Input Credit Under GST & GST Presentation

Goods and Services
Tax(GST)
A N Bhutada & CO.
Chartered Accountant
1

Overview
 Present Taxation System
 Problems with Sales Tax
 Why GST?
 Frame Work of GST ?
 Which Central And States Taxes would be subsumed
 GST Registration
 Taxes and Credit Utilization
 GST On Free Supply & Stock Transfer
 Invoicing Under GST
 Time of Supply
 Benefits of GST
 Approach to GST
2

PRESENT TAX STRUCTURE IN INDIA
3

Problems of Sales Tax
 Cascading effect(Tax on tax)
 Selling without bill- no tax liability
 “Inspector Raj”- of officials
 Not technology enables make revenue
lickage
4

Why India need GST?
 Purpose- GST is introduced majorly due to two reasons:
1. The current indirect tax structure is full of uncertainties due to multiple taxes and
multiple rates.
2. Due to multiple rates, there are multiple forms and intern compliances. This will
improve Tax compliances.
 Because of above transparency, Taxation would increase and lead to reduced
tax evasion.
 It would also reduce cascading effect(tax on tax) up to much extent.
5

Which Central Taxes will be subsumed??
1) Custom Duty
2) Tobacco Products
3) Petroleum Products- so far no but maybe yes
4) Central Excise Duty
5) Central Sales Tax
6) Service Tax
7) Counter-Veiling Duty on Imported goods
8) Cess, Surcharges , SBC , KKC
No More in GST
No More in GST
No More in GST
No More in GST
No More in GST
No More in GST
ONLY CGST
6

Which State Taxes Will Be Subsumed??
1) Excise On Liquor For Human Consumption
2) Stamp Duty On Immovable Properties
3) Electricity Duty
4) Petroleum Products (Will Depend Upon The
GST Council But till now no)
5) State VAT
6) Luxury Tax, Entertainment Tax,Purchase tax
7) Entry Tax
8) Lottery , Betting , Gambling
ONLY SGST
No More in GST
No More in GST
No More in GST
No More in GST 7

Framework(Model) of GST
 India will have Concurrent Dual GST comprising of Central GST and State GST
levied on the same base.
 GST rate= CGST rate + SGST rate
 Total tax collected in GST will be distributed to centre and state as per CGST
, SGST rate
 Central GST(or CGST) would be administered by Central Govt.
 State GST(or SGST) would be administered by State Govt.
 Integrated GST(or IGST) administered by central Govt. on inter state transfer
of goods and services.
 In this model, all the goods and services would be subject to concurrent
taxation by the state and the centre.
 For example, if a product have levy at base price of Rs. 10000 and rate of GST
are 8% , CGST is 3% and SGST is 5% ,then tax collected during transaction is
800 , 300 goes to central govt as CGST tax, 500 goes to the state govt. as
SGST tax.
Central GST
(CGST)
• No Excise
• No Service Tax
• No Cess,
Surcharges,
etc.
State GST
(SGST)
• No VAT
• No Cess,
Surcharges,
entry taxes,
etc.
8

GST
Sales Price
Before GST(in ₹)
After GST
GST=10%(assumption)
Payment to Government
(Total GST-Input
Credited)
Manufacturer to Mr.X Manufacturer sales price
=100+10
=110
Total GST=10
Input Credited=0
GST Payable=10
Mr.X to Mr.Y @ Rs. 200 Whole Sales price
=200+20
=220
Total GST=20
Input Credited=10
GST Payable=10
Mr.Y to Mr.Z @ Rs.250 Retailer Sales price
=250+25
=275
Total GST=25
Input Credited=20
GST Payable=5
9

GST Registration
 Northeaster and hill states ( Arunachal Pradesh, Assam, Meghalaya, Manipur, Mizoram,
Nagaland and Tripura ) with an annual turnover of Rs.10 lakhs.
 For all other entities in rest of India would be required to obtain GST registration, if
annual turnover exceeds Rs.20 lakhs. (section 2 (6) of the MGL – Taxable & Non Taxable)
 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.
Structure of GST Registration Number
 GSTIN will be of 15 digits and various digits in GSTIN will denote the following as
shown below:
State
Code
PAN
Entity
Code
Blank
Check
Digit
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
:
10

