Tag: GST portal

Maintaining accurate and comprehensive accounting records is a fundamental requirement under the Goods and Services Tax (GST) regime in India. These records help in the correct calculation of tax liability, claiming input tax credit, and complying with various statutory requirements.

1. Sales Register:

This is a record of all the sales transactions. It should include details like the invoice date, invoice number, customer name, GSTIN (if applicable), description of goods/services sold, taxable value, rate of GST, amount of CGST, SGST/UTGST, IGST, and the total invoice value.

2. Purchase Register:

Similar to the sales register, this records all purchase transactions. It should detail the invoice date, invoice number, supplier name, GSTIN, description of goods/services purchased, taxable value, rate of GST, and the amount of CGST, SGST/UTGST, IGST charged.

3. Input Tax Credit (ITC) Ledger:

This ledger tracks the credit of GST paid on purchases which can be used to offset the GST liability on sales. It’s vital to maintain detailed records to support the claim of input tax credit.

4. Output Tax Ledger:

This ledger records the GST collected on sales. The GST liability is determined based on this ledger and is payable to the government.

5. Inventory Records:

Maintaining accurate inventory records is crucial under GST, especially for businesses that deal with goods. This includes details of the opening balance, receipts, supply, goods lost, stolen, written off, disposed of as gifts or free samples, and the closing balance of inventories.

6. Advance Payment Records:

Records of advance payments received for the supply of goods or services and the GST paid on such advances. Similarly, advances paid for the acquisition of goods or services and the GST availed as credit on such advances.

7. GST Returns Files:

Businesses should keep copies of all GST returns filed. This includes GSTR-1 (outward supplies), GSTR-2 (inward supplies), GSTR-3B (monthly summary return), and any other applicable returns along with supporting documents.

8. E-Way Bills:

If the business involves the movement of goods, records of all e-way bills generated for the transportation of goods should be maintained.

9. Other Records:

• Records of amendments to sales or purchases
• Tax invoices, bills of supply, credit and debit notes, and receipt vouchers
• Documents related to the dispatch, receipt, and delivery of goods or services
• Contracts and agreements affecting the supply of goods or services

Legal Requirement:

As per the CGST Act, businesses are required to maintain these records at their principal place of business for at least 72 months (6 years) from the due date of filing of the Annual Return for the year to which the records pertain. In cases involving any litigation, appeal, or investigation, records should be kept until the matter is resolved.

Digital Record Keeping:

GST regime encourages digital record-keeping. Many businesses use accounting software that is GST-compliant to maintain their books of accounts, which helps in easier compliance, including the filing of returns and reconciliation of input tax credit.

Composition Scheme under the Goods and Services Tax (GST) in India is a simplified method of taxation designed for small taxpayers to reduce their compliance burden. It allows eligible businesses to pay GST at a fixed rate of their turnover, instead of paying tax on every supply made. This scheme is an option for small businesses to simplify their GST obligations.

Eligibility Criteria for the Composition Scheme

• Businesses with an annual turnover below a specified threshold can opt for the composition scheme. As of the latest updates prior to April 2023, the turnover limit for eligibility is Rs. 1.5 crore for most businesses. For businesses in the northeastern states and Himachal Pradesh, the limit is Rs. 75 lakh.
• The scheme is available to manufacturers, traders, restaurants not serving alcohol, and service providers (the latter with a turnover cap of Rs. 50 lakh, as introduced in April 2019).
• Not all taxpayers are eligible for the Composition Scheme. For instance, businesses that make interstate supplies, supply goods not taxable under GST, or supply through e-commerce operators who are required to collect tax at source cannot opt for this scheme.

Key Features of the Composition Scheme

1. Simplified Tax Rates:

The GST rates under the Composition Scheme are significantly lower than the regular GST rates and are as follows (as of the latest update before April 2023):

• 1% for manufacturers and traders (0.5% CGST + 0.5% SGST)
• 5% for restaurant services
• 6% for other eligible service providers (3% CGST + 3% SGST)

2. Simplified Compliance:

Taxpayers under this scheme are required to file quarterly returns instead of the monthly returns required under the regular GST regime. They also need to file an annual return.

