be the location of the recipient of services on the records of the supplier of services. So Goa shall be the place of supply.
If the service is not linked to the account of person, place of supply shall be Kullu i.e. the location of the supplier of services. However if the service is linked to the account of the person, the place of supply shall be Mumbai, the location of recipient on the records of the supplier.
The location of the recipient of services on the records of the supplier of insurance services shall be the place of supply. So Gurgaon shall be the place of supply. (proviso clause to section 6(14) of the IGST Act)
Goods and Services Tax Network (GSTN) is a nonprofit non-government company, which will provide shared IT infrastructure and service to both central and state governments including tax payers and other stakeholders. The Frontend services of registration, Returns and payments to all taxpayers will be provided by GSTN. It will be the interface between the government and the taxpayers.
The GST System Project is a unique and complex IT initiative. It is unique as it seeks, for the first time to establish a uniform interface for the tax payer and a common and shared IT infrastructure between the Centre and States. Currently, the Centre and State indirect tax administrations work under different laws, regulations, procedures and formats and consequently the IT systems work as independent sites. Integrating them for GST implementation would be complex since it would involve integrating the entire indirect tax ecosystem so as to bring all the tax administrations (Centre, State and Union Territories) to the same level of IT maturity with uniform formats and interfaces for taxpayers and other external stakeholders. Besides, GST being a destination based tax, the inter- state trade of goods and services (IGST) would need a robust settlement mechanism amongst the States and the Centre. This is possible only when there is a strong IT Infrastructure and Service back bone which enables capture, processing and exchange of information amongst the stakeholders (including taxpayers, States and Central Government, Bank and RBI) This aspect was discussed in the 4th meeting of 2010 of the Empowered Committee of State Finance Ministers held on 21/7/2010. In the said meeting the EC approved creation of an ‘Empowered Group on IT Infrastructure for GST’ (referred as EG) under the chairmanship of Dr. Nandan Nilekani along with Additional Secretary (Rev), Member (B&C) CBEC, DG (Systems), CBEC, FA Ministry of Finance, Member Secretary EC and five state commissioners of Trade Taxes (Maharashtra, Assam, Karnataka, West Bengal and Gujarat). The Group was mandated to suggest, inter alia, the modalities for setting up a National Information Utility (NIU/ SPV) for implementing the Common Portal to be called GST Network (GSTN) and recommend the structure and terms of reference for the NIU/ SPV, detailed implementation strategy and the road map for its creation in addition to other items like training, outreach etc. In March 2010, TAGUP constituted by the Ministry of Finance had recommended that National Information Utilities should be set up as private companies with a public purpose for implementation of large and complex Government IT projects including GST. Mandate of TAGUP was to examine the technological and systemic issues relating to the various IT projects such as GST, TIN, NPS, etc. The EG had seven meetings between 2nd August 2010 and 8th August 2011 to discuss the modalities. After due deliberations, the EG recommended creation of a Special Purpose Vehicle for implementing the GST System Project. To enable efficient and reliable provision of services in a demanding environment, the EG recommended a non- Government structure for the GSTN SPV with Government equity of 49% (Centre – 24.5% and States – 24.5%) after considering key parameters such as independence of management, strategic control of Government, flexibility in organizational structure, agility in decision making and ability to hire and retain competent human resources. In view of the sensitivity of the role of GSTN and the information that would be available with it, the EG also considered the issue of strategic control of Government over GSTN. The Group recommended that strategic control of the Government over the SPV should be ensured through measures such as composition of the Board, mechanisms of Special Resolution and Shareholders Agreement, induction of Government officers on deputation, and agreements between GSTN SPV and Governments. Also, the shareholding pattern would ensure that the Centre individually and States collectively are the largest stakeholders at 24.5% each. In combination, the Government shareholding at 49% would far exceed that of any single private institution. EG also brought out the need to have technology specification to run this company so that there is 100 percent matching of returns. The business knowledge resides with the officials of Government of India and States. However, professionals with sophisticated technology knowledge will be required to run this company independently, similar to NSDL which is working professionally and independently. EG also recommended a non-government company as that will have operational freedom. These recommendations were presented before the Empowered Committee of State Finance Ministers in its 3rd meeting of 2011 held on 19th August 2011 and in the 4th meeting of 2011 of the EC held on 14th Oct 2011. The proposal of the EG on IT infrastructure for GST regarding GSTN and formation of a non-profit section 25 company with the strategic control with the Government were approved by the Empowered Committee of State Finance Ministers (EC) in its meeting held on14.10.11. The note of Department of Revenue for setting up a Special Purpose Vehicle to be called Goods and Services Tax Network on the lines mentioned above was considered by the Union Cabinet on 12th April 2012 and approved. The Union cabinet also approved the following: i. Suitable and willing non-government institutions will be identified and firmed up by the Ministry of Finance to invest in GSTN-SPV prior to its incorporation. ii. The strategic control of the Government over the SPV would be ensured through measures such as composition of the Board, mechanisms of Special Resolution and Shareholders Agreement, induction of Government officers on deputation, and agreements between GSTN SPV and Governments. iii. The Board of Directors of GSTN SPV would comprise 14 Directors with 3 Directors from the Centre, 3 from the States, a Chairman of the Board of Directors appointed through a joint approval mechanism of Centre and States, 3 Directors from private equity stake holders, 3 independent Directors who would be persons of eminence and a CEO of the GSTN SPV selected through an open selection process. iv. Relaxation in relevant rules to enable deputation of Government officers to the GSTN SPV for exercise of strategic control and for bringing in necessary domain expertise. v. GSTN SPV would have a self- sustaining revenue model, where it would be able to levy user charges on the tax payers and the tax authorities availing services. vi. GSTN SPV to be the exclusive national agency responsible for delivering integrated indirect Tax related services involving multiple tax authorities. Accordingly, any other service provider seeking to deliver similar integrated services would be required to enter into a formal arrangement with GSTN SPV for the services. vii. A one- time non- recurring Grant- in aid of Rs. 315 crore from the Central Government towards expenditure for the initial setting up and functioning of the SPV for a three year period after incorporation. In compliance of the Cabinet decision, GST Network was registered as a not-for-profit, private limited company under section 25 of the Companies Act, 1956 with the following equity structure: Central Govt 24.5% State Govts 24.5% HDFC 10% HDFC Bank 10% ICICI Bank 10% NSE Strategic Investment Co 10% LIC Housing Finance Ltd 11% The GSTN in its current form was created after taking after approval of Empowered Committee of State Finance Ministers and Union Government after due deliberations over a long period of time.
GSTN will render the following services through the Common GST Portal: (a) Registration (including existing taxpayer master migration and issue of PAN based registration number); (b) Payment management including payment gateways and integration with banking systems; (c) Return filing and processing; (d) Taxpayer management, including account management, notifications, information, and status tracking; (e) Tax authority account and ledger Management; (f) Computation of settlement (including IGST settlement) between the Centre and States; Clearing house for IGST; (g) Processing and reconciliation of GST on import and integration with EDI systems of Customs; (h) MIS including need based information and business intelligence; (i) Maintenance of interfaces between the Common GST Portal and tax administration systems; (j) Provide training to stakeholders; (k) Provide Analytics and Business Intelligence to tax authorities; and (l) Carry out research, study best practices and provide training to the stakeholders.
In GST regime, while taxpayer facing core services of applying for registration, uploading of invoices, filing of return, making tax payments shall be hosted by GST System, all the statutory functions (such as approval of registration, assessment of return, conducting investigation and audit etc.) shall be conducted by the tax authorities of States and Central governments. Thus, the frontend shall be provided by GSTN and the backend modules shall be developed by states and Central Government themselves. However 24 states (termed as Model 2 states) have asked GSTN to develop their backend modules also. The CBEC and rest of the states (Model 1) have decided to develop and host the back-end modules themselves.
