Monthly Archives: June 2017

GST Simplified for Business Associations- Part-2

 

SPECIFIC REQUIREMENTS FOR  BUSINESS ASSOCIATIONS

Let us discuss about the activities which business associations usually undertake and how to handle such activities under GST provisions.

 Activities where there will be no tax under GST.

  • Supplies without consideration will not attract tax under GST. In simple words, there will be no tax against free supplies. Free supplies do not include barter deals.
  • No GST on Government Grants.
  • Meetings/seminars/conferences and events held by business associations with the partnership of other organizations will not attract GST. But Agreements and MOUs entered with such organizations need to be simple and clear without any room for alternative interpretations.

 Activities where tax will be charged under GST.

  • On all supplies of services.
  • Generally, associations supply following services:
  1. Membership Subscription
  2. Meetings/Seminars/Conference and workshops.
  3. Exhibitions
  • Nature of Receipts are:
  1. Delegation Fee.
  2. Services to Exhibitors e.g. renting of stalls, Electricity Expenses etc.
  3. Sponsorships
  4. Sale of Tickets.

GST must be charged based on the Place of supply of Services.

  • There can be three types of transactions
  1. Where both service provider & service receiver are within the same state intra state GST will be applicable.
  2. Where service provider & service receiver is in two different states and or union territories interstate GST will be applicable.
  3. Where supply of services is outside India, no GST will be payable as such supplies will be treated as Export of Services.

Determination of Place of Supply of Services.

  • Place of supply of services is the most important factor for the application of tax.
  • Place of supply is required to be established at the time of preparation of invoices.
  • Wrongly issued invoices will mean loss of revenue as no input credit of taxes paid may be allowed apart from various liabilities to the supplier of services.

 Determination of Place of Service in the case of Membership Subscription.

  • Location of Supplier: Place of registration under GST. Supplier’s location will be place from where invoices are being issued as per GSTIN No…….
  • Place of Supply of service will be:
  1. If the recipient is registered dealer (GSTIN No….) –location of recipient.
  2. If the recipient is not registered dealer- location of the recipient, if known.
  3. If the location of the recipient is not known- location of the supplier.
  4. If the location of the recipient is outside India- location of the recipient.

 Determination of Place of Service in the case of Exhibitions.

  • Place of the Supplier: Invoice bearing GSTIN NO…. from where the invoice is generated.

Place of Supply of service will be:

  • If the exhibitor is registered dealer (GSTIN No….) –Place of recipient.
  • If the exhibitor is not registered dealer- Place of the exhibition.
  • Place of exhibition for foreign Exhibitor-Place of the exhibition (GST PAYABLE)

 Exhibition being held outside India:

  • Where exhibition is organized out of India, Place of supply of services shall be location of the recipient.
  • GST shall be payable on a and b as mentioned above and not on c.

Determination of Place of Service for Sale of Tickets:

  • Place of supply is the location of event in all cases
  • GST is payable in case the event is being held in India.

 Determination of Place of Service in case of sponsorship:

  • Place of the Supplier: Invoice bearing GSTIN NO…. from where the invoice is generated.
  • Place of Recipient of Service:
    1. Place of recipient is the registered -GSTIN No.
    2. Otherwise Location of the event for which sponsorship is being made.
  • Payment of Tax will be on reverse charge i.e. by service recipient.
  • Important: Invoice must show that GST payment is required to be made under reverse charge method.
  • Determination of Place of Service in  case of  Meetings/Conferences/Seminars/ Workshops.
  • Place of the Supplier: Invoice bearing GSTIN NO…. from where the invoice is generated.
  • Place of Recipient of Service: 
    •  Place of recipient is the registered -GSTIN No.
    • Place of the event in the recipient is not registered.
  • Delegate Fee: 
    • If recipient is registered, GSTIN is needed and the place of supply shall be the Place of recipient.
    • If recipient is not registered, or GSTIN is not available, place of supply shall be the place of event.
    • In case delegate ask for invoice/receipt in the name of company/organization, we need to insist on GSTIN No. to pass on the credit of GST paid.

 Time of Supply:

  • Tax is required to be paid on earliest of the following dates:
    • Date of payment of receipt.
    • Date of preparation of Invoice.
    • Date on which revenue is booked in the account books.
    • Within 30 days of the completion of service.

Rate of Tax:

  • Most of association supplies of services like membership subscription, exhibitions, meetings, seminars and conferences will attract GST @ 18%.
  • Sale of tickets will attract GST @ 28%.

Note: Any changes in the rates will be updated and intimated at all.

