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Basics for Valuation
• Relationship between:
– Consideration
– Price
– Value
• CGST Act refers:
– Levy and value
– Turnover and value
– Assessable value or
transaction value
• Value of supply:
– Means or is; or
– Shall e…..which is
• Key considerations:
– Cost impact by credit
– Relevance of Dai Ichi
– Income re-characterization
– Retention money
Express Provisions
• Key disqualifications:
– Price:
• Actually paid
• For the supply
– Unrelated parties
– Price is sole consideration
• Value to exclude:
– Discount on supply
– Discount allowed later:
• Est. by agreement
• Linked to invoice
• Value to include:
– Other taxes imposed
– Amounts owed by supplier
but paid by recipient
– Costs at / efore supply
– Interest or late charges
– Direct subsidies
Recourse to Rules
• Declaration or
prescription: ”…. alue of supply…..cannot be
determined under ss 1 ….”
• Reference to Rules:
– i all situatio s or – o ly i these situatio s
• Disqualified by s.15(1)
• Situations specified:
– Consideration not in
money terms
– Related persons
– Sole consideration
• Tariff value notified
Implied Provisions • Valuation for IGST to be
integrated with Customs
• Value of supplies with:
– Land and rights in land
– Excluded supplies
• Value for:
– Credit attri uta le
– Job-work (not u/s 143)
– Included consideration
– Any other consideration
– No consideration
– Incentive to distributor
• Key considerations:
– Leasing and HP
– Transport by rail
– Air-travel agents
– Insurance services
– Money changers
– Lottery distribution
– Reimbursable charges
– Chit fund activities
– Undivided share in land
– Inter-branch transfers
– Provision for bad-debts
Valuation Cases
• Reimbursable charges
• Warranty replacement
• Out-of-warranty
• Recovered parts
• Free or defaced samples
• Free-of-charge (project)
• Free replacements for:
– Transit-loss
– Quality defect
– Project delay
• Free-issue-material
• Part-B supplies • Demo/trial equipment
• Stand-by equipment
• Loss-leader produ ts
• Sale price below cost
• Bra hes at loss
• Pseudo discounts
• Sponsorship/subsidy
• Paid dis ou t oupo s
Subject of GST
• Purpose of provision:
– Common provision
– Desti atio pri iple
• Relation to S.7 and 8
• Facts about:
– Place of supply ..shall be..
– Location of supplier – not
used
Goods
(S.10 &
11)
Services
(S.12 & 13)
Goods
as services
Place of Supply s. 10(1)(a)
• Supply i ol es movement:
– Supply i ol es
movement
– Supply i ol es o e e t
• Refer o asio s o e e t fro CST
Act
• Question of fact:
– fro ter s of supply
– fro ature of goods supplied
• Termination of
o e e t for delivery
Place of Supply s. 10(1)(b)
• Key considerations:
– Locus standii
– Recipient s.2(93)
– Overriding force
– Supply – limbs?
• Review supply model,
pre and post-GST
Supplier
Third
Party
Recipient
A
B
1 2
10(1)(b) 10(1)(c)
Place of Supply s. 10(1)(c)
• Supply does ot involve movement:
– …. hether y….
– ….supplier or re ipie t….
• Place is location of
goods at ti e of delivery
• Key considerations:
– What goods do ot involve movement?
– Where would they be
taken for consumption?
Place of Supply s. 10(1)(d)
• Assembly at site:
– Delivery to site for
assembly
– Assembly at site after
delivery
• Interpretation of:
– Where the goods are asse led….
– ….shall e pla e of su h asse ly
• Key considerations:
– Would works-contract be
covered s. 2(119)?
– Ho a y supplies i source-transfer-assemble?
– Which limb does clause
(d) address?
Place of Supply s. 10(1)(e)
• Supply o oard conveyance:
– Supply of goods to airline
– Supply to passenger by
airline
• Interpretation of:
– ….lo atio at hi h su h goods are taken on
board
• Key considerations:
– Differentiate between
supply to conveyance and
supply on-board conveyance
– Only one limb covered
Place of Supply s. 10(2)
• Residual provision
• Exclude other provisions
• Deter i e pla e of supply as pres ri ed
• Key considerations:
– Where….. a ot e deter i ed….
– Which circumstance?
International Supply
Imports
• Definition:
– Import
– Importer
• Place of supply is location of
importer
• Key considerations:
– Place of import
– Port of import
– Reimport of exports
– Warranty imports
Exports
• Definition:
– Export
– Exporter
• Place of supply is location
outside India
• Key considerations:
– Currency of transaction
– Location of recipient
– Merchanting trade
– High sea sales / SICOI
– Impact on credit
Subject of GST
Goods
(S.7 & 8)
Services
(S.9 & 10)
Goods
as services
• Identify services or goods
with caution
• Relation to s. 7 and 8
• Facts about:
– Legislative will – place
– Location of supplier of
services s. 2(15)
Place of Supply s. 12(3)
• Supply of:
– Immovable property –
grant-of-rights,
construction or use
– Vessel, etc.
