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25 views40 pagesGST 2020 Ans
Gst notes
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© © All Rights Reserved
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/ 40
Tax Structure in India 13
Tax Structure in India before implementation of GST
Tax structure in India before implementation of GST is as follows:
Tax structure in
India before
implementation
of GST.
Indirect taxes|
Ecee Service Customs
duties on Sales tar J
pcatics ea sales tax ia at VAT
On
Manufacture} |lon tnterstare | L]On provision! [Jon Import of| On within
of goods ale of services ‘goods siate sales
(a) Direct Taxes in India: Direct Taxes in India include taxes on income
and property, the important ones being Personal Income Tax, Corporate
Tax, Estate Duty and Wealth Tax. Income tax is progressive in India,
ie., the rate of tax is not uniform but rises progressively with the rise in
moncy income.
(b) Indirect Taxes: The some important indirect taxes imposed in India are
as under:
Excise Duty: This duty imposed by the government on the manufacturer
orpraducer_on the production of some goods is called excise duty. The
Central Government levies excise duty under the Central Excise Act,
1944 and the Central Excise ‘Tariff Act, 1985. Central excise duty is tax
which is charged on such excisable goods that are manufactured in India
and are meant for domestic consumption. The liability to pay excise duty
is always on the manufacturer or producer of goods who collected it from
the buyer of goods.
Customs Duty: Duties of customs are levied on goods imported or
exported from India at the rate specified under the customs Tariff Act,
1975 as amended from time to time or any other law for the time being in 14
Goods and Services Tax (Gg7
— —s
Customs Act was formulated in 1962 to prevent illegal import
Hesicles, all imports are sought to be subject to
votection to indigenous industries.
force. T
and exports of good
duty with a view to allording p'
‘The service providers
ashinir are required to pay
11994, Under Section 67 of this Act, the
ate amount charged by the
in India except those in the state
Service Tax under the
Service Tax:
of Jammu and I
ns of the Finance Act o}
Tax is levied on the gross or aggregs
provisio
Service
service provider on the receiver.
Lux paid by the consumer on the purchase of some items js
sed under both, Central Governmen,
x) Legislation. From
mented sales tax
Sales Ta:
~alled the sales tax. Sales Tax is impo:
x) and State Government (Sales T
tof the States in India have supple
(Central Sales
10th April, 2005, mos
with a new Value Added Tax (VAT)
VAT: VAT is a tax on the sale of goods. It is imposed on intrastate sale,
ie, sale of goods within the State. Tt is known as Tax on Value Added or
amount of value addition made,
Value Added Tax as it is imposed on the
where value addition = Sale price - Purchase price. It is a tax paid on
yale addition, as the tax paid on purchases is allowed to be set off agains
the tax payable on sales, the resultant being the tax only on value addition,
Difference between Excise duty, Custom duty and Sales tax
Gustom duty] Sales Tax
Basis [Texeise duty
Basis of charge This duty is ‘This duty is This tax is
imposed on the | imposedon the __ | charged on
manufacture of — | export or import | inter-state sale
goods in India, | of goods within India,
‘Taxable Event ‘Taxable Event
axable Event
is when goods is when goods
manufactured or | are exported or state sale within
produced of goods | imported out or in | India take
of India. place.
Taxable Event
and point
is when inter-
in India
Distribution — | I1is levied Tris not It is levied by
and collected distributed and the Centre
by the Centre levied, collected Government
Government but | and retained but collected
shared with the by the Centre and retained by
7 | States. Government. the States.
ct 5 ; 5 =
Central Excise Act Custom Act 1962 Central Sales
and Custom Tariff | Tax Act 1956.
Act 1975.
1944 and Central
Excise Tariff Act Overview of GST 25
consumer point of view, the biggest advantage would be in terms of a reduction in the
overall tax burden on goods
Goods and Services Tax (GST) wesssS
GST is a taxon supply of
goods and services, Under GS
distinction is made between good
and services for levying of tax. It will
mostly substitute all indifect taxes
levied on goods and. services. by
the Central and State governments
in India. GST is a single tax ata
national level to be levied at all
stages right from manufacture up
to final consumption. Under GST
every_person is liable to pay tax on
his ouput and entitled 16 get input tax credit (ITC) on_the tax paid on its inputs.