 Services where applicability of payment of GST will be on Reverse Charge:

  • Following services shall attract tax on reverse charge:
  • Sponsorship- our invoices must show that tax is payable on reverse charge mechanism.
  • Services received from outside India.
  • Service received from transporters.
  • Services received from lawyers, law firm or arbitrators.
  • Services received from Government or local authority except renting, services received from Department of post or in relation to aircraft or passenger transportation.
  • Payment for copyright.
  • Services received from Unregistered persons.
  • Location of supplier and place of supply is necessary to determine if CGST & SGST or IGST is payable.

 Export of Services:

  • Where the recipient of supply is outside India, and payment is received in foreign exchange, association can get Export benefit.
  • No GST shall be payable on export supplies, and no credit reversal is required.
  • Exporting services have become easy now. Foreign exchange earning shall be rewarded by the Government. We are waiting for DGFT Foreign trade policy to take into account new tax regimes.

Exceptions to claim Input Credit on Exhibitions/Events:

  • Invoices related to property based services w.r.t. exhibitions/events the place of service will be location of the property.
  • The supplier of services must pay SGST.
  • Association will not be able to claim input credit in such cases unless registered locally.
  • Solution:
    • Use local registration in case registered locally.
    • Get registered and claim the input credit.
    • Use an agent for procurement of such property based services.
    • Association need to decide on case to case basis.

No Input Credit of Taxes Paid will be available in the following cases:

  • Input tax credit is available on all items except:
    • Motor vehicles
    • Rent a cab, life insurance or health insurance (except statutorily required).
    • Food and beverages, catering, personalized services like beauty treatment, health club membership, health services etc.
    • Construction services.
    • It is important that our vendors prepare correct invoices, upload it properly and pay duty. If it is not done, we shall not get the credit.

Payment of Tax:

  • The assessee shall have electronic credit register, consisting of SGST, CGST and IGST credit separately.
  • IGST credit can be used to pay CGST/SGST and vice versa; CGST credit cannot be used to pay SGST and vice versa.
  • Present service tax credit shall be migrated to CGST credit.

WORD OF CAUTION

  • The liability of GST will be around 20% of the transaction value. Thus, loss of input tax credit will mean heavy loss to the organization.
  • Thus, every business activity must be examined beforehand to determine
    • GST liability and
    • (b) Elimination of loss of Input tax credit due to bad planning.
  • No invoice need to be generated before considering GST liability.
  • With meticulous compliance of GST law, and proper credit management- GST provisions are a boon to an honest and organized business.
  • No organization can survive without complying with GST laws meticulously.

Note: I have used inputs from presentation by Mr. Rajesh Kumar of Rajesh Kumar & Associates (Advoctes).

B.Com; FCA (ICAI); LL.B.;PGDFM; PGDCA; DBM; Cert. IFRS (ICAEW); NCFM Capital Market (Dealers Module); Microsoft Certified IT Professional: Application for Microsoft Dynamics NAV (ERP) & AXAPTA (ERP).

GST SIMPLIFIED Part-1

IMPORTANT NOTE

 This paper has been created keeping in view a common man’s job or an accountant’s routine job while dealing with the GST to the extent of applicability, routine calculation and preparing invoices of inward supplies, out ward supplies and issuing debit notes and credit notes. This paper does not involve the provisions of interest, penalties, legal process to be followed to address disputes, if any and prosecution. This paper is meant for handling day to day routine working only that too in simple words easy to understand by a common man or an accountant.

INTRODUCTION

GST stands for Goods and Services Tax. Unlike present system GST is supposed to take care of the taxes being charged under various indirect taxation laws presently in existence. The aim of GST is to cover the journey of a transaction from its inception to the end. The tying of these two ends will help the tax authorities to ensure that there is no leakage of taxes in between which may cause loss of revenue to the Government. Being single major taxation platform GST is supposed to bring more transparency, efficiency and plug loopholes under present system of indirect taxation.

GST aims to simplify the indirect tax structure. Presently we have two sets of indirect taxes first one being implemented by the Central Government authorities and the second one by state authorities. There are many departments dealing with various central and state taxes. Most of such taxes will be subsumed in one sea i.e. GST

AIM OF GST

By bring majority of indirect taxes under one department will lead to more transparency, less wastage of time and cost as in future businessmen/service providing community will be required to interact through GST Portal and if need be, follow up with a single department for all sorts of problems.

By subsuming majority of existing indirect taxes, it will do away with the cascading effect of taxes in future. This is expected to bring down the prices of products by around 2% to 15%. Cascading effect of taxes means paying tax on tax.

GST will convert the whole nation into single market with identical tax rates applicable on various goods and services. It will end the multi system of taxation rates for the same goods or services existing at present which varies from state to state.

Another major shift from the present system of indirect taxes is that GST will be consumption based tax system. By consumption based tax we mean to say that in future the taxes charged under GST will become the revenue of the state where the goods or services are consumed. Thus, the taxes will be recovered from the actual consumer and up to that point registered dealers can claim input credit of taxes.

