MODEL GST LAW Decoding The Regulation…
Khandhar Mehta & Shah 1
CONTENTS
BASICS OF GST
LEVY IN GST REGIME
TIME AND PLACE OF SUPPLY
GST VALUATION RULES
INPUT TAX CREDIT (ITC)
TAX ADMINISTRATION
SECTOR-SPECIFIC IMPACT
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BASICS OF GST
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GST - MEANING
• GST is stage wise destination based consumption tax.
• Broad based and a single comprehensive tax levied on goods and services consumed in an economy.
• Levied and collected on value addition at each stage of sale or purchase of goods or supply of services based on input credit method but without state boundaries.
• Uniform single tax across the supply chain.
• Improvement in international cost competitiveness of indigenous goods and services.
• Enhancement in efficiency in manufacture and distribution due to economies of scale.
• GST encourages an unbiased tax structure that is neutral to business processes, business models, organization structure, product substitutes and geographical locations.
• The prices of commodities are expected to come down in the long run as dealers pass on the benefits of reduced tax incidence to consumers by slashing the prices of goods.
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Intra-state Supply of Goods and Services
•Central GST
•State GST
Inter-state Supply of Goods and Services
• IGST
•1% Additional Tax on Supply of Goods
Imports
•Basic Customs Duty
• IGST (in place of CVD and SAD)
Exports
•Zero Rated
Excise Duty – Manufacturing of Goods VAT / CST – Sale of Goods Service Tax – Provision of Services
DUAL GST : BASIC PROPOSED STRUCTURE
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PROBABLE RATE STRUCTURE IN GST
SGST (+) CGST Total Rate %
Goods and Services
Zero Rated
Goods and Services of National Importance viz. Defense etc.
Basic Education, Healthcare, Agriculture related, Public Transport etc.
Export of Goods and Services, Goods and Services provided to SEZ, UN and Foreign Diplomatic Mission
1% to 2% Gold and Silver ornaments, precious and semi-precious stones
18% Normal GST on all goods and services (distributed in CGST and SGST)
Rates without restrictions
Tobacco, Cigarettes, Lottery tickets, betting and gambling [SIN Goods and SIN Services]
Will be brought in GST at a later Stage
Petroleum and Petroleum products
Out of GST Alcoholic Liquor for Human Consumption
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ROAD MAP TO GST
Winter Session 2015 – CGST Law was to be
passed in Upper House of Parliament and State GST was to be passed
in States
Report of Joint Committee on
GST Registration, Refund &
Payment process was issued in October 2015
Draft Model GST law published
for public comment in
June’16
Monsoon Session July ‘16 – GST Law to be introduced and
Model State GST Law
• April 1, 2017- Anticipated Date of Implementation of GST
Time available for Industry for GST
preparation July 2016 to March 2017
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CHALLENGES
Multiple levies & Compliances at
State and Centre Levels
Overlapping of tax in various transactions
Complex Laws on movement of
Goods –
Form C,F…
Cascading of Taxes
Ineligibility of ITC for SPs & CENVAT
for Traders
Disputes of Classification, Valuation &
Credit Eligibility
CHALLENGES IN CURRENT INDIRECT TAX STRUCTURE
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CENTRAL LEVIES
Excise Duty
Service Tax
CVD / SAD
Central Sales Tax
GST
Customs Duty
Customs Duty
State VAT
Entry/ Purchase Tax
Octroi / LBT
Luxury/ Entertainment
Tax
GST
Lottery, Betting & Gambling Tax
Lottery, Betting & Gambling Tax
STATE LEVIES
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FORMATION
• Provide common PAN-based registration
• Enable returns filing and payments processing for all States on a shared platform
• Ensure integration of the common GST Portal with the existing tax administration systems of the Central / State Governments and other stake holders
• Build efficient and convenient interfaces with tax payers to increase tax compliance
• Carry out research, study best practices and provide training to the stakeholders
• Special Purpose Vehicle (GSTN-SPV) has been set up to create enabling environment for smooth introduction of GST
• GSTN-SPV will provide IT infrastructure and services to various stakeholders including the Centre and the States
• Strategic control over GSTN-SPV has been ensured with the Government due to sensitivity of role of GSTN-SPV and the information which would be available with it
• GSTN-SPV has been incorporated as a not-for-profit, non-Government, private limited company with 49% equity held by the Government and 51% equity held by the non-Government institutions
GST NETWORK – GSTN SPV
ROLES & RESPONSIBILITY
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STAKEHOLDERS OF GSTN
GSTN
State Tax Authorities
Central Tax Authorities
SME Taxpayers
Corporate Taxpayers
Facilitation Agencies
Banks
GSTN
Registration
Returns
GST Payment
Refunds
Audits
Appeals
STAKEHOLDERS WORKFLOW
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LEGISLATIONS TO BE REPEALED
GST
The Entertainment
Tax Act
The Luxury Tax Act
The Entry Tax Act
Chapter V of
Finance Act
Medicinal and
Toiletries Act
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LEVY IN GST REGIME
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MEANING AND SCOPE OF SUPPLY
Supply includes
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For consideration & for business
• Sale
• Barter
• Transfer
• Exchange
• License
• Rental
• Lease
• Disposal
Whether or not for consideration or business
• Importation of service
Supply without consideration
• Permanent transfer/disposal of business assets
• Temporary application of business assets to a private or non-business use
• Services put to a private or non-business use
• Assets retained after deregistration
•Supply of goods and/ or services by a taxable person to another taxable or non-taxable person in course of business
GIST OF SCHEDULE – II – GOODS VS. SERVICE
Where a person, acting as an agent, for an agreed commission or brokerage, either supplies or receives any goods and/or services on behalf of any principal, the transaction between such principal and agent shall be deemed to be a supply.
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Service
•Transfer of goods without transfer in title thereof
•Transfer of business assets for private use with or without consideration
•Lease, tenancy, license to occupy land
•Lease or letting out of commercial or residential building
•Treatment or process which is applied to another person’s goods
•Declared list of service
Goods
•Transfer in title in goods
•Supply of goods by unincorporated association of body to their members for consideration
•Transfer of business assets except transfer made for the private use with or without consideration
GST SUPPLY CHAIN – LAY OUT
Supplier
Distributor Overseas Supplier
Supplier
Distributor
Factory
Gujarat OGS
Outside India
Import
Overseas Customer Export (Zero Rated)
Purchase
CGST + SGST
Trf in G
ujarat
No
Tax
Sale
CG
ST + SGST
Transfer
IGST
Purchase
IGST
Sale
CGST + SGST
Warehouse
Warehouse
BCD - Cost
IGST - Credit
India
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TIME & PLACE OF SUPPLY OF GOODS
& SERVICES
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TIME OF SUPPLY OF GOODS
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Earliest of :
• Date of removal of goods
• Date on which goods made available to recipient
• Date of issue of invoice /receipt of payment
• Date on which receipt is shown by recipient in his books
Normal Supply
• Date of expiry of successive payment / statement
• If no successive account then earliest of :
• Date of issue of invoice
• Date of receipt of payment
Continuous supply
Earliest of :
• Date of receipt of goods
• Date of payment
• Date of receipt of invoice
• Date of debit in books of accounts
Reverse charge
Earliest of :
• Time of supply when it is known
• 6 months from date of removal
Goods sent on approval
TIME OF SUPPLY OF SERVICES
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Invoice within time – Earlier of issue of invoice or receipt of payment
Invoice not within time – Earlier of completion of service or receipt of payment
Other than above – Date of receipt in books of recipient
Normal Supply
Due date of payment is ascertainable - Date on which payment is liable to made irrespective of invoice or payment Due date is not ascertainable- Earlier of payment or invoice Payment linked to completion of event - Time of completion
Continuous supply
Earliest of : Date of receipt of service Date of payment Date of receipt of invoice Date of debit in books of accounts
Reverse charge
Date of filing of return; or Date on which CGST / SGST is paid Others
PLACE OF SUPPLY OF GOODS
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• Place where movement of goods terminate
Movement of goods
• Location of such agent
Supply on direction of Agent
• Location of goods at time of delivery to recipient
Supply without movement
• Location at which goods are taken on board
Supply on Board Conveyance
• As per law of Parliament based on Council’s suggestion
Others
PLACE OF SUPPLY OF SERVICES
Particulars Place of supply
General Provision Supply to Registered Person - Location of such person Supply to any other person - Location of recipient of services
where the address is on record; and in other cases location of supplier of service
Immovable property Location of such property
Restaurant, personal grooming, fitness etc.
Location where the services are performed
Training service, Transportation of goods including mail & courier
Where supplied to a registered person, location of such person
Any other person, location where services are performed
Admission to a cultural, sporting event etc.
Location where event is actually held
Organization of a cultural, sporting event etc.
Supply to Registered Person - Location of such person Supply to any other person - Location where event is held
Goods Transportation Service
Supply to Registered Person - Location of such person Supply to any other person - Location where goods are
handed over for their transportation
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PLACE OF SUPPLY OF SERVICES Cont…
Particulars Place of supply
Passenger Transportation Service
Supplied to Registered Person - Location of such person Supply to any other person - Location from where the passenger
embarks on the conveyance
Services provided on board a conveyance
Location of first scheduled point of departure of that conveyance
Telecommunication services, including data transfer, broadcasting, DTH
Location where the telecommunication line, leased circuit or cable connection or dish antenna is installed
For mobile connection for telecommunication and internet services: • Post-paid basis - Location of billing address of the recipient • Pre-paid basis through a voucher - Location where such
pre-payment is received / vouchers are sold
Banking & other financial services
Account linked services - Location of recipient Non account linked services - Location of supplier
Insurance Services Supplied to Registered Person - Location of such person Supply to any other person - Location of the recipient of services
on record of supplier
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VALUATION RULES
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VALUATION OF SUPPLY
Value of supply
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Transaction Value, subject to • Unrelated Parties • Price is sole consideration
Transaction Value
• Shall Include
• Amount paid by recipient instead of supplier and not included in price
• Value of goods / services supplied by the recipient free of charge or at reduced cost
• Royalties and License fees related to and as a condition to supply
• Taxes and duties other than GST
• Incidental costs/ expenses (such as commission, packing, royalties etc.)
• Subsidies linked to the supply
• Reimbursable expenses incurred on behalf of the supplier
• Discount or incentive allowed after the supply
• Shall not Include
• Post supply discount known before supply and linked to invoices
• Any discount allowed before or at the time of supply as recorded in invoice
Transaction value accepted in following scenarios: • Related party transaction where price not influenced by relationship • Goods transferred from one place of business to another • Principal to an agent or vice versa
Value to be determined by proceeding sequentially through rules 4 to 6
Rule 4 – Value by comparison • Goods / services of like kind, quality and supplied at the same time • Adjustment by proper officer
Rule 5 – Computed value method • Cost + charges for design or brand + profit and general expenses
Rule 6 – Residual method • Value determined using reasonable means
Rule 7 – Prescribes the mechanism for rejection of declared value
Rule 8 – Valuation in certain cases • Pure agent of service recipient – consistent with service tax legislation • Money changer
VALUATION OF SUPPLY
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INPUT TAX CREDIT (ITC)
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CASCADING OF TAX - PRESENT TAX STRUCTURE
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Input CENVAT (Service Tax + Excise Duty)
Input Tax Credit of VAT
Input CST – Always a COST
(Service Tax + Excise Duty) Liability
VAT Liability
CST Liability
Credit available
Credit not available
Cascading Impact – Burden of Tax on Tax
Non – availability of VAT credit against Service Tax / Excise liability and vice-versa
Non – availability of CST credit against any liability
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Central GST Credit
State GST Credit
IGST Credit
Central GST Liability
State GST Liability
IGST Liability
Credit available
Credit not available
AVAILABILITY OF CENVAT CREDIT - GST
To be Setoff in the same order
Credit of CGST Credit of SGST Credit of IGST
1 CGST Liability SGST Liability IGST Liability
2 IGST Liability IGST Liability CGST Liability
3 X X SGST Liability
INPUT TAX CREDIT
Credit in respect of any invoice pertaining to a financial year cannot be taken after
• Filing of return for the month of September following the end of financial year to which such invoice pertains, or;
• Filing of the relevant annual return, whichever is earlier
Credit not admissible on such tax component of the cost of capital goods, for which depreciation has been claimed under the Income Tax Act, 1961 .