The application for Registration will be made Online on GST Portal. Some of the key data like PAN, Business Constitution, Aadhaar, CIN/DIN etc. (as applicable) will be validated online against respective agency i.e. CBDT, UID, MCA etc, thereby ensuring minimum documentation. The application data, supporting scanned documents shall be sent by GSTN to states/ Centre which in turn shall send the query, if any, approval or rejection intimation and digitally signed registration to GSTN for eventual download by the taxpayer.
GSTN has engaged M/S Infosys as a single Managed Service Provider (MSP) for the design, development, deployment of GST system, including all application software, tools and Infrastructure and operate & maintain the same for a period of 5 years from Go-Live.
The GST portal shall be accessible over Internet (by Taxpayers and their CAs/Tax Advocates etc.) and Intranet by Tax Officials etc. The portal shall be one single common portal for all GST related services e.g.– i. Tax payer registration (New, surrender, cancelation, etc.); ii. Invoices upload, auto-drafting of Purchase register of buyer Periodic GST Returns filing; iii. Tax payment including integration with agency banks; iv. ITC and Cash Ledger and Liability Register; v. MIS reporting for tax payers, tax officials and other stakeholders; vi. BI/Analytics for Tax officials.
A common GST system will provide linkage to all State/UT Commercial Tax departments, Central Tax authorities, Taxpayers, Banks and other stakeholders. The eco-system consists of all stakeholders starting from taxpayer to tax professional to tax officials to GST portal to Banks to accounting authorities. The diagram given below depicts the whole GST eco-system.
The GST System is being developed by Infosys, the Managed Service Provider (MSP). The work consists of development of GST Core System, provisioning of required IT infrastructure to host the GST System and running and operating the system for five years. The proposed GST envisages all filings by taxpayers electronically. To achieve this, the taxpayer will need tools for uploading invoice information, matching of input tax credit (ITC) claims, creation of party-wise ledgers, uploading of returns, payment of taxes, signing of such document with digital signature etc. The GST System will have a G2B portal for taxpayers to access the GST Systems, however, that would not be the only way for interacting with the GST system as the taxpayer via his choice of third party applications, which will provide all user interfaces and convenience via desktop, mobile, other interfaces, will be able to interact with the GST system. The third party applications will connect with GST system via secure GST system APIs. All such applications are expected to be developed by third party service providers who have been given a generic name, GST Suvidha Provider or GSP. Taxpayers will interface with GST System via GST system portal or via GSP ecosystem provided by way of applications for activities such as Registration, Tax payments, Returns filing and other information exchange with GST core system. The GSPs will become the user agencies of the GST system APIs and build applications and web portals as alternate interface for the taxpayers.
The GSP developed Apps will connect with the GST system via secure GST system APIs. Some of the functions of GSP are: • Development of various apps / interfaces for taxpayer, TRPs of GST system • Providing other value added services to the taxpayers The GST Suvidha Providers (GSPs) are envisaged to provide innovative and convenient methods to taxpayers and other stakeholders in interacting with the GST Systems from registration of entity to uploading of invoice details to filing of returns. Thus there will be two sets of interactions, one between the App user and the GSP and the second between the GSP and the GST System.
A GSP providing tax accounting software will have the advantage of already providing the tax payer with a vast majority of the taxation functionality. It will help the tax payer if the delta process of upload of the invoice/ return and reconciliation of the same is also provided by the GSP. Whereas in case of GST portal, another set of exercise manually or otherwise will have to be done to upload the invoice data or the return. The interface and features exposed by GST portal will be uniform for all taxpayers and might be basic in form and design. On the other hand GSPs are expected to have richer interfaces and features required by specific group (large taxpayers with completely automated financial system,SME with semi-automated system and small size with no system) of taxpayers. Also, by sheer size the GST portal will not be as nimble as that provided by a GSP. GSPs can come up with application to provide GST filing facility in existing software or develop end-to-end solution for SME and small taxpayer to manage their sale/purchase and GST filing e.g. an offline utility like spread sheet, which taxpayer can fill their invoice details and then upload on GST portal for processing. Similarly, for Tax Consultants (TC), GSPs can provide dashboard to display list of his/her all clients and clicking on a particular client can give TC the snapshot of the actions/ pending actions by client. GSPs can provide innovative/value added features, which would distinguish them with other GSPs in the market. Source: http://www.gstn.org/ecosystem/faq_question.php
Ans. Some of the functions which will be performed by taxpayers through GSTN are: • Application for registration as taxpayer, and profile management; • Payment of taxes, including penalties and interest; • Uploading of Invoice data & filing returns / annual statements; • Status review of return/tax ledger/cash ledger.
The officers will be required to use GSTN information at the backend for following functions: • Approval/rejection for enrollment/registration of taxpayers; • Tax administration of state tax(Assessment / Audit /Refund / Appeal/ Investigation); • MIS and other functions.
No, GSTN will not generate any new identification. The combination of Supplier’s GSTIN, Invoice no and Financial year with HSN/SAC Code will make each line unique.
Yes, GST Portal will have functionality to take invoice data on any time basis. Earlier one uploads better it is as it will get reflected to the receiver who can see the same in his/her purchase register
Yes, GSTN will provide spreadsheet (like Microsoft Excel) like tools free of cost to taxpayers to enable them to compile invoice data in the same and upload invoice data in one go. This will be an offline tool which can be used to inputs invoice data without being online and then upload the invoice data in one go for few hundred invoices.
Yes, the GST portal is being designed in such a way that it can be seen on any smart phone. Thus ledgers like cash ledger, liability ledger, ITC ledger etc. can be seen on a mobile phone.
Yes, GSTN will be providing separate user ID and Password to Tax Professional to enable them to work on behalf of their clients without asking for their user ID and passwords. The tax professional will be able to do all the work on behalf of taxpayers as allowed under GST Law except final submission, which will be done by the taxpayers using e-sign (OTP) or Digital Signature Certificate.
Yes, a taxpayer may choose a different tax professional by simply unselecting it at GSTN portal and delegating to a new tax professional.
No, the existing taxpayers whose PAN have been validated from CBDT database will not be required to apply afresh. They will be issued provisional GSTIN by GST portal, which will be valid for six months for providing relevant data as per GST registration form. On completion of data filing provisional registration will get converted into regular Registration. Further notification giving timelines will be issued by respective tax authorities.
Yes, GSTN is preparing Computer Based Training materials which have videos embedded into them for each process to be performed on the GST portal. These will be put on the GST portal as well as on the website of all tax authorities.
Yes, all steps are being taken by GSTN to ensure the confidentiality of personal and business information furnished by the taxpayers on GST Common Portal. This will be done by ensuring Role Based Access Control (RBAC) and encryption of critical data of taxpayers both during transit and in storage. Only the authorized tax authorities will be able to see and read the data.
GST Systems project has incorporated state of art security framework for data and service security. Besides high end firewalls, intrusion detection, data encryption at rest as well as in motion, complete audit trail, tamper proofing using consistent hashing algorithms, OS and host hardening etc., GSTN is also establishing a primary and secondary Security Operations Command & Control center, which will proactively monitor and protect malicious attack in real time. GSTN is also ensuring secure coding practices through continuous scanning of source code to protect against commonly known and unknown threats.
Yes, the registered taxable person shall be entitled to such credit and it will get credited to his electronic credit ledger – section 143.
He shall be entitled to credit only when ITC on such goods were admissible under the earlier law and is also admissible in GST. Since on the two items credit was not available under the earlier law, the said person cannot claim it in GST – proviso to section 144(1).
The recovery relating to ITC wrongfully enjoyed will be done under GST only - section 143 to 146.
