Goods and Service Tax Law 

  • GST Registration
  • GST Return Filing
  • GST Invoicing
  • GST Composition Schemes
  • GST E Way Bill
  • GST Penalties and Appeals
  • Input Tax credit
  • GST Rates and HSN Codes
  • GST Payments and Refunds
  1. GST Basics: 

GST is an Indirect Tax which has replaced many Indirect Taxes in India. The Goods and Service Tax Act was passed in the Parliament on 29th March 2017. The Act came into effect on 1st July 2017; Goods & Services Tax Law in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.

GST is one indirect tax for the entire country.

      2.Components of GST

  • CGST: Collected by the Central Government on an intra-state sale (Eg: transaction happening within Karnataka)
  • SGST: Collected by the State Government on an intra-state sale (Eg: transaction happening within Karnataka)
  • IGST: Collected by the Central Government for inter-state sale (Eg: karnataka to Tamil Nadu)

      3. Advantages of GST

GST has mainly removed the Cascading effect on the sale of goods and services. Removal of cascading effect has impacted the cost of goods. Since the GST regime eliminates the tax on tax, the cost of goods decreases. GST is also mainly technologically driven. All activities like registration, return filing, application for refund and response to notice needs to be done online on the GST Portal

Remove cascading tax effect

  • Online procedures
  • Higher Threshold for registration
  • Composition scheme for small business houses
  • Lesser Compliances

   4.What Changs has GST brought in?

In the pre-GST regime, every purchaser including the final consumer paid tax on tax. This tax on tax is called Cascading Effect of Taxes.

GST has removed this cascading effect as the tax is calculated only on the value-addition at each stage of the transfer of ownership

Illustration:

Tax calculations in earlier regime:

ActionCost10% TaxTotal
Manufacturer1,0001001,100
Warehouse adds a label and repacks @ 3001,4001401,540
Retailer advertises @ 5002,0402042,244
Total1,8004442,244

Along the way, the tax liability was passed on at every stage of the transaction and the final liability comes to rest with the customer. This is called the Cascading Effect of Taxes where a tax is paid on tax and the value of the item keeps increasing every time this happens. Tax calculations in current regime: 

ActionCost10% TaxActual LiabilityTotal
Manufacturer1,0001001001,100
Warehouse adds label and repacks @ 3001,300130301,430
Retailer advertises @ 5001,800180501,980
Total1,800 1801,980

In the case of Goods and Services Tax, there is a way to claim credit for tax paid in acquiring input. What happens in this case is, the individual who has paid a tax already can claim credit for this tax when he submits his taxes. In the end, every time an individual is able to claim the input tax credit, the sale price is reduced and the cost price for the buyer is reduced because of lower tax liability. The final value of the biscuits is therefore reduced from Rs. 2,244 to Rs. 1,980, thus reducing the tax burden on the final customer. GST regime also brought a centralised system of waybills by the introduction of “E-way bills”. This system was launched on 1st April 2018 for Inter-state movement of goods and on 15th April 2018 for intra-state movement of goods in a staggered manner. Under the e-way bill system, manufacturers, traders & transporters are now able to generate e-way bills for the goods transported from the place of its origin to its destination on a common portal with ease. Tax authorities are also benefitted as this system has reduced time at check -posts and help reduce tax evasion. 

GST Registrations

In the GST Regime, businesses whose turnover exceeds Rs. 40 lakhs is required to register as a normal taxable person. This process of registration is called GST registration.

For certain businesses, registration under GST is mandatory. If the organization carries on business without registering under GST, it will be an offence under GST and heavy penalties will apply.

GST registration usually takes between 2-6 working days. We’ll help you to register for GST.

Who has to apply for GST registration?

  • Individuals registered under the Pre-GST law (i.e., Excise, VAT, Service Tax etc.)
  • Businesses with turnover above the threshold limit of Rs. 40 Lakhs
  • Casual Taxable person
  • Agents of a supplier & Input service distributor
  • Those paying tax under the reverse charge mechanism
  • Person who supplies via e-commerce aggregator
  • Every e-commerce aggregator
  • Person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered taxable person.

Documents Required for GST registration

  • PAN of the Applicant
  • Aadhaar card
  • Incorporation certificate
  • Photograph
  • Bank Details
  • Rental Agreement of the premises
  • Electricity Bill of the premises

Penalty for not registering under GST

An offender not paying tax or making short payments (genuine errors) has to pay a penalty of 10% of the tax amount due subject to a minimum of Rs.10,000.

The penalty will at 100% of the tax amount due when the offender has deliberately evaded paying taxes.

 

 

GST Returns

A return is a document containing details of income which a taxpayer is required to file with the tax administrative authorities. This is used by tax authorities to calculate tax liability.

Under GST, a registered dealer has to file GST returns that include:

  • Purchases
  • Sales
  • Output GST (On sales)
  • Input tax credit (GST paid on purchases)

To file GST returns, GST compliant sales and purchase invoices are required

Different Type of GST Returns

 

Return FormParticularsFrequencyDue Date
GSTR-1Details of outward supplies of taxable goods and/or services affectedMonthly

11th* of the next month with effect from October 2018

*Previously, the due date was 10th

GSTR-2

Suspended

Details of inward supplies of taxable goods and/or services affected claiming the input tax credit.Monthly

15th of the next month

GSTR-3

Suspended

Monthly return on the basis of finalization of details of outward supplies and inward supplies along with the payment of tax.Monthly

20th of the next month

GSTR-3BSimple Return in which summary of outward supplies along with Input Tax Credit is declared  and payment of tax is affected by taxpayerMonthly20th of the next month
GSTR-4Return for a taxpayer registered under the composition levyQuarterly18th of the month succeeding quarter
GSTR-5Return for a Non-Resident foreign taxable personMonthly20th of the next month
GSTR-6Return for an Input Service DistributorMonthly13th of the next month
GSTR-7Return for authorities deducting tax at source.Monthly10th of the next month
GSTR-8Details of supplies effected through e-commerce operator and the amount of tax collectedMonthly10th of the next month
GSTR-9Annual Return for a Normal TaxpayerAnnually31st December of next financial year*
GSTR-9AAnnual Return a taxpayer registered under the composition levy anytime during the yearAnnually31st December of next financial year*
GSTR-10Final ReturnOnce, when GST Registration is cancelled or surrenderedWithin three months of the date of cancellation or date of cancellation order, whichever is later.
GSTR-11Details of inward supplies to be furnished by a person having UIN and claiming a refundMonthly28th of the month following the month for which statement is filed

Late Fees for Non Filing GST Return

If GST Returns are not filed within time, you will be liable to pay interest and a late fee.

Interest is 18% per annum. It has to be calculated by the taxpayer on the amount of outstanding tax to be paid. The time period will be from the next day of filing to the date of payment.

Late Fees is Rs. 50 per day per Act. So it is  under 25 CGST & 25 under SGST. Total will be Rs. 100/day. Maximum is Rs. 5,000. There is no late fee on IGST.

GST Invoice 

Should Contain the following details

  1. Invoice number and date
  2. Customer name
  3. Shipping and billing address
  4. Customer and taxpayer’s GSTIN 
  5. Place of supply
  6. HSN Code/ SAC code
  7. Item details i.e. description, quantity (number), unit (meter, kg etc.), total value
  8. Taxable value and discounts
  9. Rate and amount of taxes i.e. CGST/ SGST/ IGST
  10. Whether GST is payable on reverse charge basis
  11. Signature of the supplier

GST Composition Schemes

A taxpayer whose turnover is below Rs 1.5 crore can opt for Composition Scheme.

Conditions for availing Composition Schemes

No Input Tax Credit can be claimed by a dealer opting for composition scheme

  • The dealer cannot supply GST exempted goods
  • The taxpayer has to pay tax at normal rates for transactions under the Reverse Charge Mechanism
  • If a taxable person has different segments of businesses (such as textile, electronic accessories, groceries, etc.) under the same PAN, they must register all such businesses under the scheme collectively or opt out of the scheme.
  • The taxpayer has to mention the words ‘composition taxable person’ on every notice or signboard displayed prominently at their place of business.
  • The taxpayer has to mention the words ‘composition taxable person’ on every bill of supply issued by him.
  • As per the CGST (Amendment) Act, 2018, a manufacturer or trader can now also supply services to an extent of ten percent of turnover, or Rs.5 lakhs, whichever is higher.

A composition dealer cannot issue a tax invoice.

 

Advantages of Composition Scheme

  • Lesser compliance (returns, maintaining books of record, issuance of invoices)
  • Limited tax liability
  • High liquidity as taxes are at a lower rate

Disadvantages of Composition Scheme

  • No Input Tax Credit available to composition dealers
  • The taxpayer will not be eligible to supply exempt goods or  goods through an e-commerce portal.

Composition Scheme for Service Providers

The composition scheme for service providers gives an option to taxpayers rendering services having aggregate annual turnover up to Rs. 50 lakh to pay tax at a nominal rate, subject to conditions.

The following persons can opt into this scheme:

  1. Supplier of services only (i.e., service providers
  2. Suppliers of goods and services (i.e., those suppliers who were not eligible for composition scheme earlier)

Normal Tax Vs Composition Tax

Illustration:

Sl. NoDescription

Normal taxpayer

(Rate – 18%)

Composition taxpayer

(Rate – 6%)

1Sales  value1180011800
2Sales value exclusive of taxes1000011800
3Output GST1800708
4Purchases40004000
5Input GST @ 18%720720
6Total purchase value (6 = 4 + 5)47204720
7Net GST liability (7 = 3 – 5)1080708
8Gross Profit (8 = 1 – {6+7})6,0006,372

GST E Way Bill

Eway bill must be generated when there is a movement of goods of more than Rs 50,000 in value to or from a Registered Person. A Registered person or the transporter may choose to generate and carry eway bill even if the value of goods is less than Rs 50,000.

Unregistered persons are also required to generate e-Way Bill. However, where a supply is made by an unregistered person to a registered person, the receiver will have to ensure all the compliances are met as if they were the supplier. 

Transporters carrying goods by road, air, rail, etc. also need to generate e-Way Bill if the supplier has not generated an e-Way Bill.

  1. Invoice/ Bill of Supply/ Challan related to the consignment of goods
  2. Transport by road – Transporter ID or Vehicle number
  3. Transport by rail, air, or ship – Transporter ID, Transport document number, and date on the document

 

GST Penalties

An offender has to pay a penalty amount of tax evaded/short deducted etc., i.e., 100% penalty, subject to a minimum of Rs. 10,000.

Additional penalties as follows-

Tax amount involved100-200 lakhs200-500 lakhsAbove 500 lakhs
Jail termUpto 1 yearUpto 3 yearsUpto 5 year
FineIn all three cases

Cases of fraud also face penalties, prosecution, and arrest.

Cannot file Subsequent Returns

If you don’t file any GST return then subsequent returns cannot be filed.

GST Appeals

The first appeal against an order by an adjudicating authority goes to the First Appellate Authority

If the taxpayer is not happy with the decision of the First Appellate Authority they can appeal to the National Appellate Tribunal, then to the High Court, and finally to the Supreme Court.

GST Input Tax Credit

a. The dealer should be in possession of tax invoice

b. The said goods/services have been received

c. Returns have been filed.

d. The tax charged has been paid to the government by the supplier.

e. When goods are received in installments ITC can be claimed only when the last lot is received.

f. No ITC will be allowed if depreciation has been claimed on tax component of a capital good

g. A person registered under composition scheme in GST cannot claim ITC.

h. ITC can be claimed only for business purposes.

Documents required for claiming Input Tax Credit

1. Invoice issued by the supplier of goods/services

2. The debit note issued by the supplier to the recipient 

3. Bill of entry

4. An invoice issued under certain circumstances like the bill of supply issued instead of tax invoice if the amount is less than Rs 200 or in situations where the reverse charge is applicable as per GST law.

5. An invoice or credit note issued by the Input Service Distributor(ISD) as per the invoice rules under GST.

6. A bill of supply issued by the supplier of goods and services or both.

GST rates and HSN

List of rate changes at 31st GST Council Meeting
SL.noList of Goods/ServicesChanges in Tax Rate
1Vegetables provisionally preserved but unsuitable for immediate consumption5% to Nil
2Vegetables cooked/uncooked via steamed, frozen or boiled (branded)5% to Nil
3Music Books12% to Nil
4Parts for manufacturing renewable energy devices falling under chapter 84, 85 or 94 of Tariff5%
5Natural cork12% to 5%
6Fly ash blocks12% to 5%
7Walking sticks12% to 5%
8Marble rubble18% to 5%
9Agglomerated cork18% to 12%
10Cork roughly squared or debugged18% to 12%
11Articles of Natural cork18% to 12%
12Movie Tickets < or = Rs 10018% to 12%
13Premium on Third party insurance on Vehicles18% to 12%
14Accessories for Handicapped Mobility Vehicles28% to 5%
15Power banks28% to 18%
16Movie Tickets > Rs 10028% to 18%
17Video game consoles, equipments used for Billiards and Snooker and other sport related items of HSN code 950428% to 18%
18Retreated & used pneumatic Rubber Tyres28% to 18%
19Colour Television Sets & monitors up to “32 Inches”28% to 18%
20Digital & Video Camera recorders28% to 18%
21Pulleys, transmission shafts, cranks and gear boxes under HSN 848328% to 18%
22Tax rate on Air travel of pilgrims reduced*28% to 18%

*For travel by non-scheduled/chartered operations for religious pilgrimage which are facilitated by GoI under bi-lateral agreements.

GOODS
S.NOItemsNew RateOld rate
1Rakhi (other than that of precious or semi-precious material )Nil18%
2Sanitary NapkinsNil12%
3Circulation and commemorative coinsNil5%
4Raw material for broomNil12%
5Stone/Marble/Wood DeitiesNil5%
6Sal leaves and its productsNil18%
7Khali donaNil18%
8Coir pith CompostNil5%
9Chenille fabrics and other fabrcis under 58015%12%
10Handloom dari5%12%
11Phosphoric Acid (fertilizer grade only)5%12%
12Handmade Carpets, Textile Floor, Coverings5%12%
13Knitted cap/topi having retails sale value exceeding Rs. 10005%12%
14Kota Stones and Simliar Stones (other than polished)5%18%
15Ethanol for sale to oil marketing companies for blending with fuel5%18%
16Solid Bio fuel pellets5%18%
17Marine Engine5%28%
18Bamboo Flooring12%18%
19Hand Operated Rubber Roller12%18%
20Brass Kerosene Pressure Stove12%18%
21Zip and Slide Fastener12%18%
22Handicrafts (Excluding handmade)12%18%
23Handbags including pouches and purses; jewellery box12%18%
24Fuel Cell vehicle12%28%
25Televisions upto 68 cm18%28%
26Glaziers’ putty, grafting putty, resin cements18%28%
27Refrigerators, freezers, water cooler, milk coolers, ice cream freezer18%28%
28Washing Machines18%28%
29Food Grinders & mixer18%28%
30Vacuum Cleaners18%28%
31Paints and Varnishes (including enamels and lacquers)18%28%
32Shavers, Hair Clippers18%28%
33Hair Cleaners18%28%
34Storage water heaters18%28%
35Immersion heaters18%28%
36Hair Dryers, Hand Dryers18%28%
37Electric Smoothing irons18%28%
38Scent Sprays18%28%
39Toilet Sprays18%28%
40Pads for application of cosmetics or toilet preparations18%28%
41Lithium-ion batteries18%28%
42Powder Puffs18%28%
43Special purpose motor vehicles18%28%
44Work Trucks (Self-propelled, not fitted with lifting or handling equipment)18%28%
45Trailers & Semi trailers18%28%

