AN OVERVIEW OF THE GOODS AND SERVICES TAX
Post independence, India was triggered by one of the most important tax reforms, which was introduced in the country after a 13-year long journey i.e. the introduction of the concept of GST (Goods and Services Tax) in the market. It is an indirect tax, which is uniform for the whole nation and hence aims at making India one cohesive market. It covers within its ambit everyone, be it the manufacturer or the consumer.
The various taxes which are counted under the Goods and Services Tax includes Central Excise Duty, Additional Excise Duty, Service Tax, Additional Customs Duty and Special Additional Duty of Customs at the central level, and State Value Added Tax/Sales Tax, Entertainment Tax, Central Sales Tax, State Cesses and Surcharges, Octroi and Entry Tax, Purchase Tax, Luxury Tax and Taxes on lottery, betting and gambling at the state level. Only those goods and services are exempted from the tax which is below the prescribed threshold limits. Alcohol for human consumption has been kept outside the purview of GST.
There are various benefits which can be witnessed in the Indian market, be it for the business, the government or the consumer, after the introduction of the GST. Few of them are as follows:
- It ensures the uniformity of indirect tax rates all over the country.
- It brings with it the easy compliance of services and transparency.
- With its introduction, the trade and industry have also witnessed an improved competition.
- When compared at the administration level, it is simpler and easier for the government agencies to administer the tax.
- It leads to the efficiency of higher revenue.
- It reliefs the overall tax burden on the consumers as they have to pay only a single tax.
- The system of paying only one tax from the manufacturer to the consumer leads to transparency.
A very well-designed concept of Goods and Services Tax in India is expected to simplify and rationalize the current indirect tax regime, eliminate tax cascading and put the Indian economy on a high-growth trajectory.
FURNISHING RETURNS UNDER GST
Goods and Services Tax (GST) is a comprehensive indirect tax system which works on self monitoring mechanism. Under GST a normal taxpayer needs to file monthly returns and an annual return. The type of return to be held by the taxpayer depends on the type of activities undertaken by him.
A normal taxpayer undergoes the following process of furnishing returns under GST:
- Firstly, the supplier other than an Input Service Distributor, a non resident taxable person and a person paying tax under the provisions of section 10 or section 51 or section 52, shall enter electronically details of outward supply in FORM GSTR 1 by 10th of the next month.
- The details entered by the supplier in FORM GSTR 1 will be made available in FORM GSTR 2A, FORM GSTR 4A and FORM GSTR 6A through the common portal.
- The changes if any made by the recipient in details of inward supplies will be made available in FORM GSTR 1A for the supplier to either accept or reject the modifications. The same may be dome between 15th and 17th Thus suppliers’ FORM GSTR 1 will stand amended accordingly. Thus by 17th day, both the supplier and the recipient reconcile the invoice details.
- An auto populated Part A of return in FORM GSTR 3A is generated on the basis of information furnished in FORM GSTR 2 and FORM GSTR 1. Details of tax payable, tax paid, interest, fees etc. will be included in Part B of FORM GSTR 3 and the registered person is required to file FORM GSTR 3 by 20th day of the month succeeding such calendar month.
- An annual return in FORM GSTR 10 is required to be filed by 31st December of the following financial year by the registered taxable person through the common portal either directly or through a Facilitation Centre notified by the Commissioner.
Under GST the returns are filed online and the invoice level information is uploaded. Returns can be filed using the following methods:
- GSTN Portal
- Offline utilities provided by GSTN
- GST Suvidha Providers (GSP)
NEW CONCEPTS IN THE GST REGIME COMPOSITE SUPPLY AND MIXED SUPPLY
The concepts of supplying of goods have been introduced in the GST regime, which is to some extent a new one. These are the composite supply and the mixed supply.
When two or more goods are sold in combination, it becomes difficult to identify the rate of tax which is to be levied. For such goods and services, the Central Goods and Services Tax Act, 2017 has provided with two terms i.e. the composite supply and mixed supply. Composite supply is similar to the concept of “bundled services” as under the service tax laws in the existing regime. But, the concept of mixed supply is completely the new one.
Sections 2(30) and 2(74) of the Central Goods and Services Tax Act deals with Composite supply and Mixed supply respectively.
Both composite supply and mixed supply consist of two or more taxable supplies of goods and services or both but the main difference between the two is that composite supply is naturally bundled i.e., goods and services are usually provided together in normal course of business and cannot be separated. Whereas in mixed supply, the goods or services can be sold separately.