A manufacturer having a turnover of say Rs 60 lakhs was enjoying SSI exemption earlier, will have to be registered in GST as the said turnover exceeds the basic threshold of Rs 10 lakhs - section 9. A trader having turnover below the threshold under VAT making sales through e-commerce operator will be required to be registered in GST. There will no threshold for such persons – section 145 read with section 9 and Schedule III. Q 6. Will ITC be
No, VAT does not cover services. Under it, only goods are covered.
No. He shall have to pay an amount equivalent to the credit of input tax on inputs held in stock on the day immediately preceding the date of switchover. The amount can be paid either through the electronic credit ledger or the electronic cash ledger. Where payment is made through the electronic credit ledger, excess ITC balance lying, if any, will lapse. The relevant section is section 147.
First, find out whether the goods are taxable in GST or not. Secondly check whether the goods were returned after 6 months from the appointed day. If the answer to both happens to be ‘yes’ then the person returning the goods will have to pay tax in GST. However, where the goods are returned within 6 months from the appointed day, no tax will be payable by the person returning them if the goods are identifiable and tax was paid under the earlier law at the time of its sale, made not earlier than 6 months from the appointed day. The relevant section is section 149.
No tax shall be payable by the manufacturer or the job worker under the following circumstances: • Inputs/ semi-finished goods are sent to the job worker in accordance with the provisions of the earlier law before the appointed day. • The job worker returns the same within six months from the appointed day (or extended period of 02 months). • Both the manufacturer and the job worker declare the details of inputs held in stock by the job worker on the appointed day in the prescribed form. The relevant sections being section 150 and section 151.
Tax would be payable by the job worker. Further, the manufacturer will also be liable to pay tax on expiry of the specified time limit – section 150 (1) & section 151(1).
Yes, a manufacturer can as per the provisions of the earlier law transfer the said goods to the premises of any registered taxable person on payment of tax or without payment of tax for exports within 6 months or extended period from the appointed day – section 152.
No tax will be payable in GST by the manufacturer or by the Job worker where the goods removed prior to the appointed day for carrying out process not amounting to manufacture are returned within 6 months from the appointed day (or extended period of 02 months) – section 152.
The person returning the goods shall become liable to pay tax if the said goods are liable to tax in GST and are returned after 6 months from the appointed day – proviso to section 152.
No, it is not automatic. It shall be extended by the competent authority only on sufficient cause being shown.
The taxable person may issue the debit/credit note(s) or a supplementary invoice within 30 days of the price revision. In case where the price is revised downwards the taxable person shall be allowed to reduce his tax liability only if the recipient of the invoice or credit note has reduced his ITC corresponding to such reduction of tax liability – section 153.
The pending refund claims shall be disposed of in accordance with the provisions of the earlier law – section 154.
It shall be disposed of in accordance with the provisions of the earlier law only in both the cases –section 155/156.
The refund shall be made in accordance with the provisions of the earlier law only. In case any recovery is to be made then it will be made as an arrear of tax under GST.
The same shall be refunded in accordance with the provisions of the earlier law – section 158.
No tax shall be payable on supply of goods/services on or after the appointed day if the consideration for it has been received prior to the appointed day and the duty/ tax thereon has already been paid under the earlier law – section 160.
Yes, irrespective of whether the invoice(s) relating to such services is received on or after the appointed day – section 162.
The agent can take such credit on fulfilment of the following conditions:- • The agent is a registered taxable person in GST; • Both the principal and the agents declare the details of stock lying with the agents on the date immediately preceding the appointed day; • The invoices for such goods had been issued not earlier than 12 months immediately preceding the appointed day; • The principal has either reversed or not availed of the ITC in respect of such goods. This provision is applicable to SGST law only – section 162A and section 162 B
Yes, if such goods are liable to tax in GST and the person who rejected or not approved the goods returns it after 6 months (may be extended by 2 months) from the appointed day. This provision is applicable to SGST law only – section 162D
Abuse of tax treaties is an important source of base erosion and profit shifting (BEPS). The MLI helps the fight against BEPS by implementing the tax treaty-related measures developed through the BEPS Project in existing bilateral tax treaties in a synchronised and efficient manner. These measures will prevent treaty abuse , improve dispute resolution , prevent the artificial avoidance of permanent establishment status and neutralise the effects of hybrid mismatch arrangements .
With over 70 jurisdictions participating in the first signing ceremony of the MLI, the MLI already has a significant impact on the worldwide network of tax treaties: • 76 countries and jurisdictions have signed the MLI or have expressed their intention to sign the instrument o 67 countries and jurisdictions have signed the MLI, covering 68 jurisdictions. o Nine countries and jurisdictions have signed a letter expressing their intent to sign the MLI. o Additional countries and jurisdictions are actively working to prepare for signature in the near future. • 2,365 is the total number of unique treaties listed by the Signatories in their MLI Positions. • 1,105 treaties are already matched between the Signatories and will be modified by the MLI. • Over 85% of all treaties concluded between the Signatories will be modified through the MLI. It is expected that the remaining treaties will be modified either through bilateral negotiations or by extending the list of treaties to be covered by the MLI at a later stage. 1,150 additional treaties between Signatories and non-Signatories have already been listed. Accordingly, as more countries will join the MLI in the coming period, the number of matched agreements will increase rapidly.
The MLI was developed by a group of over 100 countries and jurisdictions, including many developing countries. Developing countries have shown great interest in signing the MLI and have started their technical preparations to sign. Many of them however needed more time to complete the domestic procedures for Signatories. It is expected that many additional countries will sign the MLI by year-end, including a significant number of developing countries. The OECD has supported these countries in the completion of their domestic procedures and will continue to offer its support.
The Principal Purposes Test will apply to all treaties covered by the MLI, introducing this rule to the over 1,100 treaties already covered by the MLI. In addition, 12 Signatories have chosen to supplement the provisions of the Principal Purposes Test with a simplified Limitation on Benefits test, including Argentina, Armenia, Bulgaria, Chile, Colombia, India, Indonesia, Mexico, Russia, Senegal, Slovak Republic and Uruguay.
The Signatories of the MLI cover already 85% of the treaties that they have concluded among themselves. In most cases, for the remaining treaties, renegotiations on a bilateral basis have already started or the Signatories continue their matching discussions and will decide later whether to list a treaty or to update the treaty bilaterally through an amending protocol.
The MLI modifies tax treaties that are "Covered Tax Agreements". A Covered Tax Agreement is an agreement for the avoidance of double taxation that is in force between Parties to the MLI and for which both Parties have made a notification that they wish to modify the agreement using the MLI. Lists of notified tax treaties by jurisdiction can be found in the MLI Positions available at oe.cd/mli .
For most countries, there is no legal requirement to prepare consolidated texts of modified treaties. Also, the MLI does not amend treaties like an amending protocol. Instead, the MLI modifies treaties by sitting alongside treaties. However, for purposes of clarity, many governments may produce some form of consolidated text as guidance to aid readers. Given that Signatories' positions can change significantly until ratification of the MLI, most Signatories will not start to prepare consolidated versions immediately.
No. The MLI is a flexible instrument which will modify tax treaties according to a jurisdiction's policy preferences with respect to the implementation of the tax treaty-related BEPS measures. Before signature, jurisdictions must accordingly analyse their tax treaty networks and determine how they would want the MLI to affect and modify their tax treaties.
The flexibility provided by the MLI is intended to accommodate a variety of tax policies while still ensuring that the tax treaty-related BEPS measures are effectively implemented. The MLI's flexibility also reflects the circumstance that certain elements of the BEPS minimum standards on treaty abuse and dispute resolution developed through the BEPS Project may themselves be implemented in different ways.
