FREQUENTLY ASKED QUESTIONS (FAQs) ON GOODS AND SERVICES TAX (GST) the draft laws of CG ST, SGST, IGST, UTGST and Compensation cess along with a host of rules have been approved by GST Council, second edition of the FAQs has been prepared by NACEN based on the aforesaid bills introduced in the Parliament.
CENTRAL BOARD OF EXCISE & CUSTOMS
NEW DELHI
FREQU ENTLY ASKED QUE STIONS (FAQs)
ON
GOODS AND SERVICES TAX (GST )
2nd Edition. 31 st March, 2017
FOREWORD
The compilation of frequently asked questions on GST brought out by the apex training institute under the Central Board of Excise & Customs (CBEC) the National Academy of Customs, Excise & Narcotics (NACEN), has been extremely well received. These GST FAQs were released on 21st September, 2016 by the Hon'ble Finance Minister and were based on the Model GST Law as on June, 2016. The GST FAQs were translated in many regional languages to ensure dissemination across the country.
An umber of significant developments have taken place since the first edition was released. As of now the draft laws of CG ST, SGST, IGST, UTGST and Compensation cess along with a host of rules have been approved by GST Council. The Central bills have been introduced in the Parliament; legislation relating to States will be passed by the respective state assemblies. As promised at the time of bringing the first edition, a second edition of the FAQs has been prepared by NACEN based on the aforesaid bills introduced in the Parliament. I congratulate DG, NACEN and his team for the efforts made and am sure that these will go a long way in disseminatingknowledgeand awareness on GST amongest the Tax officials, Trade and Public.
sd/-
NajibShah
Prepared by:
- Shri Deepak Mata, Assistant Director, NACEN Mumbai and
- Sanjeev Nair, Examiner, CESTAT Mumbai under the supervision of
- Shri Samir Bajaj, Additional Director, NACEN,Mumbai
Reviewed by: S/Shri P.K. Mohanty, Consultant,CBEC
- (Chap.1); Shri Vishal Pratap Singh, DC(GST), GST Policy Wing, CBEC
- (Chap.2), Dr. P.D. Vaghela, CCT, Gujarat
- (Chap3&7); Shri D.P. Nagendra Kumar, Pr. ADG, DGCEI, Bengaluru
- (Chap.4to6); Shri Upender Gupta, Commissioner, GST, CBEC
- (Chap.8to11); Shri Ritvik Pandey, CCT, Karnataka
- (Chap.12); Shri Arun Kumar Mishra, Jt. Secretary, CTD, Bihar
- (Chap.13); Shri Khalid Anwar, Senior JCT, WB
- (Chap.14&24); Shri Ajay Jain, Pr.Commissioner of Customs, Ahmedabad
- (Chap.15); Shri Bankey Behari Agrawal, Principal Commissioner of Customs; Shri Shashank Priya, A DG, DGGST, CBEC
- (Chap.17to20); Shri G.D. Lohani, CCE, Faridabad
- (Chap.21&22); and Shri Prakash Kumar, CEO, GSTN (Chap.23).
Comments and Suggestions on FAQ may please be sent to
dg.nacen-cbec[at]nic.in
dg.nacen-cbec[at]nic.in
Disclaimer :
This FAQ on GST compiled by NACEN and vetted by the Source Trainers is based on the CGST/SGST/UTGST/IGST Act(s).This FAQ is for training and academic purposes only. The information in this booklet is intended only to provide a general overview and is not intended to be treated as legal and vice or opinion. For greater details, you are requested to refer to the respective CGST/SGST/UTGST/IGST Acts. The FAQs refer to CGST and SGST Acts as CGST/SGST as CGST Act and SGST Act are identical in most of the provisions. CGST Act has been introduced in the Parliament. The SGST Acts will be passed by respective state legislatures. A few provisions may be specific to state and may not be in CGST Act.
1. Overview of Goods and Services Tax (GST)
Q 1• What is Goods and Services Tax (GST)?
Ans. It is a destination based tax on consumption of goods and services. It is proposed to believe details taxes right from manufacture up to final consumption with credit of taxes paid at previous stages available asset off. In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer.
Q 2• What exactly is the concept of destination based tax on consumption?
Ans. The tax would accrue to the taxing authority which has jurisdiction over the place of consumption which is also termed as place of supply.
Q 3• Which of the existing taxes are proposed to be subsumed under GST ?
Ans.The GST would replace the following taxes:
(i) taxes currently levied and collected by the Centre:
- Central Excise duty
- Duties of Excise (Medicinal and Toilet Preparations)
- Additional Duties of Excise(Goods of Special Importance)
- Additional Duties of Excise(Textiles and Textile Products)
- Additional Duties of Customs(commonly known as CVD)
- Special Additional Duty of Customs(SAD)
- Service Tax
- Central Surcharges and Cesses so far as they relate to supply of goods and services
(ii) State taxes that would be subsumed under the GST are:
- State VAT
- Central Sales Tax
- Luxury Tax
- Entry Tax (all forms)
- Entertainment and Amusement Tax (except when levied by the local bodies)
- Taxes on advertisements
- Purchase Tax
- Taxes on lotteries,betting and gambling
- State Surcharges and Cesses so far as they relate to supply of goods and services
The GST Council shall make recommendations to the Union and States on the taxes, cesses and surcharges levied by the Centre, the States and the local bodies which may be subsumed in the GST.
Q 4• What principles were adopted for subsuming the above taxes under GST?
Ans.The various Central, State and Local levies were examined to identify their possibility of being subsumed under GST. While identifying, the following principles were kept in mind:
(i) Taxes or levies to be subsumed should be primarily in the nature of indirect taxes, either on the supply of goods or on the supply of services.
(ii) Taxes or levies to be subsumed should be part of the transaction chain which commences with import/ manufacture/ production of goods or provision of services at one end and the consumption of goods and services at the other.
