ई चालान: बेहतर चालान और कुशल कर प्रशासन की दिशा में एक और कदम

इंग्लिश मे ई चालान के बारे पढे/Read in English

1) ई-चालान का परिचय? Introducing E-Invoice?

                  प्रौद्योगिकी के सुधार के साथ यह महत्वपूर्ण हो जाता है कि अर्थव्यवस्था और शासन के हर क्षेत्र को बेहतर बनाने के लिए ऐसी उन्नति का लाभ उठाया जा सके। यहां हम भारत के कर संग्रह प्रणाली के लिए बेहतर प्रशासन और बेहतर विनियमन के बारे में बात कर रहे हैं। सरकार ने कुछ पंजीकृत करदाताओं के लिए ई चालान (E-Invoicing) प्रणाली शुरू की है। यह मूल रूप से GSTN जी.एस.टी.एन. (गुड्स एंड सर्विस टैक्स नेटवर्क) में चालान अपलोड करने और जी.एस.टी.एन. से संबंधित विभिन्न गतिविधियों को स्वचालित करने जैसे की ई-वे बिल (E-Way Bill) की ट्रैकिंग और उसे बनाने की प्रक्रिया, जीएसटी रिटर्न भरना, आपूर्तिकर्ता (supplier) द्वारा रिसीवर से इनपुट टैक्स क्रेडिट की प्राप्ति, आदि।  आप इस पोस्ट के माध्यम से ई चालान से संबन्धित प्रक्रिया विस्तार मे जान सकते हैंI

invoice

 

 

2) प्रासंगिक प्रावधान (Relevant Provisions)

चालान की बनाने की प्रक्रिया केंद्रीय माल और सेवा कर नियमों, 2017 (Central GST Rule, 2017) के नियम 48 के अनुसार की जाती है। ई चालान की अवधारणा को शामिल करने के लिए इस नियम में कुछ संशोधन किए गए हैं। अधिसूचना 68/2019 सी.टी. से 72/2019 सी.टी. दिनांक 13/12/2019 प्रासंगिक अधिसूचना है। हम आने वाले विषयों में उपरोक्त सूचनाओं के प्रभाव के साथ सी.जी.एस.टी. नियमों (केंद्रीय माल और सेवा कर नियम, 2017) में किए गए प्रावधानों और सभी परिवर्तनों के बारे में जानेंगे। अभी के लिए आइए हम ई-चालान में मूल चरणों को जानें।

3) ई चालान की प्रक्रिया।

चरण 1

इनवॉइस की उत्पत्ति: PEPPOL (पैन यूरोपीय सार्वजनिक खरीद ऑनलाइन) मानक में चालान जनरेट करने के लिए सामान्य नियमों का पालन करते हुए इनवॉइस जनरेट किया जाना चाहिए। एक ERP सॉफ्टवेयर का उपयोग किया जा सकता है जो JSON प्रारूप में इनवॉइस उत्पन्न करने में सक्षम है।

चरण 2

IRP (चालान पंजीकरण पोर्टल/ Invoice Registration Portal) में इनवॉइस अपलोड करना: JSON फॉर्मेट में उत्पन्न इनवॉइस IRP यानी इनवॉइस रजिस्टरिंग पोर्टल पर अपलोड की जानी चाहिए। JSON को IRP पे API , वेब साइट और SMS – तीन तरीकों से अपलोड किया जा सकता है।

चरण 3

चालान विवरणों की वैधता: आईआरपी (चालान पंजीकरण पोर्टल) चालान पर विवरणों को मान्य करेगा और चार मापदंडों पर आधारित किसी भी दोहराव की जांच करेगा -सेलर जीएसटीआईएन, चालान संख्या, वित्तीय वर्ष और दस्तावेज़ प्रकार (चालान / क्रेडिट नोट / डेबिट नोट) )।

चरण 4

जनरेशन इनवॉइस रेफरेंस नंबर (Invoice Reference Number)/ क्यूआर कोड (QR Code) / ईमेल (E mail): सत्यापन के बाद आईआरपी संदर्भ के लिए इनवॉइस संदर्भ संख्या उत्पन्न करता है। आईआरपी डिजिटल रूप से चालान पर हस्ताक्षर करता है और JSON प्रारूप में चालान के लिए क्यूआर कोड का उत्पादन करता है। तब सिस्टम ई-चालान की पीढ़ी को सूचित करते हुए आपूर्तिकर्ता को एक ईमेल भेजता है।

चरण 5

जीएसटी रिटर्न और ई वे बिल पोर्टल का स्वचालन: IRP (चालान पंजीकरण पोर्टल/ Invoice Registration Portal) जीएसटी रिटर्न के विवरण और ई वे बिल पोर्टल को भरने के लिए ई वे बिल पोर्टल के लिए चालान की जानकारी जीएसटी पोर्टल को भेजता है। अब अगर हम चालान के लिए ई वेस्बिल बनाने की कोशिश करते हैं तो पार्ट ए इस ऑटोमेशन के परिणामस्वरूप प्रीफिल्ड हो जाएगा।

 

4) ई चालान के लिए किसे आवेदन करना चाहिए?

ई चालान उन करदाताओं के लिए लागू किया गया है, जिनका वार्षिक कारोबार (भारत भर में सभी GSTIN एक ही पैन (स्थायी खाता संख्या) से जुड़ा हुआ कारोबार की राशि) 100 करोड़ रुपये से अधिक है। वर्तमान में यह बी 2 बी (बिजनेस टू बिजनेस) लेनदेन में केवल एक पंजीकृत व्यक्ति से दूसरे पंजीकृत व्यक्ति को आपूर्ति के लिए है।

5) सॉफ्टवेयर की तैयारी:

जिन व्यवसायों को ई चालान सिस्टम का उपयोग करना है, उन्हें खुद को कुछ जरूरी सॉफ्टवेयर से लैस करना होगा। इन आवश्यकताओं पर निम्नलिखित बिंदुओं के तहत चर्चा की जा सकती है।

प्रथम:

ई.आर.पी. सॉफ्टवेयर जैसे SAP / TALLY / आदि जो चालान बनाने के लिए उपयोग किए जाते हैं उन्हें पी.ई.पी.पी.ओ.एल (PEPPOL)(पैन यूरोपीय सार्वजनिक खरीद ऑनलाइन) मानक का पालन करना चाहिए। यह दुनिया भर के व्यवसायों के लिए सबसे अधिक इस्तेमाल किया जाने वाला मानक है। मानक E-XML (इलेक्ट्रॉनिक एक्सएमएल) के यूबीएल/UBL (यूनिवर्सल बिजनेस लैंग्वेज) संस्करण की आवश्यकता है

दूसरा:

ईआरपी सॉफ्टवेयर JSON प्रारूप में सभी चालानों को उत्पन्न करने में सक्षम होना चाहिए क्योंकि IRP JSON प्रारूप में डेटा को संसाधित कर सकता है।

तीसरा:

आई.आर.पी. /IRP (इनवॉइस रजिस्टरिंग पोर्टल) के साथ बातचीत करने के लिए उपयोगकर्ता के पास इंटरेक्टिंग सॉफ्टवेयर / सिस्टम होना चाहिए। इसे वेब आधारित, एपीआई आधारित, एसएमएस आधारित, ऑफ़लाइन उपकरण आधारित, मोबाइल ऐप आधारित, आदि के माध्यम से पहुँचा जा सकता है। सरकार ने उन लिंक की एक सूची अधिसूचित की है जिनका उपयोग आईआरपी तक पहुँचने के लिए किया जा सकता है।

चौथा:

आपूर्तिकर्ता के पास IRP द्वारा उत्पन्न क्यूआर कोड/ QR Code का उपयोग करने के लिए एक क्यूआर रीडर हो सकता है।

6)ई चालान प्रणाली के  लाभ:

जैसा कि हम चालान बनाने के अगले स्तर पर जा रहे हैं, पहले हमें इसके उपयोग के फायदों को समझें।

प्रथम:

इस प्रणाली द्वारा लाया गया स्वचालन एक स्पष्ट बात है जिसे याद नहीं किया जा सकता है। वर्तमान में रिटर्न मैन्युअल रूप से भरना होता है और ई वे बिल में विवरण भरने के लिए भी आपके अकाउंटिंग व्यक्तियों के मैनुअल प्रयास की आवश्यकता होती है। अब दोनों एक निश्चित सीमा तक स्वतः ही आबाद हो जाते हैं।

दूसरा:

इसके साथ आई.टी.सी/ITC (इनपुट टैक्स क्रेडिट) का मिलान कुछ हद तक सरल हो गया है। वर्तमान प्रणाली में आपूर्तिकर्ता द्वारा उत्पन्न चालान जीएसटीआर 1 में दर्ज किया जाना है और वही आई.टी.सी./ITC जी.एस.टी.आर. 2 ए/ GSTR 2A में रिसीवर के लिए उपलब्ध है। कई बार ऐसा होता है कि आपूर्तिकर्ता /supplier कुछ चालान अपलोड करना भूल जाता है और परिणामस्वरूप रिसीवर को वे ITC नहीं मिल पाता । अब चूंकि आईआरपी (इनवॉइस रजिस्टरिंग पोर्टल) डेटा को जीएसटीआर 1 और ई वे बिल को एक साथ भेजता है, जिसके लिए ई वे बिल जनरेट किया जाता है, जबकि रिटर्न फाइल करते समय चूक नहीं की जा सकती है।

तीसरा:

चालान के विवरण को अपलोड करने में मैनुअल त्रुटि को काफी हद तक कम किया जा सकता है।

चौथा

वर्तमान व्यवस्था से बेहतर तरीके से चालान में किसी भी अंतर की पहचान करना विभाग के लिए आसान होगा। इससे उनकी दक्षता में सुधार होगा। इसके अलावा नकली चालान के मामलों को आसानी से पहचाना जा सकता है और समय पर कार्रवाई की जा सकती है।

