GST - Goods and Services Tax

1. Demystifying GST - Goods and Services Tax

2. Agenda: • Introduction to GST • GST Highlights • Registration • GST Compliance • Brief inference in comparison with existing law • GST Impact • Preparedness for GST • Technology for GST

3. GST Key Milestones • 14th June 2016 – Draft Model GST Law on public domain • 3rd Aug – Rajya Sabha passes the Bill • 8th Aug – Lok Sabha passes the Bill • 8th Sept – President Ascent • 12th Sept – Cabinet Approval to form GST Council • 16th Sept – Govt. notifies GST Council • 22nd /23rd– First Council Meeting • 26th/27th – Draft Rules on public Domain

4. Academic: Prelude to GST Current Taxation System Indirect Tax Direct Tax State Government Central Government Income VAT Customs Duties Luxury tax Central Excise Purchase tax Service Tax Entry tax Octroi etc.

5. Academic: Prelude to GST Current Estimated Tax Collection Indirect Tax Direct Tax Customs Duty 1.9L Cr Tax Collection of 7.35 Lakh Crores Excise Duty 2.0L Cr Service Tax 2.20L Cr Total central Tax 6.5L Cr State 8.0L Cr Total Indirect Tax 15.0LCr

6. Introduction to GST A significant indirect taxation revolution in our country since Independence “One Tax, One Nation, One Market” GST is outright Business Reform not just Tax Reform GST is not an incremental tax, it is an transformational Tax Reform GST is highly compliance driven Law

7. Why GST? • Simple Tax Structure • GST • Increased revenue • Eliminates Cascading Effect • Technology Driven System

8. Highlights of GST Common threshold limit across the country Continuity of tax credit across the supply chain till it reaches the consumer Elimination of tax cascading effect in the supply chain PAN Based Registration ‘on Supply’ tax liability instead of ‘Removal / Sale’

9. Highlights of GST Valuation method broadly as ‘Transaction Value’ Branch transfers taxable and credit eligibility Tax credit eligibility on inward supply of goods / services for Inter-state transaction No declaration forms (Form – C, F, etc…….)

10. Registration– Threshold Limit Regular Dealer Composition Scheme

11. Transition Registration • Migration • Automatic Registration • First provisional & then final registrations

12. If details Or information is satisfactory, Registration certificate will be issued Registration Process and Forms - Existing Existing Dealer Registration GSTN No Yes Hearing on show cause notice. Successful? Within 6 M Existing Registered Dealer Yes No

13. Application Reference Number will be generated If detailsare satisfactory, Registration Process and Forms - New New Dealer Registration Applicant Within 7 working days from the date of Form GST REG-03 GSTN Yes If details are complete & satisfactory? Verification PAN– Verification onPortal Mobile No – OTP verification E-mail ID – OTP verification Yes Within 3 working days from the date of Form GST REG-01 No No Yes

14. Registration Forms Registration forms for other stakeholders

15. Approval by an officerFor changes specified in Rule Amendment of Registration details Registered Dealer Amend Registration Details GSTN Making change as per Form GST REG-11 Form GST REG-12

16. Cancellation of Registration Registered Dealer Cancellation of Registration Within 7 days GSTN Show cause Hearing Successful? Yes

17. Revocation of cancelled Registration Revoke cancelled Registration Registered Dealer No Within 7 working days from the date of Form GST REG-03 Within 30 days from the date of cancellation order Hearing on show cause notice. Successful? GSTN No Yes Details are satisfactory? Yes Complete details are provided? No Within 30 days from the date of Form GST REG-17 or Form GST REG-04 Within 3 working days from the date of Form GST-REG-17 Yes

18. Mandatory Registration Casual and Non-resident Taxable Persons • Taxable person carrying on interstate supply • Businesses liable to pay tax under reverse charge • Agents supplying on behalf of Taxable Person • Input Service Distributor • Persons responsible to deduct TDS • Sellers on e-commerce platforms • Aggregator supplying services under his brand name

19. Determinationof GST charge • CGST • CGST stands Central GST • This is applicable on within state supply • Tax collected will be shared to Central • SGST • SGST stands for State GST • This is applicable on within state supply • Tax collected will be shared to state • IGST • IGST stands for Integrated GST • This is applicable on Interstate and Import transactions • Tax collected is shared between central and state

20. TaxessubsumedunderGST Purchase Tax VAT CST CVD & SAD ADE Excise Duty GST Entry Tax Luxury tax Service Tax Surcharge & Cess Surcharge & Cess CGST SGST IGST

21. Tax scenario under GST

22. Input Credit Adjustment CGST - ITC IGST CGST SGST - ITC IGST SGST IGST- ITC CGST IGST SGST

23. Restriction of ITC set-off Under the current model draft law, the CGST and SGST of a state cannot be adjusted with the CGST/SGST of another state. Example: A CA has a registered place of supply in Karnataka, goes to Mumbai to appear for a court case, and stays in hotel in Mumbai. The Hotel will charge intra-state GST, as it is supply of service of immovable property, though the customer’s place of supply is Karnataka, in that scenario, the CGST/SGST charged in Maharashtra cannot be set-off against the liability of CGST/SGST of Karnataka The concept of destination based consumption tax. (Customer value proposition)

