8 Practical Issues under GST
by Agam Gupta 9.48K
Introduction
We are witnessing a historic change, and when history writes itself I remember a quote from Charles Darwin that deem fit on this particular occasion; “it is not the strongest of the spices that survive, nor the most intelligent one, but the most responsive to change.”
As said, GST is not only a tax reform; it is a complete transformation of the existing system. We can see people all over the communities are discussing about the GST and making headlines every day discussing the impact and repercussions of the GST law. I do appreciate this act of our community that people are becoming aware of this reform before it hits them.
Based upon the queries, we have tried to compile some important practical issues to help you understand the GST far better. Let us proceed to discuss the issues:
#Practical Issue No.1 – The mystery of Cenvat Credit of SGST
We will take a practical case to explain the facts and the problems faced by the community at large.
Suppose, a CA firm registered in Delhi, went to Mumbai for audit. The whole audit team stays at the 5 star hotels in Mumbai. They stay there for 1 month. The hotel bill is paid by the CA firm. The hotel charges them CGST and SGST because there place of supply is in Mumbai.
Now, the important question is that whether the CA firm can claim the ITC of the SGST paid on the hotel bill?
Various experts believe that the ITC of SGST shall not be available to the CA firm in Delhi because the same is not registered in Mumbai. However, in our view the SGST of Maharashtra may not be available to you to be set off against the SGST of any other state but its ITC shall be available against the IGST. This view is very logical; otherwise it would have defeated the whole purpose of GST implementation.
Furthermore, our view has also been upheld by the government by answering to one of the query on twitter.
#Practical Issue No.2 – Who all are liable to Register under GST
Various people across India have this doubt, whether they are covered under GST or not. Further, some rumors over social media regarding GST registration is only making it worse. Hence, we would like to explain the registration provision here once again.
Also, I personal advice is not to believe blindly anything over social media rather reach to a professional and resolve your queries. You may even to us at info@hubco.in.
As per GST law, if your annual aggregate turnover of Goods and services exceeds Rs. 20 Lakh (Rs.10 lakh in case of north eastern states). However, this basic exemption limit shall not apply to the following:
- Person making any inter-state taxable supply (i.e. selling outside the state)
- Casual Taxable person
- Person who required to pay under Reverse Charge
- Non-resident taxable person
- A person required to deduct tax (e.g. e-commerce business – marketplace)
- The person supplying goods or services or both as an agent of any other person.
- Input Service Distributor
- A person who supplies goods or services through e-commerce.
- Every e-commerce operator
- An aggregator who supplies services under his brand name
Hence, if you are not falling under the aforesaid clauses, then the basic exemption limit to registration shall apply.
#Practical Issue No.3 – Registration for New Dealers and Migration for already Registered Dealers and Service Providers
More than 8 million taxpayers have already migrated to GST but still a large number is still confused about the GST migration. Also, there are many people in the industry who are mixing this with fresh registration.
Hence, for the last time, we would like to explain the GST migration in India.
All existing Excise dealers, Registered Service Tax Users and VAT dealers will compulsorily migrate to GST. Migration has again started from 1st June 2017 and to migrate to GST, assessee would be provided a Provisional ID and Password by their respective Departments.
It is mandatory to migrate under GST irrespective of the turnover condition if you want to take benefit of your Input Tax Credit. The registered dealers and service providers needs to use this Provisional ID and Password to login to the GST Common Portal where they would be required to fill and submit the application for Migration into GST.
The person who seeks to take fresh registration under GST can apply for fresh registration once GST is notified to be implemented. Also, per the Government Twitter Handle the new registrations might get open before 1st July.
Documents Required for Migration and Registration
- Provisional Id and Password (In Case of Migration only)
- Pan Card of Company/Firm + Proprietor/Authorized Signatory Pan card
- Pan Card of Partners/Directors
- Aadhar Card of Partners/Directors/Proprietors
- Bank Statement of Business Account
- Passport Size photo
- Authorization Letter
Understanding the GSTIN Number
Once you get the Registration, you will be allotted with a GSTIN Number which needs to be mentioned on your every Invoice and on your Purchase Invoice also.
GST Registration Number is a 15 Digit Alpha Numeric Number consisting of 5 Elements.