7) ई इन्वाइस से संबन्धित गलत धारणाओ का खंडन :

प्रथम:

सबसे आम मिथक यह है कि यह सभी करदाताओं पर लागू होता है। हालाँकि वर्तमान में यह केवल बी 2 बी /B2B चालान के साथ लागू होता है, जिसमें १०० करोड़ रुपये या उससे अधिक का कारोबार होता है, अधिसूचना 70/2019 CT dated 13/12/2019  के अनुसार आपूर्तिकरता का रिसीवर भी एक पंजीकृत व्यक्ति होना चाहिए ।

दूसरा:

यह सबसे आम गलत धारणा है। ज्यादातर लोगों को लगता है कि अब से जी.एस.टी.एन. /GSTN पोर्टल के माध्यम से चालान तैयार किया जाएगा। लेकिन जैसा कि हमने देखा है कि ईआरपी सॉफ्टवेयर के माध्यम से चालान तैयार किए जाएंगे और इनवॉइस रेफरेंस नंबर जनरेट करने के लिए विवरण आईआरपी सिस्टम में अपलोड करना होगा।

 

8) आगे का रास्ता

यह सरकार द्वारा चालान प्रणाली को स्वचालित करने के लिए उठाया गया एक शानदार कदम है। प्रौद्योगिकी की सहायता से कराधान /taxation में यह विकास सरहनीय है जो की करदाता सुविधा और कराधान में बेहतर प्रशासन  लाएंगे। शुरुआत में तकनीकी या कार्यान्वयन संबंधी कठिनाइयाँ हो सकती हैं लेकिन उद्योग और सरकार आपसी सहयोग और विश्वास से इसे निश्चित रूप से दूर करेंगे। यह बस कुछ समय की बात है जब इस प्रणाली को करदाताओं के अन्य वर्गों तक बढ़ाया जाएगा और ऐसी उन्नति का फल सभी को मिल सकेगा।

Complete list of Services under Reverse Charge Mechanism

This post describes the list of services under Reverse Charge Mechanism (RCM) . In the discussion below the points from 1 to 19 are as per section 9(3) of Central Goods and Service Tax Act, 2017 (CGST Act, 2017). Points 20 and 21 relates to the provisions of Integrated Goods and Service Tax Act, 2017 (IGST Act, 2017) . This is the complete and updated list as on March 2020.

 

 In all the below mentioned cases the liability of tax arises on the recipient of service and hence the tax is payable by him. For the easy reference of the readers clickable list items are created below.

reverse charge me

 

 

  1. Supply of Services by Goods and Transport Agency
  2. Supply of service by advocates
  3. Supply of service by arbitral/ tribunal
  4. Supply of Sponsorship Service
  5. Services provided by Central Government, State Government, Union Territory or Local Authorities excluding some specified services
  6. Renting of immovable property service provided by Central Government, State Government, Union Territory or Local Authorities
  7. Service provided by the way of transfer of development rights or Floor Space index
  8. Service by director of a company/ Body Corporate
  9. Service by an insurance agent to any person carrying insurance business
  10. Service by a recovery agent to banking company or financial institution or non banking financial company
  11. Supply of service by music composers, photographer, artists etc.
  12. Supply of service by an author
  13. Supply of service by members of Overseeing Committee to Reserve Bank of India
  14. Service by an Individual Direct Selling Agent (DSAs) to any banking or Non Banking Financial Company (NBFC)
  15. Service by a Business Facilitator (BF) to a banking company
  16. Service provided by an agent of Business Correspondent (BC) to Business Correspondent (BC):
  17. Security Services
  18. Service by the way of renting of motor vehicle
  19. Lending of securities under Securities Lending Scheme, 1997 of SEBI (Security Exchange Board of India) as amended
  20. Import of Service
  21. Service provided by the way of transportation of goods by vessel outside India up to customs station

1.Reverse Charge Mechanism on supply of Services by Goods and Transport Agency –

Goods Transport Agency

Type of service:

                Transportation of Goods by road to –

  • any factory governed by the Factory Act 1948.
  • any society registered under the Societies Registration Act,1860
  • any cooperative society established by or under any law
  • any person registered under CGST, SGST or IGST
  • any body corporate established under any law
  • any partnership firm whether registered or not under any law
  • any casual taxable person.

Supplier of service:

Goods Transport Agency who has not paid CGST, SGST or IGST for the said service

Recipient of Service:

  • Any factory governed by the Factory Act 1948 to who receives the said service.
  • Any society registered under the Societies Registration Act,1860 who receives the said service.
  • any cooperative society established by or under any law
  • any person registered under CGST, SGST or IGST
  • any Body Corporate established under any law
  • any partnership firm whether registered or not under any law
  • any casual taxable person.

Note: At times situation confuses in determining the recipient of service (the sender of goods or receiver of goods). Here the person who makes the payment to the Goods Transporter is generally considered as the recipient and tax liability is borne by him.

2. Reverse Charge Mechanism on supply of service by advocates

Type of Service:

Individual advocate or firm of advocate provides legal services. These legal services are taxable supplies taxed under RCM (Reverse Charge Mechanism). These legal services include legal advice, legal consultancy, legal assistance, representational service before any court/ tribunal etc.

Supplier of Service:

Individual Advocates or firm of advocates supply these services.

Recipient of Service:

Any business entity located in the taxable territory of India receives these services.

3. Reverse Charge Mechanism (RCM) on Supply of service by arbitral/ tribunal

Type of Service:

Any service provided by an arbitral or tribunal is considered under RCM (Reverse Charge Mechanism)

Supplier of Service:

Arbitral or Tribunal provides any service.

Recipient of Service:

Any business entity located in the taxable territory.

tribunal

4. Reverse Charge Mechanism on supply of Sponsorship Service

Type of Service:

The supplier provides Sponsorship service is this case.

Supplier of Service:

Any person may provide the sponsorship service

Recipient of Service:

Any Body Corporate or partnership firm located in taxable territory of India receives the supply

5. Services provided by Central Government, State Government, Union Territory or Local Authorities excluding some specified services

Type of Service:

Reverse Charge Mechanism (RCM) applies to any service provided by the government excluding the following services

  • Renting of immovable property (explained in next section) and
  • The below mentioned services

Supplier of Service:

Government – Central Government/ State Government/ Union Territories / any local authority supplies such services

Recipient of Service:

Any Business Entity in the taxable territory receives such services

6. Renting of immovable property service provided by Central Government, State Government, Union Territory or Local Authorities

Type of Service:

Renting of Immovable property is the service provided by the supplier.

Supplier of Service:

Government – Central Government/ State Government/ Union Territories / any local authority supplies such services

Recipient of Service:

The service is received by any person registered under the CGST Act 2017(Central Goods and Service Tax Act, 2017)

7.Service provided by the way of transfer of development rights or Floor Space index

Type of Service:

The provider of service provides the service in form of transfer of development rights or floor space index

Supplier of Service:

Any person may be the supplier who provides the development rights or floor space index for any activity.

Recipient of Service:

Promoter undertaking the task after receiving such development right or floor space index is  the recipient of service.

8. Service by director of a company/ Body Corporate

Type of Service:

The director provides service to a company where he has assumed directorship. Reverse Charge Mechanism is applied on such services. However if the director provides any service to the company while being in employer-employee relationship with the said company, then taxability under Goods and Service Tax Act 2017 does not arise.

Supplier of Service:

Director is the supplier or service.

Recipient of Service:

The company or any Body Corporate where he has assumed directorship is the recipient of service and is thus liable to discharge tax.

9. Service by an insurance agent to any person carrying insurance business

insurance agent, reverse charge mechanism

Type of Service:

The insurance agent provides service to a person carrying insurance business

Supplier of Service:

Definitely the insurance agent is the supplier of service.

Recipient of Service:

The person located in taxable territory, carrying insurance business and getting service from the insurance agent is the receiver/ recipient or service.

10. Service by a recovery agent to banking company or financial institution or non banking financial company:

Type of Service:

A recovery agent supplies services to the banking company or financial institution or non banking financial company.

Supplier of Service:

 The recovery agent supplies the service.

Recipient of Service:

The banking company, Non-banking Financial Institutions or any other financial institution receives the service.

11. Supply of service by music composers, photographer, artists etc.:

Type of Service:

Music Composers, photographers and artists may transfer or permit the use of the copyright present in their name under the Copyright Act, 1957 relating to their artistic work to Music Company, producer, etc.

Supplier of Service:

The Music Composer, photographer or artist who transfer or permits the use of copyright is the supplier.

Recipient of Service:

Music Company, producers etc who make use of the copyright privilege are recipient of service.

music composer, lawbanyan

12. Reverse Charge Mechanism on supply of service by an Author:

Type of Service:

An author may transfer or permit the use of the copyright present in their name under the Copyright Act, 1957 relating to original literary work to any publisher.

Supplier of Service:

The author who transfer or permits the use of his literary work is the supplier.

Recipient of Service:

The publisher who uses the literary work of the author is the recipient of service.

13. Supply of service by members of Overseeing Committee to Reserve Bank of India:

Type of Service:

Any service provided by the member of the Overseeing Committee.

Supplier of Service:

In such cases the Overseeing Committee members are supplier for the purpose of taxation.

Recipient of Service:

RBI (Reserve Bank of India) is the recipient of service.

14. Service by an Individual Direct Selling Agent (DSAs) to any banking or Non Banking Financial Company (NBFC)

Type of Service:

Services provided by individual Direct Selling Agents (DSAs) to any banking or Non Banking Financial Company (NBFC).

Supplier of Service:

The individual Direct Selling Agents (DSAs) are supplier in this case. It is to be noted that these  DSAs shall not be any Body Corporate or partnership firm in order to come under the ambit of Reverse Charge Mechanism.

Recipient of Service:

The Banks or Non Banking Financial Company (NBFCs) is recipient for the above service provided they are located in taxable territory.