– Ancillary services
• Place is location of
property
• Key considerations:
– Scope of i relatio to and y ay of
– Meaning of location
Place of Supply s. 12(4)
• Supply of:
– Restaurant and catering
– Personal grooming
– Fitness
– Beauty treatment
– Health service including
cosmetic and plastic
surgery
• Place is location of
a tual perfor a e
• Key considerations:
– Exhaustive or illustrative
– Specific or expansive
– Rule implies taxability of
new activities
– Implication to registered
recipient
Place of Supply s. 12(5)
• Supply of:
– Training and
performance appraisal
• Place is location of:
– registered recipient
– a tual perfor a e to unregistered recipient
• Key considerations:
– Location of such person
s. 2(14)
Place of Supply s. 12(6)
• Supply of admission to:
– Cultural & artistic
– Sporting
– Scientific & educational
– Entertainment &
amusement event
• Place is venue of event
• Key considerations:
– Admittance to viewer
– Ancillary services
Place of Supply s. 12(7)
• Supply of:
– Organizing event
– Ancillary services
• Place is location of:
– registered recipient
– venue of event if
recipient unregistered
• Key considerations:
– Assigning sponsorship
– Distribution by
proportion of large
events
Place of Supply s. 12(8) & 12(9)
• Supply of:
– Transport of goods
– Transport of passenger
• Place is location of:
– registered recipient
– loading or boarding if
unregistered recipient
• Key considerations:
– Mode of transportation
not specified
– Unspecified pre-booking
PLUS place not known
– Return booking, separate
Place of Supply s. 12(10)
• Supply of services on-
board
• Place is first poi t of departure
• Scope of supply:
– To conveyance operator
– By such operator
• Key considerations:
– Place of supply known
even before supply
– Will explanation in ss. 9
apply to return journey
Place of Supply s. 12(11)
• Supply of:
– Device-dependent telecom service
– Mobile telecom service:
• Post-paid basis
• Pre-paid basis
– Any other
• Place is:
– Location of in situ device
– Post-paid / e-pay billing address
– Pre-payment location
– Address-on-record
• Key considerations:
– Ownership of device
– Fixed-wireless telephone
– Data-card for laptop
Place of Supply s. 12(12)
• Supply of:
– Banking
– Financial and broking
service
• Place is:
– address i supplier s records
– location of supplier
(address not on records)
• Key considerations:
– Not ser i es y ut of
– Overlapping services –
financial v/s consulting
– Supplier-guided category
of services
Place of Supply s. 12(13)
• Supply of insurance
service
• Place is:
– location of registered
recipient
– address i supplier s records
• Key considerations:
– Ancillary services not
covered
– Services to insured not to
any others
Place of Supply s. 12(14)
• Supply of advertisement
service to Government
• Place is State of
dissemination in
proportion
• Key considerations:
– Ser i es to ot y
– Allocation by reasonable
asis i a se e of contract
Place of Supply s. 12(2)
• Supply of any other
service
• Place is:
– location of registered
recipient cl.(a)
– address i supplier s records cl.(b)(i)
– location of supplier
cl.(b)(ii)
• Key considerations:
– When not covered by
ss.3 to 14
– If none of above, then:
• To registered person cl.(a)
• To any other cl.(b)
International Supply
• Exports-imports (s.13)
• Supplier or Recipient
located outside India
• Location of recipient is
place of supply, unless:
– Location is determined
by other provisions or
– Location unknown then
it is location of supplier
• Services on goods:
– Goods made available
– Recipient present
• Service on immovables
• Services of admission
• Origin-of-supply (3)
• Transport service
• On-board services
• OIDAR
Necessity for GST
• Present system of indirect tax has multiplicity of taxes levied by Centre & State
• Tax on tax, increases cost - Cascading
• No uniformity of tax rates – Confusion when to pay, on what to pay
• Increase in compliance & administration costs
• Credit blockage due to restrictions under various laws – Luxury tax, VAT, ST
Example:
i. A Service provider cannot claim VAT , Luxury tax, SAD Credit...
ii. A VAT dealer cannot claim CST , luxury tax, Service tax Credit...
iii. A a ufacturer ca ot clai CST, Lu ur ta …Credit.
Hiregange 2
Does GST help India progress?
• GDP Growth go Up by about 2-4%
• International Competitiveness by about 5-8%
• Increased FDI- Already seen
• Common Market- Tax distorted locations and check post delays would not be there.
• All those who gain to be part of tax payment
• Lower transaction cost – reduced corruption
• Increased IDT + Direct Tax Revenue
Hiregange 3
What is GST (Goods and Service Tax)?
• Ta o Suppl of Goods & Services
• Destination based tax – Global Integration
• Goods – Every kind of movable property other than money and securities.
• Services – Anything other than goods
• Thus, GST has a wider coverage, and merges 11 Taxes.
• India proposes dual GST model – Federal Structure - CGST & SGST.
• Internationally, GST was first introduced in France and now more than 160 countries have introduced GST
Hiregange 4
Levy
• CGST/SGST - shall be levied on all intra-State supplies of goods
and/or services
• IGST - shall be levied on all inter-State supplies of goods
• Composition Levy – Not applicable to services ( Incl. WCT) - pay 0.5
1% for traders Restaurants – 2.5% - More later
• Reverse Charge – Goods ( URD ) & Services ( Unregistered,
Unorganised, Import) – Even those in Threshold as they will not be
registered.
Hiregange 5
Levy & Collection
18
• Services
• Goods
• Goods as services
1: Subject
• Included
• Implied
• Excluded
2: Supply
• Specified for goods
• Specified for services
4: Time
• Inter-State
• Intra-State
3: Place
© Indirect Taxes Committee, ICAI
Levy & Collection
© Indirect Taxes Committee, ICAI
19
Description Composite Supply Mixed Supply
Naturally bundled Yes No
Supplied together Yes Yes
Can be supplied separately No Yes
One is predominant supply for recipient Yes No
Other supply is not ‘aim in itself’ of recipient Yes No
Each supply priced separately No No
All supplies are goods Yes Yes
All supplies are services Yes Yes
One supply is goods and other supply is services Yes Yes
While, the above tests could be guiding principles in determining as to whether a supply is composite or mixed supply
the end user test could be adopted as one of the criteria; Every supply will have to be independently analysed.