The MLI provides for different types of flexibility: jurisdictions can choose amongst alternative provisions in certain MLI articles; jurisdictions can choose to apply optional provisions (for instance, the provisions on mandatory binding arbitration); and, in certain cases, jurisdictions may choose to reserve the right not to apply MLI provisions (to opt out through a "reservation") with respect to all of their Covered Tax Agreements or with respect to a subset of their Covered Tax Agreements. Jurisdictions only have the possibility to opt out of provisions that do not reflect a BEPS minimum standard, with the possibility to withdraw their reservation (and opt in) later.
No. The MLI does not permit jurisdictions to make treaty-by-treaty choices when they decide how they want the MLI to affect and modify their tax treaties. Instead, before signature, jurisdictions are generally required to express how they want the MLI to modify their Covered Tax Agreements.
The MLI covers the treaty-related minimum standards that were agreed as part of the BEPS Package in November 2015 and to which all countries and jurisdictions within the Inclusive Framework on BEPS have committed. These minimum standards relate to the prevention of treaty abuse (BEPS Action 6) and the improvement of dispute resolution (BEPS Action 14). Where an MLI provision reflects an agreed BEPS minimum standard, a jurisdiction must meet the minimum standard when signing the MLI. Certain elements of these minimum standards can, however, be met in different ways provided for in the MLI.
Each Signatory must prepare and submit its "MLI Position" before signing the MLI. The MLI Position sets out all of the Signatory's choices with respect to the different options provided for in the MLI. Provisional MLI Positions of Signatories are available at oe.cd/mli .
The provisional MLI Position of each Signatory indicates the tax treaties it intends to cover, the options it has chosen and the reservations it has made. Signatories can amend their MLI Positions until ratification. Even after ratification, Parties can choose to opt in with respect to optional provisions or to withdraw reservations. For example, while 25 Signatories have chosen to apply the MLI arbitration provisions, other additional Signatories can choose to apply those provisions later.
It is likely that the first modifications to covered treaties will become effective in the course of 2018. The timing of entry into effect of the modifications is linked to the completion of the ratification procedures in the jurisdictions that are parties to the covered tax treaty. The Signatories will inform the OECD of the completion of their ratification procedures. As the Depositary of the MLI, the OECD will be tracking ratification procedures completed by the MLI Signatories and will make available to the public all relevant information on effects of the MLI provisions.
The OECD Secretariat is developing tools and guidance on the MLI. The first tools are already available at <a href="http://www.oecd.org/tax/treaties/multilateral-convention-to-implement-tax-treaty-related-measures-to-prevent-beps.htm" target="_blank">oe.cd/mli </a> . These tools include interactive flowcharts on each of the substantive MLI Articles and the MLI Toolkit on the application of the MLI.    
The MLI is a milestone for international taxation and treaty law as it allows all interested jurisdictions to update tax treaties with provisions reflecting internationally agreed standards. By providing an efficient instrument to swiftly and consistently implement these standards in the extensive network of existing bilateral tax treaties, the MLI could pave the way for the future of tax treaties in a fast-moving globalised environment.
The MLI remains open for signature to all interested jurisdictions after the signing ceremony of 7 June 2017. A large number of jurisdictions are actively working towards signature of the MLI and more are expected to follow by the end of 2017. At the occasion of the 7 June signing ceremony, a group of countries have already explicitly expressed their intent to sign the MLI as soon as possible. It is expected that many other jurisdictions will sign the MLI in the course of 2017. The OECD and other international and regional organisations will provide extensive support to prepare these governments for signature in the coming period. Support will be provided to interested jurisdictions through dedicated regional events, one-on-one workshops and online materials and tools.
In the first place, jurisdictions signing the MLI are in charge of completing their domestic process to ratify the MLI. The OECD will provide a platform through the ad hoc Group to share experiences and information in the ratification processes and to make tools and materials available that support the technical work involved in countries' ratification processes.
Upon signature of the MLI, Signatories are required to submit their MLI Positions to the Depositary. MLI Positions are documents of 10 to 60 pages, the length of which varies depending on the number of treaties a jurisdiction wishes to modify with the MLI and its policy choices. The PDF version of Signatories' MLI Positions will be made available on the OECD Website upon signature of the MLI. The MLI Positions have been based on a template developed by the OECD Secretariat to ensure consistency in the formulation of the options chosen and reservations made by the Signatories. The content of MLI Positions will remain provisional until ratification of the MLI. The OECD Webpage will present a list of jurisdictions for which MLI Positions are available.
The provisional MLI Positions of the Signatories will be made public on the OECD website shortly after the June 7 signing ceremony. An up-to-date list of the MLI Signatories as well as their provisional MLI Positions are available at oe.cd/mli.
The OECD expects to launch a public online matching tool. The tool will be based on a database containing all relevant data from the MLI Positions, facilitating the analysis of information. As a next step, the matching tool could also simulate the likely matching outcome, while noting that the final matching process is one of legal interpretation of the formal documents. The tool will be expanded and refined over the next couple of years, for example to include detailed information on the timing of the modifications made by the MLI. The first parts of the tool will be made available as soon as possible, when all data will be carefully processed and analysed by the Signatories and the OECD Secretariat. It is expected that a beta version of the tool will be available by October.
The OECD will be the Depositary for the MLI. The MLI requires Signatories to notify all changes to their MLI Positions to the Depositary in order for those changes to become effective. The Depositary will record and publish all future changes made to MLI Positions.
The number of jurisdictions that have already signed the MLI or that have expressed their intention to sign the MLI is already impressive, and the MLI will accordingly modify a significant and growing number of treaties. Signatories include developed and developing jurisdictions, including financial centres and treaty-shopping hubs. With a large number of treaties covered and with key countries included, treaty-shopping structures will come to an end as the anti-abuse provisions are introduced in the treaty networks of treaty-shopping hubs.
The mutual agreement procedure (MAP) article of tax treaties based on the OECD and UN Models provides a mechanism to resolve disputes in cases in which a taxpayer considers that he has been taxed in a manner inconsistent with the provisions of the treaty. One weakness of this mechanism is that the MAP article does not require to parties to the treaty to resolve the dispute but only to use their best efforts to do so. As a result, some MAP cases may remain unresolved for long periods or never be resolved when it is not possible to reach an agreement. Mandatory binding arbitration is a mechanism which, in defined circumstances, obliges the parties to the treaty to submit unresolved issues in a MAP case to an independent and impartial decision-maker -an arbitration panel. The decision reached by the arbitration panel is binding on the parties to the treaty and thus resolves the issues that can otherwise prevent agreement in deadlocked MAP cases.
At the time of signature on June 7 there are 25 Signatories signing up for the arbitration provisions provided for in the MLI: Andorra, Australia, Austria, Belgium, Canada, Fiji, Finland, France, Germany, Greece, Ireland, Italy, Japan, Liechtenstein, Luxembourg, Malta, the Netherlands, New Zealand, Portugal, Singapore, Slovenia, Spain, Sweden, Switzerland and the United Kingdom. This will lead to the introduction of arbitration to over 150 existing treaties. Most of the countries opting in for arbitration have opted for the default option of final offer arbitration (also referred to as "baseball arbitration") as provided for in Article 23(1) of the MLI.
The MLI introduces the MAP arbitration provisions that are included in Part VI of the MLI into treaties concluded by Parties opting in for these provisions. It is expected that the provisions will apply to more than 150 existing treaties. This ensures that taxpayers that initiate a case under the mutual agreement articles procedure of these treaties will be certain that their cases will be resolved and double taxation will be eliminated in accordance with the treaty.
A jurisdiction and its treaty partner must expressly choose to adopt Part VI in order for the MLI arbitration provisions to apply. As a result, mandatory binding arbitration will be available to resolve disputes in relation to a specific Covered Tax Agreement only where both Contracting Jurisdictions to that Covered Tax Agreement have expressly chosen to adopt it.