 

List of Goods Exempt
Fortified Milkexempt5%

Recent GST Rate Changes on Services

SERVICES

Rate Change

Services

New GST Rates

Old GST Rates

Supply of e-books

5%

18%

Supply of Multimodal Transportation

12%

Nil

List of Services Exempt
Senior Citizens
1. Sevices provided by Coal Mines provident fund organisation to the PF subscribers
2. Services provided by Old age home run by state government / central government to the citizens aged more than 60 years upto Rs. 25000
3. GST exempted on the administrative fee collected by National Pension System Trust
4. Services provided by an unincorporated body or non profit entiy registered under any law to own members upto Rs. 1000 per year of membership fees.
 

Agriculture/ Farmers 

1. Services by way of artificial insemination of livestock (other than horses)
2. Services provided by FSSAI to food businesses.
3. Services provided by way of warehousing minor forest produce
4. Services provided by the installation and commissioning by DISCOMS for extending electricity distribution network for agricultural use.
 

Banking/Finance/ Insurance

1. Reinsurance services provided to insurance scheme such as Pradhan Mantri Rashtriya Swasthya Suraksha Mission
 

Government

1. Guarantees given by central/state government to their undertakings/PSUs.
2. Services provided by government to ERCC by assigning the right to collect royalty to mining lease holders.
 

Miscellaneous

1. Import of services by Foreign diplomatic missions/UN other international organizations
2. GST rate slabs will apply on the actual rate for hotel services instead of declared tariff.

GST Rates Structure for Goods and services under 5%, 12%, 18% & 28%

GST RatesProducts
0%MilkKajal
0%Eggs
Educations Services
0%Curd
Health Services
0%Lassi
Children’s Drawing & Colouring Books
0%Unpacked Foodgrains
Unbranded Atta
0%Unpacked Paneer
Unbranded Maida
0%GurBesan
0%Unbranded Natural HoneyPrasad
0%Fresh Vegetables
Palmyra Jaggery
0%Salt
Phool Bhari Jhadoo
5%SugarPacked Paneer
5%TeaCoal
5%Edible OilsRaisin
5%Domestic LPG
Roasted Coffee Beans
5%PDS Kerosene
Skimmed Milk Powder
5%Cashew Nuts
Footwear (< Rs.500)
5%Milk Food for Babies
Apparels (< Rs.1000)
5%Fabric
Coir Mats, Matting & Floor Covering
5%SpicesAgarbatti
5%Coal
Mishti/Mithai (Indian Sweets)
5%Life-saving drugs
Coffee (except instant)
12%ButterComputers
12%Ghee
Processed food
12%AlmondsMobiles
12%Fruit Juice
Preparations of Vegetables, Fruits, Nuts or other parts
of Plants including Pickle Murabba, Chutney, Jam, Jelly
12%Packed Coconut WaterUmbrella
18%Hair OilCapital goods
18%Toothpaste
Industrial Intermediaries
18%SoapIce-cream
18%PastaToiletries
18%Corn FlakesComputers
18%SoupsPrinters
28%Small cars (+1% or 3% cess)
High-end motorcycles (+15% cess)
28%Consumer durables such as AC and fridge
Beedis are NOT included here
28% 
Luxury & sin items like BMWs, cigarettes
and aerated drinks (+15% cess)

GST Payments 

Tax to be paid is mainly divided into 3

  • IGST – To be paid when interstate supply is made (paid to center)
  • CGST – To be paid when making supply within the state (paid to center)
  • SGST – To be paid when making supply within the state (paid to state)

GST payment is to be made when the GSTR 3 is filed i.e by 20th of the next month

GST Refunds

The Refund Application has to be made in Form RFD 01 within 2 years from relevant date.

The form should also be certified by a Chartered Accountant.