15. Service by a Business Facilitator (BF) to a banking company.

Type of Service:

The Business Facilitator provides Business Facilitation service.

Supplier of Service:

Business facilitator is the supplier.

Recipient of Service:

A banking company located in the taxable territory is the recipient of service.

16. Service by an agent of Business Correspondent (BC) to Business Correspondent (BC):

Type of Service:

An agent of Business Correspondent provides services to the Business Correspondent (BC)

Supplier of Service:

The agent of Business Correspondent is the provider/ supplier of service.

Recipient of Service:

A Business Correspondent in taxable territory availing the services from the agent is the recipient.

17. Reverse Charge Mechanism on Security Services:

security, reverse charge mechanism

Type of Service:

Security service is provision of service by the way of supply of security personnel to registered personnel. However the concept of RCM (Reverse Charge Mechanism) does not apply to the following persons:

a)The Department of Establishment of Central or State Government, local authority or government agencies who are registered merely for deduction of TDS u/s 51 but are not the provider of services.

b) Any person, providing the service, who is registered under Composition Scheme in section 10 of the CGST, 2017(Central Goods and Service Tax Act, 2017).

Supplier of Service:

The person providing the security personnel is provider of service. The provider should not be a Body Corporate for the applicability of RCM (Reverse Charge Mechanism).

Recipient of Service:

Any registered person in the taxable territory can be a recipient of security services.

18. Reverse Charge Mechanism on service by the way of renting of motor vehicle

Type of Service:

This service includes renting of motor vehicle to Any Body corporate by a person who is paying tax and eligible to avail Input Tax Credit.

Supplier of Service:

Any person who rents motor vehicle to Any Body corporate and is eligible to avail Input Tax Credit can be the provider of service.

Recipient of Service:

Any Body Corporate located in taxable territory of India can be the receiver of service.

19. Lending of securities under Securities Lending Scheme, 1997 of SEBI (Security Exchange Board of India) as amended:

Type of Service:

The Service of lending of securities under Securities Lending Scheme, 1997 of SEBI (Security Exchange Board of India) is taxable under RCM (Reverse Charge Mechanism).

Supplier of Service:

The lender of securities is the supplier of service. To be more specific the lender deposits the securities which he/she holds with a intermediary for the purpose of lending under the Securities Lending Scheme, 1997 of SEBI (Security Exchange Board of India).

Recipient of Service:

The Borrower of security is the recipient. Borrower is the person who borrows the money under the Securities Lending Scheme, 1997 of SEBI (Security Exchange Board of India).

20. Reverse Charge Mechanism on Import of Service:

Type of Service:

A person outside the taxable territory provides any service to any person located in taxable territory of India. Such type of services falls under the concept of Reverse Charge Mechanism (RCM).

Supplier of Service:

A person outside the taxable territory of India is the supplier of service.

Recipient of Service

Any person located in taxable territory of India excluding the non taxable online recipient is the recipient of service.

21. Service provided by the way of transportation of goods by vessel outside India up to customs station:

Type of Service:

This service includes service provided by the way of transportation of goods by vessel outside India up to customs station.

Supplier of Service

Any person located in nontaxable territory is the supplier.

Recipient of Service

The Importer of Goods as defined in the Customs Act, 1962 is the recipient of service.

Also learn about the concept of valuation  in GST.

GST in Garment and Textiles: Donne new attire

Topics

1.Introduction to GST in Garment industry                                                                               

2.Broad categorization and GST rates for apparel sector                                             

3.Rate of GST for the above categories                                                                                   

4.Circular on classification of fabrics                                                                                           

5.Supply and point of taxation                                                                                               

6.Problems faced in valuation (tax calculation and paying of tax on interest and penalty)                                                                                                                                             

7.Two types of valuation for supply                                                                                             

8.Job Work in apparel industry                                                                                       

9.Transitional Credit and a missed opportunity for most suppliers                   

10.Export in garment industry                                                                                               

11.Refund (Inverted tax structure)                                                                                     

12.ROCSTL scheme for garment industry                                                                       

13.RoDTEP (Rebate on Duties and Taxes on Export Product) scheme       

14.Conclusion

1.Introduction to GST in Garment industry:

The apparel or the garment industry holds a special place in the economy of India. The reason is clearly the revenue it generates for the country and immense employment opportunities it is associated with in this country where governments persistently put efforts to keep unemployment in tap. Just to add this industry being the second largest industry in India after agriculture accounts for 14% (approx.) of total annual exports. These are the reasons why the state always keeps favorable indirect taxation for this industry. You will learn the different rates in apparel sector along with the concept of GST in garment  and textile sector in the following sections. You will also come across ways by which the government keeps check against certain tax evasions.

apparels

2.Broad categorization of goods in GST in garment / apparel sector

There are three broad categories of products in regards to GST in garment or apparel sector

  1. Knitted apparel and clothing(Chapter 61 of the tariff)
  2. Non knitted apparel and clothing(Chapter 62 of the tariff)
  3. Other textile products like curtains, bed sheets, used clothes etc.(Chapter 63 of the tariff)
  4. Fabrics(Chapter 50 to 55 and 60)

textiles

3.Rate of GST in garment sector for the above categories

The rate of Goods and Service Tax for the apparels and made up under Chapter 61 to 63 is based on the value of product. If the value of the product is more than Rs.1,000/- per item then the rate of GST is 12%. For product’s value less than or equal to Rs.1,000/- per item then GST rate is 5%.

The rate of GST on fabrics under chapter 50 to 55 and Chapter 60 is 5% of the value.

4.Circular on classification of fabrics

It is a normal practice in garment industry where a large fabric is cut into pieces and packed for transport to the wholesaler. The wholesaler may cut into smaller pieces so that each piece can be later tailored to design shirts, pants, kurtis or other apparels. The question of whether the nature of fabric is altered in this process for the purpose of levying GST or not. There was a clarification issued by the government in this regard. Here we are speaking of Circular No. 13/13/2017-CGST, dated 27th October, 2017. In this circular it has been clarified that cutting any fabric in pieces and packing it for sale does not alter the nature of the fabric. Hence the classification and rate of GST applied thereon does not change. Even embroidery work on the fabric does not change the classification under Goods and Service Tax.

brand

5.Supply and the point of taxation for GST in garment industry

The supply is basically the transfer of goods (apparel in the instant case) from the supplier to the recipient. So the point when such supply takes place is the point of taxation. However when the transport vehicle carrying the apparel reaches the destination many days may have elapsed. In such case it becomes very important to determine the point of supply and point of taxation especially when such supply is happening between two different tax periods. For this the point of taxation shall be the earlier of the below-

a.The time of issue of invoice or the last date on which he is supposed to issue the invoice

b.The time of payment received . The time of payment received is the time when the payment is booked in the accounts or the date on which the amount is credited in the bank accounts whichever is earlier.

Let us take an example to understand better. Suppose a supplier supplies Rs 1,00,000/- worth of apparels to recipient. The invoice is generated on 2nd of May 2019 and the payment is received by the supplier on 20th of April’ 2019 well in advance. Though the supplier booked in the accounts on 30th of April’ 2019. The point of taxation shall be 20th of April’ 2019 being the earliest of the three dates mentioned in this instance.

6.Problems faced in valuation (tax calculation and paying of tax on interest and penalty) for GST in Garment sector

The following points shall be kept in mind while determining the taxable value of goods

Point 1: Sometimes the supplier may pay interest or penalty on late delivery/ supply of goods. In such cases the amount paid as interest/ penalty shall be included in the valuation of goods.

Point 2:  Any expenses which are normally the liability of the supplier but are incurred by the recipient for the supply of goods have to be included in the valuation of supply. If you are wondering what such expenses are, one common example is freight charges which are sometimes incurred by the receiver of goods.

In another case, which is rare, there may be an agreement to provide dye, water or ironing expense for the garments by the receiver. In such cases the expense of dye, water or ironing expense shall be included in the valuation of supply.

Point 3: Incidental Expense such as loading, unloading, packing etc has to be included in the valuation of supply.

The above list is not exhaustive but is common issues faced in determining the valuation. For further details refer to the post on valuation of supplies.

7.Two types of valuation for supply for GST in garment

There are two types of valuation that one needs to consider in supply of a readymade garment.

valuation

Kind 1: Sale value of the goods – Selling price or the sale value is the price at which garment is sold in the market. It is different from the MRP (Maximum Retail Price) as this would also include the Goods and Service Tax. A cloth may have different selling price depending upon the market conditions and the selling price may vary from the actual cost based valuation. This sale value is important for determining the rate of tax that can be levied on the supply of garments. You may already be aware that the rate depends whether the value of supplied garment is above or below Rs. 1000/-(discussed in earlier sections).

Kind 2: Taxable value: This value is the transactional value for the supply. Transactional value is the value that is paid or payable to the supplier for making the supply. It should include freight charges, interest /penalty charges, incidental charges etc even if one or more of such expenses are borne by the recipient.

The above concept of valuation may sound confusing. So the best way to simplify is by using an example. Usually both the above discussed values are same. However let us exemplify where they can be different. These are rare examples just to bring clarity in the concept of valuation.

Example 1: Suppose the supplier manufacturing cost per unit for a given garment be Rs.900/-. Let the freight charges are paid the recipient. Let this value for per unit be Rs. 130/-. On reaching the market the MRP was tagged at Rs. 1100/- per piece and 10% discount was offered. So the selling price becomes Rs.990/- (Rs. 1100- Rs.110). This becomes the sales value for determining the rate which should be 5% of the value (as the sale value is less than Rs.1,000/-). Now the question is what the taxable value is. The value shall include the cost of freight which is incurred by the recipient in addition to the cost incurred by the supplier. So the taxable value shall be Rs. 1,100/- (Rs. 990/-(sale value) + Rs.110/-(freight)).