Let’s take an example:
Booking of air tickets which involves cost of the meal to be provided during travel will be composite supply and tax will be calculated on the principle supply which in this case is transportation through flight.
On the other hand, Diwali gift hamper which consist of different items packed in one pack is mixed supply as these items can be sold separately and it shall be treated as a supply of that particular item which attracts the highest rate of tax.
Tax liability on Composite and Mixed Supply
(Central Goods and Services Tax Act, 2017 [section B])
A composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply, and
A mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax.
GST is a completely new tax regime already taking India by storm. Now, under this concept of composite and mixed supply, the tax payers have to be very cautious and will have to plan accordingly their sale strategies and the revenue that will take on them, otherwise there will be chances of disputes and litigation to arise. The more you are cautious, the safer you will be from the demons.
THE REVOLUTIONATY ERA GOODS AND SERVICES TAX (GST)
So, finally after all drama and hue and cry, we are in the GST era, where all club together can succeed and follow one mantra: TOGETHER WE STAND, THEY BELIEVED AND NOW WE PLAN TO ACHIEVE; A NEW INDIA – SWACH INDIA.
In the simple and best way the question as to what is GST can be explained as follows:
Earlier you had many “Girl friends/friends/half friends” like “VAT/Service Tax/Excise etc”; now only one “WIFE”. Remember her all day, Report everything you do and Report each and every detail on time.
It is one indirect tax for the whole nation. For a better description, it means ONE COUNTRY, ONE TAX and ONE MARKET. The amount of tax charged will be the same, be the person paying the tax is a consumer or a manufacturer.
For bringing this tax reform into force, it took 10 years in making, above 30 sub groups and committees were formed, around 18000 man hours of discussion by the GST council, 14 EC meetings and 13 GSTC meetings were held, along with the around 175 officers meetings. Apart from all this, the Constitution of India is amended one more time and 5 laws were approved by the collaborative effort.
The 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, it would mitigate cascading or double taxation in a major way and pave the way for a common national market. This single most powerful tax reform which India has witnessed is going to be a game changing reform for the Indian Economy.
So, let’s wait and watch for how this game changing tax reform is going to have an impact on various aspects of the lifestyle of common people. We will get to know within a few days.
A BREIF LOOK AT THE OLDEN TIMES: THE GOODS AND SERVICES TAX
The Goods and Service Tax is a single indirect tax, which subsumes most of the Central and State taxes such as the Value Added Tax (VAT), excise duty, service tax, central sales tax, additional customs duty and special additional customs duty. For levying GST government introduced Constitution 122nd Constitutional Amendment Bill in the Parliament. The bill was passed by the Parliament in August 2016 and was sent for ratification by states. After being ratified by 19 states, it received President assent on September 8, 2016 and published as Constitution (101st Constitutional Amendment) Act, 2016. The act confers power on both i.e., the Parliament and the State legislatures to make laws for levying GST on supply of goods and services on the same transaction. The GST is considered as single biggest tax reform in India’s indirect tax structure since independence.
The Union Cabinet on September 12, 2016 approved the setting up of the Goods and Services Tax Council. The Council was created as per Article 279A of the amended Constitution, with its office in New Delhi. The Council, headed by Finance Minister, will be responsible for taking all key decisions relating to the indirect tax levy, including rates and exemptions as well as the subsequent Centre, state and integrated GST law. It would also comprise of the Minister of State in charge of the Revenue Department capital and State Finance Ministers. The Revenue Secretary will be the ex-official Secretary to the GST Council, with the Chair person of the Central Board of Exercise and Customs as a permanent invitee (none voting). Finance Minister of all 29 states and 2 Union Territories will also be a part of the Council with voting rights. The GST Council Secretariat will consist of a post of Additional Secretary to the GST Council and 4 post of Commissioner (at the level of Joint Secretary to the Centre). The Centre will have one third of the votes in the Council, while the states would collectively have two third of the votes. A majority of three fourths will be required to adopt a resolution.
Section 1(2) of the Constitution (101st Constitutional Amendment) Act, 2016 empowers the Central Government to appoint, by notification in the Official Gazette, different dates for the different provisions of this act. In view of this provision, the government had notified September 12 as a date on which section 12 of the Constitutional Amendment Act would come into the force.
As per section 12, the President shall within 60 days, from the date of commencement of the Constitutional Amendment Act, by order, constitute a Council to be called the Goods and Services Tax Council. The GST Council would, hence, be required to be set up within 60 days from September 12.