Taxes Under GST and Credit Utilisation
:
GST
Central GST
( CGST )
Inter state
Movement
Intra-State
Movement
State GST
(SGST )
Integrated
GST (IGST )
11

Challenges in availment of Input Tax Credit
For Taking Credit of Taxes Under GST Following Basic Conditions
 Recipient is in possession of a tax invoice or debit note issued by a supplier
registered under the GST Act, or such other taxpaying document(s) as may be
prescribed.
 Recipient has received the goods and/or services.
 Tax charged in respect of such supply has been actually paid to the account of the
appropriate Government, either in cash or through utilization of input tax credit
admissible in respect of the said supply.
 GST Return has been filed by supplier.
 Input Tax Credit of tax not allowed if depreciation claimed on tax component.
 Partial payment by supplier will not entitle the receiver of goods to avail input
credit
 ITC cannot be taken beyond the month of September of the following FY to which
invoice pertains or date of filing of annual return, whichever is earlier
:
12

GST ON FREE SUPPLY & STOCK / Branch
TRANSFER
 As per Article 366(12A); “Goods and Service tax” means any tax on supply of goods, or services
or both except taxes on the supply of the alcoholic liquor for human consumption.
 Important Point is word used is supply not sale. Hence consideration is not required for supply
 Thus , stock transfer , branch transfer , free supplies will also get converged under GST net
Comparison with Present System of Excise and VAT Provisions
It is pertinent to note that Excise duty is levied on removal of goods from the factory, meaning
thereby, as and when free samples are removed from the factory, liability to pay excise duty arises.
As far as State VAT laws are concerned, to tax a transaction there has to be monetary consideration
and therefore free samples do not attract any VAT/CST liability.
Example - For example, if a dealer is giving free chocolate fruit bars as their promotional activity,
the value of such chocolate fruit bars chargeable to tax under GST as per Rule 4 shall be the value
of the other similar chocolate bar of same type (like, fruit in our case) or quantity (say 50 gms)
which is sold by the company nearest to the supply of free chocolate bar, say Rs. 10/-.
:
13

Credit Under GST for Stock In Hand
 Tax payer is eligible to avail Cenvat and VAT/entry tax credit carried forward in the last
return filed before effective date of GST. The entitlement is subject to the condition that
the credit should be admissible as input tax credit under the GST Act also.
 Such credit shall be allowed at the rate of [forty per cent.] of the central tax applicable on
supply of such goods after the appointed date and shall be credited after the central tax
payable on such supply has been paid. Section 140 (3)
 Important Points
1. Need to file correct VAT & CST return by taking all eligible input tax credit
2. Timely filing of VAT & CST return
3. No credit allowed if same in not considered in filing of return
4. Maintain purchase invoices documents evidencing payment of duty under the earlier law
5. Submit Form GST TRAN -at the end of each of the six tax periods
6. Avoid Purchase from out of state ( CST credit will become cost )
:
14

Goods Exempt Under VAT where as same
become taxable under GST
Person shall be entitled to take, in his electronic credit ledger, credit of the Value Added
Tax(VAT) in respect of inputs held in stock and inputs contained in semi-finished or finished
goods held in stock on the appointed day subject to the following conditions:
1. Taxable person passes on the benefit of such credit by way of reduced prices to the
recipient – Reduction In Price Correspondingly
2. The said taxable person is eligible for input tax credit on such inputs under this Act
– Eligible For Input Tax Credit Under Gst
3. Taxable person is in possession of invoice and/or other prescribed documents evidencing
payment of duty under the earlier law in respect of such inputs
4. Such invoices and /or other prescribed documents were issued not earlier than 12 months
immediately preceding the appointed day
:
15