COT
Eligible
Available
Availed
Allowed
Compliance
Hiregange
Composition Levy – Sec. 10 of CGST Act-2017
8
Composition Scheme For the person who has AGGREGATE TURNOVER equal or less than
50 lakhs IN PR. YR AND CURRENT YEAR
Rates – [1+1] = 2% in case of a manufacturer ( other than notified)
- [0.5+0.5] = 1% for Traders
- [2.5+2.5]= 5% for Small suppliers of food & beverages*
• Note: Not available for service providers other than food related.
• If not eligible then very very difficult.
• Quarterly return- Upload of purchases?
9 Hiregange
C
O
M
P
O
S
I
T
I
O
N
Composition SchOptional
emeO
• Optional Scheme: Not for B2 B suppliers
• Taxable person who affects any inter-state supplies of G & / S - not entitled for
composition scheme.
• No stock of goods procured interstate or Import
• Person having business in different places and separately registered all of them
should opt for composition scheme.
• Person cannot be in composition in one registration and outside in another
registration.
• A taxable person who pays tax under composition levy shall not collect any tax
from the recipient on supplies made by him nor shall he be entitled to any credit.
• Industry representation needed made to ease some of these conditions to
enable the survival of small business man without breaking the chain of credit.
Hiregange 10
Exemption
• Rs. 20 Lakhs Aggregate T.O. ( Rs. 10 Lakhs for Special smaller States)
• No credit without registration
• Transactions by CG/ SG/ Local Body – not a supply
• Goods/ Services exempted by CG/ SG to be notified.
• Very Few Exemption: Primary Health/ education, specific cereals..
• Tax expected on: textiles, defense, research ++
Hiregange 11
13
Role as per Model GST Act, 2016
Overview Operational Consultancy
Network support & Infra.
Accounting & Taxation
Compliance requirement
Transitional Support Sr.
Centre/State Support Sr.
Audit & Assurance
Pre-GST Period Role as pre GST Act 2. Overview 3. Operational Consultancy 4. Network support & Infra. 5. Accounting & Taxation 6. Transitional Support Sr. 7. Centre/State Support Sr. 8. Global Opportunities
14
• Inspection/ Access to Business Premises
•Appearance by Authorised Representative
• Dept./ Special Audit
• Accounts and other records
• Audit –
• Rs.1 Cr. Section 35
35(5)
Section
65/ 66
Section 67
Other- Prof-
Better Fees
Section 152 – Disclosure of Information by Public Servant
Pre-GST Period 1. Role - pre -GST Act 2. Overview 3. Operational Consultancy 4. Network support & Infra. 5. Accounting & Taxation 6. Transitional Support Sr. 7. Centre/State Support Sr. 8. Global Opportunities
Being in a position to analyse the industry impact considering the global and Indian situation of the product / service;
In case of unintended hardship to some sectors- representation to the drafter would be in order as the level of listening presently is high; Akin to Companies Act
The clarity on the major impact on the client under GST due to in-depth understanding of the business; This presently service offering would provide the client with important information to plan the way forward under GST. This could be done as GST law is in place;
Being part of the core team of client for analysing, transiting into GST smoothly without business disruption & safeguarding of margins or as a knowledge advisor for s/w developers;
15
Pre-GST Period 1. Role as pre M-GST Act 2. Overview – Key Areas 3. Operational Consultancy 4. Network support & Infra. 5. Accounting & Taxation 6. Transitional Support Sr. 7. Centre/State Support Sr. 8. Global Opportunities
• Systems at client workplaces so as to provide appropriate advise on migrating to better systems/ ERP or suggest modification to make the existing systems GST compliant;
Understanding legacy tax
• For example supporting in decisions on: Closure/ reduction in godowns and branches; direct sale through e- commerce; evaluation of the working with C&F agents; in house/ outsourcing the distribution function to logistic companies; sourcing inputs at lowest cost within shorter time; linking to the ERP of the customer etc.;
Assisting in preparation of a strategic plan for procurement and
marketing systems of clients needed
under GST.
16
Pre-GST Period 1. Role as pre M-GST Act 2. Overview – Key Areas 3. Operational Consultancy 4. Network support & Infra. 5. Accounting & Taxation 6. Transitional Support Sr. 7. Centre/State Support Sr. 8. Global Opportunities
Changes in accounting software and internal control systems to suit GST. Test and guide & confirm the robustness;
GST awareness at initial stages and training for management, staff, vendors of clients.
Vetting and suggestion to modify agreements/ contracts/ major purchase orders overlapping or supplies to be made in GST regime;
17
Pre-GST Period 1. Role as pre M-GST Act 2. Overview – Key Areas 3. Operational Consultancy 4. Network support & Infra. 5. Accounting & Taxation 6. Transitional Support Sr. 7. Centre/State Support Sr. 8. Global Opportunities
Ensuring that the claim of credit on stock in hand is maximized by ensuring purchasing with excise duty paying documents as well as proper stock recording especially with job workers and agents and ensuring well thought of stocking policy;.