3. No Input Tax Credit (ITC):

Businesses opting for the Composition Scheme cannot claim input tax credit on their purchases.

4. Limited Tax Invoicing:

They are not allowed to collect GST from their customers and cannot issue tax invoices. Instead, they issue a bill of supply.

Advantages of the Composition Scheme

1. Reduced Compliance Burden:

The scheme simplifies GST formalities, reducing the compliance burden for small taxpayers.

2. Lower Tax Liability:

The fixed, lower rate of GST helps in reducing the tax liability of small businesses.

3. Simplified Bookkeeping:

With no requirement to maintain detailed records for ITC or to issue detailed invoices, bookkeeping becomes simpler for businesses under the scheme.

Limitations of the Composition Scheme

1. No Interstate Business:

Businesses cannot undertake interstate supply of goods or services.

2. No Input Tax Credit:

Businesses cannot claim the input tax credit, which could be a disadvantage if they make a lot of taxable purchases.

3. Restrictions on Customers:

Since businesses cannot issue tax invoices, this scheme may not be attractive for B2B transactions where the buyer wishes to claim ITC.

How to Opt for the Composition Scheme?

Eligible businesses can opt for the Composition Scheme at the beginning of the financial year by filing an application online through the GST portal. Existing taxpayers can opt-in by filing FORM GST CMP-02, and new taxpayers can opt-in through the GST registration form itself.

The Composition Scheme under GST represents a trade-off between simplified compliance and the benefits of ITC. It’s primarily beneficial for small businesses that primarily deal in the domestic market and have a limited number of transactions.

The due dates for the payment of Goods and Services Tax (GST) vary depending on the type of taxpayer and the scheme under which they are registered. It’s crucial for businesses to adhere to these dates to avoid interest, penalties, and other compliance issues. Note that the government may revise these dates or provide extensions under specific circumstances, so it’s advisable to always check the latest notifications from the GST Council or the Central Board of Indirect Taxes and Customs (CBIC).

Regular Taxpayers

For regular taxpayers, who file monthly returns under GSTR-3B, the due dates for GST payment are as follows:

• 20th of the following month for most taxpayers.
• Businesses with an annual turnover of up to Rs. 5 crore in the previous financial year have the option to file their GSTR-3B and make payment quarterly under the QRMP (Quarterly Return Monthly Payment) scheme. For these taxpayers, the payment due dates would be the 22nd or 24th of the month following the quarter, depending on the state or union territory they are registered in.

Composition Taxpayers

Taxpayers who have opted for the Composition Scheme under GST have to pay tax quarterly. The payment of GST for composition taxpayers is integrated with their quarterly return filing in form GSTR-4. The due date for both payment and filing the return is:

• 18th of the month following the quarter for which the return is being filed.

Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) Taxpayers

For taxpayers who are required to deduct or collect tax at source under GST:

• The due date for depositing TDS/TCS is the 10th of the following month.

Non–Resident Taxable Persons

Non-resident taxable persons are required to make the payment of GST at the time of submission of the registration application, for the period for which the registration is sought. Any additional tax liability must be paid by the 20th of the following month.

Annual Return and Final Payment

Apart from monthly or quarterly payments, the annual return for regular taxpayers is due by 31st December of the following financial year. The final tax payment for the financial year should also be completed by this date, based on the reconciliation of the returns filed and the taxes paid during the year.

Importance of Timely Payment

Timely payment of GST is crucial to avoid interest (charged at 18% per annum calculated on a day-to-day basis) and late fees (which can vary based on the type of return and the length of the delay). Keeping track of these due dates and ensuring compliance is essential for smooth business operations and maintaining a good compliance rating on the GST portal.

Businesses should regularly check for any notifications or circulars issued by the GST council or the CBIC for any changes or extensions in the payment and filing deadlines, especially in situations like natural calamities, pandemics, or technical issues with the GST portal.

Tally, one of the most popular accounting software packages, has been updated to incorporate the features required for Goods and Services Tax (GST) compliance in India. Tally.ERP 9 and its successors offer comprehensive GST solutions catering to the needs of small and medium-sized enterprises (SMEs).

