Overview of revenue system Goods and Services Tax

Overview of revenue system Goods and Services Tax

1. Welcome to this session on Overview of Revenue System-Goods and Services Tax Mandatory Training of AAOs for Promotion as SAOs Day 3 Session 4 (Common Module for All Streams) Acknowledgments: ICAI – IDTC presentations

2. Session Overview Input Tax Credit, Computation of GST Liability Procedures of GST – registration, tax invoice, credit and debit notes, electronic way bill, accounts and records

3. Learning Objective Given access to the background material on Input Tax Credit, Computation of GST Liability Procedures of GST – registration, tax invoice, credit and debit notes, electronic way bill, accounts and records Participants would be able to understand and apply these concepts in the performance of their functions

4. References Constitution of India Central Goods & Services Tax Act, 2017 Central Goods & Services Tax Rules, 2017

5. Introduction Under the erstwhile regime - Centre levied Excise duty on manufacture, Service tax on services etc. while States levied VAT, Entry Tax, Luxury Tax etc. Purpose of 101 st Constitution Amendment Act Creating a unified system of taxation by subsuming existing indirect taxes and duties; A ssigning concurrent powers to Centre and States to levy GST on all supplies of goods or services or both.

6. Power of Taxation under the Constitution Article 265: Taxes not to be imposed save by authority of law. The Power to levy tax has been allocated between: Parliament State Legislature

7. Article 246 - Power of Union and State to make laws Article 246 of the Indian Constitution, distributes legislative powers including taxation, between the Parliament of India and the State Legislatures; Schedule VII enumerates the subject matters on which the Parliament and States have the powers to make laws in three lists: List I (Union List); List II (State List); and List III (Concurrent list)

8. Schedule VII of Constitution 8

9. Article 254 Inconsistency between laws made by Parliament and laws made by the State Legislatures : If any provision of a law made by the Legislature of a State is repugnant to any provision of a law made by Parliament, or to any provision of an existing law with respect to one of the matters enumerated in the Concurrent List: The law made by Parliament shall prevail and the law made by the Legislature of the State shall, to the extent of the repugnancy, be void.

10. Article 246A - Power to impose GST [New Provisions] 10 Petroleum crude, High Speed Diesel, Motor Spirit (commonly known as petrol), Natural Gas and Aviation Turbine Fuel Notwithstanding anything contained in articles 246 and 254, Parliament, and, subject to clause (2), the Legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by such state 246A(1) 246A(2) Parliament has exclusive power to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce. In respect of goods and services tax referred to in clause (5) of article 279A, Article 246A will take effect from the date recommended by the Goods and Services Tax Council.’ Explanation Goods under 279A(5)

11. Constitution (101 st Amendment) Act, 2017 “Goods and services tax” means any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption 366(12A) Definition of GST

12. GST – Other Changes in Definition 12 Sl No Definition Article Definition 1. Service 366 (26A) Anything other than goods 2. State 366 (26B) With reference to articles 246A, 268, 269, 269A and article 279A includes a Union territory with Legislature. 3. Goods 366 (12) includes all materials, commodities, and articles [Definition Already Present prior to 101 Constitutional amendment ]

13. Levy and collection of GST in course of inter-State trade or commerce – Article 269A GST shall be levied and collected by the Central Government and such tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of GST Council. Supply of goods, or of services, or both in the course of import into the territory of India shall be deemed to be supply in the course of inter-State trade or commerce Parliament will formulate the principles for determining the place of supply, and when a supply takes place in the course of inter-State trade or commerce. 13

14. Article 269A – When GST collected will not form part of Consolidated Fund of India? 14 The amount apportioned to a State from the tax collected on supplies in the course of inter-state trade or commerce Where an amount collected as tax levied in the course of inter-state trade or commerce has been used for payment of the tax levied by a State under article 246A. In other words, where IGST is used for payment of SGST. Where an amount collected as tax levied by a State under article 246A has been used for payment of the tax levied under clause inter-state trade or commerce. When SGST is used for payment of IGST. These clauses will ensure that no separate appropriation will be required from the Parliament to disburse money to the states.