Where Part VI applies to a particular Covered Tax Agreement, Article 19 of the MLI provides that a taxpayer will be able to request arbitration with respect to the unresolved issues in a MAP case when the competent authorities are unable to reach an agreement to resolve the case within a period of two or three years.
"Treaty shopping" generally refers to arrangements through which a person who is not a resident of one of the two States that concluded a tax treaty may attempt to obtain indirectly benefits that the treaty grants only to residents of these States. These strategies are often implemented by establishing intermediary companies that may be qualified as "letterboxes", "shell companies" or "conduits" in jurisdictions that have networks of favourable tax treaties. Such companies typically exist on paper only and have no (or minimal) substance or activities in the jurisdictions in which they are created. In general, the parties to a bilateral tax treaty would not intend these types of companies or similar entities to obtain the benefits of the treaty. Treaty shopping can be addressed through changes to bilateral tax treaties implementing the minimum standard agreed in the context of Action 6 of the BEPS Project. ->For more information, also see the <a href="http://www.oecd.org/ctp/beps-frequentlyaskedquestions.htm#Action6" target="_blank">Frequently Asked Questions on  Action 6. </a>
An example of treaty shopping is set out in this video  developed by the OECD on the occasion of the launch of the BEPS Package in 2015. As explained in the video, treaty shopping occurs when a person seeks to take advantage of a tax treaty concluded by two Contracting Jurisdictions to obtain tax treaty benefits it could not otherwise obtain. This could be the case, for example, when this person is a resident of a jurisdiction that has not concluded a tax treaty with the jurisdiction where the income arises. In the example set out in the video, Company A, a resident of the Cayman Islands, wants to provide a license for the use of intellectual property to Company C in South Africa. South Africa, however, has not concluded a tax treaty with the Cayman Islands, and would thus be entitled to apply its domestic withholding tax rate on outbound royalties. However, a European country has concluded a tax treaty with South Africa that reduced the withholding tax rates on royalties. Also, this country does not itself levy a source tax on royalties. Therefore, Company A establishes a letterbox company in this European country and diverts the royalty payments through the letterbox company to reduce the tax withheld by South Africa. In this example, the principal purpose of the establishment of the arrangement including the letterbox company was to obtain the lower withholding tax rate available under the tax treaty between South Africa and the European country.
The MLI contains six Articles to address treaty abuse. Two of these provisions reflect the Action 6 minimum standard on treaty abuse and the four other provisions are specific anti-abuse rules that target specific avoidance strategies. The Principal Purposes Test that is introduced in all treaties covered by the MLI is an effective instrument to counter arrangements such as those described above that have been put in place for the principal purpose to obtain the benefits of a tax treaty.
The Principal Purposes Test that is introduced in all treaties covered by the MLI is an effective instrument to counter arrangements such as those described above that have been put in place for the principal purpose to obtain the benefits of a tax treaty. The Principal Purposes Test (PPT) is an anti-abuse rule based on the principal purposes of transactions or arrangements. This rule provides a general way to address cases of treaty abuse, including treaty-shopping situations, such as certain conduit financing arrangements that are not covered by more specific anti-abuse rules. Once introduced to a tax treaty through the MLI or bilateral negotiations, the PPT would apply to the treaty in its entirety and would address all cases of treaty abuse. Under the PPT, if one of the principal purposes of transactions or arrangements is to obtain treaty benefits (e.g. a lower withholding tax in the case of a treaty shopping scheme), these benefits would be denied unless it is established that granting these benefits would be in accordance with the object and purpose of the provisions of the treaty. The PPT is a subjective test based on an assessment of the intentions behind a transaction or arrangement. This approach is similar to approaches taken under domestic anti-abuse rules or doctrines applied by countries around the world, such as general anti-avoidance rules or an 'abuse of laws' doctrine. The PPT provisions included in the MLI establish that a tax authority may deny the benefits of a tax treaty where it is reasonable to conclude, having considered all the relevant facts and circumstances, that one of the principal purposes of an arrangement or transaction was for a benefit under a tax treaty to be obtained. The<a href="http://www.oecd.org/tax/preventing-the-granting-of-treaty-benefits-in-inappropriate-circumstances-action-6-2015-final-report-9789264241695-en.htm" target="_blank">Action 6 Report </a> of the <a href="http://www.oecd.org/ctp/beps-2015-final-reports.htm" target="_blank">BEPS  Package </a>  includes detailed guidance and examples in the form of the commentary that was developed during the course of the BEPS Project and has particular relevance in this regard. In reality, treaty shopping schemes typically involve the use of layered structures abusing the provisions of multiple tax treaties. Now that the PPT will be introduced in a large number of treaties, the treaty shopping routes will be blocked effectively.
Treaty abuse, like the abuse of domestic law, can be addressed through a combination of (i) specific anti-abuse rules, which provide greater certainty but can only deal with known abusive strategies, and (ii) general anti-abuse rules or judicial doctrines, which are less certain but offer protection against abusive transactions that have not previously been identified or addressed. Both of these approaches can be equally effective to address treaty abuse, but countries have different legal environments and policy preferences. Therefore, the MLI and the minimum standard on treaty abuse guarantee that treaty abuse is targeted effectively and that countries have some flexibility in deciding which anti-abuse rules to adopt.
Since the investment decisions of Collective Investment Vehicles, REITs and pension funds are typically not dictated by their beneficiaries, these investment vehicles do not raise the same treaty-shopping concerns as entities such as private companies.
Like the minimum standard on dispute resolution, the implementation of the minimum standard on treaty abuse will be evaluated through a monitoring mechanism in order to ensure that the commitments embodied in the Action 6 minimum standard are effectively satisfied. The relevant <a href=" http://www.oecd.org/tax/treaties/beps-action-6-preventing-the-granting-of-treaty-benefits-in-inappropriate-circumstance-peer-review-documents.pdf" target="_blank">Peer Review documents </a> have been published on the OECD website.
Changes to the permanent establishment (PE) definition developed through the work on BEPS Action 7 and included in the MLI address techniques used to inappropriately avoid the existence of a PE, including through the replacement of distributors with commissionnaire arrangements, through strategies where contracts which are substantially negotiated in a State are not formally concluded in that State because they are finalised or authorised abroad, or where the person that habitually exercises an authority to conclude contracts in the name of a foreign enterprise claims to be an "independent agent" even though it is acting exclusively or almost exclusively for closely related enterprises. These changes also address strategies based on the specific activity exceptions in Article 5(4) of the OECD Model Tax Convention by restricting these exceptions to preparatory or auxiliary activities and by addressing the fragmentation of business activities between closely related enterprises in order inappropriately to take advantage of these exceptions.   For more information, also see the <a href="http://www.oecd.org/ctp/beps-frequentlyaskedquestions.htm#Action7" target="_blank">Frequently Asked Questions on Action 7 </a>
The MLI addresses challenges related to permanent establishments only by modifying the permanent establishment definition in Covered Tax Agreements - the MLI does not change the rules on the attribution of profits to permanent establishments in Article 7.
Recognising the need to do better in this area, jurisdictions have agreed through the work on BEPS Action 14 on a minimum standard and a number of best practices in relation to dispute resolution. The minimum standard will ensure that treaty obligations related to the mutual agreement procedure are fully implemented in good faith and that administrative processes promote the prevention and timely resolution of treaty-related disputes. For more information, also see the <a href=" http://gstandmore.com/wp-admin/post.php?post=230&action=edit"  target="_blank"> Frequently Asked Questions on Action 14.</a>
Like the minimum standard on treaty abuse, the implementation of the minimum standard on dispute resolution will be evaluated through a monitoring mechanism in order to ensure that the commitments embodied in the minimum standard are effectively satisfied.
Jurisdictions will continue to conclude tax treaties on a bilateral basis. The MLI only modifies existing bilateral agreements. It is expected that jurisdictions will include treaty related BEPS measures in future bilateral tax treaties.