Example 2: How about a situation where the manufacture of the garments are taking place on the rented area of the recipient. The recipient has forgone his rental income for a month and as a result the supplier decided not to account this cost in determining the sales value. Here also the taxable value and the sales value may be different. The sales value would determine the rate of tax and the taxable value would help you to arrive at the quantum of tax to be paid.

8.Job Work in apparel industry

So first let us briefly define what a job work is. Job work is a process in which the goods are sent from principal to any other person who is called a job worker for processing of the goods into any other product. The finished or semi-finished products produced by the job worker are again returned to the principal after processing. In the garment industry it is often seen that the cloth is prepared by a manufacturer is sent to job worker for cutting or dyeing. The rate of GST on job work related to textile or textile products in chapter 50 to 63 is 5% vide Notification No. 20/2017-Central Tax (Rate) dated 22.08.2017.

dyeing

9.Transitional Credit and a missed opportunity for most suppliers

Now this is one area where an informed supplier has taken the benefit and a less informed supplier has missed the bus. The supplier are allowed to transfer the credit of eligible duties of inputs lying in stock and finished and semi- finished goods.

The suppliers of readymade garments were mostly exempted in the Service Tax regime. Hence at that time they were not allowed to avail any credit on input /input services involved in the manufacture. This was the reason most of the suppliers did not concentrate on keeping account of credit of duties of inputs lying in stock, finished or semi-finished goods. Moreover which suppliers would bother to keep the invoices on inputs which they were not allowed to avail at that time. When the GST Act came into force all the suppliers who are taxable in this act were allowed to take credit of inputs lying in stock, finished or semi-finished goods. However they were unable to avail this benefit as they could not produce accounts and related invoices.

10.Export in garment industry

The rate of Goods and Service Tax on any apparel which is exported shall effectively be zero per cent. For this two options are available for an apparel/garment exporter.

  1. The exporter can pay the tax and apply for the refund of tax paid thereon.
  2. The exported may export under LUT scheme without payment of tax.

11.Refund (Inverted tax structure)

The most common case in the apparel industry is Inverted Duty Structure. Inverted Duty Structure is a condition where the rate of tax paid on the inputs / input services is more than the tax paid on the output supply. In the supply of readymade garments for example the rate of GST is 5% for sale value less than Rs. 1,000/- and 12% for sale value greater than or equal to Rs.1,000/-. It is usual that most of the inputs/ input services would have a tax rate more than the 5%/12%. In such case the excess input tax credit may be available in the electronic credit ledger. The option available with such suppliers is to take refund  of such amount.

Refund is also available on credit taken on inputs /input services for supply for exports.

12.RoCSTL scheme for garment industry

Even though the exports are zero rated in GST there are various other forms of taxes that are paid by the supplier inadvertently like GST for electricity for running the machines during manufacturing, etc. Hence to make it actually tax free export incentive scheme in form of RoCSTL has been extended to the textile industry. Rebate on Central and State Tax and Levies (ROCSTL) is a scheme which is brought out by the government for the benefit of the apparel sector.  It is basically a rebate on all the inherent taxes and levies in apparels. The rebate can be taken by the supplier in form of scripts. The scripts can be use to discharge any duties the supplier is liable to pay. These scripts are transferable and hence can be sold freely if not for settling tax liabilities.

13. RoDTEP (Remission on Duties or Taxes on Export Products)

This a new system of extending sops to all the industries that are in export segment. The same applies to the textile industry. It is expected to be implemented from January 1, 2020.  The RoDTEP would subsume the RoCSTL scheme discussed above. This incentive scheme aims to extent the remission benefit of most of the taxes involved in the supply and make the export practically zero rate structure.

14.Conclusion

The topics related to GST in garment industry which is covered in this article are discussed briefly on each area related to textile industry. Though this write up would help the readers from conceptual point of view, each area requires more exhaustive study before practicing in real world. Therefore for the benefit of the readers it is suggested to go through the below mentioned links also.

Supply      II    Valuation        II        Reverse Charge Mechanism       II           Input Tax Credit        II      Refund          II        E-way bill                 II          Casual Taxable Person

Goods and Service Tax in Food Sector: Tax on the platter

Topics

1.Importance of indirect tax or the Goods and Service Tax in food sector for the Indian economy

2.Types of supplies in Food Industry based for the purpose of GST

3.GST in supply of food products

4.Definition of Branded food products

5.Goods and Service Tax in Food related services

6.GST on Food catering service by IRCTC (Indian Railway Catering and Tourism Corporation)

7.Composite Service

8.Mixed supply in Food

9.Composition Scheme in restaurant industry

10.Conclusion

1. Importance of indirect Tax or Goods and Service Tax in food sector for the Indian economy

Indirect tax has always been very important for every industry. However its importance for the food industry is far more important for a developing and populous country like India where the number of mouths to feed outnumbers most of other countries. It is often seen that change in the rate of indirect taxation directly affects the purchasing power of the people living in India where a considerable portion of demography thrives below poverty line. So it is quintessential for the industry to understand the taxation. This will enable industry people to manage the taxation in efficient and cost effective way. The topic of this post is Goods and Service Tax in food industry of Indian Economy. It covers topics related to food products as well as food related services.

Food Sector

2. Types of supplies in Food Industry based for the purpose of GST

Where Goods and Service Tax is concerned the supply can be broadly classified into

  1. Supply of Food Products
  2. Supply of Food related Services

Further Supply of Food Products can be classified as

  1. Branded food products
  2. Un-branded food products

Supply of Food related services can be categories as

  1. Hotel service
  2. Restaurant Service
  3. Catering Service

You shall go through each and every category mentioned and study about the different tax rates prevalent.

3.Goods and Service Tax in food products’s supply

There are varying rates of Goods and Service Tax in food products ranging from 0 % to 28%. There are many items like milk, curd, flour, eggs, oilseed etc. which are basic items for everyday life. They do not suffer any GST. However items such as cocoa chocolates, churan for pan, custard powder, etc are charged 28% of GST. You may go through the list of food items along with applicable GST rates from the .pdf file . However here we are to see the spirit of law while deciding these rates. It aim to make the essential food items GST free and charge high on items which are negative or more of a luxury for people. Now this also brings us to another distinctions within same food product- branded and unbranded. The government aims to charge less GST for the unbranded items. This may be to bring a level playing field and to support the local unbranded food product against the branded products. For example paneer is charged 5% of GST when branded and 0% when unbranded.

4.Definition of Branded food products

The most intuitive definition would be a name which is uniquely associated with a product or service – food product or service in this case. Here in our case the government felt the need to define it in another way just to tackle an unexpected situation in the industry. Every one desires more business and more money. So why to pay more tax when you can sell the same items without a brand and pay lesser tax. After all that extra money is coming into your pocket. This was a practice once. Most of the brands started to deregister their brand name.

However government was quick to figure out what was going on and to curb such a practice it came out with a press release dated 20.09.2017. It clearly stated that a brands registered on 15.05.2017 shall be considered deemed registered even if they are subsequently deregistered. Let us see the criteria which make a product branded after the press release.

a)A brand registered as on 15.05.2017 shall be deemed to be a registered brand for the purposes of levy of 5% GST, irrespective of whether or not such brand is subsequently de-registered.

b) A brand registered as on 15.05.2017 under the Copyright Act, 1957 shall also be treated as a registered brand for the purposes of levy of 5% GST.

c) A brand registered as on 15.05.2017 under any law for the time being in force in any other country shall also be deemed to be a registered brand for the purposes of levy of 5% GST.

d) A mark or name in respect of which actionable claim is available shall be deemed to be a registered brand name for the purposes of levy of 5% GST.

You may refer to the list of items in the food-product-wise_gst_rates .pdf file to find out the GST rates for branded and unbranded version of the same product.

5.Goods and Service Tax in Food related services

As we have already discussed there are three types of services

  1. Hotel Service
  2. Restaurant Service
  3. Catering Service

Hotel Service– For restaurants located in hotels the distinction is based on the declared tariff charged for the rooms in that hotel. If the tariff charged for the room is more than or equal to the threshold of Rs.7500/- per day/night then 18% of the Goods and Service Tax is levied on food service associated with restaurants in that hotel. However Input Tax Credit shall be available on providing such supplies. For the restaurants in hotels with rooms having declared tariff less than the said threshold then a lower rate of 5% shall be applicable without input tax credit.

One important thing to note is that it is the declared room tariff you should be concerned for while deciding on the rate of GST. Let us take an example.

Suppose Mr. X went to a hotel where the room rent for 1 night was fixed at Rs. 7500/-. However on negotiation the manger agreed to take Rs. 7200/-.The very same day of his stay in the hotel he went to the restaurant attached to the hotel for having his dinner. In this case what do you think the rate of GST applicable on his restaurant charges -5% or 18%. It would be 18 % as the declared value of room tariff  is Rs.7500/- and this rate is basis of determining his liability in Goods and Service Tax.

Restaurants – Restaurants are those businesses which are meant for cooking and serving food within its eating enclosure. In provisions of supplies of services by such restaurants a flat rate of 5% is applicable. Only input tax credit on provision of such services could not be availed.

Catering Services– Catering service are another kind of food supplies where foods are supplied at designated place on contract for a specific requirement. You may have taken the service from a food supplier for a birthday party, marriage and other such occasions. A rate of 18 % of GST prevails for such services.

6.GST on Food catering service by IRCTC (Indian Railway Catering and Tourism Corporation)

The GST rate for the food supplied in Indian Railways by the IRCTC is 5% without input tax credit.

7.Composite Service-

The mention of composite service in case of hotels with room service is one such case which is the cause of confusion for GST calculation. Many a times the hotels provide lunch/ dinner in rooms of the guest with the hotel package. In such a case the food service is a service composite with the hotel service. Here the hotel service is the dominant service. Hence the rate applicable on both the food service and hotel service shall be the GST rate applicable on the hotel service.

