GST on vessel freight

Payment of GST on freight paid to person outside India

Import of goods generally includes cost of goods, freight and cost of insurance as part of cost of goods.  In case the importer is making payment for freight, it is usual for him to identify the payment made for services of transportation of goods through vessel to India and pay reverse charge on such value as required by Notification No. 10/2017- Integrated Tax (Rate) dt. 28.06.2017 which requires person located in taxable territory to pay IGST on payment made to a person who is located in a non-taxable territory for any service supplied to such person.  Accordingly, IGST shall be paid on such freight by such importer at the rate of 18%.

However, most of the goods are imported into India from the supplier abroad on CIF basis i.e. including value of insurance and freight.  Accordingly, in such cases, the foreign supplier pays to the shipping line or its agent and the importer never gets to know the value of import.  However, vide Notification No. 10/2017- Integrated Tax (Rate) dt. 28.06.2017, the following liability has been casted on an importer:

S.no. Category of Supply of Services Supplier of Service Recipient of Service
10 Services supplied by a person located in non- taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India. A person located in nontaxable territory Importer, as defined in clause (26) of section 2 of the Customs Act, 1962(52 of 1962), located in the taxable territory

Importer as has been defined in Customs Act, 1962 is as under:

(26)      “importer”, in relation to any goods at any time between their importation and the time when they are cleared for home consumption, includes any owner, beneficial owner or any person holding himself out to be the importer;

An importation of goods shall be made at the legal landing place or at the place permitted by the proper officer of customs.  Upon their arrival, all goods need to be declared by the owner or his agent in the prescribed form assessing the duty payable on such goods.  On payment of such duty, the goods are then cleared into India.  Thus, any person who is a owner between the time of importation and time of clearance into India shall be required to comply with the requirement of payment of IGST on freight included in the value of such goods as CIF value.

In such cases, the value of freight of vessel shall be taken as provided in Notification No. No. 8/2017-Integrated Tax (Rate), dated the 28th June, 2017, as under:

  1. Where the value of taxable service provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India is not available with the person liable for paying integrated tax, the same shall be deemed to be 10 % of the CIF value (sum of cost, insurance and freight) of imported goods

Accordingly, such person shall pay 10% of CIF value multiplied by rate of IGST viz., 5%.  Thus, the effective liability on services of Transport of goods in a vessel including services provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs works out to be 0.5% of CIF value.

The above discussion is summarised as under:

Particular Person providing services of transportation of goods in a vessel located in India Person providing services of transportation of goods in a vessel located outside India
Importer paying freight to Shipping Line Shipping line to charge GST from Importer on his invoice Importer to pay IGST on actual value of freight paid @5%
Importer paying to freight forwarder in India Freight forwarder to charge GST from Importer on his invoice Freight forwarder to charge GST from Importer on his invoice
Importer paying to freight forwarder outside India Importer to pay IGST on actual value of freight paid @5% Importer to pay IGST on actual value of freight paid @5%
Importer paying to Supplier of Goods Importer to pay IGST on 10% of CIF value @5% Importer to pay IGST on 10% of CIF value @5%

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Impact of 21st GST Council Meeting on Handicrafts related Goods

Description Present GST Rate Recommended GST Rate
Table and Kitchenware etc. of wood 18% 12%
Grass, leaf and reed and fibre products, including mats, pouches, wallets 12% 5%
Paper Mache articles 18% 5%
Tableware, kitchenware, other household articles and toilet articles other than of porcelain or china [including small accessodes bathroom or sanitary fittings such as soap dishes, sponge baskets, toothbrush holders, towel hooks and toilet paper holders]. 28% 12%
Statues and other ornamental articles. 28% 12%
All goods, including bells, gongs and the like, non-electric, of base metal; statuettes and other ornaments of base metal including metal bidriware; photograph, picture or similar frames, of base metal; mirrors of base metal, 18% 12%
Worked ivory, bone, tortoise shell, horn, antlers, mother of pearl, and other animal carving material and articles of these materials (including articles obtained by

moulding); articles of coral

18% 12%
Dhoop batti, dhoop, sambhrani and other similar items 12% 5%
Saree Fall 12% 5%
Idols made of Clay 28% NIL
Idols of wood, stone [including marble] and metals [other than those made of precious metals] 28% 12%
Cotton quilts 18% 5% on cotton quilts not exceeding Rs. 1000 per piece, 12% on cotton quilts exceeding Rs. 1000 per piece
Statues, Statuettes, Pedestals; high or low reliefs, crosses, figures of animal, bowls, vases, cups, cachou boxes, writing sets, ashtrays, Paper weights, artificial fruit and foliage, etc; other ornamental goods essentially of stone. 28% 12%
Tableware, Kitchenware, other household articles and toilet articles of porcelain or china [including small accessories bathroom or sanitary fittings such as a soap dishes, sponge baskets, toothbrush holders, towel hooks and toilet paper holders] 18% 12%
Stone Inlay work 28% 12%
Worked corals, other than articles of coral 28% 5%