Exports will be treated as zero rated supplies. No tax will be payable on exports of goods or services, however credit of input tax credit will be available and same will be available as refund to the exporters.

Imports of Goods and Services will be treated as inter-state supplies and IGST will be levied on import of goods and services into the country. The incidence of tax will follow the destination principle and the tax revenue in case of SGST will accrue to the State where the imported goods and services are consumed. Full and complete set-off will be available on the GST paid on import on goods and services.

HSN (Harmonised System of Nomenclature) code shall be used for classifying the goods under the GST regime. Taxpayers whose turnover is above Rs. 1.5 crores but below Rs. 5 crores shall use 2 digit code and the taxpayers whose turnover is Rs. 5 crores and above shall use 4 digit code. Taxpayers whose turnover is below Rs. 1.5 crores are not required to mention HSN Code in their invoices.

Services will be classified as per the Services Accounting Code (SAC)

Tax payers with an aggregate turnover in a financial year up to [Rs.10 lakhs] would be exempt from tax. [Aggregate turnover shall include the aggregate value of all taxable and non-taxable supplies, exempt supplies and exports of goods and/or services and exclude taxes viz. GST.] Aggregate turnover shall be computed on all India basis. For NE States and Sikkim, the exemption threshold shall be [Rs. 5 lakhs]. All taxpayers eligible for threshold exemption will have the option of paying tax with input tax credit (ITC) benefits. Tax payers making inter-State supplies or paying tax on reverse charge basis shall not be eligible for threshold exemption.