8.Mixed supply under Goods and Service Tax in Food sector

You may have seen during festivals when the shops sell packets where a whole bundle of different items ranging from sweets, dry fruits, chocolates, a flower bouquet and a beautiful teddy bear toy. If the thought of GST rates applicable on such a package has hit you, the most intuitive reply would be to calculate the GST on every item separately. However that would be incorrect. Such supplies are mixed supply where a whole range of food items with varied GST rates are supplied in a package and there is no dominant supply (item). The applicable GST in these cases shall be the highest rate applicable on any items that forms the part of that package.

9.Composition Scheme in restaurant industry

The restaurants opting for the composition scheme shall pay the GST at the rate of 5% of the value without availing any input credit. The following conditions needs to be fulfilled to opt for composition scheme.

  1. The annual turnover shall be less than Rs. 1.5 crores in normal states and Rs. 1 crores in special states.
  2. The input tax credit on the input supplies shall not be availed to get the benefit of composition scheme.
  3. There should not be any inter- state supplies.
  4. The restaurant shall not make any supplies through any e- commerce operator.
  5. The business should be a permanent business and no temporary arrangement. Further the restaurant shall not engage in any business other than restaurant service.
  6. The restaurant shall not make any exempt supply.
  7. The most important thing is the restaurant shall not collect any tax from its customers.

10.Conclusion

Food being an important sector of Indian economy the rate of GST is an important thing to determine the purchasing power of people. The business shall also keep important note of the tax they are paying. Beside a round of appreciation for the framers of the law where certain food related service are treated as sin and higher tax rates are imposed.

Feel free to give suggestion at lawbanyan@gmail.com

You may also read about Audit in GST 

Audit in GST: Stay ahead

Audit in GST is a very vast topic. However for the purpose of quick applicability in business and fast learning of the topic in year 2020 a detailed discussion has been done below.

Topics

  1. What is audit ?
  2. Importance of audit in GST.
  3. Types of Audit in GST.
  4. Departmental Audit in GST
  5. Time line for raising demands by department.
  6. Things verified during the departmental audit
  7. Brief on what to be done after departmental audit.
  8. Special Audit
  9. Mandatory audit after a certain turnover
  10. Why audit is more accountable and less dispute creating?

1. What is an Audit?

audit

Audit is basically a process of verifying the records and books of accounts of the tax payer/ assessee. The accounts should match with the declaration of the assessee with the department. Besides the aim of the audit is to identify the problems in the accounting process of the assessee and suggest suitable remedy. If the classification of the supplies is not as per the law then the auditor is responsible to identify the cause. The accounts and process has to be in adherence to what is prescribed in law. For the purpose of our discussion we would be concerned about Goods and Service Tax laws.

2. Importance of Audit in GST

Audit, for many, may seem like a monster coming to engulf your hard earned money. However audit comes with many advantages which we should discuss now

  1. It checks deficiencies in the process of accounting in the business which is not compliant with the law and suggests suitable remedies.
  2. It identifies wrong classification of supplies.
  3. If an account is already audited by a professional then the department instills more faith on the assessee’s assessment of tax.
  4. A point detected by a professional during audit may save you penalty which would have aroused upon identifying the same point by departmental officers. It would also save you interest as a point detected early would amount to lesser interest.
  5. It helps to streamline the internal process of the company according to the law.

What is audit in GST

3. Types of Audit in GST.

There are three types of audit

  1. Departmental Audit
  2. Special Audit
  3. Audit by professionals like CA, Cost Accountants etc.

4. Departmental Audit in GST

  • It is carried out by the Goods and Service Tax department. The internal monitoring committee selects the units based on various parameters like risk scores, turnover, tax payment and other parameters which change from time to time.
  • The Commissioner or any other officer authorized by him can undertake the audit.
  • Once the units (assessees) are selected for the conduct of audit the audit team intimates the assessees for the same. The team is required to give the intimation 15 days in advance of the audit. Such intimation is given in FORM GST ADT 01. This is the stage where the assesses are called to furnish the relevant documents necessary for audit.
  • The audit team verifies all the documents and records made available to them and bring out observations which may or may not have revenue implications. These audit observations are provided to the assessee in FORM GST ADT 02. Any departmental audit must be completed within 3 months from the date when the assessee has furnished the documents or the start of audit whichever is later. This period may be extended for another 6 months.
  • The assessee is expected to reply to the audit contention. However if he is in agreement to any liability arising during the course of audit he may make payment. In other situation demand proceedings may be initiated by the department.
  • Special Audit may also be directed if the department is of the opinion that valuation has not been properly done.

pay your Goods and Service Tax

5. Time line for raising demands by department.

The department is supposed to raise demand within 3 months from the date when the assessee has furnished the documents or the start of audit whichever is later. This period may be extended for another 6 months.

6. Things verified during the departmental audit in GST

Process of verification

There is no definite list which could be provided for such audits. However a general checklist could be given for the benefit of the readers who are also witnessing audit in their units. The preparedness of the assessee will not only help them to be tax compliant but avoid unnecessary penalty that could be levied if points are made during the audit.

  • Books of accounts and Balance Sheet

    – These documents reveal the incomes and expenses of the concerned unit. Any additional liability for output supply or liability under Reverse Charge Mechanism is ascertained.

  • Returns and Statements

    – The correctness of output supply by reconciling values of the balance sheet/ books of accounts with that declared in the annual returns. The reason for any difference in values shall be noted.

  • Exemption

    – If any exemption is availed then the applicability of the exemption and conditions there in needs to be ascertained.

  • Deductions-

    The audit team ascertains the correctness of any deduction claimed by the assessee.

  • Rate of Tax

    – The supplies of the assessee is analyzed for correct classification. The audit team must ensure that the rate of tax is correctly applied by the assessee.

  • Input Tax Credit availed and utilized

    – The assessee’s returns, purchase invoices and payments for purchases are examined during the audit. Thereafter the eligibility of input tax credit availed and utilized by the assessee is determined. The payment for purchases on which the credit is availed shall be within180 days of raising the invoice. The same is verified by the audit team.

  • Refund-

    The audit looks whether the refunds are correctly claimed or not.

  • E-way bill-

    The value of e way bill shall match with the outward invoices. Reason for any outward supply without e –way bill must be in accordance with law.

  • Valuation of supply –

    The audit team ascertain that the supplies on which tax has been paid is not undervalued for the purpose of Goods and Service Tax calculation.

  • Other observation

    – The audit process is not limited to the above mentioned documents. The department may ask for any other documents or invoices which they feel have tax implications.

7. Brief on what to be done after departmental audit.

It is already said that after audit the observations are provided to the assessee in GST ADT 02. Now the assessee needs to reply in respect to these observations. There may two situations

8. Special Audit in GST

  • If department is of the view that the valuation is not done correctly, then it may direct special audit. The assessee is informed about special audit in FORM GST ADT 03.
  • The assessee is required to get his books of accounts examined and audited by an nominated Chartered Accountant.
  • All the cost of audit by the Chartered Accountant shall be borne by the department.
  • The nominated Chartered Accountant after audit gives report within 90 days of starting the audit. This period may be extended for another 90 days.
  • In case of any revenue observation demand proceeding is initiated.Special Audit in GST

9. Mandatory audit after a certain turnover

For entities having turnover more than Rs.2 crores in any financial year has to carry out Goods and Service Tax audit from a chartered accountant or a cost accountant. The format of the report FORM 9C has to be filled and certified by authorized persons who are conducting the audit. Thereafter the report is to be submitted to the department. You may read about the process of such audit from the following link.

10. Why audit is more accountable and less dispute creating?

The audit process is more accountable in the Goods and Service Tax regime. The main reason is because the audit is already performed by professional Chartered Accountants and Cost Accountants for entities having turnover above Rs. 2 crores. The report is already available for the departmental officer to rely upon. Hence most of the demands or revenue points get settled at an early stage. The department may not feel it necessary to conduct audit for most of the cases.

Secondly, the departmental audit is not able to cover all the taxpayers in its jurisdiction. Mandatory audit above Rs. 2 crores would have greater coverage. This would make the GST payers more compliant.

Thirdly, a point detected in the early stage by a Chartered Accountant or Cost Accountant would save penalty for the taxpaying entities. Such entities are more likely to pay and resolve issues rather than later when the same point is detected by tax authorities and demand is imposed with penalty. So disputes would be lesser.

Fourthly, the process of audit is clearly mentioned in the law unlike the previous Service Tax regime. This would bring more transparency and accountability in the audit process.

You may also read about GST in food sector 

Demand and Adjudication :Beware of it

Topics:

  1. Introduction to Demand
  2. Issue of Show Cause Notice
  3. Time limits for the issue of Show Cause Notice
  4. Periodic Show Cause Notice
  5. Adjudication of the Show Cause Notice
  6. Time limit for Adjudication of the Show Cause Notice
  7. Cross Empowerment of GST officers
  8. Conditions where Adjudication is not required
  9. Recovery proceedings
  10. Conclusion

 

1. Introduction to Demand

A demand is a tax imposed by the department when it finds any short payment, non-payment, wrong availment / utilization of input tax credit, late filing of returns, late payments or any other events where tax liability has not been properly discharged by the registered person. The demand comes with penalty which varies depending upon when the taxpayer has paid the amount involved. The taxpayer may be in contention to the demand imposed upon him and decide to appeal. You will read about all such situations in the sections covered below.

2. Issue of Show Cause Notice for a Demand

The requirement of issuing Show Cause Notice goes with the ‘Principle of Natural Justice’. Department cannot take actions in respect to a demand directly without giving the taxpayer a chance to present his case. So it is a chance for the taxpayer to show cause as to why the demand should not be imposed on him.  The demand has to be issued in FORM GST DRC 01.

3. Time limits for the issue of Show Cause Notice for a demand

  • Normal Period– If the department issues Show Cause Notice for a reason other than fraud, misstatement, etc then the demand is issued for liabilities which are within 2 years and 9 months from the date of filing the annual returns for the financial year to which the demand pertains.