(iii) The sub summation should result in free flow of tax credit in intra and inter-State levels. The taxes, levies and fees that are not specifically related to supply of goods & services should not be sub summed under GST.
(v) Revenue fairness for both the Union and the States individually would need to be attempted.
Q 5• Which are the commodities proposed to be kept outside the purview of GST?
Ans. Article 366 (12 A) of the Constitution as amended by 101 st Constitutional Amendment Act, 2016 defines the Goods and Services tax (GST) as a tax on supply of goods or services or both, except supply of alcoholic liquor for human consumption. So alcohol for human consumption is kept out of GST by way of definition of GST in constitution. Five petroleum products viz.petroleum crude, motor spirit(petrol), high speed diesel, natural gas and aviation turbine fuel have temporarily been kept out and GST Council shall decide the date from which they shall be included in GST. Furthermore, electricity has been kept out of GST.
Q 6• What will be the status in respect of taxation of above commodities after introduction of GST?
Ans. The existing taxation system (VAT&Central Excise) will continue in respect of the above commodities.
Q 7• What will be status of Tobacco and Tobacco products under the GST regime?
Ans. Tobacco and tobacco products would be subject to GST. In addition, the Centre would have the power to levy Central Excise duty on these products.
Q 8• What type of GST is proposed to be implemented?
Ans. It would be a dual GST with the Centre and States simultaneously levying it on a common tax base. The GST to believed by the Centre on intra-State supply of goods and / or services would be called the Central GST (CGST) and that to believed by the States/ Union territory would be called the State GST (SGST)/ UTGST. Similarly, Integrated GST (IGST) will be levied and administered by Centre on every inter-state supply of goods and services.
Q 9• Why is Dual GST required?
Ans. India is a federal country where both the Centre and the States have been assigned the powers to levy and collect taxes through appropriate legislation. Both the levels of Government have distinct responsibilities to perform according to the division of powers prescribed in the Constitution for which they need to raise resources. A dual GST will, therefore, be in keeping with the Constitutional requirement of fiscal federalism.
Q 10• Which authority will levy and administer GST?
Ans. Centre will levy and administer CGST & IGST while respective states /UTs will levy and administer SGST/ UTGST.
Q 11• Why was the Constitution of India amended recently in the context of GST?
Ans. Currently, the fiscal powers between the Centre and the States are clearly demarcated in the Constitution with almost no overlap between the respective domains. The Centre has the powers to levy tax on the manufacture of goods (except alcoholic liquor for human consumption, opium, narcotics etc.) while the States have the powers to levy tax on the sale of goods. In the case of inter-State sales, the Centre has the power to levy a tax (the Central Sales Tax) but, the tax is collected and retained entirely by the States. As for services, it is the Centre alone that is empowered to levy service tax.
Introduction of the GST required amendments in the Constitution so as to simultaneously empower the Centre and the States to levy and collect this tax. The Constitution of India has been amended by the Constitution(one hundred and first amendment) Act, 2016 for this purpose. Article 246-A of the Constitution empowers the Centre and the States to levy and collect the GST.
Q 12• How a particular transaction of goods and services would be taxed simultaneously under Central GST (CGST) and State GST (SGST)?
Ans. The Central GST and the State GST would be levied simultaneously on every transaction of supply of goods and services except the exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits. Further,both would be levied on the same price or value unlike State VAT which is levied on the value of the goods inclusive of CENVAT. While the location of the supplier and the recipient within the country is immaterial for the purpose of CGST, SGST would be chargeable only when the supplier and the recipient are both located within the State.
Illustration I: Suppose hypothetically that the rate of CGST is 10% and that of SGST is 10%. When a wholesale dealer of steel in Uttar Pradesh supplies steel bars and rods to a construction company which is also located within the same State for, say Rs. 100,the dealer would charge CGST of Rs.10 and SGST of Rs.10 in addition to the basic price of the goods. He would be required to deposit the CGST component in to a Central Government account while the SGST portion in to the account of the concerned State Government. Of course, hence d'not actually pay Rs.20 (Rs.10 + Rs. 10) in cash as he would be entitled to set-off this liability against the CGST or SGST paid on his purchases (say, inputs). But for paying CGST he would be allowed to use only the credit of CGST paid on his purchases while for SGST he can utilize the credit of SGST alone. In other words, CGST credit cannot, in general, be used for payment of SGST. Norcan SGST credit be used for payment of CGST.
Illustration II: Suppose, again hypothetically, that the rate of CGST is 10% and that of SGST is 10%.When an advertising company located in Mumbai supplies advertising services to a company manufacturing soap also located within the State of Maharashtra for, let us say Rs.100, the ads company would charge CGST of Rs.10 as well as SGST of Rs.10 to the basic value of the service. He would be required to deposit the CGST component into a Central Government account while the SGST portion in to the account of the concerned State Government. Of course, he need not again actually pay Rs. 20 (Rs. 10+Rs. 10) in cash as it would be entitled to set-off this liability against the CGST or SGST paid on his purchase (say, of inputs such as stationery, office equipment, services of an artist etc.). But for paying CGST he would be allowed to use only the credit of CGST paid on its purchase while for SGST he can utilize the credit of SGST alone. In other words, CGST credit cannot, in general, be used for payment of SGST. Norcan SGST credit be used for payment of CGST.
Q 13• What are the benefits which the Country will accrue from GST?
Ans. Introduction of GST would be a very significant step in the field of indirect tax reforms in India. By amalgamating a large number of Central and State taxes in to a single tax and allowing set-off of prior-stage taxes, it would mitigate the ill effects of cascading and pave the way for a common national market. For the consumers, the biggest gain would be in terms of are eductaion in the overall tax burden on goods, which is currently estimated at 25%- 30%.Introduction of GST would also make our products competitive in the domestic and international markets. Studies show that this would instantly spur economic growth. There may
also be revenue gain for the Centre and the States due to widening of the tax base, increase in trade volumes and improved tax compliance. Last but not the least, this tax, because of its transparent character, would be easier to administer.