15. GST Council – Article 279A Article 279A provides for constituting a council called the Goods and Services Tax council within 60 days from date of commencement of 101 st Constitution Amendment Act, 2016.   Members are as follows :-  Union Finance Minister as Chairperson;  Union Minister of State in charge of Revenue or Finance;  Minister in charge of Finance or Taxation or any other Minister nominated by each State Government. Vice Chairperson to be chosen among the members.  15

16. GST Council – Recommendations GST Council can make recommendations on the following:  Taxes, cesses and surcharges that may be subsumed;  Goods and services that may be subjected to or exempted from GST; Model Goods and Services Tax Laws, principles of levy, apportionment of Goods and Services Tax levied under Article 269A and the principles that govern the place of supply; Threshold limit of turnover below which goods and services may be exempted;  Rates, floor rates, band, special rates; Special provision with respect to the States of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand Date on which GST be levied on petroleum crude, HSD, Petrol, natural gas and ATF and Any other matter relating to the goods and services tax, as the Council may decide. 16

17. GST Council Meetings 17 Weightage of votes: Central Government – 1/3 rd of the total votes cast, and State Governments – 2/3 rd of the total votes cast. Other important roles of GST Council: The GST Council to be guided by the need for a harmonised structure of goods and services tax and for the development of a harmonised national market for goods and services. GST Council to devise mechanisms to adjudicate disputes arising between the Centre and States. Quorum: One-half of the total number of Members of the Goods and Services Tax Council. All decisions by a majority of not less than three-fourths of the weighted votes of the members present and voting

18. Article 286 – Restrictions on the States to impose tax Prior to amendment, the clause restricted the states to impose taxes on sale or purchase of goods. Now it has been amended to provide that the state shall not impose any tax on the supply of the goods or services or both, where such supply takes place: a. Outside the State b. in the course of the import of the goods into, or export of the goods out of, the territory of India Further, the Parliament will formulate the principals for determining when a supply constitutes a supply as mentioned in the point above. Marginal Note to the Section has not been amended. It still reads “Restrictions as to imposition of tax on the sale or purchase of goods” 18

19. Timeline - GST Enactments After receiving presidential assent on 12 th April, 2017 the following enactments came into force with effect from 1 st July, 2017 The Central Goods and Services Tax Act, 2017 The Integrated Goods and Services Tax Act, 2017 The Union Territory Goods and Services Tax Act, 2017 The Goods and Services Tax (Compensation to States) Act, 2017 19

20. Levy and Collection 20 Services Goods Goods and services 1: Subject Included Implied Excluded 2: Supply Specified for goods Specified for services 4: Time Inter-State Intra-State 3: Place

21. Concept of ITC “Input tax" means IGST (including that on import of goods), CGST, SGST and UTGST; Charged on any supply of goods or services System for a seamless flow of credit Extends to inter-State supplies Credit utilization would be as shown in the table

22. © Indirect Taxes Committee, ICAI 22 Conditions for Availment of ITC by a Registered Taxable Person – Sec 16

23. © Indirect Taxes Committee, ICAI 23 Conditions for Availment of ITC by a Registered Taxable Person – Sec 16

24. ITC in case of Capital Goods 24 Depreciation claimed on Tax component of the cost of capital goods under IT Act Example: Cost of asset = Rs. 100 Tax-10%(say) = Rs. 10 Total Cost Rs. 110 ITC not Available If Depreciation charged on Rs.100 ITC Available If Depreciation charged on Rs.110 ITC not Available “capital goods” means the goods, the value of which is capitalized in the books of accounts of the person claiming the credit and which are used of intended to be used in the course or furtherance of the business

25. Sec-22 : Person Liable for Registration Aggregate turnover > Rs20 Lakhs Special Category States, Aggregate turnover > Rs10 Lakhs What is Aggregate turnover? Taxable Supplies + Exempt Supplies + Exports + Inter State Supplies Taxable supplies does not include Alcoholic Liquor for human consumption Will it include turnover on which tax needs to be paid under reverse charge? Specific exclusion of inward supplies liable under reverse charge basis 25

26. Sec-22 : Person Liable for Registration Registration is required in the State from which he makes taxable supply. GST is destination based tax, tax goes to the “ destination ” State but registration is in the “ Origin State ”. Person registered / licensed under erstwhile law on day immediately preceding the appointed date. Transfer of Business –Transferee to obtain registration in case of Sale Succession Amalgamation or De-merger 26

27. Said process applicable to Inter-state, Voluntary, Casual, Reverse Charge , ISD, Agents, E-com Registration Certificate is Issued in Form GST Reg-06 17 days Process Registration Process Initial verification within 3 working days Clarifications/info required –Form GST Reg-03 Applicant furnish clarifications in Form GST Reg-04 within next 7 working day 27

28. Rule-10 : Registration Certificate 28 Certificate in Form GST REG-06 with GSTIN of 15 digit on GST portal 00AAAAA0000A000 State Code PAN Number Entity Code Check sum