Therefore, it is a tax on value addition only, Ulimately the final consumer shall bear
the burden of tax under GST. The important elements related with GST are explained
as below:
(® Comprehensive tax levy on supply: Goods and Services Tax (GST) is a
comprehensive tax levy on manufacture, sale and consumption of goods and
Goods and Services Tax (GST)
Pone
nal level
service ata na
Gomprehensty
sl
(ii) Mostly substitute all indirect taxes: GST will mostly substitute all indirect
taxes levied on goods and services by the Central and State governments in
India.
Raaiets
a VAT
Central Goods and Services Tax (Gs;
a single tax at an
dat all stages: GST is
my manu faceure
(ii) Single tax le
Jevied at all stages tight ft
* Retailer to
Consumer
* Manufacturer to
Wholesaler
Retailer
Under GST only value addition will be taxed and
(iv) Tax on value addition:
by the final consumer:
burden of tax is to be borne
Example
‘Stages of supply chain | Manufacturer to | Wholesaler to Retailer to
wholesaler retailer consumer
Value of input 1,000, 1,200 1,500,
Value Addition 200 800 400
Total 1.200, 1,500 1,900
GST (10%) on output 120 150 190
Input tax credit Nil 120 150
et OST payable 120 30 40
Ls’ 1. Normal or Forward Charge [Section 9 (1)]: According to Section 9 (1) there
shall be levied a tax called the central goods and services tax (CGST) on all
intra-State supplies of goods or services or both, except on the supply of
on the value determined under
alcoholic liquor for human consumption,
section 15 and at such rates, not exceeding 20 per cent, as may be notified by
the Government on the recommendations of the Council and collected in such
manner as may be prescribed and shall be paid by the taxable person. Under,
normal or forward charge taxable person is supplier.
¢ person is supplier eee eee eae eae ey NE
Persons liable for registration under GST (Section 22)
| fe According to section 22 following persons liable for registration under GST:
Persons
registra
(Section 22)
Persons
migrating from
Transferee
Transferce
Normal supplier
case of in case of
fer of /) amalgamation or
business demerger
crossing
specified limit
No limit Electronic credit ledger [Section 49(2)]:
Electronic credit ledger reflects the Input Tax Credit as self-assessed in monthly
returns. The credit in this ledger can be used for making payment of tax only and it
cannot be used for making payments of other amounts such as interest, penalty, fees,
etc. The electronic credit ledger shall be maintained in FORM GST PMT-02 for each
registered person eligible for input tax credit under the CGST Act.
Provisions related with Electronic credit ledger: Significant provisions related
with Electronic credit ledger are given as below: 44 Goods and Sorvices Tax (Gp
Benefits of GST
Following are the benefits of C
Prreniqeummeriucc inuirket
PRU emesis
Cin antes
Pins re tities cele
aaln
UW uy canc hae
Phu netca
Renitiicerin tanirest~cr it
fnitenctrtemeah aes
Fryar cat
6, Simpl
Paces enmnccerexc pen
Byacivaoc-ceelay tac
Fayre ccdtnteriira senna
i
Totesiumurtae erieceta fea acerce stone
fy fiesta liaise
Reese cote
Ti Reduction
pvvaqeucancun
ou Noe
coun
Sie siees
gest benefit of GST is an elimination
ist will not be in picture
fied common national
Creating common national market: The big;
ofsmultiple indirect taxes. All taxes that currently ¢
CST is an important reform and it will help create uni
market for India.
on of Multiple Taxes: The another benefit of GST is an elimination
of multiple indirect taxes. All taxes that currently exist will not be in pictiire.
This means current taxes like excise, octroi, sales tax, CEN VAT, Service tax,
turnover tax etc will not be applicable and all that will fall under common tax
called as GST.
