MODEL GST LAW Decoding T he Regulation Khandhar Mehta & Shah 1 - - PowerPoint PPT Presentation

MODEL GST LAW

Decoding The Regulation…

Khandhar Mehta & Shah

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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,
• rganization 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

• f Goods and

Services

• Central GST
• State GST

Inter-state Supply

• f 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

• f 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

• f 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
• r non-business use
• Assets retained after

deregistration

• Supply of goods and/ or

services by a taxable person to another taxable

• r 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 Gujarat No Tax Sale CGST + 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

• n approval

TIME OF SUPPLY OF SERVICES

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• Invoice within time – Earlier of issue of invoice or receipt
• f 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

• f 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

• f 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
• n 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

• ver 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
• rder 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
• f 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

• n Textile

and Textile Articles Additional Excise Duty

• n Goods of

Special Importance COUNTER- VEILING DUTY (CVD) National Calamity Contingent Duty Whether Krishi Kalyan Cess (KKC) to be carried forward in GST regime ?

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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

• ther purpose

For carrying out certain manufacturing processes Carrying out tests or any

• ther 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

• f 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

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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 : amish@kmsindia.in URL : www.kmsindia.in

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