 

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How to change primary authorised signatory details


Need to change Primary Authorised Signatory Mobile Number and Email ID. Step by step guide to change primary authorised signatory details on gst.gov.in (GST Portal) : 


Step-1 : Log on to www.gst.gov.in (gst portal) to go to Login Page or click here https://services.gst.gov.in/services/login


Step-2 : Click to Login button and enter your Credentials


Step-3 : In Dropdown of Services to – registration to  – Amendment of Registration Non – Core Fields


Step-4 : Go to the Authorised Signatory Tab and Add New Authorised Signatory person


Step-5 : Save the person and go to last tab called verification and submit the application via DSC/E-Signature/EVC.


Step-6 : Re-Login to portal after some time.


step-7 : Again to go to the Authorised signatory tab and deselect the Primary Authorised signatory person and select the New Authorised person you’ve entered.


Step-7 : Change the Mobile number and Email Id of new Authorised signatory Details you want to change.


Step-7 : Submit the application again using DSC/E-Signature/EVC.


Note : DSC is required in case of Company/LLP

 

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Need to Change your Mobile Number and Email on GST Portal


You can change Directors/Proprietor/Partner/Members/Authorised Signatories Mobile Number and Email id on GST Portal Following the below steps : 


Step-1 : Log on to www.gst.gov.in to go to Login Page or click here https://services.gst.gov.in/services/login


Step-2 : Click to Login button and enter your Credentials


Step-3 : In Dropdown of Services to – registration to  – Amendment of Registration Non – Core Fields


Step-4 : Click on Promoter / Partners/Authorised Signatory Tab


Step-5 : Click on Edit Button of Promoter / Partners/Authorised Signatory Name


Step-6 : change Mobile Number and Email id or other details like Address of Promoter / Partners/Authorised Signatory and Click on Save Button


Step-7 : Go to the Last Tab Verification and Submitt your Application through DSC/E-Signature/EVC.


Step-7 : ARN Number will generate after submission of your Application. You can check your application status via this ARN Number (Application Reference Number) using this link : TRACK ARN STATUS


Next Article : How to Change Primary Authorised Signatory Details


 

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Industry wise FAQs on GST

  • 14667

Government Services

August 30th, 2017|0 Comments

FAQ : Government Services Question 1: Are all services provided by the Government or local authority exempted from payment of tax ? Answer: No, all services provided by the Government or a local authority are [...]

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FAQ: Gems & Jewelery

August 30th, 2017|0 Comments

FAQ : Gems & Jewellery Question 1: Whether advertising and communication material banners/hoardings/posters) provided to distributors would be treated as supply in the course of business by the company thereby not requiring any reversal of ITC? Answer: (a) [...]

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IT/ITES Services

August 30th, 2017|0 Comments

FAQ: IT/ITES Question 1: Whether software is regarded as goods or services in GST? Answer: In terms of Schedule II of the CGST Act 2017, development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information [...]

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  • Know about gst in india

GST MSME

August 28th, 2017|0 Comments

FAQ: MSME Question 1: What is GST? Answer: GST stands for Goods and Services Tax, which is levied on supply of goods or services. “Supply” is a legal term which has very broad sweep and [...]

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  • GST faqs on Food processing

Food Processing Services

August 28th, 2017|0 Comments

FAQ : Food Processing Question 1: If I have multiple manufacturing units in a State/UT, do I have to register all my companies separately or as a group? Answer: You shall be granted a single [...]

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  • GST Sector wise implications queries - Textiels sector

Textiles Services

August 28th, 2017|0 Comments

FAQ: TEXTILES Question 1: As per Chapter 53 heading 5303 of the GST rate schedule, raw jute has been kept at the NIL rate slab. Thus, it is presumed that suppliers dealing only in raw [...]