Reviewing the various business transactions to examine whether closing out the transaction in the pre GST or post GST period is advantageous;
The students of CA- the future CAs would also require to be taught the new law to enable them do the GST work today + contribute in future;
Many CAs have good HR skills and have been in accounts outsourcing- Maybe time to ramp up substantially with increased continuous trainignin GST abnd use of IT tools;
18
Pre-GST Period 1. Role as pre M-GST Act 2. Overview – Key Areas 3. Operational Consultancy 4. Network support & Infra. 5. Accounting & Taxation 6. Transitional Support Sr. 7. Centre/State Support Sr. 8. Global Opportunities
19
• Revisit the pricing strategies with the distributors
• Renegotiate (if any) the pricing with suppliers
Pricing
• Alignment of all major contract terms and tax clauses with GST
• Discounts terms to be specifically brought out in the contracts executed with distributors
Review of contracts
• Making representation for lower rate of GST, taxability of promo products issued free
Representations
• Maintaining detailed registers of supply and procurements, input credits
• Timely filing of monthly and annual returns
Compliance and documentation
Pre-GST Period 1. Role as pre M-GST Act 2. Overview – Key Areas 3. Operational Consultancy 4. Network support & Infra. 5. Accounting & Taxation 6. Transitional Support Sr. 7. Centre/State Support Sr. 8. Global Opportunities
20
• Tracking GST developments and creating awareness on GST
GST developments – Sharing
• Mapping impact of GST on current supply chain and suggesting modifications from GST perspective
Impact on supply chain – Function wise
• Identifying impact on financials, working capital, credit chain, concessions, and suggesting controls/ Short proc + planning options
Imp.on bus./finance – Focus on SOP + controls
• GST awareness trainings, review of compliances, creation of manuals and access to GST updates/resolution to queries
Post implementation compliances
• Changes to ERP modules, MIS reports, statutory compliance support, and ongoing trouble shooting support
ERP Updation - Validation
Pre-GST Period 1. Role as pre M-GST Act 2. Overview – Key Areas 3. Operational Consultancy 4. Network support & Infra. 5. Accounting & Taxation 6. Transitional Support Sr. 7. Centre/State Support Sr. 8. Global Opportunities
Synchronising IT Systems & Old
data
Strong Management Information
System
System Reconciliations
Data Integration between Centre &
States
Automation of returns and other utilities at Centre as well as States
Updating Amendments in
IT Systems
Data management for State Jurisdiction
21
Pre-GST Period 1. Role as pre M-GST Act 2. Overview – Key Areas 3. Operational Consultancy 4. Network support & Infra. 5. Accounting & Taxation 6. Transitional Support Sr. 7. Centre/State Support Sr. 8. Global Opportunities
Treatment of Incentives / Discount
Process Documentations & Accounting Manuals
Branch Transfers
Budgetary Controls
Control & Dispute Settlement
22
Pre-GST Period 1. Role as pre M-GST Act 2. Overview – Key Areas 3. Operational Consultancy 4. Network support & Infra. 5. Accounting & Taxation 6. Transitional Support Sr. 7. Centre/State Support Sr. 8. Global Opportunities
Deregistration from Existing Laws
Managing Pending Litigations
Review & Certification of Stock on date of transition
Knowledge Sharing & Capacity Building
Credit Analysis and Utilization
Comparative Valuation Under GST
23
Pre-GST Period 1. Role as pre M-GST Act 2. Overview – Key Areas 3. Operational Consultancy 4. Network support & Infra. 5. Accounting & Taxation 6. Transitional Support Sr. 7. Centre/State Support Sr. 8. Global Opportunities
Representation - unintended hardship to sectors
Conscripting Legislation & Rules/ Procedures
Monitoring Transactions & Revenues
Cross –verification with Other Acts
Training & Education
Fixing Rate Based on RNR and Review
24
Pre-GST Period 1. Role as pre M-GST Act 2. Overview – Key Areas 3. Operational Consultancy 4. Network support & Infra. 5. Accounting & Taxation 6. Transitional Support Sr. 7. Centre/State Support Sr. 8. Global Opportunities
Tax Advisory Services
International Research Issues
Knowledge Process Outsourcing
Information & Knowledge Sharing
Capacity Building Services
Technology Support Services
25
Pre-GST Period 1. Role as pre GST Act 2. Overview – Key Areas 3. Operational Consultancy 4. Network support & Infra. 5. Accounting & Taxation 6. Transitional Support Sr. 7. Centre/State Support Sr. 8. Global Opportunities*
How to get awareness in GST?
• Start focused reading/practice in VAT, Central Excise or Service Tax till 1 July
or 1st September 2017 + Update on CGST / IGST/ UTGST + State Laws – Now
• Use online resources – [email protected] , gstclub, caclubindia, linkedin &
others.
• Form a small group for GST updates in your office
• Attend GST Cert. Course + focused workshops.
• Read books/ write articles for internal use…
Hiregange 26
How to get Expertise in GST?
• Write Articles – start with 1 small topic
• Do One Impact study for free or nominal fee
• Be part of future expert group – Mainly CA + 1/2 experienced advocates- meet 2 days a week with a paper presenter.
• Attend the weekly study circle in local branch/ RC.