Invoicing Under GST
 Original invoice: The original invoice is issued to the receiver, and is marked as ‘Original
for recipient’.
 Duplicate copy: The duplicate copy is issued to the transporter, and is marked as
‘Duplicate for transporter’.
 Triplicate copy: This copy is retained by the supplier, and is marked as ‘Triplicate for
supplier’.
 An important point to consider
 Under GST rules, a serial number of invoices should be properly marked. A consecutive
serial number containing only alphabets and numerals, unique for every financial year
should be placed on the tax invoices.
E.g. you may use the following number for invoicing for FY 2017-18;
2017/001 or 2017/AA/001 or any serial number you may decide.
 The supplier may obtain an Invoice reference number from the common portal (GSTN) by
uploading a tax invoice issued by him. The invoice reference number shall be valid for 30
days from the date of uploading.
:
16

Liability of GST On Basis of Time of Supply
 The liability to pay CGST / SGST on the goods shall arise at the time of supply as
determined in terms of the provisions of Section 12.
 The taxable event shall be the earliest of the following dates, namely,
1. Date of removal of goods
2. Date on which goods are made available to the recipient (where goods are not
required to be removed)
3. Date of issuance of invoice
4. Date of receipt of payment by supplier
5. Date on which recipient shows receipt of goods in his books of account
Presently in case of service tax on advance received service tax is payable but not in
case of Excise and VAT.
GST will be payable when advance of goods and services is made, even if invoice is not
issued. 17

What Should be Your approach ?
Business need to adopt a structured approach to prepare for a transition. Broadly the
approach should encompass the following :
 Assessment of impact of GST on different business functions
 Prepare implementation plan
 Implementation of plan and transition period
 Post-implementation validation
 Communication with suppliers / channel partners
 Revising the tax compliances set up , statutory records , compliance calendar etc
 Make changes in ERP ( Accounting Package )
 Pass GST impact eateries in books if any
 Revise work order / pending disputes
18

Benefits of GST
 Improved Logistics/Seamless movement of goods across the country as entry
check points(for entry tax)won’t be there. It will end the warehousing
obsession of large companies.
 It will convert India into a uniform market.
 A lower GST rate and removal of Cascading effect will bring down the prices.
 GST will be levied only at destination point and not at various points(from
manufacturing to retail outputs).
 Expected to build a transparent and corruption-free tax administration.
 Both CGST and SGST will be charged at same floor(manufacturing cost). This
will benefit the consumers as the cost will go down.
 Exports would however will be zero rated i.e. exporters of goods/services
need not pay the GST. GST paid by them on the procurement of
goods/services will be refunded to them.
 Better compliance.
19

122nd Constitutional Amendment Bill, 2014
 Since it is an constitution amendment bill, The govt. requires the support of 2/3rd of
the members in both the houses (Lok Sabha and Rajya Sabha) of the parliament.
 It cannot be passed by calling joint session in the parliament.
 It also needs to get passed in the legislative assembly of at least half of the states.
 After approval from Parliament and the states, the bill will become law as soon as the
President signs it.
 Currently, this bill has been passed in the Lok Sabha but is stuck in Rajya Sabha as the
govt. is in minority there.
How to pass
the bill
122nd Bill
How to pass the Bill:
9
NO DUAL CONTROL IN GST BY CENTRAL AND STATE
GOVERMENT
Total Turnover of
Assess ( Including
goods & Services )
Assess Turnover < 1.5
Crore
Assess Turnover > 1.5
Crore 50 % by CBEC
Central Government
10 % by CBEC
State Government
( including IGST )
90 % by State & IGST
50 % by State & IGST
20

President signs it.
How to pass
the bill
122nd Bill
9
NO DUAL CONTROL IN GST BY CENTRAL AND STATE
GOVERMENT
21

President signs it.
How to pass
the bill
122nd Bill
s
Thank Your
CA Amit Bhutada
Contact No. 80555 66789
www.anbca.com
22

Input Credit Under GST & GST Presentation

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