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  • Drugs & Pharmaceuticals Services (Medicine services) under GST

Drugs & Pharmaceuticals Services

August 28th, 2017|0 Comments

FAQ: Drugs & Pharmaceuticals :  Question 1: Whether formulations cleared have to be assessed to GST under transfer price mechanism or on the basis of MRP printed on them? Answer : The assessment of drugs and [...]

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  • GST Handicraft services

Handicrafts Services

August 6th, 2017|0 Comments

GST Sectoral Series : Handicrafts By Directorate General of Taxpayer Services Central Board of Excise & Customs FAQ: Handicrafts Question 1: How will imports be taxed under GST? Answer: [...]

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  • GST Services wise implications : Mining Services under GST

Mining Services

August 5th, 2017|0 Comments

GST Sectoral Series : Mining By Directorate General of Taxpayer Services Central Board of Excise & Customs FAQ: Mining   Question 1: Can small mining leaseholders with a [...]

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  • GST on E-Commerce Services under GST- Sectoral Series India

E-Commerce Services

August 4th, 2017|0 Comments

GST Sectoral Series : E-Commerce By Directorate General of Taxpayer Services Central Board of Excise & Customs FAQ: E-Commerce Question 1: What is Electronic Commerce? Answer : Electronic Commerce has [...]

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  • Export under GST

Exports Services

July 19th, 2017|0 Comments

GST FAQ ON EXPORTS : All Question and Answers Question 1: How are exports treated under the GST Law? Answer: Under the GST Law, export of goods or services has been treated as:  inter-State [...]

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EPC Services

November 5th, 2016|0 Comments

Impact on Output Pricing GST on services in place of Service Tax and VAT FOC impacts to be factored in supply No more abatements forseen, rate at general level. Exemption forseen for [...]

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Manufacturing Services

November 5th, 2016|0 Comments

Impact on Output Pricing FOC impacts to be factored in supply Exemption forseen for schools, UN, SEZ only Impact on Supply Chain Management Branch transfers taxable [...]

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Housekeeping Services

November 5th, 2016|0 Comments

Impact on Output Pricing FOC impacts to be factored in supply Exemption forseen for schools, UN, SEZ only Impact on Supply Chain Management Usually no supply [...]

  • 5184
  • MAINTENANCE SERVICES

Maintenance Services

November 5th, 2016|2 Comments

Impact on Registrations Separate registrations in each state. ISD registration in case of common input services. TDS deduction by customer may impact decision of registration. Impact on Cash [...]

  • 5182
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Repairing Services

November 5th, 2016|0 Comments

Impact on Output Pricing GST on services in place of Service Tax and VAT FOC impacts to be factored in supply No more abatements forseen, rate at general level. Exemption forseen for [...]

  • 5180
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Catering Services

November 5th, 2016|0 Comments

Impact on Output Pricing FOC impacts to be factored in supply Inputs mostly (fruits/ vegetables/ basic food) may be exempt while output taxable. No more abatements Exemption forseen for factory canteens, schools, [...]

  • 5178
  • TRAVEL SERVICES

Travel Agency Services

November 5th, 2016|2 Comments

Impact on Output Pricing Inter state and Intra state supplies Supply Valuation – a major challenge especially in case of associated enterprises / Branches FOC impacts to be factored in supply No [...]

  • 3701

Trading

September 25th, 2016|1 Comment

    Read More  EPC SERVICES MANUFACTURING SERVICES HOUSEKEEPING SERVICES MAINTENANCE SERVICES REPAIRING SERVICES CATERING SERVICES TRAVEL AGENCY SERVICES TOUR OPERATOR SERVICES ECOMMERCE OPERATOR SERVICES HOTEL [...]

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Tour Operator Services

September 25th, 2016|0 Comments

Impact on Output Pricing Separate registrations in each state ISD registration in case of common input services TDS deduction by customer may impact decision of registration Impact on [...]

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Differences between GSTR 3B and GSTR 3 and resolutions thereof

S.No. Situation Treatment
1. No Difference between Form 3B details and Form 1 and 2 details. Assessee can sign and submit FORM GSTR-3 without any additional payment of tax
2. Where the tax payable by a registered person as per FORM GSTR-3is more than what has been paid as per FORM GSTR-3B ‣   Common portal would show another instance of Table 12 for making additional payment of taxes.