For example let us suppose the demand is from the month June, 2018 and the date of filing the Annual Return for 2018-19 is 31.12.2019. Then the demand under this provision could be made till 31.09.2022(2 years and 9 months from 31.12.2019).

  • Extended Period– Similarly if the department issues Show Cause Notice in case of fraud, misstatement, and suppression of facts etc the demand is issued for liabilities which are within 4 years and 6 months from the date of filing the annual returns for the financial year to which the demand pertains.
  • Tribunal or courts at times stay the issuance of SCN. In such cases the period of stay is excluded from the above periods of issue of SCN.

4. Periodic Show Cause Notice

If the demands which are present in the Show Cause Notice as discussed above persist in the even after the demand period then periodic Show Cause Notice is issued in regular intervals by the department. However the taxpayer may opt to pay the tax demanded in the original Show Cause Notice. There are two cases arising in this situation.

  • Normal period – If the taxpayer has paid the amount along with applicable interest then no Show Cause Notice will be issued.
  • Extended period– The taxpayer has to pay the demand amount along with interest and penalty of 15% of the amount. On such payment made by the taxpayer and on being informed to the department regarding the same no Show Cause Notice will be issued.

5. Adjudication of the Show Cause Notice for any demand

The person to whom the Show Cause Notice is issued is required to reply/ make representation against the demand in FORM GST DRC 06 within the prescribed time. His reply / representation against Show Cause Notice are considered by the proper officer and tax payable is determined accordingly. Interest and penalty is also determined accordingly. For normal period penalty of 10% of the amount or Rs. 10,000/- whichever is higher is demanded. For extended period 100% of the amount or Rs. 10,000/- whichever is higher is demanded. The adjudicating order for the demand is issued in FORM GST DRC 07. This order is treated as recovery notice.

6. Time limit for Adjudication of the Show Cause Notice

There are two situations

  • Normal period (where demand is for reason other than fraud etc.) – In this case the adjudication process has to be completed within 3 years of the due date of filing the annual return for the financial year to which the demand pertains.
  • Extended period (where demand is for reason of fraud etc.) – In this case the adjudication process has to be completed within 5 years of the due date of filing the annual return for the financial year to which the demand pertains.

 

7. Cross Empowerment of GST officers

It is to be noted that the Goods and Service officers are cross empowered. This means that a Central Goods and Service Tax officer is empowered to adjudicate the demand of State Goods and Service Tax and vice versa.

8. Conditions where Adjudication is not required

In normal period of demand if the assessee admits and pays the demanded amount with interest within 30 days from the date of issue of Show Cause Notice then the case is concluded without issuing any order.

In extended period of demand if the assessee admits the liability and pays the demanded amount along with interest and penalty of 25 % of the amount within 30 days  of issue of Show Cause Notice then the case is concluded without issuing any order.

Any amount paid by assessee for the demand has to be intimated to the department in FORM GST DRC 03. On receiving this communication the proper officer shall conclude the proceedings by issuing order in FORM GST DRC 05.

9. Recovery proceedings

As you already know that the adjudication order in GST FORM GST DRC 07 is treated as recovery notice. If the taxable person fails to pay for the demand within 3 months or any extended period allowed then recovery proceeding is initiated. The amount liable for payment is first charged on the property of such taxable person. Provisional attachment of bank accounts can also be done.

10. Conclusion

This was an intimidating piece of information for many. However the purpose of knowing these things is for understanding the process followed in the government machinery. An informed and honest tax payer can take a better decision and seek proper justice.

You may read about Audit in GST

Filing FORM GSTR 9C: A step by step guide

Topics

  1. Introduction
  2. What is GST Audit Form?
  3. Is it mandatory to file FORM GSTR 9C?
  4. Who should file and certify FORM GSTR 9C?
  5. Is interest and penalty payable on identification of additional tax liabilities during filing the audit form?
  6. Process of filing GSTR 9C
  7. Conclusion

 

Introduction

This is a great leap on the path of self assessment by the tax payers. It is yet to be seen how the audit in GST looks like. However we have brought for you a step by step guide on how to file the GST Audit Form(GSTR 9C). You might want to know who can file this form. Is it mandatory to file it? There may be other questions in your mind. You can expect to solve all your doubts related to this topic in this post. So let us start.

What is GST Audit Form?

GST audit by the professionals is basically a reconciliation of accounts of the taxpayer. All the figures declared by the taxpayer in returns GSTR 9, 9A, and 3B and audited Annual Accounts Statement is reconciled and certified by the professionals. This reconciliation has to be filed in FORM GSTR 9C. This form is an indicator for the tax authorities to find the correctness of the figures present in the returns of the registered person.

Is it mandatory to file FORM GSTR 9C?

All the taxpayers who have their annual turnover more than Rs. 2 crores have to mandatorily file GSTR 9C and submit their audited annual accounts to the tax department.

Who should file and certify FORM GSTR 9C?

FORM 9C is filed based on verified accounts and annual statement of the tax person. The details have to be filed and certified by a professional Chartered Accountant or a CMA.

Is interest and penalty payable on identification of additional tax liabilities during filing the audit form?

Only interest is applicable. Penalty is applicable when the same points are identified by the tax department. So it is better to conduct this audit in a transparent manner.

Process of filing GSTR 9C

GSTR 9C has two parts:

 

Part A is Reconciliation Statement

Part B is Certification by professionals

Part A: Reconciliation Statement looks as the screen shot given below. Part 1 of Part A of Reconciliation statement contains basic details like:

  • Financial year – The year of which the details are provided in the form.
  • GSTIN of the taxpayer- It is the GSTIN number of the taxpayer whose data is being analyzed.
  • Legal Name of Registered person- The taxpayer must give his legal name. This is the name with which he has registered his company.
  • Trade Name- There are entities who use one name for his trade but are registered in some other name. This is the name which the company uses while in trade.

Part 2 of the reconciliation statement contains the actual reconciliation of the Annual Returns (FORM GSTR 9) with that of the Audited Annual Financial Statement of the taxpayer. Let us discuss all the fields mentioned in this part in a step by step way.

  • 5.Reconciliation of Gross Turnover
  • .5A.Turnover (including exports) as per audited financial statements. Here one this to note is the turnover is related to the State or Union Territory to which the GSTIN number of the taxpayer is mapped to. In usual case where an entity has presence over multiple states the Annual Financial Statement is consolidated for the entire business. In such cases the taxpayer is required to internally derive the turnover for that state or union territory and fill up the value. Not to mention that this value should also include the export turnover.
  • .5B.Unbilled revenue at the beginning of the financial year –There are times where some revenue which were recorded earlier in the previous financial year are not part of the turnover of the Annual Financial Statement but GST is payable in the present financial (year under assessment). Such value needs to be declared in this field.
  • .5C.Unadjusted advances at the end of the financial year –There are situations where the GST on advances are paid but they are not recognized as revenue in the Annual Financial Statement. Declare such values over here. For example for construction industry certain advances are received from the clients year on year as the development work progress. In Annual Financial Statement such revenue are treated as work in progress and does not figure in the turnover of the company until the entire construction is over.
  • .5D.Deemed Supply under Schedule I – There are certain items which are present in schedule I which are considered as deemed supply. Goods and Service Tax are levied on such activities and value of such supplies is declared in this field.
  • 5F.Credit Note issued after the end of the financial year-There is a possibility that credit notes are issued after the financial year is over but the supply has taken place in this financial year. Values of such credit notes are declared here.
  • .5G.Turnover of April 2017 to June 2017 – If the Financial Year is 2017-18 then the turnover for the period April 2017 to June 2017 has to be declared so that while assessing the taxable amount such amounts which are beyond the GST period can be omitted.
  • .5H.Unbilled revenue at the end of the financial year– Some unbilled revenue on which tax may be payable in the next financial year but is part of revenue in the current Annual Financial Statement has to be declared here. This value is deducted from the turnover while calculating the taxable value for the taxpayer
  • .5I.Unadjusted advances at the beginning of the financial year- Value of all the advances where GST has not been paid in the current financial year but is recognized as revenue in the Annual Financial Statement.
  • .5J.Credit Note accounted for the Audited Financial Statement but is not permissible under GST- This is the aggregate value of credit notes which is part of the Annual Financial Statement but is not admissible under Section 34 of CGST Act,2017.
  • .5K.Adjustment on account of supply of goods by SEZ units to DTA units.- If you are an SEZ unit and have made supply to any DTA unit then such supplies are not taxable in GST. You are required to declare value of such supplies over here. While calculating taxable value this value is deducted.
  • .5L.Turnover of the period under composition scheme– A taxpayer may partially pay tax under composition scheme and partially under normal tax structure. The turnover of the entity under composition scheme has to be deducted from the turnover to arrieve at the taxable value in FORM GSTR 9. So this value is declared in this field.
  • .5M.Adjustment in turnover under section 15 and rules thereunder-This is the difference between the reported turnover in the Annual Financial Statement and the turnover reported in the Annual GST returns (GSTR 9 ) due to difference in the value of supply.
  • .5N.Adjustment of turnover due to foreign exchange fluctuation: This is the difference between the reported turnover in the Annual Financial Statement and the turnover reported in the Annual GST returns (GSTR 9 ) due to foreign exchange fluctuation.
  • .5O.Adjustment of turnover for reason not listed above: This is the difference between the reported turnover in the Annual Financial Statement and the turnover reported in the Annual GST returns (GSTR 9) due to any other reason which is not listed above.
  • .5P.Annual turnover after adjustment as above- This is an auto populated field which is calculated from the values declared above. It is calculated as5P= 5A+5B+5C+5D+5E+5F-5G-5H-5I-5J-5K-5L(+/-)5M(+/-)5N(+/-)5O
  • 5Q.Turnover as declared in Annual Returns (GSTR 9): Annual turnover as declared in GSTR 9 is declared here. It is calculated from the values declared in Sr. No. 5N, 10 and 11 in FORM GSTR 9.
  • 5R.Un-reconciled turnover (Q-P): This field shows the difference between the value of 5P and 5Q. The reason for such difference is to be stated in the next section.
      • 6.Reason for un-reconciled difference- The reason of un-reconciled amount as indicated in 5R is to be presented over here.
      • 7.Reconcillation of Taxable turnover- Till this stage we have data to arrive at the total taxable output of the taxpayer. Now further data are required for arriving at the taxable turnover of the taxpayer.
        • 7A Annual Turnover after adjustment – This field is auto populated from the figure generated in field 5P.
        • 7B.Value of exempted, NIL rated, Non GST supplies, No supply turnover-Here the value of exempted, NIL rated, Non GST and no supplies has to be declared.
        • 7C.Zero rated supplies without payment of tax-Here zero rated supplies are declared.
        • 7D.Supplies on which tax has to be paid by the recipient on reverse charge basis- Here the value of inward supplies where tax is to be paid on reverse charge mechanism is declared.
        • 7E.Taxable turnover as per adjustment above: This is calculated as 7E= 7A-7B-7C-7D. This field is auto generated.
        • 7F. Taxable turnover as per liability declared in Annual Returns (GSTR9)- This is taxable turnover as declared in Table 4N of FORM GSTR 9.
        • 7G. Un-reconciled turnover (7F-7E): This field shows the difference between the value of 7F and 7E. The reason for such difference is to be stated in the next section.
      • 8.Reason for Un-reconciled taxable turnover- The reason for any difference in 7F and 7E has to be presented over here.