24. Type of Returns (Latest 27th Sept – Rule &Format) Regular Dealer

25. Type of Returns (Latest 27th Sept – Rule &Format) Composite Tax payer Foreign Non-Resident Taxpayer

26. Type of Returns (Latest 27th Sept – Rule &Format) Input Service Distributor Tax Deductor E-commerce and Service Aggregators

27. Type of Returns (Latest 27th Sept – Rule &Format) Aggregate Turnover exceeding 1 Cr. Final return -For taxable person whose registration has been surrendered or cancelled Government departments and United Nation Bodies

28. FORM GST ITC-1 Communication of acceptance, discrepancy or duplication of input tax credit claim

29. Input Credit Mechanism / Return Upload Supply of Goods / Services Supply of Goods/ Services TAX INVOICE TAX INVOICE BUYER Payment of Tax on 20th GSTR-1 by10th GSTR-2 by 15th Electronic Credit ledger SUPPLIER FORM GST ITC-1 Provisional ITC GSTR-1 by10th GSTR-2A on 11th GSTR-2 by 15th GSTR-2A on 11th GSTR-1A between 15th to 20th GSTR-3 on 20th GSTR-1A between 15th to 20th GST Portal

30. Supply of goods / or Services Barter Exchange Transfer Sale All forms of supply of goods and/or services made or agreed to be made Disposal Lease License Rental For a consideration In the course or furtherance of business Whether for a consideration or not Importation of service Whether in the course or furtherance of business or not For commission or brokerage, supplies or receives goods and/ or services on behalf of principal Person acting as Agent Supply of any branded service by an aggregator Under a brand name owned by him Treated as Deemed supply Specified Supplies made without consideration Schedule - I

31. Determining - Supply of goods Any transfer of title in goods is treated as supply of goods Business assets transferred for non-business purpose with or without consideration is treated as supply of goods Transfer of business assets for recovery of debts is treated as supply of goods

32. Determining - Supply of services Any transfer of goods without transfer of title is a supply of services Any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly is supply of services Job work - Any treatment or process which is being applied to another person’s goods is supply of services Works contract including transfer of property in goods is a supply of services

33. Supply without consideration – Schedule I Permanent transfer/disposal of business assets Under GST law, permanent transfer of business assets without consideration is supply of goods and is taxable Temporary application of business assets to a private or non-business use Under GST law, temporary application of business assets to private use without consideration is supply of goods. Services put to a private or non-business use Services put to a private or non-business use without consideration is supply of services. Assets retained after deregistration without consideration is supply of goods Assets retained after deregistration Supply of goods and / or services by a taxable person to another taxable or non-taxable person in the course or furtherance of business. Free samples supplied in the course of business is a deemed supply under GST and liable to tax

34. Time of Supply of goods Forward charge on supply of Goods • Date of removal • Applicable for goods required to removed • Goods whichare actually capable of physically moved • Date of making available to buyer • Applicable for goods not required to removed • Goods not capable of physically moved • Supplied in assembled form or supplied by supplier to agent • Date of Invoice • The date on which supplier issues invoice w.r.t supply • Date of receipt of payment • Date on which supplier receives the payment w.r.t supply • Earliest of payment entered in books of A/c or credited to Bank A/c • Recipient shows receipt of goods in his books of account • Books • of Accounts

35. Time of Supply of goods Reverse Charge on supply of Goods • Date of Receipt of Goods • Date of Payment • Date of Invoice • Date of debit in the Books of Accounts

36. Time of Supply of Services Forward charge Invoice issued within prescribed period Date of issue of invoice Receipt of Payment whichever is earlier Invoice not issued within prescribed Period Date of completion of the Service Receipt of Payment whichever is earlier Not falling under (1) or (2) above Date on which the recipient shows the receipt of services in his books of account

37. Place of Supply Overview Destination Tax system Goods and / or Services are taxed in the state in which they are consumed Place of supply determines the taxable jurisdiction where tax should reach Determines the whether transaction is intra-State which is subject CGST + SGST or Inter-State which subject to IGST

38. Place of Supply of Goods Supply involves movement of Goods Location of receiver where goods are delivered Supply involves no movement of Goods Location of goods at the time of delivery to receiver Supply of Goods to recipient through agent or third person Principal pace of business of such agent or third person Goods are assembled or installed at site Location of Site Goods are supplied on board a vessel/train/aircraft or motor vehicle Location where goods are on boarded

39. Place of Supply of Services Services supplied to Registered Person Location of such Registered Person Services to Unregistered Person – If address is available on record Location of Recipient Services to Unregistered Person – If address is not available on record Location of Supplier of Services