‣   Additional amount can be paid by electronic cash or credit ledger

‣   Applicable interest on delayed payment of tax starting from 26th day of August, 2017 till the date of debit in the electronic cash or credit ledger

3. Eligible ITC as per Form 2 is less than that claimed in Form 3B Difference would be added to his output tax liability and shall have to be paid by him along with interest
4. Eligible ITC claimed in FORM GSTR-3B is less that the ITC as per FORM GSTR-2 Additional amount of ITC shall be credited to the electronic credit ledger on submission of FORM GSTR-3
5. Liability also increased and credit also increased Assessee can utilise additional credit to pay additional liability, however, interest liability for period post Aug 26, 2017 remains
6. Output tax liability as per FORM GSTR-1 and FORM GSTR-2 is less than the output tax liability as per FORM GSTR-3B ‣   The excess shall be carried forward to the next month’s return to be offset against the output liability of the next month
7. Simultaneous reduction in liability of output and available ITC Both shall be offset to the extent reduced and balance shall be exigible to suitable treatment as discussed above
8. Submission of GSTR-3B without payment of taxes ‣   Registered person shall be liable for payment of interest on delayed payment of tax starting from 26 Aug, 2017 till the date of payment

‣   Late fee not to be imposed of FORM GSTR-3B was submitted on or before the due date

9. Form 3B not submitted ‣   Taxpayer shall furnish the details in FORM GSTR-1 and FORM GSTR-2 and sign and submit the return in FORM GSTR-3

‣   Payment of interest on delayed payment of tax

‣   No late fee

 

Source : Circular No. 7/7/2017-GST dated on 01.09.2017

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know how to file GST TRAN-1 Form

Who need to file Form GST TRAN-1?

Input Tax Credit on old tax regime paid through purchases raw materials, semi finished goods & Finished goods that need to claim by taxpayers can claim on GST TRAN-1 Form.

Below are the steps on how to file GST TRAN-1 Form : 

Notes: Once you fill the details in relevant Tables, please submit the Form. Please be informed that once “Submit” button is clicked, no modification will be allowed. Entries with respect to transitional credit declared in TRAN-1 will get reflected in the electronic credit ledger.

  1. For non-TRAN-1 cases, last date for payment and filing return is 25th August 2017.
  2. For TRAN-1 cases, last date for payment is 25th August 2017 and filing return continues to be 28th August 2017.
  • First step need to login go to service tab then to Return and then transitions forms
    Services-Returns-Transition Forms 

  • It will show TRAN-1/2/3 but by default it will take TRAN-1 (TRANSITIONAL ITC/STOCK STATEMENT)below it will show “Whether all the returns required under existing law for the period of six months immediately preceding the appointed date have been furnished” choose yes and proceed

  • Fill neccessary details  in column 5,6,7,8,9,10,11 in series wise as per your transactions etc.

  • After successful Submit of TRAN-1,details will be posted (Transition credit claimed) However, it can be utilized only after filing of TRAN I by signing it.
  • upload DSC or EVC. 

The ITC posted in Electronic Credit Ledger, post successful filing, can be used to offset liabilities GSTR3B (July 2017) or any other subsequent returns.

 

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GST MEANING AND SCOPE OF SUPPLY

 

The taxable event in GST is supply of goods or services or both. Various taxable events like manufacture, sale, renderingof service, purchase, entry into a territory of state etc. have  been done away with in favour of just one event i.e. supply.

The constitution defines “Goods and Services Tax” as any tax on supply of goods, or services or both, except for taxes on the supply of the alcoholic liquor for human consumption.

The Central and State governments will have simultaneous powers to levy the GST on Intra-State supply. However, the Parliament alone shall have exclusive power to make laws with respect to levy of Goods and Services Tax on Inter-State supply.

The term, “supply” has been inclusively defined in the Act. The meaning and scope of supply under GST can be understood in terms of following six parameters, which can be adopted to characterize a transaction as supply:

  1. Supply of goods or services. Supply of anything other than goods or services does not attract GST
  2. Supply should be made for a consideration
  3. Supply should be made in the course or furtherance of business
  1. Supply should be made by a taxable person
  2. Supply should be a taxable supply
  3. Supply should be made within the taxable territory

While these six parameters describe the concept of supply, there are a few exceptions to the requirement of supply being made for a consideration and in the course or furtherance of business. Any transaction involving supply of goods or services without consideration is not a supply, barring few exceptions, in which a transaction is deemed to be a supply even without consideration. Further, import of services for a consideration, whether or not in the course or furtherance of business is treated as supply.