Q 14• What is IGST?
Ans. Under the GST regime,an Integrated GST (IGST) would be levied and collected by the Centre on inter-State supply of goods and services. Under Article 269 A of the Constitution, the GST on supplies in the course of inter- State trade or commerce shall be levied and collected by the Government of India 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 the Goods and Services Tax Council.
Q 15•Who will decide rates for levy of GST?
Ans.The CGST and SGST would be levied at rates to be jointly decided by the Centre and States. The rates would be notified on the recommendations of the GST Council.
Q 15.What would be the role of GST Council?
Ans.A GST Council would be constituted comprising the Union Finance Minister (who will be the Chairman of the Council), the Minister of State (Revenue) and the State Finance/Taxation Ministers to make recommendations to the Union and the States on
(i) the taxes, cesses and surcharges levied by the Centre, the States and the local bodies which maybe sub summed under GST;
(ii) the goods and services that may be subjected to or exempted from the GST;
(iii) the date on which the GST shall be levied on petroleum crude, high speed diesel, motor siprit (commonly known as petrol), natural gas and aviation turbine fuel;
(iv)model GST laws, principles of levy, apportionment of IGST and the principles that govern the place of
supply;
(v) the threshold limit of turn over below which the goods and services may be exempted from GST;
(vi) the rates including floor rates with bands of GST;
(vii)any special rate or rates for as pecified period to raise additional resources during any natural calamity or disaster;
(viii) special provision with respect to the North- East States, J&K, Himachal Pradesh and Uttarakhand; and
(ix)any other matter relating to the GST, as the Council may decide.
Q 16•What is the guiding principle of GST Council?
Ans. The mechanism of GST Council would ensure harmonization on different aspects of GST between the Centre and the States as well as among States. It has been provided in the Constitution (one hundred and first amendment) Act, 2016 that the GST Council, in its discharge of various functions, shall be guided by the need for a harmonized structure of GST and for the development of a harmonized national market for goods and services.
Q 17• How will decisions be taken by GST Council?
Ans. The Constitution(one hundred and first amendment) Act, 2016 provides that every decision of the GST Council shall be taken at a meeting by a majority of not less than 3/4th of the weighted votes of the Members present and voting. The vote of the Central Government shall have a weight age of 1/3rd of the votes cast and the votes of all the State Governments taken together shall have a weight age of 2/3rd of the total votes cast in that meeting. One half of the total number of members of the GST Council shall constitute the quorum at its meetings.
Q 18•Who is liable to pay GST under the proposed GST regime?
Ans. Under the GST regime, tax is payable by the taxable person on the supply of goods and/or services. Liability to pay tax arises when the taxable person crosses the turnover threshold of Rs.20 lakhs (Rs.10 lakhs for NE& Special Category States)except in certain specified cases where the taxable person is liable to pay GST even though he has not crossed the threshold limit. The CGST / SGST is payable on all intra-State supply of goods and/or services and IGST is payable on all inter-State supply of goods and/or services. The CGST/SGST and IGST are payable at the rates specified in the Schedules to the respective Acts.
Q 19•What are the benefits available to small tax payers under the GST regime?
Ans. Tax payers with an aggregate turn over in a financial year up to [Rs.20 lakhs & Rs.10 Lakhs for NE and special category states] would be exempt from tax. Further, a person whose aggregate turnover in the preceding financial year is less than Rs.50 Lakhs can opt for a simplified composition scheme where tax will payable at a concessional rate on the turnover in a state. [Aggregate turn over shall include the aggregate value of all tax able supplies, exempt supplies and exports of goods and/or services and exclude taxes viz. GST.] Aggregate turn over shall be computed on all India basis. For NE States and special category states, the exemption threshold shall be [Rs. 10 lakhs]. All taxpayers eligible for threshold exemption will have the option of paying tax with input tax credit (ITC) benefits.Tax payers making inter-State supplies or paying tax on reverse charge basis shall not be eligible for threshold exemption.
Q 20•How will the goods and services be classified under GST regime?
Ans. HSN (Harmonised System of Nomenclature) code shall be used for classifying the goods under the GST regime. Tax payers whose turn over is above Rs.1.5 crores but below Rs. 5 crores shall use 2-digit code and the taxpayers whose turnover is Rs. 5 crores and above shall use 4-digit code. Taxpayers whose turnover is below Rs. 1.5 crores are not required to mention HSN Code in their invoices. Services will be classified as per the Services Accounting Code(SAC)
Q 21•How will imports be taxed under GST?
Ans. Imports of Goods and Services will be treated as inter-state supplies and IGST will be levied on import of goods and services into the country. The incidence of tax will follow the destination principle and the tax revenue in case of SGST will accrue to the State where the imported goods and services are consumed. Full and complete set-off will be available on the GST paid on import on goods and services.
Q 22• How will Exports be treated under GST?
Ans.Exports will be treated as zero rated supplies. No tax will be payable on exports of goods or services, however credit of input tax credit will be available and same will be available as refund to the exporters. The Exporter will have an option to either pay tax on the output and claim refund of IGST or export under Bond without payment of IGST and claim refund of Input Tax Credit (ITC).
Q 23• What is the scope of composition scheme under GST?
Ans. Small taxpayers with an aggregate turnover in a preceding
financial year up to [Rs. 50 lakhs] shall be eligible for
composition levy. Under the scheme, a taxpayer shall pay tax as a
percentage of his turnover in a state during the year without the
benefit of ITC. The rate of tax for CGST and SGST/UTGST shall not
be less than [1% for manufacturer & 0.5% in other cases; 2.5%
for specific services as mentioned in para 6(b) of Schedule II viz
Serving of food or any other article for human
consumption]. A tax payer opting for composition levy shall not
collect any tax from his customers. The government may increase the
above said limit of 50 lakhs rupees to up to one crore rupees, on
the recommendation of GST Council.
Tax payers making inter- state supplies or making supplies through
ecommerce operators who are required to collect tax at source shall
not be eligible for composition scheme.