3/ Prevent cascading of taxes: GST will prevent cascading of taxes. In it Input
Tax Credit will be available across goods and services at every stage of suppl}-
. Eliminatit
4. Improve the overall investment climate: GST will improve the overall
investment climate in the country which will naturally benefit the development
inthe states. .
5. Re ion it i 5:
eduction in compliance costs: GST has removed multiple records keeping
and lesser investment of resources and m: i intaini i
I a anpower in
required now. Pp maintaining records is overview of GST
6.
7.
9
10.
12.
13.
14.
15,
16.
17.
45
Fis an attempt to make the system
«i atitomated procedures for
ns, refunds, tax payments, etc.
Simplified and automated Procedure:
taxpayer friendly. Under
ious processes such as i
ci
inplified
tration, ret
y
: ction to be through the
between
Reduction in corruption: Under ail gue
common GSTN portal. This is done to ensure less public interfa
the taxpayer and the tax Slain It will definitely affect the corruption.
It will improve environment of
d online,
Improve compliance: GST is based on I
compa ance as all renurns tobe fi olin, input credits to be verif
ugidin 3
a Dior m SGST and IGST rates will reduc
the incentive for evasion by eliminating rate arbitrage between neighboring
States and that between intra and inter-State sales.
Companies Tax burden likely to come down: Average tax burden on
companies is likely to come down which is expected to reduce prices and
lower prices mean more consumption, which in turn means more production
thereby helping in the growth of the industries . This will create India as a
“Manufacturing hub”,
Reductions in the multiplicity of taxes: The main purpose of GST introduction
is to remove complexities. It results in reductions in the multiplicity of taxes
and results in simplification and uniformity.
Bring greater certainty: GST brings common procedures for registration of
taxpayers, refund of taxes, uniform formats of tax return, common tax base,
common system of classification of goods and services. Due to this uniformity
greater certainty will come to the taxation system,
result Harmonization of
Harmonization of laws: Introduction of GST wil
laws, procedures and rates of tax.
Boost export and manufacturing activity: GST will boost export and
manufacturing activity, gencrate more employment and thus increase GDP
with gainful employment leading to substantive economic growth.
Helpful in poverty eradication: GST will help in poverty eradication by
generating more employment and more financial resources
Making products more competitive in the international market: More effi icient
neutralization of taxes especially for exports thereby making products more
competitive in the international market and give boost to Indian Exports.
Timelines: In GST timelines are provided for important activities like
alt in increased efficiency and
obtaining registration, refunds, etc. This will res
compliance. 46 Goods and Services Tz
Fe (Sa
erything is online
Under GST
thus making the
its all across India
systen
tax ¢
18, Transparent and accountable
Electronic matching of input
process more transparent and aceo
expected (9 be lower: Final price of goods is expected tg
flow of input tax credit between the manufacture,
inther, tax burden on companies is likely ¢
atable.
19. Price of goods is
be lower due to seamless
nel service supplier
ch may reduce prices.
retailer
come down wi
Drawbacks of Goods and Services Tax
wbacks of Goods and Se
es Tax in India:
Following are the drat
Neaiena-tets
blems in Adoption and migr
impact on some of industries
ot
shears
se in operational costs
6. Petroleum produetsexempted
ici a slay ers erect
udp aneues taro Wet Mente rons Tesora
iit castes aii nasstunt<
deere
HE RULRe ts eh ioluch
Goods ‘and
prong tan
icons on coniposiuon scheme holder
Hoscdialione rit
1. Not a single tax: GST is being referred as a single taxation system but in
reality it is a dual tax in which state and centre both collects separate tax oma
single transaction of sale and service. GST is a confusing term where double
tax is charged in the name of a single taxation system.
Adoption and migration: Adoption and migration into new GST
2. Problems
system is a complex task.
3. Negative i i i
! ea ive impact on some of industries: Introduction may have negative
impact on some of industries such as real estate.