• Analyse all the suggestions made to Govt by various authorities ( ICAI)
• Write a topics GST book on a sector or areas of concern
• Answer online forums with care/ in depth reading
Hiregange 27
2
GST on Goods
/service
Used/intended
to be used in the
course or
furtherance of
business
Restricted Items
INPUT TAX SCHEME
ITC
4
TAXES ON WHICH CREDIT IS ELIGIBLE
IGST, CGST, SGST / UTGST
IGST on import of goods or services
GST paid on reverse charge basis
Tax paid under composition does not qualify as input tax
a) Motor vehicles / other conveyances:
5
ITC for Motor
Vehicles will
NOT be
available
Except when they are used for:
Transportation of goods, or
Making the following taxable services:
i. Further supply of such vehicles/
conveyances, or
ii. Transportation of passengers, or
iii. Imparting training for driving/
flying/ navigating such vehicles/
conveyances
iv. Transportation of goods
RESTRICTED ITEMS
6
b) Supply of goods and services being:
Food and
Beverages
Outdoor
Catering
Beauty
Treatment
Health
Services
Cosmetic
and Plastic
Surgery ITC Not
allowed,
except
when used
in outward
supply of
same
category
Life/ health
Insurance Rent-a-cab
Govt notifies services obligatory for
employer to employees
RESTRICTED ITEMS
No credit shall be allowed for the following services:
Membership
of club
Health and
Fitness
Centre
Travel
Benefits to
employees
RESTRICTED ITEMS
8
c) Works Contract (other than plant & machinery)
d) Construction of Immovable Property (other than plant & machinery)
Works contract services,
Except where it is an input
service for further supply of
works contract service
Goods or services received by a taxable
person for construction of an
immovable property on his own account
including when used in course or furtherance
of business;
ITC not Available
Construction includes re-
construction, renovation,
addition or alteration or
repairs to the extent of
capitalisation.
RESTRICTED ITEMS
9
Other restrictions
e. GST paid under composition scheme under section 10;
f. Goods or services or both received by a non-resident taxable person except on
goods imported by him;
g. Goods or services or both used for personal consumption;
h. Goods lost or stolen/ written off/ disposed off by way of gift or free samples;
(Gifts to employees beyond Rs.50, 000 is considered as supply- what happens to
credit?)
i. Tax paid after adjudication where there involves fraud etc. (S. 74) / detention (S.129)
/ confiscation of goods (S. 130)
ITC – availment & utilisation
10
System for a seamless flow of credit
Extends to inter-State supplies
Credit utilization u/s 49 would be as follows:
CGST and SGST/UTGST
cannot be mutually set-off.
Tax To be adjusted with
IGST 1) IGST
2) CGST
3) SGST
CGST 1) CGST
2) IGST
SGST 1) SGST
2) IGST
UTGST 1) UTGST
2) IGST
11
Invoice • In possession of invoice or other document
Receipt
• Receipt of goods or services [Instalment supply - credit only upon
receipt of the last lot/ instalment.
• Goods deemed to be received by a registered person when the supplier delivers the goods to the recipient/ any other person, on the direction provided by the registered person.
Tax
• Tax payment and filing of returns by supplier
CONDITIONS FOR AVAILMENT
12
Payment
• Payment to supplier within 180 days of date of invoice
Depreciation
• No depreciation on credit amount of capital goods
Time limit
• Credit to be availed before filing of return for Sept month of next FY or before filing of annual return (earliest)
CONDITIONS FOR AVAILMENT
13
Regular supply
Invoice of supplier
Price variation
Debit note
Reverse charge
Invoice made by recipient
import
Bill of entry
ISD
Document issued by ISD
Document on the basis of which credit could be availed
15
Exempt supply
NIL rated Exemption Non
taxable supplies
“non-taxable supply” means a supply of goods or services which is not leviable to tax under this Act or under IGST
Supply to SEZ / SEZ unit or Exports are ZERO rated supplies and not
exempt supplies
S.17 - First apportion – partly used for business and partly for other purposes (non-business):
16
Use of input tax credit
Attributable to Business purposes
Credit available
Attributable to Other Purposes
Credit not available
Formula for apportion is given in Draft ITC Rules
S.17-Second apportion – partly used for taxable supplies and partly for exempted supplies:
17 Formula for apportion is given in Draft ITC Rules
Use of input tax credit: Partly for
Taxable Supplies
ITC Availabl
e
Zero-rated
Supplies
Credit available
Non-taxable Supplies
ITC not availabl
e
Exempt Supplies
ITC not availabl
e
Nil-rated
Supplies
Credit not available
18
Net credit
eligible
Total credit for
a period
Only on
inputs and
input services
not on capital
goods
Exclusively
used for
Personal purposes
Exempted supply
Credit not
eligible
Specified input credit - Invoice level segregation
19
Common
Credit
Total credit
less specified
credits
Personal purposes- 5% of the credit
Exempted supply – Proportionate basis
Common Credit- apportionment
Taxable supply – Proportionate basis
Reversal of credit on the basis of turnover
To be reversed on the monthly basis using monthly turnovers
Re-computation on annual basis within the month of September next FY
20
Special provision for banking companies & financial institutions:
In the case of banking companies or financial institutions including NBFCs could opt for availment of 50% of the total credit eligible in the tax period.
Where the aforesaid banking companies, NBFCs etc opt for availing 50% of total credit eligible, they have to follow the procedure contained in Rule 3 of Input Tax Credit Rules.
