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Overview

As you must be aware, GST is proposed to be implemented in India with effect from July 1, 2017. It is critical for all the stakeholders to be ready for the said change as it involves transformation of various business functions such as supply chain, accounting, information technology and tax compliances.

Please ensure that below steps are taken in advance, in order to ensure smooth transition to the change. In this connection, we have highlighted certain key aspects that would be relevant. These inputs are preliminary in nature and we shall inform you on any further requirements once further amendment to the Act and Rules are notified, or further clarifications are released by the Govt. of India.

Registration under GST

  • Registration needs to be obtained in every state from where a taxable supply of goods and or services is being made. The Government has initiated the process of migration of the existing tax payers to GST and is issuing provisional ids and passwords to every tax payer registered under current Indirect Tax legislations.
  • Accordingly, if you are an existing tax payer (Excise Duty, VAT or Service Tax), we would request you to obtain the necessary registrations in a timely manner and make them available to IndusInd Bank Limited (‘IBL’) as soon as possible to enable us to update your records.
  • In case of multiple GST registrations (state-wise / business verticals), we request you to kindly update IBL of the same along with the relevant place of business for the purpose of invoicing / billing.
  • To enable us to issue GST compliant invoices on a timely basis, we request you to share with us the details of your GST Registration Numbers. You may please visit GST portal available on our website for updation of your GSTIN or you may also visit nearest branch to furnish your GSTIN.

We are pleased to have you as a valued customer and we sincerely look forward to continuing our business relationship in the future, refer below FAQs for any queries.

FAQs

What is Goods and Service Tax?

‘GST’ stands for “Goods and Services Tax”, and is a comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services at the national level. It replaces all the indirect taxes, hitherto, levied on goods and services by the Central Government through central legislations and by various State Governments through their respective State legislations.

What is the nature of GST?

It is a destination based tax on consumption of goods and services. It is levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as setoff. In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer.

Which of the existing taxes are be subsumed under GST?

The GST replaces the following taxes:

  • Service Tax
  • Excise duty
  • State VAT
  • Central Sales Tax
  • Luxury Tax
  • Entry Tax (all forms)
  • Entertainment and Amusement Tax (except when levied by the local bodies)
  • Taxes on advertisements
  • Purchase Tax
  • Taxes on lotteries, betting and gambling
  • State Surcharges and Cesses so far as they relate to supply of goods and services
  • Excise duty levied under the Medicinal & Toiletries Preparation Act
  • Countervailing duty in lieu of excise duty
  • Special additional duty of customs
  • Surcharge and Cesses (relating to supply of goods and services).

The GST Council shall make recommendations to the Union and States on the taxes, cesses and surcharges levied by the Centre, the States and the local bodies which may be subsumed in the GST.

How are the goods and services classified under GST regime?

HSN (Harmonised System of Nomenclature) code shall be used for classifying the goods under the GST regime. Services will be classified as per the Services Accounting Code (SAC).

What is the taxable event under GST?

Supply of goods and/or services is the taxable event under GST. Central Goods and Service Tax (‘CGST’) & State Goods and Service Tax (‘SGST’) or Union Territory Goods and Service Tax (‘UTGST’) will be levied on intra-state supplies while Integrated Goods and Service Tax (‘IGST’) will be levied on inter-state supplies.

Who is a taxable person under GST?
  • A person who carries a business in India or in any state of India except Jammu and Kashmir; he would be taxable person or he is required to take registration under the Act
  • Who are already registered under Excise, Service Tax & VAT, they are taxable person too.
  • Central Government, State Government & local authorities are taxable person except for the activities which are specified in the law.
Who is liable to pay GST (to the respective Government authorities) under the proposed GST regime?

Under the GST regime, tax is payable by the taxable person on the supply of goods and/or services. Liability to pay tax arises when the taxable person crosses the turnover threshold of Rs. 20 lakhs (Rs. 10 lakhs for North Eastern & Special Category States) except in certain specified cases where the taxable person is liable to pay GST even though he has not crossed the threshold limit. The CGST / SGST / UTGST and IGST are payable at the rates specified in the Schedules to the respective Acts.

As far as the consumer is concerned, the GST is included in the invoice and the same shall have to be paid to the supplier of goods or services. This process was the same when service tax was charged till June 30, 2017.

What is the time limit for taking a Registration under GST Act?

Any person should take a Registration, within thirty days from the date on which he becomes liable to registration, in such manner and subject to such conditions as may be prescribed.

If a person is operating in different states, with the same PAN number, whether he can operate with a single Registration?
No. Every person who is liable to take a Registration will have to get registered separately for each of the States where he has a business operation and is liable to pay GST.
Whether all assesses/dealers who are already registered under existing central excise/service tax/ vat laws will have to obtain fresh registration?

No. GSTN shall migrate all such assesses/dealers to the GSTN and shall issue GSTIN and password. They will be asked to submit all requisite documents and information required for registration in a prescribed period of time.

What are the provision related to SEZ registration?

Every person who has units in the SEZ location or is a SEZ developer shall make a separate application of registration as a business vertical distinct from other units which are located outside the SEZ location. Multiple units in the same SEZ may obtain a single registration.