29. Tax Invoice – Sec 31 29 Revised invoices may be issued against the invoice already issued during the period starting from the effective date of registration till the date of issuance of certificate of registration within one month from date of issuance of certificate of registration . No invoice required if value of goods or services or both < Rs. 200 Composition dealers and Person supplying exempted goods or services to issue a bill of supply instead of tax invoice Registered taxable person shall issue tax invoice Supply of taxable goods Supply of taxable services Before / at the time of :- Removal of goods for supply (supply involves movement of goods) Delivery of goods/ making available to the recipient (other cases) Before / after provision of service but within prescribed period

30. Credit / Debit Notes – Sec 34 30 Registered taxable person issuing Debit / Credit notes to declare its details in the return for the month during which such notes are issued / received or in the return for any subsequent month but not later than September following the end of FY of supply, or the date of filing of the relevant annual return, whichever is earlier, and the tax liability shall be adjusted in the manner specified in this Act.

31. E-Way Bill E-way bill is a document required by a person in charge of the conveyance carrying any consignment of goods of value exceeding fifty thousand rupees as mandated by the Government in terms of Section 68 of the Goods and Services Tax Act read with Rule 138 of the rules framed thereunder. It is generated from the GST Common Portal for E-Way bill system by the registered persons or transporters who cause movement of goods before commencement of such movement.

32. Who can Register and use e-way bill Portal 32

33. Process

34. Accounts and Records Requirement for maintenance of records under Section 35 and Rule 56: Every registered person will be required to maintain the following records at his principal place of business and at each additional place of business, regarding: Production/Manufacture of goods ( production accounts showing raw materials or services used in the manufacture and the waste and by products of manufactured goods) Inward and outward supply of goods of services or both (including concerned tax documentation such as invoices, DC, bill of supply etc.) Stock of goods (Balance of stock including raw materials, FG, scrap and goods lost, stolen, destroyed and written off or disposed off as gift or free sample 34

35. Requirement for maintenance of records under Section 35 and Rule 56: Input Tax Credit availed and Output tax payable and paid. (along with register of tax invoice, credit notes, debit notes, delivery challan issued or received.) Separate account of advances received, paid and adjustments made thereto. Names and addresses of the suppliers from whom supplies have been received and recipients to whom supplies have been made. The complete address of all the premises where goods are stored by a registered person 35 Accounts and Records Contd …

36. Accounts and Records Contd … Requirement for maintenance of records under Section 35 and Rule 56: Records may also be maintained in electronic form authenticated by digital signature. Proper backup of the electronic record must be maintained and the same are to be produced on demand Entries in records to not be erased, effaced or overwritten, and all incorrect entries shall be scored out and attested. In case of electronic records, a log of edited and deleted entries to be maintained. Each volume of books of account maintained manually to be serially numbered. Annual audit by a Chartered Accountant or a Cost Accountant if turnover exceeds 1 crore during the financial year. 36

37. Period of retention Every registered person required to maintain records for 72 months from the due date of furnishing of annual return for the year pertaining to such accounts and records. In case of proceedings or investigation, the registered person to retain records for a period of one year after final disposal of such proceedings or investigation or 72 months from the due date for filing annual return pertaining to such records, whichever is later. In case such records are maintained manually, to be kept at every related place of business of the registered person for the above period. In case such records are maintained digitally, they are to be accessible at every related place of business for the above period. 37 Accounts and Records Contd …

38. Penal provisions Section 35 (6) - If a registered person fails to account for goods and services as specified under Section 35, the said unaccounted goods or services will be treated as supplied by the said registered person and tax will be recoverable along with interest. Rule 56 (6) - The complete addresses of all the premises where goods are stored by a registered person are to be disclosed. If any taxable goods are found to be stored at any place(s) other than the premises disclosed in the records by the registered person, without the cover of any valid documents, tax shall be payable (along with interest) on such goods as if such goods have been supplied by the registered person. 38

39. GST Network (GSTN) Initially incorporated as a Private Limited Company in 2013 with 49% stake of the Central and State Governments Now notified as a fully-owned Government Company registered under the Companies Act, 2013 with 50% equity of the Central Government and the balance 50% by various States and Union Territories (notified in March 2019 but yet to take effect) The Company has been set up primarily to provide IT infrastructure and services to the Central and State Governments, tax payers and other stakeholders for implementation of the Goods and Services Tax (GST) 39

40. Thank You