21
Eligibility to avail ITC
23
Eli
gib
ilit
y o
f I
TC
Av
ail
me
nt
Registered
Person – 16(1)
ITC on supplies used/ intended to be used in
the course/ furtherance of business
ITC will be credited to
the electronic Credit
Ledger
Applied for
registration within
30 days of being
liable to register
ITC available on:
a) Inputs
b)Semi-finished Good
c) Finished Goods
On the day immediately
prior to date on which
he is liable to pay tax
Person applied
for Voluntary
Registration
Same as above
On the day immediately
preceding the date of
registration
Registered person
ceases to pay
composition tax
Same as above
On the day
immediately prior to
date on which he is
liable to pay tax u/s 9
O
n
e
Y
e
a
r
Ti
m
e
li
m
it
Eligibility to avail ITC-Cap goods
24
Eli
gib
ilit
y o
f I
TC
Av
ail
me
nt
Composition to
regular scheme
Capital goods as on the
day immediately prior
to date of such
conversion
Cost less reduction of
5% per Quarter from
the date of invoice
Exemption to
taxable Same as above Same as above
Transfer of credit due to change in constitution
25
Change in
Constitution of
Registered
Person
On account of:
Sale,
Merger,
Demerger,
Amalgamation,
Lease, or
Transfer of
business
Transferee is allowed
to take credit of
unutilized ITC
REVERSAL OF CREDIT
26
Re
ve
rsa
l o
f I
TC
Regular to
composition
Reverse credit to the
extent of stocks
Capital goods as on the
day immediately prior
to date of such
conversion
Capital goods credit
based on 5 years
useful life
Taxable to
Exemption Same as above Same as above
Removal of Cap. Goods
27
Removal of
Capital goods on
which credit is
availed
Pay higher of below:
A) Cost of Cap.
Goods less
depreciation
based on useful
life (assumed as
5 years)
B) Transaction value
Exception for
refractory bricks,
moulds an dies, jigs
and fixtures which
are supplied as
scrap, then tax has
to be paid on
tra sa tio alue only.
Input tax credit on inputs/CG sent for job work
28
Principal Job Worker
Inputs/ Capital Goods sent for job work
Received back or directly supplied from job-
orker s pre ises ithi 1 ear i puts or 3 years (capital goods) of being sent out
If not received/directly supplied in time: It is deemed that Principal has supplied
the input/capital goods on the day when input / capital goods were sent out.
He can reclaim this ITC on receiving back such inputs/ capital goods.
Where goods are directly sent to job worker, the period of one year shall
be counted from the date of receipt of inputs by the job worker.
29
INPUT SERVICE DISTRIBUTOR
(61) "Input Service Distributor" means an office of the supplier of
goods and / or services which receives tax invoices issued under
section 31 towards receipt of input services and issues a prescribed
document 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;
Input service distributor (Sec 20)
ISD shall distribute the credit subject to following conditions:
(a) the credit can be distributed to the recipients of credits against a
prescribed document;
(b) the amount of the credit distributed shall not exceed the amount of
credit available for distribution;
(c) the credit of tax paid on input services attributable to a recipient
shall be distributed only to that recipient;
30
31
Input service distributor (Sec 20)
(d) the credit of tax paid on input services attributable to more than
one recipient – e distri uted o l attri uta le re ipie ts o pro-
rata o the asis of the tur o er i a State or UT of su h re ipie t, during the relevant period, to the aggregate of the turnover of all
such recipients to whom such input service is attributable and which
are operational in the current year, during the said relevant period.
(e) where credit is attributable to all recipients, it shall be distributed
amongst such recipients on pro rata basis of turnover in a State or UT
of all recipients during the relevant period.
Explanation to Section 20-definitions
(a the rele a t period shall e––
1) if the recipients of credit have turnover in their States or Union
territories in the financial year preceding the year during which
credit is to be distributed, the said financial year; or
2) if some or all recipients of the credit do not have any turnover in
their States or Union territories in the financial year preceding the
year during which the credit is to be distributed, the last quarter for
which details of such turnover of all the recipients are available,
previous to the month during which credit is to be distributed;
(b the e pressio re ipie t of redit ea s the supplier of goods or services or both having the same Permanent Account Number as that of the
Input Service Distributor; 32
Recovery of ISD credit Sec 21
When ISD credit is distributed in excess of what is
available, it can be recovered with interest in manner
specified in section 73 or 74
33
Steps in availment and utilisation of credit
Avail credit provisionally after receipt of goods and invoice – S.41
Supplier to file returns along with supply details and pay taxes – S.37
Recipient to file return along with inward details and pay taxes – S.38
The credits are correlated with respective supplier returns – S. 42
Credits which match to the vendor details are treated as finalised
Credits not matched or excess on account of duplication etc. would be
treated as tax payable and intimated to the recipient. Vendors also would
be intimated about mismatch
The said amount of credits not matched would be paid along with interest in
the next month
Where the vendor rectifies and uploads, to such an extent credit would be
allowed and balance shall be payable with interest 34
Date of/ Last date for
issue of Invoice Ref: Sec 31 (1)
Time of Supply of
Goods (Sec 12)
Date of payment received by
Supplier
Excess Amt Recd ≤ Rs 1000, when compared with Invoice value, supplier may opt to TOSG to be Date of Invoice
for such amount
E
A
R
L
I
E
S
T
Explanation 1.––For the purposes of clauses (a) and (b), “supply” shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment.
Explanation 2.––For the purposes of clause (b), “the date on which the supplier receives the payment” shall be the date on which the payment is entered in his books of account or the date on which the payment is credited to his bank account, whichever is earlier.
Few Explanations
TOSG in case of Reverse Charge –
(a) the date of the receipt of goods; or
(b) the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or
TOSG in case of Reverse Charge (Contd) –
(c) the date immediately following thirty days from the date of issue of invoice (??) or any other document, by whatever name called, in lieu thereof by the supplier:
TOSG in case of Reverse Charge (Contd) –
Provided that where it is not possible to determine the time of supply under clause (a) or clause (b) or clause (c), the time of supply shall be the date of entry in the books of account of the recipient of supply
Supply of Vouchers -
a) the date of issue of voucher, if the supply is identifiable at that point; or
(b) the date of redemption of voucher, in all other cases
TOSG when above mentioned could not be determined -
(a) in a case where a periodical return has to be filed, be the date on which such return is to be filed; or
(b) in any other case, be the date on which the tax is paid
TOSG in respect of Interest / Late Fee / Penalty for late payment of consideration -
The date on which the supplier receives such addition in value.