IMPACT OF GST

The revolutionary shift from the existing system of collecting indirect taxes under GST is that the whole system is going to operate on single software platform. It will be for the first time in the country where registered dealer under GST will be using single platform for uploading information to be used by the tax authorities. All the returns whether monthly, quarterly or annually will be uploaded or punched in one single platform i.e. GST portal. This will help the authorities to track down all the transactions efficiently and effectively. GST will bring the much-desired transparency into the system and is expected to plug all the leakages resulting in loss of revenue to the state.

        The software being used by the GST Portal will help in reconciliation of transactions between the supplier of goods and or services and purchaser of such supplies of goods and or services. It will also help in claiming input credit by a registered dealer and generate challans with respect to GST payable on monthly basis. This will make the process of assessment easy at later stage.

GETTING REGISTERED UNDER GST

GST Act require all the dealers to register at GST Portal subject to exemptions for small suppliers of goods & or services as per details provided under the Act.

Only registered dealers can avail input credit of taxes paid by them as purchaser or consumer of goods and services.

Since taxes are to be paid by the actual consumer of goods and services thus input credit will be available to all the dealers falling within the chain forming journey of all goods and services from inception to the consumption stage. This will help in elimination of cascading effect of taxes and may result fall in prices.

Second most important change which is going to happen under GST regime is taxes will be the revenue of the state or Union Territory where the goods and or services are consumed. This has put importance on the principle of “Place of provision of services”. Since this rule is little difficult to understand we may take it easy and may interpret it as: the place of provision of a service shall be the location of the recipient of service subject to certain rules which we will discuss at later stage. Therefore, a registered dealer will be required to obtain registration under GST Act based on supply of services and or supply of goods.

 COMPLIANCE UNDER GST

The GST regime will start with date wise compliance and there are no provisions as to late filing of returns without interest &/or penalties and no room for revised returns. GST act has taken every possible care to allow registered dealers to upload final returns after proper reconciliation of supplies outward and supplies inward. The software used for GST Portal has been developed in such a manner where reconciliation of data uploaded will get automatically done and final amount of tax to be deposited with the authorities under different heads will get automatically calculated. The software will generate challans and the registered dealer will simply be expected to deposit the tax liability. The list of returns to be filed by all the registered dealers are explained in the next page:

 

Form Type Frequency Due Date Details to be furnished.
GSTR-1 Monthly 10th day of succeeding month Furnish details of outward supplies of

taxable goods &/or services effected.

 

GSTR-2A Monthly 11th day of succeeding month Auto-populated details of inward supplies made

available to the recipient based on FORM GSTR-1

furnished by the supplier.

 

GSTR-2 Monthly 15th day of succeeding month Details of inward supplies of taxable goods and/or

services for claiming input tax credit. Addition (Claims) or modification in Form GSTR-2A should be submitted in Form GSTR-2.

 

GSTR-1A Monthly 20th day of succeeding month Details of outward supplies as added, corrected or deleted by the recipient in Form GSTR-2 will be made available to supplier.

 

GSTR-3

 

Monthly 20th day of succeeding month Monthly return based on finalization of details of outward supplies and inward supplies along with the payment of amount of tax.

 

 

GST ITC-1 Monthly Communication of acceptance, discrepancy or duplication of input tax credit claim.
GSTR-3A Notice to a registered taxable person who fails to furnish return under section 27 & Section 31.
Form GSTR-4

 

Quarterly

 

18th of succeeding month of the quarter.

 

Furnish all outward supply of goods and services. This includes auto-populated details from Form GSTR-4A, tax payable and payment of tax.

 

GSTR-9  

Annually

 

31st Dec of next fiscal Annual Return – furnish the details of ITC availed and GST paid which includes local & interstate

CONCEPT BEHIND FILING OF VARIOUS RETURNS UNDER GST REGIME

To understand the idea behind filing of various returns let us understand the purpose of all the above returns:

GSTR-1:    Require a registered dealer to upload details of all taxable outward supplies of goods and services during a month. In simple words, all the sales registers will be uploaded on the GST Portal in the country. Sales details of the suppliers will mean purchase details of purchasers of such supplies. Since all the details uploaded will be bearing GST Registration number of the dealers thus it will be easy for the registered dealers to view dealer wise purchase details for the month. This will help them in correction of any mistake before the data is uploaded.

GSTR-2:    Require a registered dealer to upload details of all taxable inward supplies of goods and services during a month. In simple word, all the purchase registers will be uploaded on the GST Portal in the country. Purchase details of the receivers mean sales details of suppliers. Since all the details uploaded will be bearing GST Registration number of the dealers thus it will help the registered dealers to view their dealer wise supplies (sales) during the month. Again, this will become basis for any correction needed in the books. 

