GST Consulting & Return filing

GST – Goods and Services Tax Consulting

Goods and Services Tax (called as GST) , an Indirect tax, was introduced in India w.e.f. Jul 2017. Prior to introduction of GST, there were many number of indirect taxes levied by State & Central Governments in India, the compliance of which was very difficult to the entrepreneurs.

The salient features of GST are :-

·       (i)GST is applicable on ‘supply’ of goods or services as against the present concept on the manufacture of goods or on sale of goods or on provision of services.

·       (ii) GST is based on the principle of destination-based consumption taxation as against the present principle of origin-based taxation.

·       (iii) It is a dual GST with the Centre and the States simultaneously levying tax on a common base. GST to be levied by the Centre would be called Central GST(CGST) and that to be levied by the States would be called State GST (SGST).

·       (iv) An Integrated GST (IGST) would be levied an inter-state supply (including stock transfers) of goods or services. This shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament by Law on the recommendation of the GST Council.

·       (v) Import of goods or services would be treated as inter-state supplies and would be subject to IGST in addition to the applicable customs duties.

·       (vi) CGST, SGST & IGST would be levied at rates to be mutually agreed upon by the Centre and the States. The rates would be notified on the recommendation of the GST Council. In a recent meeting, the GST Council has decided that GST would be levied at four rates viz. 5%, 12%, 18% and 28%. The schedule or list of items that would fall under each of these slabs has been worked out. In addition to these rates, a cess would be imposed on “demerit” goods to raise resources for providing compensation to States as States may lose revenue owing to the implementation of GST.

·       (vii) GST has  replaced the following taxes which was collected by the Centre:-

o   a) Central Excise Duty

o   b) Duties of Excise (Medicinal and Toilet Preparations)

o   c) Additional Duties of Excise (Goods of Special Importance)

o   d) Additional Duties of Excise (Textiles and Textile Products)

o   e) Additional Duties of Customs (commonly known as CVD)

o   f) Special Additional Duty of Customs(SAD)

o   g) Service Tax

o   h) Cesses and surcharge in so far as they relate to supply of goods and services.

·       (viii) State taxes that are subsumed within the GST are:-

o   a) State VAT

o   b) Central Sates Tax

o   c) Purchase Tax

o   d) Luxury Tax

o   e) Entry Tax (All forms)

o   f) Entertainment Tax and Amusement Tax (except those levied by the local bodies)

o   g) Taxes on advertisements

o   h) Taxes on lotteries, betting and gambling

o   i) State cesses and surcharges in so far as they relate to supply of goods and services.

·       (ix) GST would apply on all goods and services except Alcohol for human consumption.

·       (x) GST on five specified petroleum products (Crude, Petrol, Diesel, ATF & Natural Gas) would by applicable from a date to be recommended by the GSTC.

·       (xi) Tobacco and tobacco products would be subject to GST. In addition, the Centre would have the power to levy Central Excise duty on these products.

·       (xii) A common threshold exemption would apply to both CGST and SGST. Tax payers with an annual turnover not exceeding Rs.20 lakh (Rs.10 Lakh for special category States) would be exempt from GST. For small taxpayers with an aggregate turnover in a financial year upto 50 lakhs, a composition scheme is available. Under the scheme a taxpayer shall pay tax as a percentage of his turnover in a State during the year without benefit of Input Tax Credit. This scheme will be optional.

·       (xiii) The list of exempted goods and services would be kept to a minimum and it would be harmonized for the Centre and the States as well as across States as far as possible.

·       (xiv) Exports would be zero-rated supplies. Thus, goods or services that are exported would not suffer input taxes or taxes on finished products.

·       (xv) Credit of CGST paid on inputs may be used only for paying CGST on the output and the credit of SGST paid on inputs may be used only for paying SGST. Input Tax Credit (ITC) of CGST cannot be used for payment of SGST and vice versa. In other words, the two streams of Input Tax Credit (ITC) cannot be cross-utilised, except in specified circumstances of inter-state supplies for payment of IGST. The credit would be permitted to be utilised in the following manner:-

o   a) ITC of CGST allowed for payment of CGST & IGST in that order;

o   b) ITC of SGST allowed for payment of SGST & IGST in that order;

o   c) ITC of IGST allowed for payment of IGST, CGST & SGST in that order.

·       (xvi) Accounts would be settled periodically between the Centre and the States to ensure that the credit of SGST used for payment of IGST is transferred by the Exporting State to the Centre. Similarly, IGST used for payment of SGST would be transferred by the Centre to the Importing State. Further, the SGST portion of IGST collected on B2C supplies would also be transferred by the Centre to the destination State. The transfer of funds would be carried out on the basis of information contained in the returns filed by the taxpayers.

·       (xvii) The laws, regulations and procedures for levy and collection of CGST and SGST would be harmonized to the extent possible.

The whole GST system will be backed by a robust IT system. In this regard, Goods and Services Tax Network (GSTN) has been set up by the Government. It will provide front end services and will also develop back end IT modules for States who opted for the same.