       

      Part 3 is basically the reconciliation of tax paid by the taxpayer.

      • 9.Reconciliation of rate wise liability and amount paid thereon- It is basically the amount of tax paid by the taxpayer for different rate of Goods and Service Tax. The taxable value of each such supply has to be specified in this field. Further the taxable value and tax paid for inward supplies under reverse charge mechanism is to be specified over here. The tax payer also declares the value of any interest, penalty, late fee or any other tax payment made by the assessee in the financial year. Finally in field 9Q the value of tax paid by the tax payer as declared in FORM GSTR 9 has to be provided. Any un-reconciled amount of tax paid is calculated and auto populated in 9R. Reason for such un- reconciled amount has to be presented in the next section which is section 10.
      • 11.Additional amount payable but not paid (due to reasons specified under Table 6,8 and 10 above) – Here any additional amount payable but not paid due tp reasons presented in section 6,8 and 10 shall be declared here.

      Part 4 is reconciliation of Input Tax Credit availed and utilized by the taxpayer under assessement

      • 12A.ITC availed as per audited Annual Financial Statement for State/ UT – For a multi-location unit the Audited Annual Financial Statement contains reference of the Input Tax Credit (ITC) availed in respect to all the units related to that PAN. However in cases where such references are not present ITC availed has to be internally derived for each GSTIN and declared over here. The Input Tax Credit declared in this field is the total credit availed after reversals.
      • 12B.ITC booked in the earlier financial year claimed in current financial year- This field should contain the Input Tax Credit declared in the earlier financial year but availed in this financial year.
      • 12C.ITC booked in current financial year to be claimed in subsequent financial years-There may be ITC that has been declared in this financial year but is availed in the next financial year. Such Input Tax Credit is declared over here.
      • 12D.ITC availed in audited financial statements or books of account- This is the auto populated field and is calculated as 12D=12A+12B-12C.
      • 12F.ITC claimed in Annual Returns (GSTR 9)- This is the net ITC available as declared in Table 7J of GSTR 9(Annual Returns).
      • 12G.Un-reconciled ITC – Any un-reconciled amount that is the difference between 12D and 12E figures out in this field.
      • 13.Reason for any reconciled difference – In case of any un-reconciled amount as indicated in 12F, reasons for such a difference has to be presented over here.
      • 14I.Reconciliation of ITC declared in Annual Returns (GSTR 9) with ITC availed on expenses as per Audited Annual Financial Statement or books of accounts – This filed is basically the breakup of the Input Tax Credit availed for each input/ input services. For example you have to declare ITC availed on purchase, transport, rent etc. After all the values are fed into the table at last the total ITC availed is auto calculated. Finally any difference in the value declared in Annual Returns (GSTR 9) is indicated. Reasons for any such difference have to be provided in Table 15. Finally the value on which tax is payable due to reasons specified in table 13 and 15 is declared in table 16

      Part 5:  Auditor’s recommendation on additional Liability due to non-reconciliation – Here the auditor’s recommendation on the tax payable due to un-reconciled turnover and un-reconciled Input Tax Credit is indicated. Any erroneous refund taken by the tax payer or any outstanding demand to be settled has to be declared over here. Finally the declaration has to be signed by the auditor who has verified and filled in the details.

      Part B: Certification

    1. The auditor who has verified the accounts certifies in this part regarding the documents maintained by the taxpayer is per the law. Further he declares the documents not maintained by the registered taxpayer. Further he should present his observations on the accounts and reconciliation presented above.

      Conclusion

      This is really a tiring piece to read and more tiring to perform. But I believe that the guidelines presented in the post would be a great help for tax person who are having a tough time figuring out what to do with GSTR 9C audit. Anyway you need to hire a CA or a CWA to take care of this form but an understanding of the form definitely helps to figure out the requirement. If you have any queries feel free to post.

       

 

Input Service Distribution: Make input tax credit distribution simpler

Topics:

  1. What is Input Service Distributor(ISD)?
  2. Conditions to be followed by Input Service Distributor.
  3. Eligible documents issued by Input Service Distributor.
  4. Procedure for distributing input service credit.
  5. Adjustment of credit after distribution of credit
  6. Formula for distribution of ISD credit.
  7. Credit which cannot be transferred through ISD route.
  8. What to do if excess credit is distributed?
  9. Conclusion

 

1.What is an Input Service Distributor?

Input service Distributor is an entity who is engaged in accruing and distributing Goods and Service Tax credit to other branches of the same company. During the course of business it is a normal practice that the vendors raise all the bills to the head office of a company instead of the unit where the actual supply is taking place. The credit of tax paid on such bills cannot be taken directly by the manufacturing or service providing units. Instead the head office is required to take ISD (Input Service Distributor) registration and pass on the credit to the respective branches.

There may also be a situation where the head office is carrying on marketing and management activities for all the units. Here expenditure is incurred by the head office in housekeeping service, security service, software maintenance service and others. The input tax credit is available on such services. However such credit cannot be utilized by the head office directly as all the output supplies are from the units and no taxability arises here. In such a scenario the head office distributes the credit so accumulated among all the units from where the supply is taking place.

2.Conditions to be followed by Input Service Distributor

The following conditions needs to be followed by the Input Service Distributor

  • The PAN (Permanent Account Number) of the Input Service Distributor shall be same as that of the units where the input tax credit is distributed.
  • Input Service Distributor shall have separate registration from all other units.
  • All the units where credit is distributed must be taxable suppliers.
  • The ISD can distribute credit only from input services. Credit pertaining to inputs cannot be distributed by this route.
  • The Input Service Distributor cannot distribute credit on account of Goods and Service Tax payment on Reverse Charge Mechanism.

 

3.Eligible documents issued by Input Service Distributor.

There are three documents that can be issued by an Input Service Distributor to distribute credit. These are as follows:

  • Input Service Distributor invoice
  • Credit note issued by an Input Service Distributor
  • Any other documents issued by Input Service Distributor containing details as per Section 54 (1) of Central Goods and Service Tax Rules, 2017.

4.Procedure for distributing input service credit.

The following procedures shall be maintained while distributing any Input Service Credit

  • Input Tax Credit available with the Input Service Distributor in a particular month shall be distributed in the same month.
  • Here the Input Service Distributor furnishes the details of distributed input tax credit in FORM GSTR-6.
  • The eligible credit and ineligible credit shall be distributed separately.
  • The Input Service Distributor distributes the credit on account of Central Tax, State Tax, Union Territory Tax and Integrated Tax separately.
  • There is a particular formula prescribed for distributing of input tax credit among the units which you will read in the next section. The credit so deduced shall be distributed to the units after issuance of the eligible documents as already discussed.

5.Adjustment of credit after distribution of credit

There may be two situations

  • If additional amount of Input Tax Credit is available on account of issuance of debit note then the Input Service Distributor distributes the credit in the same month in which the debit note is issued. The same shall be included in FORM GSTR-6 for that period.
  • Sometimes credit notes are issued. In such a case the Input Tax Credit distributed is reduced. Now the Input Service Distributor is required to apportion the credit so reduced among all the units in the same manner in which the credit was previously distributed. Further the credit shall be reduced in GSTR -6 for the month. If the amount could not be adjusted in GSTR-6 then the amount of credit required to be reduced shall be added to the output tax liability.

6.Formula used for distribution of ISD credit.

There are two sets of rules for this section

  1. If the credit available for distribution to a particular unit (recipient) then the credit is transferred only to that unit.
  2. If the credit available for distribution to more than one units or all the units then the distribution shall be made on pro rata basis based on the turnover of that unit in that state or union territory.

Let C= amount of credit to be distributed,

T1= turnover of unit 1 in its state/ union territory in the relevant period

T = Aggregate turnover of all recipient in the relevant period.

Now if, C1= credit distributable to unit 1 then,

C1= C x (T1 / T)

 

In this formula there is an important word ‘relevant period’. Let us define it for clarity. So relevant period shall be

  • The preceding year to the year when the credit is distributable to the recipients if the recipients have any turnover in the previous year.
  • If there is no turnover of the recipient in the preceding year, then the last quarter for which the details of turnover is available with the recipient.

 

7.What credits are not eligible for transfer through Input service distribution?