GSTR-1A & GSTR-2A:

Once the system will process the data filed under GSTR-1 & GSTR-2 details of corrections/deletions/additions made in GSTR-1 & GSTR-2 will be available on the GSTN Portal for information. 

GSTR-3: This will be the final monthly return for the month, along with payment of tax as calculated and populated by the system.

Practically speaking this is the end of job of filing monthly returns.

GST ITC-1:   This will be online Communication of acceptance, discrepancy or duplication of input tax credit claim.

GSTR-3A: Online notice to a registered dealer who fails to furnish return under section 27 and section 31.

GSTR-4:     A quarterly return to be filed giving details of all outward supply of goods and services. This includes auto-populated details from Form GSTR-4A, tax payable and payment of tax.

GSTR-9:     Annual return to be filed by all registered dealers furnishing the details of ITC availed and GST paid which includes local & interstate.

 

EXPLAINATION TO THE STRUCTURE OF GST.

GST will comprise GST and IGST. GST will be applicable in the case of intrastate transactions and IGST will be applicable to interstate transactions. GST will have two components for calculation and collection of taxes CGST and SGST.  The collections under CGST will be the revenue to the Central Government and under SGST the revenue will belong to respective states or union territory. IGST will be calculated at single rate of taxes.

GENERAL NOTE

The most difficult and interesting part of the GST is the compliances. GST has dispensed with earlier terms of sale, purchase, transfer of stocks etc. Now we have either supply outward or supply inward of goods or services. The liability to pay taxes will depend on the word supply. Supply can be to third party or to self or to agent etc. Once there is supply there will be tax incidence. Under GST details of the previous month must be uploaded on the GST portal on or before the 10th. Date of next month with respect to outward supply and on or before 15th. day of next month with respect to supply inward. The system will match the details with respect to inward and outward supplies of each business house with the details filed by suppliers, vendors, customers and internal-transfers. Any difference will be visible on the portal. All what is required by the registered dealer is to reconcile the differences and/or put comments on the portal. Once the process is completed the registered dealer is required to pay the tax liability as per the challan generated by the GST portal. Taxes thus calculated by the portal will be after making adjustment for input credit.

Next step will be to file quarterly and annual returns. There is no provision for revised returns as the information uploaded is accepted by the system only after proper verification and reconciliation of the figures.

B.Com; FCA (ICAI); PGDFM; PGDCA; DBM; Cert. IFRS (ICAEW); NCFM Capital Market (Dealers Module); Microsoft Certified IT Professional: Application for Microsoft Dynamics NAV (ERP) & AXAPTA (ERP). Certficate Advance Certificate Course on Companies Act. 2013 (NUJS Kolkatta)Student LL.B.(IIIrd. Year)

 

GST stands for

INTRODUCTION

GST stands for Goods and Services Tax. Unlike present system GST is supposed to take care of the taxes being charged under various indirect taxation laws presently in existence. The aim of GST is to cover the journey of a transaction from its inception to the end. The tying of these two ends will help the tax authorities to ensure that there is no leakage of taxes in between which may cause loss of revenue to the Government. Being single major taxation platform GST is supposed to bring more transparency, efficiency and plug loopholes under present system of indirect taxation.
GST aims to simplify the indirect tax structure. Presently we have two sets of indirect taxes first one being implemented by the Central Government authorities and the second one by state authorities. There are many departments dealing with various central and state taxes. Most of such taxes will be subsumed in one sea i.e. GST.

AIM OF GST

By bring majority of indirect taxes under one department will lead to more transparency, less wastage of time and cost as in future businessmen/service providing community will be required to interact through GST Portal and if need be, follow up with a single department for all sorts of problems.
By subsuming majority of existing indirect taxes, it will do away with the cascading effect of taxes in future. This is expected to bring down the prices of products by around 2% to 15%. Cascading effect of taxes means paying tax on tax.
GST will convert the whole nation into single market with identical tax rates applicable on various goods and services. It will end the multi system of taxation rates for the same goods or services existing at present which varies from state to state.
Another major shift from the present system of indirect taxes is that GST will be consumption based tax system. By consumption based tax we mean to say that in future the taxes charged under GST will become the revenue of the state where the goods or services are consumed. Thus, the taxes will be recovered from the actual consumer and up to that point registered dealers can claim input credit of taxes.

DILIP K RAINA –Chartered Accountant:

B.Com; FCA (ICAI); PGDFM; PGDCA; DBM; Cert. IFRS (ICAEW); NCFM Capital Market (Dealers Module); Microsoft Certified IT Professional: Application for Microsoft Dynamics NAV (ERP) & AXAPTA (ERP)

%d bloggers like this: