GST Input Tax Credit Systems..

One of the fundamental features of GST is the seamless flow of input credit across the chain (from the manufacture of goods till it is consumed) and across the country. In this section, let’s discuss about various conditions laid down by law to avail GST input tax credit on supply of goods or services.

All of the following conditions need to be satisfied to avail GST Input credit:
• The dealer should be in possession of Tax Invoice / Debit or Credit Note / Supplementary Invoice issued by a supplier registered under GST Act.
• The said goods/services have been received.
• Returns (GSTR-3) have been filed.
• The tax charged has been paid to the government by the supplier.

What do these conditions imply?

Once Form GSTR-1 (Outward supply details) is filed by the supplier, the recipient has a visibility of the purchase through the auto-populated Form GSTR-2A (Inward supplies details). After necessary modification, additions (if any) and acceptance in Form GSTR-2, the Input credit will be credited to the recipient’s electronic credit ledger on a provisional basis.

The addition and modification done by the recipient in Form GSTR-2 will be made available to supplier in Form GSTR- 1A for his acceptance.

Input credit will be available only when the Monthly returns (Form GSTR-3) are filed by the supplier along with payment tax. The final acceptance of Input Tax credit will be communicated in Form GST ITC-1.

Notes
GSTR-1: Furnish all outward supply details on or before 10th of the Subsequent month.
GSTR-2A: Auto-populated by System on 11th of subsequent month. This includes all inward supplies details
GSTR-3: Monthly Return auto-populated by the system on 20th of subsequent month

-------------------------------------------------
Industrial Accounting & Taxation Training 
(GST,Income Tax,TDS,Payroll-PF-ESIC-Prof.Tax,Auditing,Tally ERP9,Excel)

AIAT Institute
15-Bhande Plot,Umred Road, Nagpur
Mob.9373104022
www.aiatindia.com

What is GST

log on more details

What is GST Council

The GST bill seeks to set up a GST Council. The GST Council aims to develop a harmonized national market of goods and services. According the GST Bill, the President must constitute a GST Council within sixty days of this Act coming into force. The composition of the GST Council includes:

1. “New article 279A will create a GST council, a joint forum of state and centre. The GST Council, and not the Centre, would be decision making authority for GST.” The President shall, within 60 days from the date of commencement of the Constitution (122 Amendment) Act, 2014, by order, constitute a Council to be called the Goods and Services Tax Council.
2.  The GST council shall consist of the following members, namely:-

a)      The Union Finance Minister Mr Arun Jetly Chairperson;

b)     The Union Minister of State in charge of Revenue or Finance Member;

c)      The Minister in charge of Finance or Taxation or any other Minister nominated by each State Government Members

  The GST Council shall make recommendations to the Union and the States on

a)      The taxes, cesses and surcharges levied by the Union, the States and the local bodies which may be subsumed in the goods and services tax;

b)     The goods and services that may be subjected to, or exempted from the goods and services tax;

c)      The threshold limit of turnover below which goods and services may be exempted from goods and services tax;

d)     The rates including floor rates with bands of goods and services tax;

e)      Any special rate or rates for a specified period, to raise additional resources during any natural calamity or disaster;

f)       Special provision with respect to the States of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand; and

g)      Any other matter relating to the GST, as the Council may decide.

 

4. One half of the total number of Members of the GST Council shall constitute the quorum at its meetings.
5. Every decision of the GST Council shall be taken at a meeting by a majority of not less than 3/4^th of the weighted votes of the members present and voting, in accordance with the following principles, namely:-

a)      The vote of the CG shall have a weightage of 1/3^rd of the total votes cast,

b)     The votes of all SG taken together shall have a weightage of 2/3^rd of the total votes cast, in that meeting.

Schedule VII of the Constitution of India will be amended vide 122^nd Constitutional Amendment Bill with a view to bring various Union and State taxes and duties in the GST Scope.

 GST will subsume following Central Taxes/ Duties on supply of goods and services :-

• Central Excise Duty (other  than on tobacco and its products and specified petroleum goods)
•  Additional Excise duty
•  Excise duty under Medicinal & toilet Preparation,
•  Special Additional Duty of Customs (SAD)
•  Service Tax
•  Taxes on Sale or purchase of newspapers and on advertisements published therein,
•  Central Sales tax (levied and collected by states). (it may be partially phased out since few commodities are outside the GST)
•  Surcharges & cesses relatable to supply of goods & services.

GST will subsume following State Taxes/ Duties:-

• State Value Added Tax/ Sales tax (other than alcoholic liquor for human consumption and specified petroleum goods)
• Purchase tax
• Entertainment tax
• Luxury tax
• Entry tax and  Muncipal Octroi
• Taxes on lottery, betting and gambling
• Taxes on advertisements other than those published in newspapers and broadcast on televisions and radios
• Surcharges & cesses  relatable to supply of goods & services.

 

GST will not subsume following Central Taxes/ Duties:-

ü  Basic custom duty

ü  Excise duty on tobacco and its products and specified petroleum goods

ü  Specific cesses (other than relatable to supply of goods & services).

 

GST will not subsume following State Taxes/ Duties:-

ü  State excise duty on alcoholic liquor for human consumption

ü  Taxes on entertainment and amusements to the extent levied and collected by a Panchayat or a Municipality or a Regional Council or a District Council

ü  Specific cesses (other than relatable to supply of goods & services)

ü  Stamp duty on transfer of immovable property

ü  Tax on consumption or sale of electricity.

With the introduction of 122^nd Constitutional Amendment Bill, 2014, the broad framework of GST is now clear. The GST will be a dual tax with both the Central GST and State GST levied on the same base. Thus, all goods and services barring a few exceptions will be brought into the GST net. There will be no distinction between goods and services for the purpose of the tax with a common legislation applicable to both.

• Understanding the concept
• Evaluate the impact on own industry, its input suppliers of goods and services and output procedures
• Input VAT credit on stock on the date of transition
• Unutilized Cenvat Credit on the date of transition
• Contracts already entered and partly executed on the date of transition
• Existing tax holidays and tax incentive schemes
• Registration – consolidation or new registration in the respective state
• Pending assessments and refunds
• Adequate training to staff
• Updating the accounting software.

Design Issues

•  Constitutional amendments
•  Enactments of legislations
•  GST rates - to be decided by GST Council
•  Determining exempted and zero rated activities, Non vatable goods & services
•  Seamless input tax credit removing all cascading effect.
•  To determine the basic exemption limit
•  Framework for exemption and composition
•  Registration, payment of tax, and filing of returns
•  future of various existing exemptions under Cenvat and State VAT

Operational Issues

•  Monitoring of inter- state trade
•  Sharing of information using comprehensive IT network
•  Improving relations between centre and state
•  Common approach of the states, i.e., common law, common assessment procedure and even a common return.

 Infrastructure Issues

•  Human Resource of the department
•  IT Infrastructure
•  Impact on Small Enterprises
•  Cross - verification of documents must be strengthened
•  Decision on elimination of Check Posts
•  Common dispute resolution mechanism
•  Common procedure for levy, assessment, collection and appropriation
•  Training
•  Persuasion to the State Government

As next step, this Bill needs to be debated and voted on by the Lower House of Parliament. Thereafter, it would need to be voted on by the Upper House of Parliament, before being ratified by at least half of the States. 

Models of GST

Central GST

•Two levels of governments would combine their levies in the form of a single National GST.

•Central Government will collect most of country’s total tax revenue, leaving very little for sub – national Governments.

State GST

•States alone levy GST, and the centre withdraws completely from GST and VAT.

•Significantly enhance the revenue capacity of States and reduce their dependence on the Centre.

Dual GST

•GST levied by both tiers of Government concurrently. Central GST administered by Central Government & State GST administered by State Government.

•Central GST to subsume central taxes, such as, excise duty, CVD, SAD and service tax

•State GST to subsume VAT, Octroi, entry tax, luxury tax, etc.

Rates of GST

The GST will be on dual structure, where, the Central GST shall be levied and collected by the Centre and the State GST shall be levied and collected by the States.

Centre will also levy and collect the Integrated GST on Inter State transactions. It will be distributed amongst States.

Rate of GST would be on the basis of Revenue Neutral Rates (RNR). RNR is defined as the rate at which tax revenue will remain same for both Centre and the States, despite allowing input tax credit and other factors.

• It shall mean the rate that allows the Centre and the States to sustain the current revenues from tax collections; and therefore, taking into various aspects, such as, any tax losses because of taxes subsumed and/or phased out, grant of input tax credits as well as sharing of the tax base.
• In this regime, the revenue of the Government would not be same in comparison with the present tax structure due to tax credit mechanism, removal of cascading effect or otherwise. Therefore, an adjustment in tax rate is required to avoid reduction in revenue of Government. Hence, the tax rate has to suitably adjusted to make sure the tax revenue does not reduce.

The GST rates have not yet been finalized; but most likely, it might be in between 16% to 24%. Task of finalizing the tax rates will be given to GST Council.

“Entry tax will be subsumed in the GST. However, since some states fear losing revenues, the government has proposed 1% extra levy for states for a period of two years. Additional tax at 1 percent is to be applied on the inter-state supply of goods and services for a period of two years or such other period as the Goods and Services Tax Council may recommend which would directly accrue to the originating State and therefore would not be shared.

Petroleum to be included in GST but taxed at zero rate till the time GST council decides. Thus, petroleum will be taxed in the present form for some years.

Alcohol products are outside GST.”

Logon for mode details  http://aiatindia.com/

JOBs Available in Accounts Sector for MBA, BBA, BCA, COM,Arts, Science Candidates
Contact. AIAT Placement Dept.

Basic GST Knowledge

GST is a tax on goods and services with comprehensive and continuous chain of set-off benefits

from the producers point and service provider's point up to the retailer's level. It is

essentially a tax only on value addition at each stage, and a supplier at each stage is

permitted to set-off, through a tax credit mechanism, the GST paid on the purchase of goods and

services as available for set-off on the GST to be paid on the supply of goods and services.

The final consumer will thus bear only the GST charged by the last dealer in the supply chain,

with set-off benefits at all the previous stages.


GST is levied at every stage of production-distribution chain. It will facilitate seamless

credit flowing across the entire supply chain and across all States under a common tax base.

Salient features of the proposed model are as follows:

1. DUAL GOODS AND SERVICE TAX

The GST shall have two components: one levied by the Centre   (hereinafter referred to as

Central GST), and the other levied by the States (hereinafter referred to as State GST). Rates

for Central GST and State GST would be prescribed appropriately, reflecting revenue

considerations and acceptability.   This dual GST model would be implemented through multiple

statutes (one for CGST and SGST statute for every State).

2. APPLICABILITY OF GST TO ALL TRANSACTIONS

The Central GST and the State GST would be applicable to all transactions of goods and services

made for a consideration except the exempted goods and services, goods which are outside the

purview of GST and the transactions which are below the prescribed threshold limits.

3. DESTINATION BASED MULTI POINT LEVY

It is recommended that the Centre and States should adopt a consumption based GST with no

distinction being made between raw materials and capital goods , in avaliment of Input tax

credit. GST is based on destination principle, thus tax base will shift from production to

consumption of goods. The taxable event is Consumption of goods or services. As a result,

revenue will accrue to the state in which consumption takes place or deemed to take place.


4. COMPUTATION OF GST ON THE BASIS OF INVOICE CREDIT METHOD

The liability of CGST and SGST is computed the basis of Invoice Credit method i.e. allow credit

for tax paid on all intermediate purchases of goods and services on the basis of invoice issued

by the supplier. As a result, all different stages of production and distribution can be

interpreted as a mere tax pass-through, and the tax will effectively stick on final consumption

within the taxing jurisdiction.

5. PAYMENT OF GST

The Central GST and State GST are to be paid to the accounts of the Centre and the States

separately. It would have to be ensured that account-heads for all services and goods would

have indication whether it relates to Central GST or State GST (with identification of the

State to whom the tax is to be credited).

6. UNIFORM PROCEDURE FOR COLLECTION OF GST

To the extent feasible, uniform procedure for collection of both Central GST and State GST

would be prescribed in the respective legislation for Central GST and State GST.

GST is not simply VAT plus service tax, but a major improvement over the previous system of VAT

and disjointed services tax – a justified step forward.

GST is by far one of the most important and voluminous Indirect Taxation reform in India which

has far reaching effects. GST Knowledge Series is an attempt to spread awareness of the

Proposed GST Regime in clear and concise manner. It will also provide latest updates on GST to

its users from time to time.

====================================================

Click For More Details

What is GST (Goods & Services Tax)

The present structure of Indirect Taxes is very complex in India. There are so many types of taxes that are levied by the Central and State Governments on Goods & Services.

We have to pay Value Added Tax (VAT) on purchasing goods & services. We have to pay ‘Entertainment Tax’ for watching a movie. And there are Excise duties, Import Duties, Luxury Tax, Central Sales Tax, Service Tax.. etc…

As of today some of these taxes are levied by the Central Government and some are by the State governments. How nice will it be if there is only one unified tax rate instead of all these taxes?

In this post, let us understand – what is Goods and Services Tax and its importance. What are the benefits of GST Bill to  Industries, Business & common man and end consumer? What are the advantages, disadvantages and challenges?

What is GST?

It has been long pending issue to streamline all the different types of indirect taxes and implement a “single taxation” system. This system is called as GST ( GST is the abbreviated form of Goods & Services Tax). The main expectation from this system is to abolish all indirect taxes and only GST would be levied. As the name suggests, the GST will be levied both on Goods and Services.