1. Easy Setup and Configuration

Tally provides an easy setup feature for GST details, including company GSTIN, applicable tax rates, HSN/SAC codes, and more, making it simple to migrate to a GST-compliant system. Configuration options allow for the setting of tax rates product-wise or service-wise, helping in accurate GST calculation.

2. GST-Compliant Invoicing

Generates GST-compliant invoices for goods and services, complete with all necessary details such as GSTIN, HSN/SAC codes, CGST, SGST, IGST, and UGST calculations. Supports different invoice formats, including tax invoices, bills of supply, export invoices, and reverse charge invoices.

3. Comprehensive GST Return Filing

Automates the preparation of GST returns by utilizing the data from sales and purchase transactions. It supports the generation of GSTR-1, GSTR-2, GSTR-3B, and other relevant returns. Facilitates the easy export of return reports in the format required by the GST portal, making the filing process smoother.

4. Input Tax Credit Management

Efficiently manages input tax credits, ensuring businesses can accurately track and claim their eligible credits, reducing their overall GST liability. Allows for the reconciliation of purchase invoices with the suppliers’ data filed in GSTR-2, helping in identifying mismatches and taking corrective actions.

5. E-Way Bill Integration

Tally supports the generation of E-Way Bills directly from the invoice screen, simplifying the process of moving goods from one place to another under GST. Provides options to include transport details such as transporter ID, transportation mode, and vehicle number.

6. Advanced Reconciliation

Offers advanced reconciliation tools for matching purchase records with the suppliers’ GSTR-2A data, helping in ensuring compliance and maximizing the input tax credit. Alerts for mismatches and discrepancies aid in timely rectification and follow-up with vendors.

7. Inventory Management

Integrates GST with inventory management, allowing for the tracking of stock movement and valuation inclusive or exclusive of GST. Helps in determining the impact of GST on stock pricing and profit margins.

8. Multi-currency Support

For businesses dealing with international customers or suppliers, Tally supports transactions in multiple currencies, along with the calculation of GST on foreign currency transactions at current exchange rates.

9. Data Security and Reliability

Ensures data security with features like backup and restore, user access levels, and audit trails, which are crucial for maintaining the integrity of financial information.

10. Continuous Updates

Tally continuously updates its software to comply with the latest GST rules and regulations, ensuring businesses remain compliant with any changes in the tax regime.

The final assessment in GST (Goods and Services Tax) refers to the conclusive determination of tax liabilities of a taxpayer for a specific period. This is crucial for ensuring that all tax dues are accurately paid and that any discrepancies or underpayments are rectified. The final assessment process can be initiated either by the taxpayer themselves or by the tax authorities.

Self-Assessment

• Primary Mechanism:

Under GST, self-assessment is the primary mechanism through which taxpayers calculate their tax liabilities. Taxpayers must self-assess their taxes due and file their returns accordingly for each tax period.

• Regular Returns:

Through the filing of regular monthly or quarterly returns (GSTR-1, GSTR-3B), and annual returns (GSTR-9), taxpayers declare their output tax liabilities and claim input tax credits.

Scrutiny of Returns

The GST authorities may scrutinize the returns filed by taxpayers to verify the correctness of the information declared. If discrepancies are found, the taxpayer may be asked to provide explanations or rectify the returns.

Audit

• By Tax Authorities:

An audit can be conducted by the GST authorities to verify the accuracy of the tax paid and compliance with GST law. This could be based on risk parameters or on a random selection basis.

• Turnover Basis:

Taxpayers whose turnover exceeds a specified limit (as per GST laws, this limit was Rs. 2 crore for FY 2017-18 and 2018-19) must get their accounts audited by a chartered accountant or a cost accountant and submit the audit report in form GSTR-9C along with the annual return.

Assessment by Tax Authorities

• Provisional Assessment:

If taxpayers are unable to determine the value of goods or services or the applicable tax rate, they can request a provisional assessment from the GST authorities.