Under the GST regime, tax is payable by the taxable person on the supply of goods and/or services. Liability to pay tax arises when the taxable person crosses the threshold exemption, i.e. Rs.10 lakhs (Rs. 5 lakhs for NE States) except in certain specified cases where the taxable person is liable to pay GST even though he has not crossed the threshold limit. The CGST / SGST is payable on all intra-State supply of goods and/or services and IGST is payable on all interState supply of goods and/or services. The CGST /SGST and IGST are payable at the rates specified in the Schedules to the respective Acts.

The Constitution (one hundred and first amendment) Act, 2016 provides that every decision of the GST Council shall be taken at a meeting by a majority of not less than 3/4th of the weighted votes of the Members present and voting. The vote of the Central Government shall have a weightage of 1/3rd of the votes cast and the votes of all the State Governments taken together shall have a weightage of 2/3rd of the total votes cast in that meeting. One half of the total number of members of the GST Council shall constitute the quorum at its meetings.

The mechanism of GST Council would ensure harmonization on different aspects of GST between the Centre and the States as well as among States. It has been provided in the Constitution (one hundred and first amendment) Act, 2016 that the GST Council, in its discharge of various functions, shall be guided by the need for a harmonized structure of GST and for the development of a harmonized national market for goods and services.

A GST Council would be constituted comprising the Union Finance Minister (who will be the Chairman of the Council), the Minister of State (Revenue) and the State Finance/Taxation Ministers to make recommendations to the Union and the States on.

  1. the taxes, cesses and surcharges levied by the Centre, the States and the local bodies which may be subsumed under GST;
  2. the goods and services that may be subjected to or exempted from the GST
  3. the date on which the GST shall be levied on petroleum crude, high speed diesel, motor sprit (commonly known as petrol), natural gas and aviation turbine fuel;
  4. model GST laws, principles of levy, apportionment of IGST and the principles that govern the place of supply;
  5. the threshold limit of turnover below which the goods and services may be exempted from GST;
  6. the rates including floor rates with bands of GST;
  7. any special rate or rates for a specified period to raise additional resources during any natural calamity or disaster;
  8. special provision with respect to the NorthEast States, J&K, Himachal Pradesh and Uttarakhand; and
  9. any other matter relating to the GST, as the Council may decide.

The CGST and SGST would be levied at rates to be jointly decided by the Centre and States. The rates would be notified on the recommendations of the GST Council.

Under the GST regime, an Integrated GST (IGST) would be levied and collected by the Centre on inter-State supply of goods and services. Under Article 269A of the Constitution, the GST on supplies in the course of interState trade or commerce shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of the Goods and Services Tax Council.

