CGST.pptx

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1. 207- Legal & Business Environment Unit No.2.2 CGST Presented By: Dr. K. Meenakshi 1 Sanjivani College of Engineering, Kopargaon Department of MBA www.sanjivanimba.org.in

2. Introduction The Goods and Services Tax (GST) was implemented in India by the central government from July 1, 2017, onwards. Drafted with the aim of “ One Nation One Tax ,” the GST subsumed several different taxes levied by governments under the three broad sections mentioned below.   Central Goods and Services Tax (CGST):  It subsumed within it all the different taxes levied by the central government, including central excise duty and central surcharges and cess. State Goods and Services Tax (SGST):  This subsumed all the indirect taxes levied by state governments, including sales tax, VAT, state surcharges and cesses, etc. Integrated Goods and Services Tax (IGST):  This category was brought in for taxing interstate movement of goods and services.

3. History of CGST Brought into form under the Central Goods and Services Tax Act 2016, the CGST Act replaced a host of indirect taxes, including central sales tax, central excise duty, service tax, additional customs duties, and further excise duties. The CGST charges levied on the movement of standard goods and products can be enhanced by a separate body. While the revenue of CGST is collected by the central government, the  input tax credit  for CGST is for states. The input tax credit can, however, only be appropriated against the CGST payment.

4. Objectives of the CGST Act, 2017 The central and state governments were both levying different amounts and forms of taxation on the same products and services, resulting in double taxation for the manufacturers and others involved in the supply chain. Owing to double taxation, the country saw high rates of tax evasion and cascading effects. The free flow of trade throughout the country was also hampered by octroi, entry tax, check posts, etc., which saw an additional level of taxation for the transport of goods and services across states. Taxpayers were also faced with a higher burden of compliance owing to a large number of taxes levied. To overcome these obstacles to free trade and to do away with double taxation, which increased the taxation burden on taxpayers, the GST was implemented on July 1, 2017, which saw the central government levy taxes in the form of CGST while states began levying  SGST .

5. Features of the CGST Act, 2017 CGST is levied on all the intra-state goods and services supply. It expands the input tax credit base by ensuring their availability as taxes paid on supply of goods and services. CGST enables self-assessment by taxpayers on taxes payable by them. CGST conducts audits so taxpayers can ensure compliance with the Act’s provisions. The CGST can recover tax arrears through provisions for detaining and restricting sale of goods and property by defaulting taxpayers. The CGST has provisions for levying  GST penalties  or fines in case of contravention by taxpayers. For consumers, the Central Goods and Services Tax enables a reduction of the tax burden on various goods and services.

6. CGST Law Taxonomy The CGST Act, 2017 comprises of 174 Sections in 21 Chapters and three Schedules on supplies without consideration, treatment of activities as to goods or services and activities which shall be considered as neither goods or services. These Schedules are as under : Schedule I. Activities to be treated as supply even if made without consideration Schedule II. Activities to be treated as supply of goods or supply of services Schedule III. Activities or transactions which shall be treated neither as a supply of goods nor a supply of services.

7. CGST Rules A tax invoice must be issued to all taxable goods and services if you are already  registered for GST . A bill of supply must be issued if registration is under the  GST composition scheme . Ensure that all these invoices have a unique serial number and are noted in sequential order. Ensure that the  GST invoice  includes your name, address, supply place, and GSTIN. CGST and SGST are equally filed. So in case, the GST rate is 18%, the CGST is 9% and SGST is also 9%. For sales pertaining to out of state businesses,  IGST  must be levied.

8. It is preferable to not buy goods or services from unregistered dealers. Ensure that you are filing GST correctly for the same and different states. All sales of chargeable goods and services must be issued with a tax invoice. Ensure to collect the tax invoice for all the purchases you make. Ensure that your documents include your and the client’s  GSTIN . Furthermore, ensure that all documentation is submitted well within time in order to avoid penalties.