Supply of Goods or Services or Both

Goods as well as services have been defined in the GST Law. The securities are excluded from the definition of goods as well as that of services. Money is also excluded from the definition of goods as well as services, however, activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged are included in services.

Schedule II to the CGST Act, 2017 lists a few activities which are to be treated as supply of goods or supply of services. For instance, any transfer of title in goods would be a supply of goods, whereas any transfer of right in goods without transfer of title would be considered as services.

Further Schedule III to the CGST Act, 2017 spells out activities which shall be treated as neither supply of goods nor supply of services or outside the scope of GST.

This includes:

  1. Services by an employee to the employer in the course of or in relation to his employment.
  2. Services of funeral, burial, crematorium or mortuary including transportation of the deceased.
  3. Sale of land and sale of building where the entire consideration has been received after completion certificate is issued or after its first occupation. Actionable claims are included in the definition of goods, however, Schedule III provides that actionable  claims other than lottery, betting and gambling shall be neither goods nor services.

Supply for Consideration

Consideration has specifically been defined in the CGST Act, 2017. It can be in money or in kind. Any subsidy given by the Central Government or a State Government is not consideredas consideration. It is immaterial whether the payment is made by the recipient or by any other person.

A deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration forthe said supply. Further, when there is barter of goods of services, the same activity constitutes supply as well as a consideration. When a barber cuts hair in exchange for a painting, hair cut is a supply of services by the barber. It is a consideration for the painting received.

However, there are exceptions to the requirement of ‘Consideration’ as a pre-condition for a supply to be called a supply as per GST. As per schedule to CGST Act, 2017, activities as mentioned below shall be treated as supply even if made without consideration:

  1. Permanent transfer or disposal of business assets where input tax credit has been availed on such assets.
  2. Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business: Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both.
  1. Supply of goods— (a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or (b) by an agent to his principal where the agent undertakes to receive such goods on behalf of theprincipal.
  2. Import of services by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business.

Supply in the Course or Furtherance of Business

GST is essentially a tax only on commercial transactions. Hence, only those supplies that are in the course or furtherance of business qualify as supply under GST. Hence, any supplies made by an individual in his personal capacity do not come under the ambit of GST unless they fall within the definition of business as defined in the Act. Sale of goods or service even as a vocation is a supply under GST. Therefore, even if a famous politician paints paintings for charity and sells the paintings even as a one-time occurrence, the sale would constitute supply.

However, there is one exception to this ‘Course or Furtherance of Business’ rule i.e., import of services for a consideration.

Supply by a Taxable Person

A supply to attract GST should be made by a taxable person. Hence, a supply between two non-taxable persons does not constitute supply under GST. A “taxable person” is a person who is registered or liable to be registered under section 22 or section 24. Hence, even an unregistered person who is liable to be registered is a taxable person. Similarly, a person not liable to be registered but has taken voluntary registration and got himself registered is also a taxable person.

It should be noted that GST in India is State-centric. Hence, a person making supplies from different States needs to take separate registration in each State. Further, the person may take more than one registration within a State if the person has multiple business verticals. A person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of GST. Hence, a supply between these entities constitutes supply under GST.

Taxable Supply

For a supply to attract GST, the supply must be taxable. Taxable supply has been broadly defined and means  any supply of goods or services or both which, is leviable to tax under the Act. Exemptions may be provided to the specified goods or services or to a specified category of persons/ entities making supply.

Supply in the Taxable Territory

For a supply to attract GST, the place of supply should be in India except for the State of Jammu and Kashmir. The place of supply of any goods or services is determined based on Sections 10, 11, 12 and 13 of IGST Act 2017.

Inter/Intra State Supply

The location of the supplier and the place of supply determines whether a supply is treated as an Intra State supply or an Inter State supply. Determination of the nature of supply is essential to ascertain whether integrated tax is to be paid or Central plus State tax are to be paid. Inter- State supplyof goods means a supply of goods where the location of thesupplier and place of supply are in different States or Union territories. Intra State supply of goods means supply of goods where the location of the supplier and the place of supply are in the same State or Union territory. Imports, Supplies from and to SEZs are treated as deemed Inter-State supplies.

Composite/Mixed Supply

A composite supply means a supply made by a taxable person to a recipient comprising two or more supplies of goods or services or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply.