Date of Invoice - If issued as per Sec
31 (2)
Time of Supply of Services (Sec 13)
Date of Provision of Service if invoice
not issued as per Sec 31 (2)
Excess Amt Recd ≤ Rs 1000, when compared with Invoice value, supplier may opt to TOSS to be Date of Invoice for such excess amount
If both do not apply, Date of Receipt of service as recorded by recipient
E
A
R
L
I
E
S
T
(i) the supply shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment;
(ii) “the date of receipt of payment” shall be the date on which the payment is entered in the books of account of the supplier or the date on which the payment is credited to his bank account, whichever is earlier.
Few Explanations
TOSS in case of Reverse Charge –
(a) the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or
(b) the date immediately following sixty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier
TOSS in case of Reverse Charge –
Provided that where it is not possible to determine the time of supply under clause (a) or clause (b), the time of supply shall be the date of entry in the books of account of the recipient of supply:
TOSS in case of Reverse Charge –
Provided further that in case of supply by associated enterprises, where the supplier of service is located outside India, the time of supply shall be the date of entry in the books of account of the recipient of supply or the date of payment, whichever is earlier.
Supply of Vouchers -
(a) the date of issue of voucher, if the supply is identifiable at that point; or
(b) the date of redemption of voucher, in all other cases
TOSS when above mentioned could not be determined -
(a) in a case where a periodical return has to be filed, be the date on which such return is to be filed; or
(b) in any other case, be the date on which the tax is paid
TOSS in respect of Interest / Late Fee / Penalty for late payment of consideration -
The date on which the supplier receives such addition in value.
Change in the rate of Goods / Services / Both –
(a) in case the goods or services or both have been supplied before the change in rate of tax,––
(i) where the invoice for the same has been issued and the payment is also received after the change in rate of tax, the time of supply shall be the date of receipt of payment or the date of issue of invoice, whichever is earlier; or
(ii) where the invoice has been issued prior to the change in rate of tax but payment is received after the change in rate of tax, the time of supply shall be the date of issue of invoice; or
(iii) where the payment has been received before the change in rate of tax, but the invoice for the same is issued after the change in rate of tax, the time of supply shall be the date of receipt of payment
Shall we quickly try to tabulate and simplify thereby –
For example
Old rate of GST – till 30.06.2018
New rate of GST – From 01.07.2018
Situations
Supplied on Invoice Raised
Payment Received by Supplier
Point of
Taxation (TOS)
A 28-06-2018 03-07-2018 10-07-2018 03-07-2018
B 28-06-2018 30-06-2018 10-07-2018 30-06-2018
C 28-06-2018 03-07-2018 30-06-2018 30-06-2018
D 03-07-2018 28-06-2018 05-07-2018 05-07-2018
E 03-07-2018 28-06-2018 30-06-2018 28-06-2018
F 03-07-2018 04-07-2018 28-06-2018 04-07-2018
When to refer bank account?
Provided that the date of receipt of payment shall be the date of credit in the bank account if such credit in the bank account is after four working days from the date of change in the rate of tax
What is the date of payment
The date on which the payment is entered in the books of account of the supplier or the date on which the payment is credited to his bank account, whichever is earlier.
1
Levy & Composition,
Exemption from Tax
CA Ganesh Prabhu Balakumar B.Com, MFM, F.C.A, LL.B, DISA (ICAI)
2
Goods & Services Tax
Single Tax Payable on Taxable
Supply
Single Tax on the Supply of Goods
and Services
Multi Stage & Destination based Consumption Tax
GST
All About GST
3
GST is charged only
on the component of Value Addition
No (Reduce)
Cascading Effect
i.e tax on tax
All About GST
5
Section 7 - Supply
Sch 1 Activities w/o Consd.
Sch3 Activities - NOT
Activities by Govt or LA as Public Authorities
Notified by Govt + Co GST recom.
Sale, transfer, barter, exchange, license, rental, lease, disposal w/o consd
Import services w/ or w/o
Consd.
Scope of
Supply
Sch 2 Activities
By a person
For a consideration
In the course or furtherance of
Business
Sale/ Transfer/ Barter/ Exchange/License/
Rental/ Leases/ Disposal
Phrase To another person not incorporated
All form of Supply
Made or agreed to be made
Supply
Taxable Event
7
Sch – I Supply without Consideration
• Permanent Transfer of BA - ITC
• Supply Between Related or Distinct Person – FoB
• Gift by Employer to Employee – Rs.50,000/-
• Supply by Principal to Agent or
• Receipt of Goods by Agent on behalf of Principal
• Import of Service – Related Person - FoB
8
Sch II Supply of Goods or Services
• Transfer of title in Goods - SoG
• Right or UDS in Goods W/O Title Transfer – SoS
• Transfer of title in Goods - Future Date – HP/EMI -
SoG
• Right in Immovable Property W/O Title Transfer - SoS
• Treatment or Process – Another Person Goods - SoS
• Transfer of BA – No Longer Forms Part - SoG
9
Sch II Supply of Goods or Services
• If a BA – Private Use or Any Purpose other than
purpose of Business – SoS
• If a BA held by a taxable person who ceases to be a
taxable person –SoG
• Renting of IMP – SoS (DS)
• Construction of Complex – SoS - Except Entire Consd
• Temporary Transfer IPR – SoS
10
Sch II Supply of Goods or Services
• Information Technology Software – SoS
• Refrain from Act or Tolerate an Act – SoS
• Transfer of Right to use any Goods – SoS
• Composite Supply – WCS & Supply of Food
• Supply of Food by Club or Association - SoG
11
Sch III – Neither SoG or SoS
• Service - Employee to Employer – In Relation or Course
• Any Court or Tribunal, Functions – MP, MLA, etc.