PAYMENT UNDER THE GST ERA
As India is moving towards digitization, GST has provided an easy and simple way of payment of taxes. Under GST regime, all the taxpayers will get three electronic ledgers namely the E – cash ledger, E – credit ledger and E – liability ledger through their GST profile.
E – cash ledger :
the electronic cash ledger under sub-section(1) of section 49 shall be maintained in FORM GST PMT – 05 for each person, liable to pay tax, interest, penalty, late fee or any other amount, on the Common Portal for crediting the amount deposited and debiting the payment there from towards tax, interest, penalty, fee or any other amount. Thus, payment can be made in cash by debiting the e-cash ledger maintained on the common portal.
Money can be deposited in the cash ledger by E – Payment (Internet Banking, Credit card, Debit card) or by Real Time Gross Settlement (RTGS) or by National Electronic Fund Transfer (NEFT) or by over the counter payment. Over the counter payment can be made in branches of banks authorized (for deposits up to ten thousand rupees per challan per tax period, by cash, cheque or demand draft) to accept the deposit of GST. A challan in FORM GST PMT – 06 is required to be generated and the details of the amount to be deposited towards tax, interest, penalty, fees or any other amount will be entered in the challan. Challan in FORM GST PMT – 06 generated at the Common Portal shall be valid for a period of fifteen days.
E – debit or credit ledger :
every registered taxable person is required to record and maintain an electronic liability ledger in FORM GST PMT – 01 and all amounts payable will be debited in the said register. The electronic credit ledger shall be maintained in FORM GST PMT – 02 for each registered person eligible for input tax credit under the Act on the common portal and every claim of input tax credit under the act shall be credited to the said ledger. Payment of every liability by a registered taxable person can be made by debiting the e-liability ledger or the e-cash ledger. Any amount of demand debited or amount of penalty imposed or liable to be imposed in the electronic tax liability register shall stand reduced to the extent of relief given by the appellate authority or appellate tribunal or court or if the taxable person makes the payment of tax, interest, and penalty specified in the show cause notice or demand order, the electronic tax liability register shall be credited accordingly.
Any payment required to be made by a person who is not registered under the Act, shall be made on the basis of a temporary identification number generated through the common portal.
AUDIT UNDER GOODS AND SERVICES TAX ( GST )
GST is the concept of ‘One Nation, One Tax’ and an attempt to unite all the indirect taxes under one umbrella. To keep up a check and to examine whether the correct amount of GST is being paid and the refund is claimed, certain taxable persons will be subject to audit under GST.
Audit under GST is the process of examination of records, returns and other documents maintained by a taxable person. The purpose is to verify the correctness of turnover declared, taxes paid, refund claimed and input tax credit availed, and to assess the compliance with the provisions of GST.
Broadly the Audit under GST can be classified into two categories, namely the Audit by Taxable person and the Audit by GST Tax authorities.
AUDIT BY TAXABLE PERSON
If threshold > 1 crore, then File audited Returns + Audited Accounts + Reconciliation Statements
Every registered taxable person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited by a chartered accountant or a cost accountant.
AUDIT BY GST TAX AUTHORITIES
The Audit by tax authorities under GST can be further classified into the following two types, namely the General Audit and the Special Audit.
GENERAL AUDIT
General Audit – Commissioner or officer authorized by commissioner – by way of general or special order.
A prior notice of not less than fifteen working days has to be sent to the registered person before conducting of the audit. The audit needs to be completed within a period of three months from the date of commencement of the audit, but a further extension for a period of six months may be provided by the Commissioner for the reasons to be recorded in writing. On conclusion of audit, the proper officer shall, within thirty days, inform the registered person, whose records are audited, about the findings, his rights and obligations and the reasons for such findings.
SPECIAL AUDIT
Special Audit – Officer not below the rank of Assistant Commissioner – regard to nature and complexity of the case and the interest of revenue.
If at any stage of scrutiny, inquiry, investigation or any other proceedings before him, any officer not below the rank of Assistant Commissioner, having regard to the nature and complexity of the case and the interest of revenue, is of the opinion that the value has not been correctly declared or the credit availed is not within the normal limits, he may, with the prior approval of the Commissioner, direct such registered person by a communication in writing to get his records including books of account examined and audited.
A report of audit signed and certified by the appointed Chartered Accountant or Cost Accountant is required to be submitted within 90 days although this period can be further extended to 90 days. The registered person shall be given an opportunity of being heard in respect of any material gathered on the basis of special audit which is proposed to be used in any proceedings against him under this Act or the rules made there under. Where the special audit conducted results in detection of tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilized, the proper officer may initiate the required action.