In case of supply of capital goods on which input tax credit has been taken, payment is required to be made
• for an amount equal to input tax credit reduced by percentage as may be specified, or;
• tax on the transaction value of such capital goods, whichever is higher
Time limit
Capital Goods
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EXCLUSIONS IN ITC
Exclusions
Motor Vehicle Goods / Service
Personal use of Employee
Private or Personal Use
Taxed under Composition Levy
Immovable Property
Construction Service
Works Contract
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ITC IN RESPECT OF STOCK
Entitlement of Credit of input tax in respect of input held in stock and Inputs contained in Semi Finished or Finished Goods
Person Eligible Point in Time
Person who has applied for registration within 30 days from the date he become liable and has been granted certificate of registration
On the day immediately preceding the date from which he becomes liable to pay tax
Person who has taken Voluntary Registration u/s. 19(3) of GST Act
On the day Immediately preceding the date of registration
Registered Taxable person ceases to pay tax u/s. 8 i.e. Composition Levy
On the day immediately preceding the date from which he becomes liable to pay tax u/s. 7
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SWITCH OVER PROVISIONS
Registered Taxable person availing benefits of Input
Tax Credit (ITC)
Switches over as a taxable person paying tax u/s. 8 i.e. Composition levy
Goods / Services supplied by him become exempt absolutely u/s. 10
1. He shall pay an amount equal to the credit of input tax in respect of inputs held in stock and inputs contained in semi finished or finished goods held in stock immediately preceding the date of such switch over or date of exemption.
2. Balance of Input tax credit, if any, lying in electronic credit ledger shall be lapsed.
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REVERSAL OF ITC
ITC on Goods / Services
• Partly used for Business • Partly used for other
purpose
• Partly used for taxable supply
• Partly used for non-taxable supply
ITC attributable to business purposes
will be eligible
ITC attributable to taxable supply will be eligible
Taxable supply shall include zero rated supply but excludes exempted supply
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GST ELECTRONIC CREDIT ALLOWED ON SUPPLY TRANSACTIONS
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GSTN
Dealer A
Dealer B Supply along with Invoice
Cash Flow
Credit Flow
TAX ADMINISTRATION
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REGISTRATION, PAYMENT & REFUND
State wise, Business vertical wise and Voluntary Registration options are available.
Concept of ISD continue.
Single threshold limit for goods and services. i.e. Rs. 9 Lakhs for normal category and Rs. 4 Lakhs for Northern Eastern State incl. Sikkim.
Certain persons required to take compulsory registration. Such as Inter state supplier, Casual dealer, Person required to pay tax under RCM, Person paying TDS, Person acting agent, ISD, e-Commerce operator, Aggregator, Other persons to be notified by Government.
Registration
Payment
Single threshold limit for goods and services. i.e. Rs. 10 Lakhs for normal category and Rs. 5 Lakhs for Northern Eastern State including Sikkim.
Three modes of payment of tax under GST regime are proposed i.e. through internet banking / credit or debit card, Over the Counter payment (upto Rs. 10,000 per challan) and payments through NEFT/RTGS.
The input tax credit as self-assessed in the return of a taxable person shall be credited to his electronic credit ledger to be maintained in the manner as may be prescribed.
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REGISTRATION, PAYMENT & REFUND
Refund claim is required to be filed within 2 years from relevant date.
Refund order to be passed within 90 days from the date of receipt of application.