• Post Recognized by CoI or CP, M, D of Board or
Commission of CG or SG or LA
• Funeral, Burial, Cremation, or Mortuary
• Sale of Land (except Construction of Complex)
• Actionable Claims (except Lottery, Betting, Gambling)
12
Sec 8 – TL on Mixed & Composite
Basis Mixed Supply
Composite Supply
Meaning Two or more supplies together, which is NOT a Composite Supply
Two or More supplies with 1 Principal Supply & Naturally Bundled
Treatment As supply of that supply w/ higher tax rate
As supply of that principal supply
13
Sec 9 (1) Levy of CGST & SGST
• Tax Levy of CGST (SGST Levy – Respective SGST
Act)
• All Intra-State Supply of G or S or B – Except Liquor
• Value determined as per Sec 15 of CGST Act
• Rate Notified by CG, SG
• Not Exceeding 20%
• Collected in Manner Prescribed (Sec 12 & 13)
14
Sec 9 (3) Levy of CGST & SGST - RCM
CG & SG – Recommendation GST Council
Specify Goods or Services or Both
Tax on which Payable under Reverse Charge
Tax shall be paid by Recipient
All provisions apply as if he is Supplier of such Goods or Services.
15
Sec 9 (4) Levy of CGST & SGST –URS
• Supply of taxable Goods or Services or Both
• By a Supplier, who is not registered under GST
• Tax on which Payable under Reverse Charge
• Tax shall be paid by such person as Recipient
• All provisions apply as if he is Supplier of such Goods or Services.
16
Sec 9 (5) Levy of CGST & SGST – ECom
• CG & SG on Recommendations of GST Council
• Specify category of Services (Goods – NA)
• Tax on which shall be paid by E-Commerce Operator
• If such services are supplied through them
• All provisions apply as if he is Supplier of such Goods or Services.
17
Sec 5 (1) of IGST - Levy of IGST
• Levy of IGST
• All Inter-State Supply
• Value determined as per Sec 15 of CGST
• Rate Notified by CG, SG - Not Exceeding 40%
• Collected in Manner Prescribed (Sec 12 & 13)
• IGST will be levied on Imported Goods
18
Sec 5(3) of IGST - Levy of IGST - RCM
• CG & SG on Recommendations of GST Council
• Specify Goods & Services
• Tax on which Payable under Reverse Charge
• Tax shall be paid by Recipient
• All provisions apply as if he is Supplier of such Goods or Services.
19
Sec 5(4) of IGST - Levy of IGST – URS
• Supply of taxable Goods & Services
• By a Supplier, who is not registered under GST
• Tax on which Payable under Reverse Charge
• Tax shall be paid by Recipient
• All provisions apply as if he is Supplier of such Goods or Services.
20
Sec 5(5) of IGST - Levy of IGST – E-Com
• CG & SG on Recommendations of GST Council
• Specify category of Services
• Tax on which shall be paid by E-Commerce Operator
• If such services are supplied through them
• All provisions apply as if he is Supplier of such Goods or Services.
21
Sec 10 Composition Levy - Eligibility
PY Aggregate Turnover ≤ Rs.50
Lakh
Engage in Supply of Services of Supply
of Foods
(Sch2 Para6 Clause (b))
Engage in making Supply of goods
which are liveable to tax under this
Act;
NOT Engaged
Inter-State Outward supplies of Goods;
NOT Engaged
Supply of goods through E Com
(Sec 52 of CGST Act)
22
Sec 10 Composition Levy - Eligibility
NOT Manufacturer of goods Notified*
If same PAN for more than 1 RP, eligible only if
both or all opt for Composition Levy
NOT collect any tax from Recipient & NOT entitled
to ITC
If RP opted without being eligible and PO has
reasons – Tax+ Penalty u/s 73 & 74
23
Sec 10 Composition Levy – Rate of Tax
Manufacturer 1% of State or UT
Turnover
Supply of Food
2 ½% of State/UT Turnover
Other Suppliers ½% of State/UT
Turnover
24
Conditions & Restrictions – Rules
Neither a CTP or a NRTP. Goods held in Stock as on AD are not
Inter State or Branch Transfer Imported Purchase Unregistered Person. (He shall pay tax under (3) & (4) of Sec 9
of CGST Act)
He should mention the word CTP - on every Bill, Notices & on Signboard He need not file a fresh intimation every year.
25
Validity of Composition Levy
Option to pay tax u/s 10 is valid only till all
conditions are fulfilled.
Conditions – Not satisfied then withdrawal is made
in FORM GST CMP 04 within 7 days of violation.
And liable to pay tax U/s 9 of CGST Act
26
Sec 11 of CGST Power to Exempt
Govt on GST Council recommendation in public interest may exempt:-
By notification, exempt partly or
wholly
By special order under exceptional nature
By Inserting explanation within one year of issue
with retrospective effect
28
CA Ganesh Prabhu Balakumar Partner C.Ramasamy & B.Srinivasan Chartered Accountants, Chennai. Mobile: +91 98404 71139 E- Mail : [email protected] [email protected]