• Summary Assessment:

In cases where there is evidence of tax liability to protect the revenue interest, a summary assessment can be initiated by the authorities without giving notice to the taxpayer.

• Best Judgment Assessment:

If a taxpayer fails to file returns, the GST authorities may proceed to assess the tax liability to the best of their judgment based on available information.

Finalization

• The process concludes with the final assessment, where any adjustments required are made based on audit findings, scrutiny outcomes, or additional information provided by the taxpayer.
• The taxpayer must pay any additional tax determined as due along with applicable interest and penalties. Conversely, if it’s found that excess tax has been paid, the taxpayer is eligible for a refund.

Appeals

Taxpayers have the right to appeal against assessment orders if they disagree with the final assessment made by the tax authorities. Appeals must be filed within a specified period from the date of receipt of the assessment order.

Levy and Collection of Goods and Services Tax (GST) are central aspects of the GST regime in India, aimed at simplifying and harmonizing the indirect tax landscape across the country. Introduced on July 1, 2017, GST replaced a myriad of previous taxes with a single, unified system of taxation. Understanding the framework for the levy and collection of GST is crucial for businesses and professionals to ensure compliance and efficient tax management.

Constitutional Foundation

GST framework is rooted in the 101st Amendment of the Indian Constitution, which granted the Central and State governments the power to levy GST on the supply of goods and services. The amendment led to the introduction of various GST laws, including the Central GST (CGST) Act, State GST (SGST) Act, Union Territory GST (UTGST) Act, and the Integrated GST (IGST) Act.

Levy of GST

GST is levied on the “supply” of goods and services. Under GST law, supply includes sale, transfer, barter, exchange, license, rental, lease, or disposal made or agreed to be made for a consideration. It also includes import of services. The GST model is a destination-based tax, where the tax is collected by the State where the goods or services are consumed as opposed to where they are produced.

Types of GST

• CGST and SGST/UTGST:

For intra-state supplies (within the same state), both Central GST (CGST) and State GST (SGST) or Union Territory GST (UTGST) are levied. CGST goes to the Central Government, and SGST/UTGST goes to the State/Union Territory government.

• IGST:

For inter-state supplies (between two states or a state and a union territory) and imports, Integrated GST (IGST) is levied. IGST is shared between the Central and State governments as per the IGST Act.

Collection of GST

The collection mechanism of GST is designed to facilitate seamless credit throughout the value chain and across state boundaries. Businesses registered under GST charge the applicable tax (CGST, SGST/UTGST, or IGST) on their sales, and the tax is collected from the buyer. The seller then remits this amount to the government.

Input Tax Credit (ITC)

One of the fundamental features of GST is the Input Tax Credit (ITC) mechanism, which allows businesses to deduct the GST paid on their purchases (inputs) from the GST payable on their sales (output), effectively taxing only the value addition at each stage. This mechanism prevents the cascading effect of taxes, making the system more efficient and reducing the overall tax burden on the end consumer.

Exemptions, Thresholds, and Composition Scheme

• Exemptions:

Certain goods and services are exempt from GST to ensure that essential items remain affordable for the general public.

• Thresholds for Registration:

Businesses with annual turnover exceeding a specific threshold (Rs. 40 lakhs for goods and Rs. 20 lakhs for services, with variations for special category states) are required to register for GST.

• Composition Scheme:

Small taxpayers with a turnover below a certain threshold (Rs. 1.5 crores, subject to certain conditions) can opt for the Composition Scheme, under which they pay GST at a fixed rate on their turnover, without the benefit of ITC.

Compliance and Administration

GST compliance involves regular filing of returns, payment of taxes, and adherence to various procedural requirements under the law. The GST Network (GSTN), a digital platform, facilitates registration, return filing, payment, and other GST-related services.

The levy and collection of GST have significantly transformed India’s indirect tax system, making it more transparent, technology-driven, and aligned with international standards. While challenges remain, particularly in terms of compliance and administration, the system has been evolving to address these issues and to foster a more conducive environment for business and growth.