For instance, a travel ticket from Mumbai to Delhi may include service of food being served on board, free insurance, and the use of airport lounge. In this case, the transport of passenger, constitutes the pre-dominant element of the composite supply, and is treated as the principal supply and all other supplies are ancillary. The GST Law lays down the tax liability on a composite or  mixed supply in the following manner.

  1. Composite Supply comprising two or more supplies one of which, is a principal supply, shall be treated as supplyof such principal supply.
  2. Mixed Supply comprising two or more supplies, shall betreated as supply of that particular supply which attracts the highest rate of tax.
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GST RECOVERY OF TAX

 

Tax administration occasionally comes across situations where the tax dues are not paid correctly by the tax payers, most of the times inadvertently and sometimes deliberately. To minimise the inadvertent short payment of taxes, the concept of ‘Matching’ details of ‘Outward supplies’ of supplier with the details of ‘Inward supplies’ of recipient has been introduced in the GST Act. Moreover, the self-assessed tax has to be paid by the due date prescribed under the GST Act and in case of any failure to pay the same by the due date, the InputTax Credit will not be available to customers and also the tax payer will not be able to file any return for further period. Effectually these provisions work as a self-policing system and take care of any mis-match in the payment of taxes. However, despite these provisions, there may arise some instances where the tax was not paid correctly. To deal with such situations, the provisions for recovery are incorporated in any tax law. Accordingly, the GST Act contains elab orate provisions for the recovery of taxunder various situations, which can be broadly classifiedinto the following two categories:

(i) Tax short paid or erroneously refunded or Input Tax Credit wrongly availed; and

(ii) Non-payment of self-assessed tax or amount

collected as representing the Tax.

s.no. Action by Tax

Payer

Amount

of Penalty

payable —

Normal

Cases

Amount

of Penalty

payable —

Fraud Cases

Remarks
1 Tax amount,

along with the

interest, paid

within 30 days

of issuance of

Notice

No

Penalty. All

proceedings

deemed

to be

concluded

25% of

the Tax

amount. All

proceedings

deemed

to be

concluded

The

penalty

shall also

be not

chargeable

in cases

where

the self

assessed

tax or any

amount

collected

as tax is

paid (with

interest)

within 30

days from

the due

date of

payment

2

 

Tax amount,

along with the

interest, paid

within 30 days

of issuance of

Notice

No

Penalty. All

proceedings

deemed

to be

concluded

25% of

the Tax

amount. All

proceedings

deemed

to be

concluded

3 Tax amount,

along with

the interest,

paid within

30 days of

communication

of Order

10% of the

Tax amount

or Rs.

10,000/-,

whichever is

higher

50% of

the Tax

amount. All

proceedings

deemed

to be

concluded

4 Tax amount,

along with the

interest, paid

after 30 days of

communication

of Order

10% of the

Tax amount

or Rs.

10,000/-,

whichever is

higher

100% of the

Tax amount

  1. As can be seen from the foregoing para that for all types of incidences of short payment or erroneous refund or wrong availment of Input Tax Credit, there are incentives for the

person who accepts tax liability and readily discharges the same. The law provides an opportunity for the payment of tax, interest and a nil or nominal penalty (depending

on the nature of offence) before the issuance of Notice and emphatically stipulates that in all such cases no Notice shall be issued and consequently there shall be no other

consequences for any default. However, this is not the end of the road and there is another chance to discharge tax and interest liability with nil or nominal penalty (depending on the nature of offence) within 30 days of issuance of the Notice and the law provides that all proceedings inrespect of the said Notice shall be deemed to be concluded.

If it becomes inevitable to issue a show cause notice and thereafter pass an Order, the GST Act ensures timely completion of all these procedures by providing a fixed timeline for issuance of notice and order-as follows:

S no. Nature of

Case

Case

Time for issuance of

Notice

Time for issuance of

Order

 

 

 

 

1

Normal

Cases

Within 2 years and

9 months from the

due date of filing

Annual Return for the

Financial Year to which

the demand pertains

or from the date of

erroneous refund

Within 3 years from the

due date of filing of

Annual Return for the

Financial Year to which

the demand pertains

or from the date of

erroneous refund

2 Fraud

Cases

Within 4 years and

6 months from the

due date of filing of

Annual Return for the

Financial Year to which

the demand pertains

or from the date of

erroneous refund

Within 5 years from the

due date of filing of

Annual Return for the

Financial Year to which

the demand pertains

or from the date of

erroneous refund

3 Any

amount

collected

as tax but

not paid

No time limit Within one year from

the date of issue of

notice

 