Q 24. Whether t h e composition scheme w i l l be optional or
compulsory?
Ans. Optional.
Q 25. What is GSTN and its role in the GST regime?
Ans. GSTN stands for Goods and Service Tax Network (GSTN). A
Special Purpose Vehicle called the GSTN has been set up to cater to
the needs of GST. The GSTN shall provide a shared IT infrastructure
and services to Central and State Governments, tax payers and other
stakeholders for implementation of GST. The functions of the GSTN
would, inter alia, include: (i) facilitating registration; (ii)
forwarding the returns to Central and State authorities; (iii)
computation and settlement of IGST; (iv) matching of tax payment
details with banking network; (v) providing various MIS reports to
the Central and the State Governments based on the tax payer return
information; (vi) providing analysis of tax payers’ profile; and
(vii) running the matching engine for matching, reversal and
reclaim of input tax credit.
The GSTN is developing a common GST portal and applications for
registration, payment, return and MIS/ reports. The GSTN would also
be integrating the common GST portal with the existing tax
administration IT systems
and would be building interfaces for tax payers. Further, the GSTN
is developing back-end modules like assessment, audit, refund,
appeal etc. for 19 States and UTs (Model II States). The CBEC and
Model I States (15 States) are themselves developing their GST
back-end systems. Integration of GST front-end system with back-end
systems will have to be completed and tested well in advance for
making the transition smooth.
Q 26. How are the disputes going to be resolved under the GST
regime?
Ans. The Constitution (one hundred and first amendment) Act, 2016
provides that the Goods and Services Tax Council shall establish a
mechanism to adjudicate any dispute-
(a) between the Government of India and one or more States; or
(b)
between the Government of India and any State or States on one side
and one or more other Sates on the other side; or
(c) between two or more States,
arising out of the recommendations of the Council or implementation
thereof.
Q 27. What is the purpose of Compliance rating mechanism?
Ans. As per Section 149 of the CGST/SGST Act, every registered
person shall be assigned a compliance rating based on the record of
compliance in respect of specified parameters. Such ratings shall
also be placed in the public domain. A prospective client will be
able to see the compliance ratings of suppliers and take a decision
as to
whether to deal with a particular supplier or not. This will create
healthy competition amongst taxable persons.
Q 28. Whether actionable claims liable to GST?
Ans. As per section 2(52) of the CGST/SGST Act actionable claims
are to be considered as goods. Schedule III read with Section 7 of
the CGST/SGST Act lists the activities or transactions which shall
be treated neither as supply of goods nor supply of services. The
Schedule lists actionable claims other than lottery, betting and
gambling as one of such transactions. Thus only lottery, betting
and gambling shall be treated as supplies under the GST regime. All
the other actionable claims shall not be supplies.
Q 29. Whether transaction in securities be taxable in GST?
Ans. Securities have been specifically excluded from the definition
of goods as well as services. Thus, the transaction in securities
shall not be liable to GST.
Q 30. What is the concept of Information Return?
Ans. Information return is based on the idea of verifying the
compliance levels of registered persons through information
procured from independent third party sources. As per section 150
of the CGST/SGST Act, many authorities who are responsible for
maintaining records of registration or statement of accounts or any
periodic return or document containing details of payment of tax
and other details of transaction of goods or services or both or
transactions related to a bank account or consumption of
electricity or transaction of purchase, sale or exchange of
goods or property or right or interest in a property under any law
for the time being in force, are mandated to furnish an information
return of the same in respect of such periods, within such time, in
such form and manner and to such authority or agency as may be
prescribed. Failure to do so may result in penalty being imposed as
per Section 123.
Q 31. Different companies have different types of accounting
software packages and no specific format are mandated for keeping
records. How will department be able to read into these complex
software?
Ans. As per Section 153 of the CGST/SGST Act, having regard to the
nature and complexity of a case and in the interest of revenue,
department may take assistance from an expert at any state of
scrutiny, inquiry, investigation or any other proceedings.
Q 32. Is there any provision in GST for tax treatment of goods
returned by the recipient?
Ans. Yes, Section 34 deals with such situations. Where the goods
supplied are returned by the recipient, the registered person
(supplier of goods) may issue to the recipient a credit note
containing the prescribed particulars. The details of the credit
note shall be declared by the supplier in the returns for the month
during which such credit note was issued but not later than
September following the end of the year in which such supply was
made or the date of filing of the relevant annual return, whichever
is earlier. The details of the credit note shall be matched with
the corresponding reduction in claim for input tax credit by the
recipient in his valid return for the same tax period or any
subsequent tax period and the claim for reduction in
output tax liability by the supplier that matches with the
corresponding reduction in claim for ITC by the recipient shall be
finally accepted and communicated to both parties.
Q 33. What is Anti-Profiteering measure?
Ans. As per section 171 of the CGST/SGST Act, any reduction in rate
of tax on any supply of goods or services or the benefit of input
tax credit shall be passed on to the recipient by way of
commensurate reduction in prices. An authority may be constituted
by the government to examine whether input tax credits availed by
any registered person or the reduction in the tax rate have
actually resulted in a commensurate reduction in the price of the
goods or services or both supplied by him.
2. Levy of and Exemption from Tax
Q 1. Where is the power to levy GST derived from?
Ans. Article 246A of the Constitution, which was introduced by the
Constitution (101st Amendment) Act, 2016 confers concurrent powers
to both, Parliament and State Legislatures to make laws with
respect to GST i. e. central tax (CGST) and state tax (SGST) or
union territory tax (UTGST). However, clause 2 of Article 246A read
with Article 269A provides exclusive power to the Parliament to
legislate with respect to inter-State trade or commerce i.e.
integrated tax (IGST).
Q 2. What is the taxable event under GST?
Ans. Taxable event under GST is supply of goods or services or
both. CGST and SGST/ UTGST will be levied on intra-State supplies.
IGST will be levied on inter-State supplies.