  • The input tax credit pertaining to the inputs cannot be transferred through Input Service Distribution.
  • The credit pertaining to payment under reverse charge mechanism cannot be transferred through this mode.

8.What to do if excess credit is distributed?

If the Input Service Distributor distributes excess credit in contravention of the available provisions then the excess credit shall be reversed along with applicable interest.

7.Conclusion

The importance of Input Service Distribution is important as it help to greatly set off your tax expenses. There are many businesses that have input tax credit lying in input services but they are unaware of this avenue. By understanding this concept they can utilize the money already present with them in the form of credit and get the maximum out of it.

Refund: Reduce your excess tax expense now , ask for refund

Topics

  1. Introduction
  2. Cases where refund of tax can be applied for
  3. Time limit for applying for Refund
  4. Relevant Date for application of Refund
  5. Withholding the amount of the refund
  6. Consumer Welfare Fund
  7. Calculation of admissible Refund amount of Zero Rated supplies
  8. Calculation of admissible refund in inverted tax structure (inverted rated supplies)
  9. Grant of provisional Refund
  10. Conclusion

1. Introduction:

Refund is an important concept adopted in GST similar to the previous tax regimes. A tax paid in excess to the department should not be an additional burden on the expenditure side of any business. Tax is already a considerable expense. On top of it if tax paid in excess is also booked as expense the situation becomes unsustainable for many a business. To deal with such a scenario refund route is prescribed. You would read about conditions and cases where refund on tax already paid could be availed by any person.

2. Cases where refund of tax can be applied for:

A person can apply for refund in a number of scenarios. These scenarios are mentioned below.

  1. Pending amount in the electronic cash ledger where the tax is paid and balance amount is applied for refund.
  2. Refund of unutilized Input Tax Credit accumulated by specialized agencies like United Nations Organization or any Multi Lateral Financial Institution notified under United Nation (Privilege and Immunity) Act, 1947, Consulate or Embassy of foreign countries or any person or class of person notified under Section 55 of Central Goods and Service Tax Act, 2017.
  3. The input tax credit taken by the supplier of zero rated supplies in their electronic credit ledger. As such suppliers are unable to utilize such credit they can seek refund of the same. The zero rated supplies are those supplies where the rate of GST levied is zero. Export of goods or service and supply of goods or services to SEZ are two types of zero rated supplies.
  4. The unutilized credit accumulated by the suppliers of inverted tax structure. The inverted tax structure (inverted rated supplies) means the supplies where the rate of GST on output supplies is less than the rate of GST paid on inputs/ input services involved in such supplies. Obviously the supplier may not be able to utilize the available credit completely and credit in electronic ledger would keep on accumulating over time. So he may ask for refund of such credit available.                                                                                                                                         
  5. Refund of tax paid pursuant to Section 77 of Central Goods and Service Tax Act, 2017. There are situations where a taxable person out of confusion pays tax in IGST (Integrated Goods and Service Tax) instead of CGST (Central Goods and Service Tax) and SGST (State Goods and Service Tax). A reverse situation may also happen where the person has paid CGST and SGST instead of IGST. In such situation the taxable person has the option of paying the tax again correctly without any interest and claim refund of tax paid erroneously.
  6. Refund on account of any order by court, Tribunal, Appellate Authority or Appellate Tribunal.
  7. Refund on the amount paid due to mistake.
  8. Refund on refund vouchers for taxes paid where the goods or the services have not been supplied.
  9. Refund to International Tourist who pays tax on goods purchased in India and carries with them the goods so purchased.
  10. Refund on excess amount pre-deposited by casual taxable persons and non-resident taxable persons.

3. Time limit for applying for Refund

Refunds are time barred. That means that if the application for refund is not submitted within the prescribed time then the refund for the amount concerned would be disallowed by the department. This time limit for the application for refund is 2 years from the relevant date. Read the concept of relevant date in the next section.

4. Relevant Date for application of Refund

The relevant date as discussed in the previous section is different in different situation. Such cases are tabulated below.

Sl. No. Description of supply Relevant Date for refund
1. Goods exported out of India by ship or aircraft Date on which the ship or aircraft leaves India
2. Goods exported out of India by land Date on which such goods pass the frontiers
3. Goods exported out of India by post Date on which the goods are dispatched from the concerned post office.
4. Deemed Export of Goods Date on which the returns related to such deemed export is filed.
5. Export of Service outside India where the supply of service is completed prior to the receipt of payment Date of receipt of payment
6. Export of Service outside India where the supply of service is completed after the receipt of payment i.e. money paid in advance Date of issue of invoice
7. Where tax becomes refundable as a consequence to a judgment, decree or order of any court, Tribunal and Appellate Tribunal Date of communication of such judgment, decree , order or direction
8. Refund in case of inverted tax structure Stipulated date of furnishing the returns
9. Case where the tax is paid provisionally. E.g. Casual taxable person Date of adjustment of tax after the final adjustment of advance with actual liability
10. In cases where person seeking refund is not the supplier. E.g. Refund sought by foreign specialized agencies on the tax paid on goods or services purchased The date of receipt of goods or services
11. In any other case Date of payment of tax

5. Withholding the amount of the refund

A person is liable to pay any dues in GST tax amount, interest or penalty. Court, Tribunal or Appellate Tribunal has not stayed payment of such amounts. Similarly in another situation a person is required to furnish returns for any supplies but has failed to do so. In both the above situations the department can take two stands

  1. The department may withhold an amount that is eligible for refund until such returns are furnished or GST, interest or penalty is paid.
  2. The department may deduct such dues in GST, interest and penalty from the refund amount.

6. Consumer Welfare Fund

This section is mainly for students who want to know how the refunded amount flows in the system. A refund approved by a proper officer of the department gets credited in the Consumer Welfare Fund. Then the amount is paid from this fund to the person who has applied for such refund. Consumer Welfare Fund is constituted by the Government. The amounts that are usually credited to this fund are

  • Any amount that a proper officer of the department considers refundable and passes an order accordingly.
  • An income from the amount invested from Consumer Welfare Fund is also credited back to this fund
  • Other monies received by it.

However there is some refunds where amount is directly paid to the applicant of refund instead of crediting to the Consumer Welfare Fund. These categories of refunds are mentioned below

  • Refund of amount paid on export of goods or services.
  • Refund of input tax credit on inputs or input services used for export without payment of tax.
  • Refund of tax of zero rated supplies.
  • Refund of input tax credit availed on supply of goods or services having inverted tax structure.
  • Refund of tax paid in CGST and SGST instead of IGST or vice versa.
  • Refund of tax or interest of an amount paid by a person but the incident of tax is not passed on to another person.
  • Refund of tax or interest of any other class of persons notified by the Government.

7. Calculation of admissible Refund amount of Zero Rated supplies

Let ‘S’ be the Turnover of total zero rated supply of services and ‘G’ be total turnover of zero rated supplies of goods. Zero rated supply of services (S) shall include all the supply of services where the payment is received. If advance is paid for any service then the turnover shall include services which are completed. In simple to take a supply of service in the turnover of zero rated supply the two conditions that needs to be fulfilled are

  • Service is complete
  • Consideration for service is received

Turnover of zero rated supplies of goods (G) shall include the value of Goods exported under bond or letter of undertaking. This shall not include the goods where the supplier has availed the benefit of

  • Notification 48/2017 Central Tax dated 18.10.2017
  • Notification 40/ 2017 Central Tax dated 23.10.2017
  • Notification 41/2017 Central Tax dated 23.10.2017

Let ‘T’ be total adjusted total turnover. It includes the value of

  • The turnover in a state or a union territory exclusive of taxes
  • Turnover of zero rated supply of services determined above and non zero rated supply of services.
  • The above shall exclude value of exempt supplies other than zero rated supplies and turnover in respect of supplies where benefit of notification mentioned above is availed.

Now,

The maximum admissible refund = (S+G) x (Net Input Tax Credit)/T

 

8. Calculation of admissible refund in inverted tax structure

 

Let ‘T’ be total adjusted total turnover. It includes the value of

  • The turnover in a state or a union territory exclusive of taxes
  • Turnover of zero rated supply of services determined above and non zero rated supply of services.
  • The above shall exclude value of exempt supplies other than zero rated supplies and turnover in respect of supplies where benefit of notification mentioned above is availed.

The maximum admissible refund, T = {(Turnover of inverted rated supplies of goods/ services) x Net ITC / Adjusted Total Turnover)} – tax payable on inverted rated supplies

 

9.  Grant of provisional Refund

The government refunds 90% of the amount applied for the refund on provisional basis if

  • Refund is on account of zero rated supplies
  • Such refund has not been specifically notified for not getting amount on provisional basis
  • The applicant has not prosecuted for any offence under the GST Act where the evasion is for an amount more than Rs.2.5 crores.

10. Conclusion

As you have gone through the post you may have appreciated the importance of Refund concept. The excess of tax amount paid by any person is allowed to be taken back. However the concept should be properly understood and used for the benefit of the business.

You may also like to read about Registration in GST

GST updates: Notification 10/2019 Central Tax dated 07.03.2019

Notification 10/2019 dated 07.03.2019 exempts any person engaged exclusively in supply of goods from taking registration if his aggregate turnover in that financial year less than Rs.40 lakhs. However the provisions of this notification shall not apply on

  • Person liable for compulsory registration.
  • Person making supply of
Sl. No. Tariff Heading Particulars
1 2105 00 00 Ice Cream, Edible ice
2 2106 90 20 Pan Masala
3 24 All goods i.e. Tobacco and manufactured tobacco products

 

  • Person making intra state supplies in the state of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Pudducherry, Sikkim, Telangana, Tripura and Uttarakhand.
  • Person exercising option of registration under section 25(3) of the CGST Act, 2017 (voluntary registration discussed below) or such persons who want to continue their registration under this Act.

The provisions of this notification is effective from 01.04.2019.

If you want to read about the criteria of registration in GST follow this link.