GST was first introduced during 2007-08 budget session. On 17^th December 2014, the current Union Cabinet ministry approved the proposal for introduction GST Constitutional Amendment Bill. On 19^th of December 2014, the bill was presented on GST in Loksabha. The Bill will be tabled and taken up for discussion during the coming Budget session. The current central government is very determined to implement GST Constitutional Amendment Bill.

GST is a tax that we need to pay on supply of goods & services. Any person, who is providing or supplying goods and services is liable to charge GST.

GST is a consumption based tax/levy. It is based on the “Destination principle.” GST is applied on goods and services at the place where final/actual consumption happens.

GST is collected on value-added goods and services at each stage of sale or purchase in the supply chain. GST paid on the procurement of goods and services can be set off against that payable on the supply of goods or services. The manufacturer or wholesaler or retailer will pay the applicable GST rate but will claim back through tax credit mechanism.

But being the last person in the supply chain, the end consumer has to bear this tax and so, in many respects, GST is like a last-point retail tax. GST is going to be collected at point of Sale.

The GST is an indirect tax which means that the tax is passed on till the last stage wherein it is the customer of the goods and services who bears the tax. This is the case even today for all indirect taxes but the difference under the GST is that with streamlining of the multiple taxes the final cost to the customer will come out to be lower on the elimination of double charging in the system.

The current tax structure does not allow a business person to take tax credits. There are lot of chances that double taxation takes place at every step of supply chain. This may set to change with the implementation of GST.

Indian Government is opting for Dual System GST. This system will have two components which will be known as

• Central Goods and Service Tax (CGST) and
• State Goods and Service Tax (SGST).

The current taxes like Excise duties, service tax, custom duty etc will be merged under CGST. The taxes like sales tax, entertainment tax, VAT and other state taxes will be included in SGST.

So, how is GST Levied? GST will be levied on the place of consumption of Goods and services. It can be levied on :

• Intra-state supply and consumption of goods & services
• Inter-state movement of goods
• Import of Goods & Service

What is the applicable GST rate?

The rate (percentage) of GST is not yet decided.  As mentioned in the above table, there might be CGST, SGST and Integrated GST rates. It is also widely believed that there will be 2 or 3 rates based on the importance of goods. Like, the rates can be lower for essential goods and could be high for precious/luxury items.

Benefits of GST Bill implementation

• The tax structure will be made lean and simple
• The entire Indian market will be a unified market which may translate into lower business costs. It can facilitate seamless movement of goods across states and reduce the transaction costs of businesses.
• It is good for export oriented businesses. Because it is not applied for goods/services which are exported out of India.
• In the long run, the lower tax burden could translate into lower prices on goods for consumers.
• The Suppliers, manufacturers, wholesalers and retailers are able to recover GST incurred on input costs as tax credits. This reduces the cost of doing business, thus enabling fairer prices for consumers.
• It can bring more transparency and better compliance.
• Number of departments (tax departments) will reduce which in turn may lead to less corruption
• More business entities will come under the tax system thus widening the tax base. This may lead to better and more tax revenue collections.
• Companies which are under unorganized sector will come under tax regime.

Challenges for implementing Goods & Services Tax system

• The bill is yet to be tabled and passed in the Parliament
• To implement the bill (if cleared by the Parliament) there has to be lot changes at administration level, Information Technology integration has to happen, sound IT infrastructure is needed, the state governments has to be compensated for the loss of revenues (if any) and many more..
• GST, being a consumption-based tax, states with higher consumption of goods and services will have better revenues. So, the co-operation from state governments would be one of the key factors for the successful implementation of GST

Since GST replaces many cascading taxes, the common man may benefit after implementing it. But it all depends on ‘what rate the GST is going to be fixed at?’ Also, Small Traders (based on Annual Business turnover) may be exempted from it.

France was the first country to introduce this system in 1954. Nearly 140 countries are following this tax system. GST could be the next biggest tax reform in India. This reform could be a continuing process until it is fully evolved. We need to wait few more months for more details on Goods & Services Tax system.

Latest News on GST Bill 2016 (03-August-2016) – Rajya Sabha passes GST Bill. What next? – The passage of the GST constitutional bill will lead to the setup of the GST council. The council will then deliberate upon the exact GST rate, which will be ratified by the States. The final and actual GST Bill will likely be taken up in Winter Session of the Parliament.

Download  GST  Draft Bill 2016 PDF.  : Ministry of Finance releases Draft GST Bill. Click here 

============================== =============== ======================

G.S.T. Training Institute in India  Join 

Advanced Institute of Accounts & Taxation Pvt.Ltd.

15, Bhande plot Umred Road, Nagpur 

Call- 9373104022