Q 3. Whether supplies made without consideration will also come
within the purview of supply under GST?
Ans. Yes, but only those activities which are specified in Schedule
I to the CGST Act / SGST Act. The said provision has been adopted
in IGST Act as well as in UTGST Act also.
Q 4. Will giving away essential commodities by a charitable
institution be taxable activity?
Ans. In order to be a supply which is taxable under GST, the
transaction should be in the course or furtherance of
business. As there is no quid pro quo involved in supply for
charitable activities, it is not a supply under GST.
Q 5. Who can notify a transaction to be supply of goods or
services?
Ans. Central Government or State Government, on the recommendations
of the GST Council, can notify an activity to be the supply of
goods and not supply of services or supply of services and not
supply of goods or neither a supply of goods nor a supply of
services.
Q 6. What are composite supply and mixed supply? How are these two
different from each other?
Ans. Composite supply is a supply consisting of two or more taxable
supplies of goods or services or both or any combination thereof,
which are bundled in natural course and are supplied in conjunction
with each other in the ordinary course of business and where one of
which is a principal supply. For example, when a consumer buys a
television set and he also gets warranty and a maintenance contract
with the TV, this supply is a composite supply. In this example,
supply of TV is the principal supply, warranty and maintenance
service are ancillary.
Mixed supply is combination of more than one individual supplies of
goods or services or any combination thereof made in conjunction
with each other for a single price, which can ordinarily be
supplied separately. For example, a shopkeeper selling storage
water bottles along with refrigerator. Bottles and the refrigerator
can easily be priced and sold separately.
Q 7. What is the treatment of composite supply and mixed supply
under GST?
Ans. Composite supply shall be treated as supply of the principal
supply. Mixed supply would be treated as supply of that particular
goods or services which attracts the highest rate of tax.
Q 8. Are all goods and services taxable under GST?
Ans. Supplies of all goods and services are taxable except
alcoholic liquor for human consumption. Supply of petroleum crude,
high speed diesel, motor spirit (commonly known as petrol), natural
gas and aviation turbine fuel shall be taxable with effect from a
future date. This date would be notified by the Government on the
recommendations of the GST Council.
Q 9. What is meant by Reverse Charge?
Ans. It means the liability to pay tax is on the recipient of
supply of goods and services instead of the supplier of such goods
or services in respect of notified categories of supply.
Q 10. Is the reverse charge mechanism applicable only to services?
Ans. No, reverse charge applies to supplies of both goods and
services, as notified by the Government on the recommendations of
the GST Council.
Q 11. What will be the implications in case of
receipt of supply from unregistered persons?
Ans. In case of receipt of supply from an unregistered person, the
registered person who is receiving goods or services shall be
liable to pay tax under reverse charge mechanism.
Q 12. Can any person other than the supplier or recipient be liable
to pay tax under GST?
Ans. Yes, the Central/State government can specify categories of
services the tax on which shall be paid by the electronic commerce
operator, if such services are supplied through it and all the
provisions of the Act shall apply to such electronic commerce
operator as if he is the person liable to pay tax in relation to
supply of such services.
Q 13. What is the threshold for opting to pay tax under the
composition scheme?
Ans. The threshold for composition scheme is Rs. 50 Lakhs of
aggregate turnover in the preceding financial year. The benefit of
composition scheme can be availed up to the turnover of Rs. 50
Lakhs in current financial year.
Q 14. What are the rates of tax for composition scheme?
Ans. There are different rates for different sectors. In normal
cases of supplier of goods (i.e. traders), the composition rate is
0.5 % of the turnover in a State or Union territory. If the person
opting for composition scheme is manufacturer, then the rate is 1%
of the turnover in a State or Union territory. In case of
restaurant services, it is 2.5% of the turnover in a State or Union
territory. These rates are under one Act, and same rate would be
applicable in the other Act also. So, effectively, the composition
rates (combined rate under CGST and SGST/UTGST) are 1%, 2% and 5%
for normal supplier, manufacturer and restaurant service respectively.
Q 15. A person availing composition scheme during a financial year
crosses the turnover of Rs.50 Lakhs during the course of the year
i.e. say he crosses the turnover of Rs.50 Lakhs in December? Will
he be allowed to pay tax under composition scheme for the remainder
of the year i.e. till 31 st March?
Ans. No. The option availed shall lapse from the day on which his
aggregate turnover during the financial year exceeds Rs.50 Lakhs.
Q 16. Will a taxable person, having multiple registrations, be
eligible to opt for composition scheme only for a few of
registrations?
Ans. All registered persons having the same Permanent Account
Number (PAN) have to opt for composition scheme. If one registered
person opts for normal scheme, others become ineligible for
composition scheme.
Q 17. Can composition scheme be availed of by a manufacturer and a
service supplier?
Ans. Yes, a manufacturer can opt for composition scheme generally.
However, a manufacturer of goods, which would be notified on the
recommendations of the GST Council, cannot opt for this scheme.
This scheme is not available for services sector, except
restaurants.
Q 18. Who are not eligible to opt for composition scheme?
Ans. Broadly, five categories of registered person are not eligible
to opt for the composition scheme. These are:
(i) supplier of services other than supplier of
restaurant service;
(ii)
supplier of goods which are not taxable under the CGST Act/SGST
Act/UTGST Act.
(iii) an inter-State supplier of goods;
(iv) person supplying goods through an electronic commerce operator;
(v) manufacturer of certain notified goods.
Q 19. Can the registered person under composition scheme claim
input tax credit?
Ans. No, registered person under composition scheme is not eligible
to claim input tax credit.
Q 20. Can the customer who buys from a registered person who is
under the composition scheme claim composition tax as input tax
credit?
Ans. No, customer who buys goods from registered person who is
under composition scheme is not eligible for composition input tax
credit because a composition scheme supplier cannot issue a tax
invoice.
Q 21. Can composition tax be collected from customers?