80% refund can be released provisionally and balance 20% after verification.
For refund application < Rs. 5 Lakhs only declaration & proof for incidence of tax is required.
Refund
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Refund claim available in case of
Export Accumulated credit due to inverted duty
structure Deemed Export
RETURNS
Types of Return Form Period for filing Return
Outward supplier GSTR -1 10th of next month
Inward supplier GSTR-2 15th of next month
All assessees except specified
GSTR-3 20th of next month
Person paying TDS GSTR-7 10th of next month
ISD GSTR-6 13th of next month
Composition Dealer GSTR-4 18th of next month following end of quarter
Annual Return GSTR-8 31st December following F.Y.
Final Return - 3 months from date of cancellation or order of cancellation whichever is later
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GOODS AND SERVICE TAX APPELLATE TRIBUNAL (‘GSTAT’)
• One branch for each state i.e. 29 GST Appellate Tribunal
• GSTAT shall comprise of following members:
GSTAT
Member (Judicial) Member
(Technical – CGST) Member
(Technical – SGST)
TRANSITIONAL PROVISIONS
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MIGRATION OF EXISTING REGISTERED TAX PAYERS
Issuance of Provisional
Certificate of Registration (RC)
Validity of RC for 6
months or extended
period
Furnish information as may be prescribed
Final RC to be issued if information
found adequate
•Cancellation of provisional RC on failure to submit information
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CARRY FORWARD OF CENVAT CREDIT / ITC
• Amount of eligible credit carried forward as per earlier law in return filed for the period ending immediately prior to appointed day
• Such CENVAT credit is eligible for utilizing credit against CGST / SGST as the case may be
Amount of CENVAT Credit / ITC to be allowed to registered taxable
person under GST
• Un-availed CENVAT credit not carried forward in return filed for the period ending immediately prior to appointed day under earlier law
• Such amount should also be eligible for CENVAT Credit under CGST / SGST
Amount of un-availed* CENVAT credit of Capital goods to be allowed to registered taxable
person under GST
*Un-availed amount of CENVAT credit in respect of Capital goods = Aggregate amount of CENVAT Credit (-) Credit already availed in respect of capital goods in earlier return
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ELIGIBILITY OF CENVAT CREDIT / ITC FOR INPUTS IN STOCK
Category of Persons
Registered taxable person under GST who :
• Was not liable to register
under earlier law • Is engaged in
manufacturing of exempt goods under earlier law
• Has availed benefit of composition scheme under earlier law
Taxes in respect of:
• inputs held in stock on appointed date
• inputs contained in semi-finished or finished goods held in stock on appointed date
Intended to be used for making taxable supplies
Not availed CENVAT credit under earlier law due to above mentioned situations
Not paying tax under composition scheme in GST regime
Eligible CENVAT credit under GST regime also
Possession of invoice issued which is not earlier than twelve months immediately preceding appointed day.