When does the liability to pay GST arise in respect of supply of services?

The time of supply of services generally shall be as below:

  •  
  • If invoice is raised within 30 days (45 days in case of services supplied by an insurer or a banking company or a financial company, including a non-banking financial company), then time of supply shall be earliest of the following:
    • The date of issue of invoice or
    • Date of receipt of payment
  • If invoice is not raised within prescribed period as mentioned above, then time of supply shall be earliest of the following:
    • The date of provision of service or
    • Date of receipt of payment

The time of supply of services in cases other than (a) and (b) shall be the date on which the recipient shows the receipt of services in his books of account. Provided that where supplier receives an amount up to INR 1000 in excess of the amount indicated in the tax invoice in respect of taxable service, he may opt to pay GST on the date of issue of invoice for such excess amount.

The time of supply of additional value of supply by the way of interest, late fees or penalty for delayed payment of any consideration shall be the date on which the supplier receives such additional payment.

What is time of supply of service in case of tax payable under reverse charge?

What is time of supply of service in case of tax payable under reverse charge?

  • The date on which the payment is made or the date of payment as entered in the books of accounts of the recipient; or
  • The date immediately following sixty days from the date of issue of invoice or any other document by the supplier.
What is the value of taxable supply to be adopted for the levy of GST?
The value of taxable supply of goods and services shall ordinarily be ‘the transaction value’ which is the actual price paid or payable, when the parties are not related and price is the sole consideration. Value of supply between distinct or related person shall be open market value of supply. However, where the recipient is eligible for full Input Tax Credit (‘ITC’), invoice value shall be deemed to be the open market value. The Act and rules thereof provide for various inclusions and exclusions from the ambit of transaction value.
How can payment of taxes be done under GST?
Payment can be done by the following methods:
  • Through debit of Credit Ledger of the tax payer maintained on the Common Portal – only tax can be paid. Interest, Penalty and Fees cannot be paid by debit in the credit ledger. Tax payers shall be allowed to take credit of taxes paid on inputs and utilize the same for payment of output tax. However, no ITC on account of CGST shall be utilized towards payment of SGST and vice versa. The credit of IGST would be permitted to be utilized for payment of IGST, CGST and SGST in that order.
  • In cash by debit in the Cash Ledger of the tax payer maintained on the Common Portal. Money can be deposited in the Cash Ledger by different modes, namely, E-Payment (Internet Banking, Credit Card, Debit Card); Real Time Gross Settlement (RTGS)/ National Electronic Fund Transfer (NEFT); Over the Counter Payment in branches of Banks Authorized to accept deposit of GST.
  • If there are any discrepancies noticed in relation to electronic cash ledger or electronic credit ledger the same shall be communicated to the concerned jurisdiction through a common portal in Form GST PMT - 04
When is payment of taxes to be made by the Supplier to the Government treasury?

Payment of taxes by the normal taxpayer is to be done on monthly basis by the 20th of the succeeding month. Cash payments will be first deposited in the Cash Ledger and the taxpayer shall debit the ledger while making payment in the monthly returns and shall reflect the relevant debit entry number in his return. Payment can also be debited from the Credit Ledger.

What is input tax?
Input tax means the central tax (‘CGST’), State tax (‘SGST’), integrated tax (‘IGST’) or Union territory tax (‘UTGST’) charged on supply of goods or services or both made to a registered person. It also includes tax paid on reverse charge basis and integrated tax goods and services tax charged on import of services. It does not include tax paid under composition levy.
What are the conditions necessary for availing ITC?

Following four conditions are to be satisfied by the registered taxable person for availing ITC:

  • He is in possession of tax invoice or debit note or such other tax paying documents as may be prescribed;
  • He has received the goods or services or both;
  • The supplier has actually paid the tax charged in respect of the supply to the government; and
  • He has furnished the return under section 39.
Can a person take ITC without payment of consideration for the supply along with tax to the supplier?
Yes, the recipient can take ITC. But he is required to pay the consideration along with tax within 180 days from the date of issue of invoice. This condition is not applicable where tax is payable on reverse charge basis.
Is there any procedure/ order for utilization of input tax credit in GST?
The credit mechanism under GST have certain rules like Input CGST should be used for paying Output CGST first and only then it is allowed to be utilised against Output IGST Liability. Similarly, Input SGST can be used for paying Output SGST first and only then it is allowed to be utilised against Output IGST Liability. IGST should be used first for output IGST liability, then it should be used against output CGST liability and at last it should be used against SGST liability
What is the time limit for taking ITC?
A registered person shall not be entitled to take input tax credit beyond the month of September of the following financial year to which invoice pertains or date of filing of annual return, whichever is earlier. The underlying reasoning for this restriction is that no change in return is permitted after September of next financial year. If annual return is filed before the month of September then no change can be made after filing of the annual return.
What type of inward and outward supply details are to be filed in the return?
A normal registered taxpayer has to file the inward/outward supply details transaction wise in relation to various types of supplies received/made in a month, namely inward/outward supplies from/to registered persons, inward/outward supplies from/to unregistered persons (consumers), details of Credit/Debit Notes, zero rated, exempted and non-GST supplies, exports, and advances received in relation to future supply.
What is the need for the Place of Supply of Goods and Services under GST?
The basic principle of GST is that it should effectively tax the consumption of such supplies at the destination thereof or as the case may be at the point of consumption. So place of supply provision determine the place i.e. taxable jurisdiction where the tax should reach. The place of supply determines whether a transaction is intra-state or inter-state. In other words, the place of Supply is required to determine whether a supply is subject to SGST/UTGST plus CGST in a given State or Union territory else would attract IGST if it is an inter-state supply.
Will the CENVAT/ ITC carried forward in the last return prior to GST under earlier law be available as ITC under GST?
Yes, the registered taxable person shall be entitled to such credit and it will get credited to his electronic credit ledger subject to certain conditions as prescribed.
Are there any specific requirements under GST for issuance of Invoice, debit & credit notes?
Yes, the details to be captured in the invoice, credit note, debit note etc. have been specifically provided in invoice rules as released by the GST council.