Ans. No, the registered person under composition scheme is not
permitted to collect tax. It means that a composition scheme
supplier cannot issue a tax invoice.
Q 22. How to compute ‘aggregate turnover’ to determine eligibility
for composition scheme?
Ans. The methodology to compute aggregate turnover is given in
Section 2(6). Accordingly, ‘aggregate turnover’ means value of all
outward supplies (taxable supplies +exempt supplies +exports +
inter-state supplies) of a person having the same PAN and it
excludes taxes levied
under central tax (CGST), State tax (SGST), Union territory tax
(UTGST), integrated tax(IGST) and compensation cess. Also, the
value of inward supplies on which tax is payable under reverse
charge is not taken into account for calculation of ‘aggregate
turnover’.
Q 23. What are the penal consequences if a person opts for the
composition scheme in violation of the conditions?
Ans. If a taxable person has paid tax under the composition scheme
though he was not eligible for the scheme then the person would be
liable to penalty and the provisions of section 73 or 74 shall be
applicable for determination of tax and penalty.
Q 24. Does the GST Law empower the Government to exempt supplies
from the levy of GST?
Ans. Yes. In the public interest, the Central or the State
Government can exempt either wholly or partly, on the
recommendations of the GST council, the supplies of goods or
services or both from the levy of GST either absolutely or subject
to conditions. Further the Government can exempt, under
circumstances of an exceptional nature, by special order any goods
or services or both. It has also been provided in the SGST Act and
UTGST Act that any exemption granted under CGST Act shall be deemed
to be exemption under the said Act.
Q 25. When exemption from whole of tax collected on goods or
services or both has been granted absolutely, can a person pay tax?
Ans. No, the person supplying exempted goods or services or both
shall not collect the tax in excess of the effective rate.
3. Registration
Q 1. What is advantage of taking registration in GST?
Ans. Registration under Goods and Service Tax (GST) regime will
confer following advantages to the business:
• Legally recognized as supplier of goods or services.
•
Proper accounting of taxes paid on the input goods or services
which can be utilized for payment of GST due on supply of goods or
services or both by the business.
•
Legally authorized to collect tax from his purchasers and pass on
the credit of the taxes paid on the goods or services supplied to
purchasers or recipients.
•
Getting eligible to avail various other benefits and privileges
rendered under the GST laws.
Q 2. Can a person without GST registration claim ITC and collect
tax?
Ans. No, a person without GST registration can neither collect GST
from his customers nor can claim any input tax credit of GST paid
by him.
Q 3. What will be the effective date of registration?
Ans. Where the application for registration has been submitted
within thirty days from the date on which the person becomes liable
to registration, the effective date of registration shall be the
date on which he became liable for registration.
Where an application for registration has been submitted by the applicant after thirty days from the date of his becoming
liable to registration, the effective date of registration shall be
the date of grant of registration.
In case of a person taking registration voluntarily while being
within the threshold exemption limit for paying tax, the effective
date of registration shall be the date of order of registration.
Q 4. Who are the persons liable to take a Registration under the
Model GST Law?
Ans. As per Section 22 of the CGST/SGST Act 2017, every supplier
(including his agent) who makes a taxable supply i.e. supply of
goods and / or services which are leviable to tax under GST law,
and his aggregate turn over in a financial year exceeds the
threshold limit of twenty lakh rupees shall be liable to register
himself in the State or the Union territory of Delhi or Puducherry
from where he makes the taxable supply.
In case of eleven special category states (as mentioned in
Art.279A(4)(g) of the Constitution of India), this threshold limit
for registration liability is ten lakh rupees.
Besides, Section 24 of the Act mentions certain categories of
suppliers, who shall be liable to take registration even if their
aggregate turnover is below the said threshold limit of 20 lakh
rupees.
On the other hand, as per Section 23 of the Act, an agriculturist
in respect of supply of his agricultural produce; as also any
person exclusively making supply of non-taxable or wholly exempted
goods and/or services under GST law will not be liable for
registration.
Q 5. What is aggregate turnover?
Ans. As per section 2(6) of the CGST/SGST Act “aggregate turnover”
includes the aggregate value of:
(i) all taxable supplies,
(ii) all exempt supplies,
(iii) exports of goods and/or service, and,
(iv) all inter-state supplies of a person having the same PAN.
The above shall be computed on all India basis and excludes taxes
charged under the CGST Act, SGST Act, UTGST Act, and the IGST Act.
Aggregate turnover shall include all supplies made by the Taxable
person, whether on his own account or made on behalf of all his
principals.
Aggregate turnover does not include value of supplies on which tax
is levied on reverse charge basis, and value of inward supplies.
The value of goods after completion of job work is not includible
in the turnover of the job-worker. It will be treated as supply of
goods by the principal and will accordingly be includible in the
turnover of the Principal.
Q 6. Which are the cases in which registration is compulsory?
Ans. As per Section 24 of the CGST/SGST Act, the following
categories of persons shall be required to be registered
compulsorily irrespective of the threshold limit:
i) persons making any inter-State taxable supply;
ii) casual taxable persons;
iii) persons who are required to pay tax under reverse charge;
iv)
electronic commerce operators required to pay tax under sub-section
(5) of section 9;
v) non-resident taxable persons;
vi) persons who are required to deduct tax under section 51;
vii)
persons who supply goods and/or services on behalf of other
registered taxable persons whether as an agent or otherwise;
viii)
Input service distributor (whether or not separately registered
under the Act)
ix) persons who are required to collect tax under section 52;
x) every electronic commerce operator
xi)
every person supplying online information and data base retrieval
services from a place outside India to a person in India, other
than a registered person; and,
xii)
such other person or class of persons as may be notified by the
Central Government or a State Government on the recommendations of
the Council.
Q 7. What is the time limit for taking a Registration under GST?
Ans. A person should take a Registration, within thirty days from
the date on which he becomes liable to registration, in such manner
and subject to such conditions as is prescribed under the
Registration Rules. A Casual Taxable person and a non-resident
taxable person should however apply for registration at least 5
days prior to commencement of business.