#Practical Issue No.4 – The flow of input credit:
Input tax credit (ITC) is said to be the soul of GST. GST is based on one of the main problems of the current taxation system, i.e. cascading effect. Hence, it is imminent that this concept is very important under GST regime.
Before going forward, we must understand the few basic definitions which were there in the previous laws as well; however they are defined differently under GST regime.
- Input: Input means any goods other than capital goods used or intended to be used by the supplier in the course or furtherance of business; [clause (59) of section 2].
- Input Service: Input service means any service used or intended to be used by a supplier in the course or furtherance of business; [clause (60) of section 2].
- Capital Goods: Capital Goods means goods, the value of which is capitalized in the books of accounts of the person claiming the credit and which are used or intended to be used in the course or furtherance of business; [clause (19) of section 2].
Important point: The definition of capital goods has been simplified a lot. Earlier, the definition was very ambiguous and subject to litigation regarding what is capital good and what is not. The order of utilizing the electronic credit ledger is as follows.
Conditions for Utilizing Input Tax Credit on Existing Stock:
This is important from the transition phase point of view and to sum up, you must fulfill the following conditions to avail the cenvat credit on the existing stock:
- Stock Invoice should not be 12 months old from the date of GST applicability
- Dealer should be Registered
- Stock is intended to be used in Taxable supply
- Duty has already been paid supporting by document
- Credit should be allowed under GST Law.
#Practical Issue No.5 – Return filing under GST
Every law has a procedural part and returns are considered above of all. An unambiguous and clear procedure helps the government to implement the act smoothly. Further, an efficient system of compliance helps government of establish ease in doing business.
Further, from taxpayer point of view filing of correct returns is very important and it is the way by which government gets to know about your running operations and it keeps a check that there is no non compliance based upon the information supplied via returns.
Further, even though we are on a verge to welcome the GST, but the truth is we are still not prepared for it. Hence, atleast understand the basic returns which are to be filed under GST which are as follows:
GSTR 1 – 10th of Every Month - Outward return (Details about your sales/ Supplies made during month)
GSTR 2 – 15th of Every Month - Inward return (Details about your purchases made during month)
GSTR 3 – 20th of Every Month - Month return (for cumulative records of inward and outward made during month)
Further, following steps to be followed for filing the GST return:
#Step 1: The person shall file the outward supply return in GSTR 1 before tenth of the month succeeding the said tax period.
#Step 2: Details of outward supplies furnished by the supplier shall be made available to the recipient in FORM GSTR 2A.
#Step 3: Recipient shall verify, validate, modify the details relating to outward supplies and may also file details of credit or debit notes.
#Step 4: After verification, recipient shall furnish the details of inward supplies of taxable goods and / or services in FORM GSTR - 2.
#Step 5: The details of inward supplies by the recipient shall be made available in FORM GSTR-1A and supplier may either accept or reject the modifications.
#Step 6: If the details provided remained unmatched, then the person shall rectify such error or omission in the tax period during which such error is noticed.
#Practical Issue No.6 – GST tax rates
The final GST rates are announced by the GST Council on 19th May 2017 in 14th GST Council Meeting at Srinagar. The council has broadly kept the rates in 5 categories and these are Nil, 5%, 12%, 18% and 28%.
The Government has decided to keep a large number of Items under 18% slabs and in total 1211 items are categorized under 5 slabs. Glimpse of GST tax rates.
#Practical Issue No.7 – Non - filing of GST return
Non compliance in GST will going to cost you a lot more than the existing tax system. Hence, you must not take GST non compliance casually. Under GST, if fail to file a return, then there is penalty of Rs.100 per day per return subject to maximum of Rs.5000/-.
Further, if you are a regular registered dealer and failed to furnish returns 6 consecutive tax period and 3 in case of dealer registered under composition scheme the registration shall stand cancelled.
Hence, get organized and forget the habit of filing the late return.
#Practical Issue No.8 – How will you ready yourself for GST
Until now, the dependency on the system and technology is limited, however with the advancement of GST, technology and computers will play a vital role and therefore it is important to have GST software in place.
So, to adopt GST, you need to be system ready and we recommend you to go for a GST Invoice Generation and return filing software which will make your GST compliance and ease.
Conclusion
In case you have any query, then kindly email us at info@hubco.in.
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