40. Place of Supply of Services- Specific Services Services related to immovable property Architects, interior decorators, engineers, surveyors, lodges / resorts / home stay / clubs / marriage or party halls, etc. Location of immovable property is the Place of Supply Personal grooming / beauty / fitness treatment / restaurant / catering service /health service / cultural / artistic / sporting / scientific events etc. Specific categories of Services Location where the service is actually performed Registered person: His location Unregistered person: Location at which goods were handed over for transportation Goods transport / mail / courier Transportation of goods Registered person: His location Unregistered person : Starting point of journey Bus / train / plane / boat, and so on. Passenger Transport

41. Value of Supply of Goods / Services The value of taxable supply of goods and / or services shall be ‘the Transaction Value’. It refers actually the price paid or payable for supply of Goods and Services Inclusions in Transaction Value Post Supply Discounts Commission and Packing charges Free supplies like Buy 1 get 1 free Any Taxes other than GST Royalties & License fees Any Cost Incurred by recipient on behalf of supplier Exclusions in Transaction Value Discount allowed and recorded in Invoice Post Supply discount mentioned in agreement and well know before supply

42. Valuation method The value shall be determined on the basis of the transaction value of goods and/or services of “like kind and quality” supplied. Comparison Value Computed value • Based on parameters like cost of production/manufacture/processing, charges for design/brand, and accounting for expenses and profit margin, the value of supply has to be arrived. • When value cannot be determined as per earlier methods, then it shall be reasonably estimated as per Generally Accepted Accounting Principles (GAAP). Residual Method

43. Accounts & Other Records True and correct account of production or manufacture of goods, of inward or outward supply of goods and / or services, of stock of goods, of input tax credit availed, of output tax payable and paid, and such other particulars as may be prescribed in this behalf at the principal place of business. In case where there are more than one place of business as specified in the certificate of registration, the accounts relating to each place of business shall be kept at such places of business concerned Audited Accounts by practicing CA, Cost Acc., CS - TO> 1.0

44. Period of Retention of Accounts Every registered taxable person shall retain them until the end of 60 months from the last of date of filing of annual return for the said year. Ex:- FY 2017-18 , annual return to be submitted by Dec -2018 Example FY 2017-18 , annual return to be submitted by Dec -2018. Books will be kept till end of Dec -2023

45. Entitlement of Input Tax Voluntary registration under GST – take credit of input tax on stocks When a registered dealer ceased to pay tax under the composition levy – take credit of input tax on stock Partial use for Business & Personal - Proportionate Where the goods and / or services are taxable & Exempted – Proportionate (Zero rate included) Change in the constitution allowed to transfer In case of goods against tax invoice are received in lots or instalments, the registered taxable person will be entitled to the credit upon receipt of the last lot or instalment

46. Non- Entitlement of Input Tax • After the expiry of one year from the date of issue of tax invoice relating to such supply of goods and / or services. Motor vehicles, except when they are supplied in the usual course of business or providing the following taxable services viz., Transportation of passengers, transportation of goods, imparting training on motor driving skills Health services Food and beverages Outdoor catering Beauty treatment LTA Goods and / or services are used primarily for personal use or consumption of any employee Membership of a club Life & Health insurance Health and fitness centre Cosmetic and plastic surgery Health services Goods and/ or services acquired by the principal in the execution of works contract for construction of immovable property, other than plant and machinery No input tax credit in respect of any invoice, after the filing of the monthly return for the month of September following the end of financial year or filing of annual return whichever is earlier.

47. Refund of Tax • Refund to be claimed by making an application to the proper officer of IGST/CGST/SGST before the expiry of 2 years from the relevant date Refund will be given only for ITC claim in case of Export and in case where the credit has accumulated on account of rate of tax on input being higher than the rate of tax on output. • In case where the goods are exported out of India are subject to export duty, no refund can be claimed 80% refund will be within specified time • 20% after due verification of documents furnished

48. Tax wrongfully collected & deposited A taxable person who had paid CGST/SGST on a transaction considered by him to be an intra-state supply, but which is subsequently held to be an inter-state supply, first need to pay the liability of IGST and then claim refund of wrong tax amount paid.

49. Documents as Evidence Micro film or reproduction of the image of a document A facsimile copy of the document Printed material produced by a computer (Computer printout) • Computer printout should be from the computer being used regularly to store or process information for any activity regularly carried on over the period (even if multiple computer, software are used) will be considered as one computer

50. Transition Provisions • Amount of CENVAT / VAT credit carried forward in a return to be allowed: - admissible under both Law Unavailed cenvat credit and VAT credit on capital goods, not carried forward in a return - admissible under both Law • Manufacturers – who are not liable to be registered and engaged in the manufacture of exempted goods under the earlier law but which are liable to tax under GST Act, can avail credit of eligible duties & taxes in respect of inputs held in stock and input containing in semi-finished and finished goods. (tax invoice and other documents as prescribed)