Q 8. If a person is operating in different states, with the same
PAN number, whether he can operate with a single Registration?
Ans. No. 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 and is liable to pay GST in terms of
Sub-section (1) of Section 22 of the CGST/SGST Act.
Q 9. Whether a person having multiple business verticals in a state
can obtain for different registrations?
Ans. Yes. In terms of the proviso to Sub-Section (2) of Section 25,
a person having multiple business verticals in a State may obtain a
separate registration for each business vertical, subject to such
conditions as may be prescribed.
Q 10. Is there a provision for a person to get himself voluntarily
registered though he may not be liable to pay GST?
Ans. Yes. In terms of Sub-section (3) of Section 25, a person,
though not liable to be registered under Section 22 may get himself
registered voluntarily, and all provisions of this Act, as are
applicable to a registered taxable person, shall apply to such
person.
Q 11. Is possession of a Permanent Account Number (PAN) mandatory
for obtaining a Registration?
Ans. Yes. As per Section 25(6) of the CGST/SGST Act every person
shall have a Permanent Account Number issued under the Income Tax
Act,1961(43 of 1961) in order to be eligible for grant of
registration.
However as per the proviso to the aforesaid section 25(6), a person
required to deduct tax under Section 51, may have, in lieu of a
PAN, a Tax Deduction and Collection Account Number issued under the
said Income Tax Act, in order to be eligible for grant of
registration.
Also, as per Section 25(7) PAN is not mandatory for a non-resident
taxable person who may be granted registration on the basis of any
other document as maybe prescribed.
Q 12. Whether the Department through the proper officer, can
suo-moto proceed to register of a Person under this Act?
Ans. Yes. In terms of sub-section (8) of Section 25, where a person
who is liable to be registered under this Act fails to obtain
registration, the proper officer may, without prejudice to any
action which may be taken under this Act, or under any other law
for the time being in force, proceed to register such person in the
manner as is prescribed in the Registration rules.
Q 13. Whether the proper officer can reject an Application for
Registration?
Ans. Yes. In terms of sub-section 10 of section 25 of the CGST/SGST
Act, the proper officer can reject an application for registration
after due verification.
Q 14. Whether the Registration granted to any person is permanent?
Ans. Yes, the registration Certificate once granted is permanent
unless surrendered, cancelled, suspended or revoked.
Q 15. Is it necessary for the UN bodies to get registration under
GST?
Ans. Yes. In terms of Section 25(9) of the CGST/SGST Act, all
notified UN bodies, Consulate or Embassy of foreign countries and
any other class of persons so notified would be required to obtain
a unique identification number (UIN) from the GST portal. The
structure of the said ID would be uniform across the States in
conformity with GSTIN structure and the same will be common for the
Centre and the States. This UIN will be needed for claiming refund
of taxes paid on notified supplies of goods and services received
by them, and for any other purpose as may be notified.
Q 16. What is the responsibility of the taxable person supplying to
UN bodies?
Ans. The taxable supplier supplying to these organizations is
expected to mention the UIN on the invoices and treat such supplies
as supplies to another registered person (B2B) and the invoices of
the same will be uploaded by the supplier.
Q 17. Is it necessary for the Govt. Organization to get
registration?
Ans. A unique identification number (ID) would be given by the
respective state tax authorities through GST portal to Government
authorities / PSUs not making outwards supplies of GST goods (and
thus not liable to obtain GST registration) but are making
inter-state purchases.
Q 18. Who is a Casual Taxable Person?
Ans. Casual Taxable Person has been defined in Section 2 (20) of
the CGST/SGST Act meaning a person who occasionally undertakes
transactions involving supply of goods and/or services in the
course or furtherance of business, whether as principal, or agent
or in any other capacity, in a State or a Union territory where he
has no fixed place of business.
Q 19. Who is a Non-resident Taxable Person?
Ans. In terms of Section 2(77) of the CGST/SGST Act, a non-resident
taxable person means any person who occasionally undertakes
transactions involving supply of goods and/or services whether as
principal or agent or in any other capacity, but who has no fixed
place of business or residence in India.
Q 20. What is the validity period of the Registration certificate
issued to a Casual Taxable Person and non- Resident Taxable person?
Ans. In terms of Section 27(1) read with proviso thereto, the
certificate of registration issued to a “casual taxable person” or
a “non-resident taxable person” shall be valid for a period
specified in the application for registration or ninety days from
the effective date of registration, whichever is earlier. However,
the proper officer, at the request of the said taxable person, may
extend the validity of the aforesaid period of ninety days by a
further period not exceeding ninety days.
Q 21. Is there any Advance tax to be paid by a Casual Taxable
Person and Non-resident Taxable Person at the time of obtaining
registration under this Special Category?
Ans. Yes. While a normal taxable person does not have to make any
advance deposit of tax to obtain registration, a casual taxable
person or a non-resident taxable person shall, at the time of
submission of application for registration is required, in terms of
Section 27(2) read with proviso thereto, make an advance deposit of
tax in an amount equivalent to the estimated tax liability of such
person for the period for which the registration is sought. If
registration is to be extended beyond the initial period of ninety
days, an advance additional amount of tax equivalent to the
estimated tax liability is to be deposited for the period for which
the extension beyond ninety days is being sought.
Q 22. Whether Amendments to the Registration Certificate is
permissible?
Ans. Yes. In terms of Section 28, the proper officer may, on the
basis of such information furnished either by the
registrant or as ascertained by him, approve or reject amendments
in the registration particulars within a period of 15 common
working days from the date of receipt of application for amendment.
It is to be noted that permission of the proper officer for making
amendments will be required for only certain core fields of
information, whereas for the other fields, the certificate of
registration shall stand amended upon submission of application in
the GST common portal.
Q 23. Whether Cancellation of Registration
Certificate is permissible?