Calculating Input Tax Credit (ITC) and net GST liability are pivotal processes in the GST framework, enabling businesses to deduct the tax already paid on inputs from the tax payable on output supplies. However, the calculation and utilization of ITC can be complex, presenting various challenges that can impact a business’s tax compliance and financial efficiency.

Eligibility and Blocked Credits

• Problem:

Determining the eligibility of inputs, input services, and capital goods for ITC can be complex. Certain expenditures are blocked under GST (e.g., food and beverages, personal consumption), and distinguishing between eligible and ineligible inputs can be challenging.

• Implication:

Claiming ITC on ineligible expenses can lead to disputes with tax authorities, interest, penalties, and demands for reversal of credit.

Invoices and Documentation

• Problem:

The availability and proper management of valid tax invoices, debit notes, and other relevant documents are crucial for claiming ITC. Missing or incorrect documentation can hinder the ITC claim process.

• Implication:

Insufficient documentation can lead to denial of credit claims, impacting cash flows and operational costs.

Matching, Reconciliation, and Compliance

• Problem:

ITC claims are subject to matching and reconciliation with the details furnished by suppliers in their GST returns. Discrepancies due to non-compliance or errors by suppliers can affect the ITC claims.

• Implication:

Unreconciled ITC due to discrepancies or supplier non-compliance can result in the temporary or permanent loss of credit, affecting financial planning and budgeting.

Time Limits for Availing ITC

• Problem:

There are specific time limits within which ITC must be claimed. Keeping track of these deadlines, especially in a large business with numerous transactions, can be cumbersome.

• Implication:

Failing to claim ITC within the stipulated time frame results in the forfeiture of the credit, increasing the cost of inputs.

Provisional Credit and Reversals

• Problem:

The GST regime initially allowed provisional ITC claims, subject to conditions and reversals if not matched. Monitoring provisional credits and managing subsequent reversals require diligent record-keeping and follow-ups.

• Implication:

Incorrect management of provisional credits and reversals can lead to tax liabilities, interest, and penalties.

Input Tax Credit on Capital Goods

• Problem:

Calculating ITC on capital goods involves specific rules, including proportionate credits and reversals over the useful life of the asset, which can be complicated.

• Implication:

Incorrect calculation or claim of ITC on capital goods can lead to non-compliance, audit queries, and financial adjustments.

Cross-utilization and Order of Utilization of ITC

• Problem:

The GST law specifies the order in which ITC on IGST, CGST, SGST/UTGST should be utilized. Ensuring compliance with these rules while optimizing tax liability can be challenging.

• Implication:

Non-adherence to the prescribed order of ITC utilization can lead to unnecessary cash outflows and suboptimal tax planning.

Solutions and Best Practices

• Automated Reconciliation Tools:

Use technology solutions for automated reconciliation of purchase registers with GSTR-2A/2B, aiding in timely and accurate ITC claims.

• Regular Training and Updates:

Keep the finance and accounting team informed about GST updates, eligible credits, and compliance requirements.

• Diligent Record–Keeping:

Maintain accurate and timely records of all invoices and relevant documents to support ITC claims.

• Professional Advice:

Consult with GST experts or tax advisors for complex transactions, eligibility assessments, and compliance strategies.

• Compliance Monitoring for Suppliers:

Regularly monitor the compliance status of suppliers to ensure that their filings do not adversely affect your ITC claims.

Navigating the complexities of ITC calculation and net GST liability requires a comprehensive understanding of GST laws, meticulous record-keeping, and proactive compliance management. Adopting best practices and leveraging technology can help businesses minimize errors, optimize tax credits, and ensure compliance.

Computation of GST Liability is a critical process for businesses in India, ensuring compliance with the Goods and Services Tax (GST) regulations. This process involves determining the amount of tax payable on supplies of goods and services. While the framework is designed to streamline tax calculations, businesses often encounter several challenges in accurately computing their GST liabilities. These problems can lead to incorrect tax payments, potential penalties, and issues with tax credits.

Classification of Goods and Services

• Problem:

Correctly classifying goods and services under the appropriate Harmonized System of Nomenclature (HSN) code or Service Accounting Code (SAC) is crucial. Incorrect classification can lead to the application of the wrong tax rates.