Introduction of GST would be a very significant step in the field of indirect tax reforms in India. By amalgamating a large number of Central and State taxes into a single tax and allowing set-off of prior-stage taxes, it would mitigate the ill effects of cascading and pave the way for a common national market. For the consumers, the biggest gain would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 25%-30%. Introduction of GST would also make our products competitive in the domestic and international markets. Studies show that this would instantly spur economic growth. There may also be revenue gain for the Centre and the States due to widening of the tax base, increase in trade volumes and improved tax compliance. Last but not the least, this tax, because of its transparent character, would be easier to administer.

The Central GST and the State GST would be levied simultaneously on every transaction of supply of goods and services except the exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits. Further, both would be levied on the same price or value unlike State VAT which is levied on the value of the goods inclusive of CENVAT. While the location of the supplier and the recipient within the country is immaterial for the purpose of CGST, SGST would be chargeable only when the supplier and the recipient are both located within the State.

Illustration I: Suppose hypothetically that the rate of CGST is 10% and that of SGST is 10%. When a wholesale dealer of steel in Uttar Pradesh supplies steel bars and rods to a construction company which is also located within the same State for, say Rs. 100, the dealer would charge CGST of Rs. 10 and SGST of Rs. 10 in addition to the basic price of the goods. He would be required to deposit the CGST component into a Central Government account while the SGST portion into the account of the concerned State Government. Of course, he need not actually pay Rs. 20 (Rs. 10 + Rs. 10 ) in cash as he would be entitled to set-off this liability against the CGST or SGST paid on his purchases (say, inputs). But for paying CGST he would be allowed to use only the credit of CGST paid on his purchases while for SGST he can utilize the credit of SGST alone. In other words, CGST credit cannot, in general, be used for payment of SGST. Nor can SGST credit be used for payment of CGST.

Illustration II: Suppose, again hypothetically, that the rate of CGST is 10% and that of SGST is 10%. When an advertising company located in Mumbai supplies advertising services to a company manufacturing soap also located within the State of Maharashtra for, let us say Rs. 100, the ad company would charge CGST of Rs. 10 as well as SGST of Rs. 10 to the basic value of the service. He would be required to deposit the CGST component into a Central Government account while the SGST portion into the account of the concerned State Government. Of course, he need not again actually pay Rs. 20 (Rs. 10+Rs. 10) in cash as it would be entitled to set-off this liability against the CGST or SGST paid on his purchase (say, of inputs such as stationery, office equipment, services of an artist etc). But for paying CGST he would be allowed to use only the credit of CGST paid on its purchase while for SGST he can utilise the credit of SGST alone. In other words, CGST credit cannot, in general, be used for payment of SGST. Nor can SGST credit be used for payment of CGST.

Currently, the fiscal powers between the Centre and the States are clearly demarcated in the Constitution with almost no overlap between the respective domains. The Centre has the powers to levy tax on the manufacture of goods (except alcoholic liquor for human consumption, opium, narcotics etc.) while the States have the powers to levy tax on the sale of goods. In the case of inter-State sales, the Centre has the power to levy a tax (the Central Sales Tax) but, the tax is collected and retained entirely by the States. As for services, it is the Centre alone that is empowered to levy service tax.

Introduction of the GST required amendments in the Constitution so as to simultaneously empower the Centre and the States to levy and collect this tax. The Constitution of India has been amended by the Constitution (one hundred and first amendment) Act, 2016 recently for this purpose. Article 246A of the Constitution empowers the Centre and the States to levy and collect the GST.

Centre will levy and administer CGST & IGST while respective states will levy and administer SGST.

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.

It would be a dual GST with the Centre and States simultaneously levying it on a common tax base. The GST to be levied by the Centre on intra-State supply of goods and / or services would be called the Central GST (CGST) and that to be levied by the States would be called the State GST (SGST). Similarly Integrated GST (IGST) will be levied and administered by Centre on every inter-state supply of goods and services

Tobacco and tobacco products would be subject to GST. In addition, the Centre would have the power to levy Central Excise duty on these products.

The existing taxation system (VAT & Central Excise) will continue in respect of the above commodities.

Alcohol for human consumption, Petroleum Products viz. petroleum crude, motor spirit (petrol), high speed diesel, natural gas and aviation turbine fuel& Electricity

The various Central, State and Local levies were examined to identify their possibility of being subsumed under GST. While identifying, the following principles were kept in mind:

  1. Taxes or levies to be subsumed should be primarily in the nature of indirect taxes, either on the supply of goods or on the supply of services.
  2. Taxes or levies to be subsumed should be part of the transaction chain which commences with import/ manufacture/ production of goods or provision of services at one end and the consumption of goods and services at the other.
  3. The subsumation should result in free flow of tax credit in intra and inter-State levels. The taxes, levies and fees that are not specifically related to supply of goods & services should not be subsumed under GST
  4. Revenue fairness for both the Union and the States individually would need to be attempted.
It is a destination based tax on consumption of goods and services. It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as setoff. In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer.
The tax would accrue to the taxing authority which has jurisdiction over the place of consumption which is also termed as place of supply.

The GST would replace the following taxes:

  1. Taxes currently levied and collected by the Centre:
    1. Central Excise duty
    2. Duties of Excise (Medicinal and Toilet Preparations)
    3. Additional Duties of Excise (Goods of Special Importance)
    4. Additional Duties of Excise (Textiles and Textile Products)
    5. Additional Duties of Customs (commonly known as CVD)
    6. Special Additional Duty of Customs (SAD)
    7. Service Tax
    8. Central Surcharges and Cesses so far as they relate to supply of goods and services
  2. State taxes that would be subsumed under the GST are:
    1. State VAT
    2. Central Sales Tax
    3. Luxury Tax
    4. Entry Tax (all forms)
    5. Entertainment and Amusement Tax (except when levied by the local bodies)
    6. Taxes on advertisements
    7. Purchase Tax
    8. Taxes on lotteries, betting and gambling
    9. State Surcharges and Cesses so far as they relate to supply of goods and services

The GST Council shall make recommendations to the Union and States on the taxes, cesses and surcharges levied by the Centre, the States and the local bodies which may be subsumed in the GST