Eligible Duties & Taxes Conditions
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ELIGIBLE DUTIES AND TAXES TO BE CARRIED FORWARD
Service Tax
Excise Duty
Additional Excise Duty on Textile
and Textile Articles
Additional Excise Duty on Goods of
Special Importance
COUNTER-VEILING
DUTY (CVD)
National Calamity
Contingent Duty
Whether Krishi Kalyan Cess (KKC) to be carried forward in GST regime ? 44
SPECIAL ADDITONAL DUTY (SAD)
EXEMPTED OR DUTY PAID GOODS RETURNED AFTER APPOINTED DATE
Exempt goods / Duty paid goods removed/sold under earlier law within 6 month
prior to appointed day
Returned within 6 months from appointed day to any
place of business
Not returned within 6 months of appointed day
to any place of business
No tax payable under GST Law
Tax payable by person returning the goods if such
goods are liable to tax under GST
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GOODS SENT ON JOBWORK RECEIVED ON OR AFTER APPOINTED DATE
Particulars Input Semi Finished Goods Finished Goods
Type Inputs received in factory
/ place of business had
been removed/dispatched
as such or post partial
process
Semi finished goods had
been removed from
factory / dispatched from
place of business
Excisable goods
manufactured in a factory /
any goods dispatched from
place of business
Process to be done prior to
the appointed day
Further processing,
testing, repair,
reconditioning or any
other purpose
For carrying out certain
manufacturing processes
Carrying out tests or any
other process not
amounting to manufacture,
to any other premises
Returned after completion
process within 6* months
from appointed day
To factory / place of
business - No Tax payable
To factory / place of
business - No Tax
payable
To factory / place of
Business - No Tax payable
Returned after completion
of process, after 6* Months
from appointed day
Tax shall be payable if
Taxable under GST by Job
worker or Manufacturer
Tax shall be payable if
Taxable under GST by Job
worker or Manufacturer
Tax shall be payable if
Taxable under GST by
person returning goods
Selling goods directly from
premises of Job worker
within 6* Months
N.A. On payment of duty
within India or export
without payment of duty
On payment of duty within
India or export without
payment of duty
* Declaration to be filed by Manufacturer & Jobworker, if goods returned within 6 months * 6 Months can further be extended by 2 months by competent authority 46
PRICE REVISION IN CONTRACT
A supplementary invoice or debit note is required to be issued within 30 days of revision
Tax is required to be paid to the extent revision under GST regime.
A supplementary invoice or credit note is required to be issued within 30 days of revision
Tax liability to be reduced to the extent of revision under GST regime.
UPWARD REVISION
DOWNWARD REVISION
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BRANCH TRANSFER AND GOODS SENT ON APPROVAL BASIS
Treatment of Branch Transfers :
Treatment under SGST Amount of input tax credit reversed prior to the
appointed day shall not be admissible as credit of
input tax under this Act
Goods sent on Approval Basis :
Goods returned within 6*
months from appointed day
No tax payable
Goods returned post 6*
months from appointed day
Tax shall be payable by:
Person returning goods
Person who has sent goods on approval basis
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* 6 Months can further be extended to 2 months by competent authority
IMPORT / INTERSTATE SUPPLY ON OR AFTER APPOINTED DATE
Transaction Liability of Tax payment under GST regime
Supply made on or after appointed date Liable to Tax
Transaction initiated on or before appointed date on which full tax has been paid in earlier law
Not liable to Tax
Transaction initiated on or before appointed date on which partial tax has been paid in earlier law
Liable to pay Tax to the extent of balance amount
Note: A transaction shall be deemed to have been initiated before the appointed day if either the invoice relating to such supply or payment, either in full or in part, has been received or made before the appointed day.
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GST IMPACT ON BUSINESS VERTICALS
Suppliers
• ITC Credit
Marketing
• Pricing Strategies
• Effect on demand
IT Systems & Human Resource
• Employee education
• System design
• Change Master Record
Supply Chain & Logistics
• Transaction Framework
• Warehousing
• Costing Analysis
Legal & Finance
• Cash Flow Impact
• Drafting Agreement
• Impact on existing contract
Customers
• Financing Model
• Offer Structure
SECTOR SPECIFIC IMPACT
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Manufacturing Sector
Pharma Sector
Automobile Sector
Media and Entertainment Sector
Hospitality Sector
IT & ITES Sector
Turnkey Projects / EPC Sector
Real Estate Sector
Education Sector
Banking and Financial Sector
Logistics Sector
E-Commerce
KMS OFFERINGS
Assessment of the impact of GST on different business functions
Evaluation of transitional impact on current business structure
Drawing up of new business model suitable under GST regime
Implementation of new business model
Post-implementation, Validation & Refinement of the operating model selection
Due Diligence
Sector Specific Structuring
Corporate trainings and Educational seminars
Assistance to IT team in implementation of ERP
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Thank You Khandhar Mehta & Shah
3rd Floor, Devpath Complex,
Off C G Road, Navrangpura,
Ahmedabad – 380006
Gujarat – India
Phone : +91 79 66315450/51/52/53
Email : [email protected]
URL : www.kmsindia.in
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