 

4

 

 

Nonpayment

of selfassessed

tax

 

 

No need to issue a

show cause notice

 

 

Recovery proceedings

can be started directly

The GST Act also ensures timely disposal of cases by further providing that if the Order is not issued within the stipulated time limit of three years or five years, as the case may be, the adjudication proceedings shall be deemed to be concluded. From all these provisions it is clear that the non-payment of self-assessed tax or the amount collected as representing the tax has been treated differently than the other short payments and in case of these two, the only opportunity for paying the same without incurring any penalty is, if it is paid, with interest, within 30 days from the due date of payment.

  1. All these provisions makes it clear that there are sufficient opportunities to amend and discharge the tax liability with nil or nominal penalties. However, there are disincentives also for the pers on who fails to utilise these beneficial provisions. Besides that, the law also provides that the Board may fix certain monetary limits for not filing an Appeal against any order. It means, if any order is passed in favour of the assesse, the department will not pursue the case further by filing appeals if the amount involved is less than the specified limit. At present, under the existing laws, the monetary limits for not filing an appeal to various judicial forums are follows:
  2. Tribunal- Rs. 10 Lakhs
  3. High Courts- Rs. 15 Lakhs and

iii. Supreme Court- Rs. 25 Lakhs

  1. The recovery proceedings are final steps towards the realisation of any tax or amount, which has been confirmed as payable after following the due process of adjudication by the proper officer. Therefore, if the tax dues and other amounts remain unpaid, despite these beneficial provisions, and the tax payer fails to pay the dues after the orders are passed and the statutory limit of 3 months is over, then the proper officer may initiate recovery proceedings. These recovery provisions under the CGST Act, 2017 lay down a well defined procedure which is as follows:
  1. Any amount payable, in pursuance to any order passed in this matter, is required to be paid within 3 months from the date of receipt of order and the tax payer should pay the same within this time limit. However, it may be mentioned that in certain cases, considering the interest of revenue, this period of 3 months may be reduced.
  1. If the payable amount is not paid within the specified time limit of 3 months then recovery proceedings shall be initiated and various actions may be taken by the recovery officer, for realisation of Government dues. The options for recovery of Government dues include deduction of money from any amount payable to such tax payer, by detaining and selling any goods, by directing any other person from whom the money is due to such person, attaching any property belonging to the defaulter etc.

iii. However, considering various business aspects, the provisions for payment of all such amounts, other than self-assessed tax, in instalments have also been made in the Act. A person can avail this benefit of payment in instalments, by making an application to the Commissioner by specifying reasons for such request. On receipt of application, the Commissioner may allow the payment of amount in instalments, subject to maximum 24 monthly instalments and on payment of applicable interest. Here it may be noted that if there is default in payment of any one instalment then the whole outstanding balance shall become due and payable immediately.

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GST TDS MECHANISM UNDER GST

 

Tax Deduction at Source (TDS) is a system, initially introduced by the Income Tax Department. It is one of the modes/methods to collect tax, under which, certain percentage of amount is deducted by a recipient at the time of making payment to the supplier. It is similar to “pay as you earn” scheme also known as Withholding Tax, in many other countries. It facilitates sharing of responsibility of tax collection between the deductor and the tax administration.

It also ensures regular inflow of cash resources to the Government. It acts as a powerful instrument to prevent tax evasion and expands the tax net, as it provides for the creation of an audit trail.

Under the GST regime, section 51 of the CGST Act, 2017 prescribes the authority and procedure for ‘Tax Deduction at Source’. The Government may order the following persons (the deductor) to deduct tax at source:

(a) A department or an establishment of the Central Government or State Government; or

(b) Local authority; or

(c) Governmental agencies; or

(d) Such persons or category of persons as may be notified by the Government on the recommendations of the Council.