9. Documents Required for CGST Registration Individuals & Sole Proprietors Owner’s PAN Card Owner’s  Aadhaar Card Owner’s photograph Residential Proof Details of Bank Account

10. Partnerships & LLPs Deed of Partnership PAN Cards of Partners Photographs of Partners Partners’ Residential Proofs Aadhaar Card of Any Authorised Signatory Proof of Signatory’s Appointment Proof of LLP Registration Bank Details Business’ Principal Address Proof

11. Hindu Undivided Families (HUFs) HUF’s PAN Card Karta’s (family patriarch’s) PAN Card Owner’s photograph Bank Details Business’ Principal Address Proof

12. Companies Company PAN Card Incorporation Certificate from MCA Memorandum or Articles of Association Appointment Proof of Signatory Signatory’s PAN Card Signatory’s Aadhaar Card PAN Cards of all Directors Directors’ Residential Proofs Bank Details Business’ Principal Address Proof

13. Societies & Clubs Registration Certificate Copy PAN Card Copies of Club or Society and of Associated Partners or Promoters Copy of Bank Account Statement or Crossed Cheque or First Page of Passbook Proof of Registered Office Address Authorisation Letter Signed by Authorised Signatory

14. Benefits - CGST

15. Elimination of Multiple Taxes:  Before the  GST  was implemented, both the Centre and states charged different rates of taxes on the same goods and services. As a result, multiple taxes were levied on goods and services, which resulted in a high burden of taxation on taxpayers. Reduces Costs:  The CGST has resulted in reducing the prices of goods and services and is helping the common man save more money.

16. Ease of Business:  CGST has the same concept across all states, which makes it easier to conduct interstate business without worrying about different taxes being levied. Seamless Tax Filing and Documentation:  CGST has made tax filing and maintaining documentation significantly easier for businessmen and made compliance processes hassle-free. Reduces Taxes’ Cascading Effects:  Since CGST ensures tax benefits at every stage from manufacturing to consumption and tax is handled on margin price only, it has stopped the cascading effect of taxation in India.

17. Discussions Case 1: Property sold during the pendency of proceedings – Void? The High Court of Madras in the case of Mrs Saraswathy Sundaraj has held since the defaulter had transferred the property in favour of his brother’s wife, by appointing his own brother as the Power Agent to act on his behalf and such a sale has happened within six months from the date of which the demand of arrears of tax was made, it can be said there are no bona fides in such a transfer.

18. Comment: Section 81 of the CGST Act, 2017 voids certain cases of transfer of property made to defraud the Government revenue. The provision also provides that the transfer shall be valid in case a. The transfer is made for adequate consideration, in good faith and without notice of the pendency of such proceedings under this Act, or b. Without notice of such tax or other sums payable by the said person, or c. With the previous permission of the proper officer Action Point: As a bonafide buyer, one has to ensure to check if there are any tax dues/pending litigation  and the payment of adequate consideration as a part of their due diligence.

19. CASE 2 A TV serial production house is producing a TV series for a TV channel. The copyright in the program will be of the TV channel. The said TV producers have availed the services of make-up artist to undertake make-up of various artist taking part in the shooting of the program. The TV producer wants to know whether it can avail the credit of GST charged by the Make-up man and whether the said expenses can be considered as eligible for credit in view of the fact that the same is part of the composite supply to the TV channel?

20. CASE 3 A company celebrated its 100th Anniversary in the month of April 2021 and for this purpose, the company gifted gold coins (5 gms coin, costing around Rs. 15,000/- per coin) to all its employees. The company has availed credit on such gold purchase and the department has issued show cause notice stating the company cannot avail credit on gold as they are not dealers in gold. What would be the position if the expenditure towards Gold is treated as part of perquisites in Income Tax and included in Salary cost of the respective employee? Whether answer will be different if the Offer letter with the employee specifies that Gold Coin will be given to employee based on performance?

21. CASE 4 ABC Ltd. has a trading division whereby it is engaged in the business of trading of packing materials. It supplies its packing materials to its customers located across India. The trading division avails ITC on packing materials, it procures from the manufacturers. During the month of June 2021, the division sent a truckload of packing materials to Pune, by issuing invoice and necessary e-Way bills, for which the customer paid the consideration in advance. However, due to heavy rains, portion of the packing materials were damaged and became non usable by the customer and he returned the same. To the extent of the returned quantity, the trading division claimed insurance on the damaged goods, which claim was accepted to the extent of 75% of the value of damaged goods.

22. Further, the trading division also sent back the damaged goods to the manufacturer who procured the same at a 25% of the sale price on which GST was also paid, as manufacturer could use the same in manufacturing process. Discuss ITC implications vis-à-vis the trader and buyer: a. Transfer of property in goods has not taken place at the time of destruction of goods b. Transfer of property in goods has taken place at the time of destruction of goods c. Because insurance amounts have been received which includes input tax component, can they claim ITC? d. If insurance amounts have been received without input tax component?

23. Thank You