4. Increa: 2 er G i ‘
=e costs: Under GST businesses have to either update their existing
i wnting ERP software to GST-compliant one or buy a GST software s°
y cal ir busi i
sha y can keep their business going. But both the options lead to increased overview of GST
5.
10.
11.
12.
13.
14.
47
ional costs due to
Increase in operational costs: GST will incr
to be GSTs
need to train their employees in GST compliance.
se the ope
int. Further, businesses will
employing of ta
x professional
mpl
T and will create
aia products exempted: Petroleum are left out of Gs
problem for those Industries which use petroleum products as input for their
work as they cannot claim ITC.
Multiple of Tax Rates: Under GST also there are multiple tax rates. Presently
it has 5 Slabs in GST-0, 5, 12, 18 and 28%.
Problems due to multiple State registrations: Under GST there are problems
due to multiple State registrations. Businesses and Firms are now needed to
register for GST in every sta te.
Problems related with assistance: Under new businesses and small people
may require hiring professionals. It will create problems for small and new
fe they oper
businesses.
Computerized GST: Under GST everything is online and it is a problem for
small businesses/taxpayers people are computer illiterates and do not have
computers and related infrastructure.
Unstable economy: Different economists are predicting, after implementing
GST, India’s economy will approximately take two years to become stable.
Old Wine in a New Bottle: It looks that terms such as GST which includes
CGST, SGST, and IGST is nothing but just a new name in accordance with the
existing tax systems.
fax benefits of GST compounding
Restrictions on composition scheme holder:
scheme are only given if taxpayer carries his business within the boundaries
barred from carrying out inter-state transactions and import-
he is compelled to carry only intra-state
ofa state He
export of goods and services. Thus,
itory of his business.
transaction and limits the ter
inesses
Problems due to dual control: The GST Act has given the control of bu:
rnments with businessmen binding by-laws. This has
to Central and State Gove
businessmen across the nation.
given rise to complexity for many Deemed supply [Section 7 (1A)
Section 7 (1) (d) has been deleted in its enti
inserted after section 7(1) . This new section ensures | i
in Schedule I will be taxed only. When the activity in constituted as supply j
ly and Section 7 (1A) new
ures that the activities specifie
accordance of Provisions of Section 7 (1).
( activities specified in Schedule IT
activities to be treated as
supply of services
supply of goods
‘Transactions covered under Schedule I: Transactions covered under Deeme
Supply are provided in Schedule 1. According to Schedule II, followin
Matters are to be treated as Supply of Goods or Services: ae
toxable Event and Scope of Supply under GST 83
1. Transfer:
Transfer include following:
(a) Transfer of the title in goods: Any transter of the title in goods is
of goods,
(b) ‘Transfer thot the transfer of title: Any transfer of goods or of right in
goods or of undivided share in goods without the transfer of title thereof,
is a supply of servic
(c) Transfer of tide 1 future: Any transfer of title in goods under an
ement which stipulates that property in goods will pass at a future
Jac upon payment of full consideration as agreed, is a supply of goods.
supply
‘Transaction Details Treatment
2, Land and Building: Land and Building include the following:
(a) Oceupy land: Any lease, tenancy, easement, licence to occupy land isa
supply of services.
(b) Letting out of the building: Any lease or letting out of the building
including a commercial, industrial or residential complex for business or
commerce, either wholly or partly, is a supply of services.
Treatment
‘Transaction SS
Goods and Services TGs
= 81)
Any treatment or process which is being applied ,,
apply of services.
3. Treatment or process:
other person's goods
Details ‘Treatment
Transaction
Rip H Nn
Pariabearsied
4. Transfer of business assets: Transfer of business assets includes following:
(a) Transfer or disposal of business assets: Where goods forming part of
the assets of a business are transferred or disposed of by or under the
directions of the person carrying on the business so as no longer to form
part of those assets, whether or not for a consideration, such transfer or
disposal is a supply of goods by the person.