The tax would be deducted @1% of the payment made to the supplier (the deductee) of taxable goods or services or both, where the total value of such supply, under a contract, exceeds two lakh fifty thousand rupees (excluding the amount of Central tax, State tax, Union Territory tax, Integrated tax and cess indicated in the invoice). Thus, individual supplies may be less than Rs. 2,50,000/-, but if contract value is more than Rs. 2,50,000/-, TDS will have to be deducted. However, no deduction shall be made if the location of the supplier and the place of supply is in a State or Union territory, which is different from the State, or as the case may be, Union Territory of registration of the recipient. The earlier statement can be explained in the following situations:

(a) Supplier, place of supply and recipient are in the same state. It would be intra-State supply and TDS (Central plus State tax) shall be deducted. It would be possible for the supplier (i.e. the deductee) to take credit of TDS in his electronic cash ledger.

(b) Supplier as well as the place of supply are in different states. In such cases, Integrated tax would be levied. TDS to be deducted would be TDS (Integrated tax) and it would be possible for the supplier (i.e. the deductee) to take credit of TDS in his electronic cash ledger.

(c) Supplier as well as the place of supply are in State  A and the recipient is located in State B. The supply would be intra-State supply and Central tax and State tax would be levied. In such case, transfer of TDS (Central tax + State tax of State B) to the cash ledger of the supplier (Central tax + State tax of State A) would be difficult. So in such cases, TDS would not be deducted.

Thus, when both the supplier as well as the place of supply are different from that of the recipient, no tax deduction at source would be made. Registration of TDS deductors: A TDS deductor has to compulsorily register without any threshold limit. The deductor has a privilege of obtaining registrationunder GST without requiring PAN. He can obtain registration using his Tax Deduction and Collection Account Number (TAN) issued under the Income Tax Act, 1961.

Deposit of TDS with the Government: The amount of tax deducted at source should be deposited to the Government account by the deductor by 10th of the succeeding month. The deductor would be liable to pay interest if the tax deducted is not deposited within the prescribed time limit.

TDS Certificate: A TDS certificate is required to beissued by deductor (the person who is deducting tax) in Form GSTR-7A to the deductee (the supplier from whose payment TDS is deducted), within 5 days of crediting the amount to the Government, failing which the deductor would be liable to pay a late fee of Rs. 100/- per day from the expiry of the 5th day till the certificate is issued. This late fee would not be more than Rs. 5000/-. For the purpose of deduction of tax specified above, the value of supply shall be taken as the amount excluding the Central tax, State tax, Union territory tax, Integrated tax and cess indicated in the invoice.

For instance, suppose a supplier makes a supply worth Rs. 1000/- to a recipient and the GST @ rate of 18% is required to be paid. The recipient, while making the payment of Rs. 1000/- to the supplier, shall deduct 1% viz Rs. 10/- as TDS. The value for TDS purpose shall not include 18% GST. The TDS, so deducted, shall be deposited in the account of Government by 10th of the succeeding month. The TDS so deposited in the Government account shall be reflected in the electronic cash ledger of the supplier (i.e. deductee) who would be able to use the same for payment oftax or any other amount. The purpose of TDS is just to enable the Government to have a trail of transactions and to monitor and verify the compliances.

TDS Return: The deductor is also required to file a return in Form GSTR-7 within 10 days from the end of the month. If the supplier is unregistered, name of the supplier rather than GSTIN shall be mentioned in the return.

S no. EVENTS CONSEQUENCE
1 TDS not deducted Interest to be paid along

with the TDS amount;

else the amount shall

be determined and

recovered as per the

law

 

2 TDS certificate not

issued or delayed

beyond the

prescribed period

of five days

Late fee of Rs. 100/-

per day subject to a

maximum of Rs. 5000/-

 

3 TDS deducted

but not paid to

the Government

or paid later

than 10th of the

succeeding month

Interest to be paid along

with the TDS amount;

else the amount shall

be determined and

recovered as per the

law

4 Late filing of TDS

Returns

Late fee of Rs. 100/- for

every day during which

such failure continues,

subject to a maximum

amount of five thousand

rupees

 

 

The details of tax deducted at source furnished by the deductor in FORM GSTR-7 shall be made available to each of the suppliers in Part C of FORM GSTR-2A electronically through the Common Portal and the said supplier may include the same in FORM GSTR-2. The amounts deducted by the deductor get reflected in the GSTR-2 of the supplier (deductee). The supplier can take this amount as credit in his electronic cash register and use the same for payment of tax or any other liability.

Consequences of not complying with TDS provisions: Any excess or erroneous amount deducted and paid to the Government account shall be dealt for refund under section 54 of the CGST Act, 2017. However, if the deducted amount is already credited to the electronic cash ledger of the supplier, the same shall not be refunded.

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