Key Important Considerations

  • GST is applicable on supply of goods or services as against the current regime which levies excise duty/ VAT/ service tax on the manufacturer or sale of goods or provision of services respectively.
  • It is a destination based consumption tax which means that tax will accrue to the State or Union territory where the goods or services are consumed.
  • GST is levied by both the federal and state or provincial governments whereby a Central Goods and Services Tax (‘CGST’) and a State Goods and Services Tax (‘SGST’) / Union Territory Goods and Service Tax (‘UTGST’) respectively will be levied on the taxable value of every transaction of supply of goods and services.
  • In respect of Intra-State (within the state/ union territory) supplies both CGST and SGST/ UTGST shall be levied with CGST Portion payable to Central Government and SGST Portion payable to respective state. In respect of Inter-State (across the state) supplies, Integrated Goods and Service Tax (‘IGST’) shall be levied and collected by centre.
  • Every assesse will be assigned a state-wise PAN-based Goods and Services Taxpayer Identification Number (GSTIN) which will have 15 digits. Structure of GST Identification Number is as below:
    • First two digits of GSTIN will represent the state code. Each state has a unique two digit code like “27” for Maharashtra and “10” for Bihar
    • The next ten digits of GSTIN will be the PAN number of the taxpayer
    • 13th and 14th digit indicates the number of registrations an entity has within a state for the same PAN
    • The last digit will be a check code which will be used for detection of errors
    • The provisional GSTIN obtained by the assesse, shall be the final GSTIN.

Illustration:

For example, if a legal entity has single or one registration only within a state then GSTIN will be “27ABACK2785P01R”

  • GST shall apply to all the services barring few which shall be notified by the Government on recommendation of GST Council (refer exemption module)
  • Government on recommendation of GST Council shall notify list of exempted goods and services which would be common for the Centre and States (refer exemption module)
  • The GST Act applies to the whole of India except Jammu and Kashmir. Thus, supplies made to/from Jammu and Kashmir will need to be treated separately. Where a supply is made to Jammu and Kashmir and location of supplies is outside Jammu and Kashmir then IGST will apply.
  • Assesse with an aggregate turnover of less than INR 20 Lakhs will be exempt from taking registration under GST. For the purpose of above mentioned threshold limit, turnover shall be calculated on an all India basis.
  • Eligible assesse can opt for composition scheme. Assesse whose turnover in the preceding financial year is less than INR 50 lakhs are eligible to opt for composition scheme under the CGST Act.
  • Tax payers shall be allowed to take credits of taxes paid on inputs and utilize the same for payment of output tax subject to conditions as prescribed under Input Tax Credit Rules
  • Exports shall be treated as Zero-rated supplies. The exporter shall have an option to pay output tax and claim refund or export under bond without tax and claim refund of ITC.
  • Import of goods and services shall be treated as inter-state supplies and would subject to IGST in addition to the applicable custom duties.
  • IGST paid on imports shall be available as ITC for further transactions.
  • GST rates on goods as well as services for Financial Sector have been specified in the module pertaining to Rates, HSN and SAC.
  • In relation to a Banking Company, the following aspects need to be taken into considerations:
    • Every state shall be considered as a distinct person under GST, therefore a Bank operating in many states will have registration in each state;
    • Separate compliances would need to be undertaken for each registration;
    • Specific provisions are applicable to a banking Company for availment and reversal of credit;
    • The details to be captured in an invoice issued by a Banking Company has been relaxed.
    • As per Section 150 of the Central Goods and Service Tax Act, 2017 an additional information return may need to be filed by a Banking Company.

Disclaimer

Readers are requested to note that the FAQ and other information relating to Goods and Service Tax, placed below, have been compiled by IndusInd Bank based on our understanding of the law and rules thereunder. These shall not be construed as our advice to our client(s) or any other reader. IndusInd Bank strongly recommends that a client or anyone who needs actionable information relating to GST may read the law and regulations themselves or get the assistance from professional advisors / experts in the field. The information provided herein below are not binding on IndusInd Bank and anyone acting on the information furnished herein is deemed to act on his/her own volition.

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