(b) Providing business goods to private use: Where, by or under the
direction of a person carrying on a business, goods held or used for the
purposes of the business are put to any private use or are used, or made
available to any person for use, for any purpose other than a purpose of
the business, whether for a consideration or not, the usage or making
available of such goods is a supply of services.
() Goods forming part of the assets on ceasing to be a taxable person:
Where any person ceases to be a taxable Person, any goods forming part
of the assets of any business carried on by him shall be deemed to be
supplied by him in the course or furtherance of his business immediately
before he ceases to be a taxable person, unless—
(@ the business is transferred as a going concern to another person;
() the business is carried on by a personal representative who is deemed
to be a taxable person. a
yale Event and Scope of Supply under GST 85
frst
‘Transaction Details Treatment
Nr ee
Ue
AiO eae tai
UUs
PoE
Soa
pega hci te
a scontiy iste tones
Punta eased
Conus eee
Que to esta
PSE SO ora
Aig eesnes
5. Transitions specifically under Supply of service: The following shall be
treated as supply of service:
(a) Renting of immovable property: Renting of immovable property shall
be treated as supply of service. 88
(B) Second Exclusion from suppl.
____ Goods an Seniesa og,
ject to clause (b) of paragray,
5. Sale of Land and Buildin,
bol Schedule UH, Sale of Building:
6. Actionable Cl
tlaims, other tha
tery, betting and gambling: Actionabjy
acl saammblings.
other thi
lottery, betting
Supply of goods from a place in the nop,
ction:
in the non-taxable territory without sug
7. Merchanting Trade Trans
taxable territory to another ph
goods entering into India.
8. Supply of warehoused goods
of purview of CST:
(a) Supply of warchoused goods:
before clearance for home consumption
(b) High Sea Sales: Supply of goods by the consignee to any other
person, by endorsement of documents of title to the goods, after
the goods have been dispatched from the port of origin located |
outside India but before clearance for home consumption. |
: |
ly: Activities or transactions undertaken by
and High Sea Sales: Following two are kept oy
Supply of warehoused goods to any person,
the Government [Section 7(2) (b)]: According to Section 7(2) (b) activities or
transactions undertaken by the Central Government, a State Government ar |
; are engaged as public authorities, as may be
any local authority in which they
notified by the Government on the recommendations of the Council, shall be |
treated neither as a supply of goods nor a supply of services. Thus, certain |
activities undertaken by Central or State Government or any local authority
as specified in Schedule TV shall be neither supply of services nor of goods.
Schedule IV provides exhaustive list of activities such as issuance of passpoms
visa, driving licence, birth and death certificates, etc.
ce of passport,
th and death certificates, etc.
visa, driving licence,
‘Treated as: neither asa supply of
goods nor a supply of services eventand Scope of Supply under gst 89
under@st
g, Declared Supply of goods orservice
Gection 7(3)): According tg =,
recommendations of the Coun wou
‘Transactions notified by Governments
73), the
I specily, by notiti
overnment may, on the
tion, the transactions that
are to be treated as:
Jared Supply af
Mls or
Governm, if
rent may specify the transactions that
Are to be treated as
a supply of services
and not as a supply
of goods
a supply of goods
and notas a supply
of services
neither a supply of
goods nor a supply
of services
(a) Supply of goods: a supply of goods and not as a supply of services;
(b) Supply of services: a supply of services and not asa supply of goods;
(c) Not supply: neither a supply of goods nor a supply of services.
From the above Section 7 (3) it is clear that the term supply has not been
defined exhaustively rather it has been d
ed in an inclusive manner.
Further, it provides power to the Government make changes in scope of supply
of goods and services.
Composite and mixed supplies [7 Composite and mixed supplie:
Combo of Goods + Goods
Goods + Services
Services + Goods
Services + Services
Before understanding the tax
fbilty on composite and mixed
supplies is necessary to have knowledge
oftheir meaning andl these are defined
Bhelow:
‘Composite Supply Mixed Supply
LE] [Section 2(30)] [Section 2(74)]
not naturally
bundled Goods and Services Tay