• Implication:

Misclassification may result in underpayment or overpayment of GST, leading to penalties, interest, or issues with Input Tax Credit (ITC) claims.

Determining the Place of Supply

• Problem:

The place of supply rules determine whether a supply is subject to CGST and SGST/UTGST or IGST. Confusion or errors in determining the place of supply, especially for services or interstate goods transactions, can complicate tax calculations.

• Implication:

Incorrect determination can lead to the wrong type of GST being charged, affecting compliance and potentially leading to disputes with tax authorities.

Input Tax Credit Reconciliation

• Problem:

Businesses are required to reconcile their ITC claims with the details furnished by their suppliers on the GST portal. Discrepancies in ITC claims can arise due to errors or delays in filing by suppliers.

• Implication:

Unreconciled ITC can lead to denial or delay of ITC claims, affecting cash flows and increasing the effective cost of supplies.

Exemptions and Reverse Charge Mechanism

• Problem:

Understanding and correctly applying exemptions, as well as complying with the reverse charge mechanism (RCM) provisions, where the recipient is liable to pay GST instead of the supplier, can be challenging.

• Implication:

Failure to comply with RCM provisions or incorrect application of exemptions can lead to underpayment of tax, attracting penalties and interest.

Time of Supply

• Problem:

The GST liability arises at the time of supply, which varies depending on the nature of the transaction (goods or services) and specific circumstances. Determining the correct time of supply can be complex.

• Implication:

Incorrect determination of the time of supply can lead to the wrong timing of tax liability recognition, affecting financial planning and compliance.

Valuation of Supply

• Problem:

The valuation of supply involves including various components in the transaction value and making adjustments for discounts, free samples, or related-party transactions. Misunderstandings in valuation rules can lead to incorrect tax calculations.

• Implication:

Incorrect valuation can lead to either underpayment or overpayment of GST, impacting the financial health of the business.

Transition issues

• Problem:

Businesses transitioning from the previous tax regime to GST faced challenges in availing transitional credits and understanding new compliance requirements.

• Implication:

Inadequate understanding of transitional provisions led to loss of eligible credits or non-compliance, affecting the smooth transition to GST.

Solutions and Best Practices

• Regular Training and Awareness:

Keeping the finance and compliance teams updated on GST laws, amendments, and clarifications issued by the tax authorities.

• Robust Reconciliation Processes:

Implementing strong reconciliation processes for ITC claims, supplier invoices, and tax payments.

• Technology Solutions:

Utilizing GST-compliant software and technology solutions for accurate tax calculations, timely compliance, and efficient record-keeping.

• Professional Assistance:

Engaging with GST consultants or tax professionals for advice on complex transactions, classification issues, and compliance strategies.

• Staying Updated:

Regularly reviewing notifications, circulars, and updates issued by the GST Council and tax authorities to remain compliant with the evolving tax landscape.

Availing Input Tax Credit (ITC) efficiently is a critical aspect of the Goods and Services Tax (GST) system in India, allowing businesses to reduce their tax liability by claiming credit for the tax paid on inputs used in the business. The process involves several steps and adherence to certain conditions as outlined in the GST law.

Ensure Eligibility for ITC

• Goods and Services Used for Business Purposes:

ITC can only be claimed for goods and services used for the purpose of the business.

• Possession of Tax Invoice or Debit Note:

The taxpayer must possess a tax invoice or debit note issued by a registered supplier or any other tax-paying document as prescribed.

• Receipt of Goods and/or Services:

The goods and/or services must have been received. For goods received in installments, ITC can be claimed upon receipt of the last lot.

• GST Payment:

The supplier should have paid the GST charged to the government. This can be verified through the GSTR-2A or GSTR-2B of the recipient.

• Filing of GST Returns:

The recipient must file the GST returns, primarily the GSTR-3B, which includes details of the tax payable and the ITC being claimed.

Document Requirements

To claim ITC, the taxpayer must have the following documents:

• Tax invoice issued by a supplier
• Debit note issued by a supplier
• Bill of entry or similar documents for imports
• Invoice issued under specific circumstances like the reverse charge mechanism (RCM), ISD invoice, etc.

Verification of ITC through GSTR-2A or GSTR-2B

• GSTR-2A and GSTR-2B:

These are auto-populated details of inward supplies received from suppliers. Taxpayers should reconcile the data in these forms with their purchase records to ensure accuracy before claiming ITC.

• Reconciliation:

Any discrepancies between the purchase records and the GSTR-2A or GSTR-2B need to be addressed and rectified. It may involve communicating with suppliers to ensure they have filed their returns and paid the corresponding tax.

Claiming ITC in GSTR-3B

• Filing of GSTR-3B:

The eligible ITC can be claimed in the GSTR-3B form, which is a monthly summary return that includes details of outward supplies, inward supplies liable to reverse charge, and the ITC claimed.

• Adjustment Against GST Liability:

The ITC claimed is used to adjust against the GST liability of the taxpayer for the month. Any excess ITC can be carried forward or in some cases, refunded.

Maintaining Records

• Documentation:

Businesses must maintain all invoices and documentation related to purchases, imports, and services for which ITC is claimed.

• Retention Period:

These records should be kept for a period specified in the GST laws, generally six years from the due date of filing the annual return for the relevant fiscal year.

Conditions for Reversal of ITC

There are certain situations where the ITC claimed must be reversed, such as:

• Non-payment to the supplier within 180 days of invoice date
• Goods and/or services used for personal use or exempt supplies
• Cancellation of GST registration

Compliance and Regular Updates

It’s crucial for businesses to stay updated with any changes in GST regulations or procedures related to ITC. Regular audits and compliance checks can help ensure the accuracy of ITC claims and adherence to GST laws.

Goods and Services Tax (GST) in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition in the supply chain. The implementation of GST represented a significant overhaul of the indirect tax system, replacing numerous state and central taxes with a unified framework.

Levy and Collection of GST

The constitutional validity of GST is anchored in the 101st Amendment of the Indian Constitution, which led to the introduction of Article 246A. This grants both the Union and the States simultaneous powers to legislate on GST. Consequently, GST is levied and collected on all intra-state supplies of goods and services by the Central GST (CGST) and State GST (SGST) and on all inter-state supplies by the Integrated GST (IGST).

Key Points:

• CGST and SGST:

For intra-state transactions, both the central and the state government levy GST simultaneously. CGST is deposited with the Central Government, and SGST is deposited with the State Government.

• IGST:

For inter-state transactions and imports, IGST is levied. The revenue from IGST is shared between the Central and State Governments as per the regulations.

The GST Council, a constitutional body, recommends the rates, exemptions, and the threshold for the levy of GST. GST is levied on the supply of goods and services except for alcohol for human consumption, petroleum products (which are expected to be included in GST in the future), and electricity.

Composition Levy

The Composition Scheme is a simple and straightforward scheme under GST for small taxpayers to reduce compliance costs. It is an optional scheme available to businesses with an annual turnover below a specified threshold (currently ₹1.5 crore for most states but ₹75 lakhs for special category states, subject to change as per Council recommendations).

Key Features:

• Taxpayers need to pay tax at a nominal rate (1% for manufacturers and traders, 5% for restaurants, and 6% for other service providers as of the latest guidelines).
• Simplified tax return filing procedures.
• No Input Tax Credit (ITC) can be availed by composition dealers.
• Not applicable to interstate suppliers, e-commerce operators, or suppliers of non-GST goods and services.

Exemptions under GST

Certain goods and services are exempt from GST to make essential goods and services more affordable for the general population. The GST Council decides these exemptions.

Key Exemptions:

• Basic food items and grains like rice and wheat.
• Services like education, healthcare, and religious pilgrimages.
• Certain agricultural and handicraft products.

Special Categories:

• Zero-rated supplies:

Exports and supplies to Special Economic Zones (SEZs) are taxed at 0% under GST, allowing exporters to claim a refund for the tax paid on inputs.

• Reverse Charge Mechanism:

In certain cases, the recipient of goods or services is liable to pay GST directly to the government instead of the supplier.