Ans. Yes. Any Registration granted under this Act may be cancelled
by the Proper Officer, in circumstances mentioned in Section 29 of
the CGST/SGST Act. The proper officer may, either on his own motion
or on an application filed, in the prescribed manner, by the
registered taxable person or by his legal heirs, in case of death
of such person, cancel the registration, in such manner and within
such period as may be prescribed. As per the Registration Rules, an
order for cancellation is to be issued within 30 days from the date
of receipt of reply to SCN (in cases where the cancellation is
proposed to be carried out suo moto by the proper officer) or from
the date of receipt of application for cancellation (in case where
the taxable person/legal heir applies for such cancellation)
Q 24. Whether cancellation of Registration under CGST Act means
cancellation under SGST Act also?
Ans. Yes, the cancellation of registration under one Act (say CGST
Act) shall be deemed to be a cancellation of
registration under the other Act (i.e. SGST Act). (Section 29 (4))
Q 25. Can the proper Officer Cancel the Registration on his own?
Ans. Yes, in certain circumstances specified under section 29(2) of
the CGST/SGST Act, the proper officer can cancel the registration
on his own. Such circumstances include contravention of any of the
prescribed provisions of the CGST Act or the rules made there
under, not filing return by a composition dealer for three
consecutive tax periods or non-furnishing of returns by a regular
taxpayer for a continuous period of six months, and not commencing
business within six months from the date of voluntary registration.
However, before cancelling the registration, the proper officer has
to follow the principles of natural justice. (proviso to Section
29(2)(e))
Q 26. What happens when the registration is obtained by means of
willful mis-statement, fraud or suppression of facts?
Ans. In such cases, the registration may be cancelled with
retrospective effect by the proper officer. (Section 29(2)(e))
Q 27. Is there an option to take centralized registration for
services under GST Law?
Ans. No, the tax paper has to take separate registration in every
state from where he makes taxable supplies.
Q 28. If the taxpayer has different business verticals in one
state, will he have to obtain separate registration for each such
vertical in the state?
Ans. No, however the taxpayer has the option to register such
separate business verticals independently in terms of the proviso
to Section 25(2) of the CGTST Act, 2017.
Q 29. Who is an ISD?
Ans. ISD stands for Input Service Distributor and has been defined
under Section 2(61) of the CGST/SGST Act. It is basically an office
meant to receive tax invoices towards receipt of input services and
further distribute the credit to supplier units (having the same
PAN) proportionately.
Q 30. Will ISD be required to be separately registered other than
the existing tax payer registration?
Ans. Yes, the ISD registration is for one office of the taxpayer
which will be different from the normal registration.
Q 31. Can a tax payer have multiple ISDs?
Ans. Yes. Different offices of a tax payer can apply for ISD
registration.
Q 32. What could be the liabilities (in so far as registration is
concerned) on transfer of a business?
Ans. The transferee or the successor shall be liable to be
registered with effect from such transfer or succession and he will
have to obtain a fresh registration with effect from
the date of such transfer or succession. (Section 22(3)).
Q 33. Whether all assesses / dealers who are already registered
under existing central excise/service tax/ vat laws will have to
obtain fresh registration?
Ans. No, GSTN shall migrate all such assessees/dealers to the GSTN
network and shall issue a provisional registration certificate with
GSTIN number on the appointed day, which after due verification by
the departmental officers within six months, will be converted into
final registration certificate. For converting the provisional
registration to final registration the registrants will be asked to
submit all requisite documents and information required for
registration in a prescribed period of time. Failure to do so will
result in cancellation of the provisional GSTIN number.
The service tax assesses having centralized registration will have
to apply afresh in the respective states wherever they have their
businesses.
Q 34. Whether the job worker will have to be compulsorily
registered?
Ans. No, a Job worker is a supplier of services and will be obliged
to take registration only when his turnover crosses the prescribed
threshold of 20/10 Lakhs.
Q 35. Whether the goods will be permitted to be supplied from the
place of business of a job worker?
Ans. Yes. But only in cases where the job worker is registered, or
if not, the principal declares the place of business of the job
worker as his additional place of business
.
Q 36. At the time of registration will the assessee have to declare
all his places of business?
Ans. Yes. The principal place of business and place of business
have been separately defined under section 2(89) & 2(85) of the
CGST/SGST Act respectively. The taxpayer will have to declare the
principal place of business as well as the details of additional
places of business in the registration form.
Q 37. Is there any system to facilitate smaller dealers or dealers
having no IT infrastructure?
Ans. In order to cater to the needs of tax payers who are not IT
savvy, following facilities shall be made available: -
Tax Return Preparer(TRP): A taxable person may prepare his
registration application /returns himself or can approach the TRP
for assistance. TRP will prepare the said registration document /
return in prescribed format on the basis of the information
furnished to him by the taxable person. The legal responsibility of
the correctness of information contained in the forms prepared by
the TRP will rest with the taxable person only and the TRP shall
not be liable for any errors or incorrect information.
Facilitation Centre (FC): shall be responsible for the
digitization and/or uploading of the forms and documents including
summary sheet duly signed by the Authorized Signatory and given to
it by the taxable person. After uploading the data on common portal
using the ID and Password of FC, a print-out of acknowledgement
will be taken and signed by the FC and handed over to the taxable
person for his records. The FC will scan and upload the summary
sheet duly signed by the Authorized Signatory.
Q 38. Is there any facility for digital signature in the GSTN
registration?
Ans. Tax payers would have the option to sign the submitted
application using valid digital signatures. There will be two
options for electronically signing the application or other
submissions- by e-signing through Aadhar number, or through DSC
i.e. by registering the tax payer’s digital signature certificate
with GST portal. However, companies or limited liability
partnership entities will have to sign mandatorily through DSC
only. Only level 2 and level 3 DSC certificates will be acceptable
for signature purpose.
Q 39. What will be the time limit for the decision on the on line
registration application?
Ans. If the information and the uploaded documents are found in
order, the State and the Central authorities shall have to respond
to the application within three common working days. If they
communicate any deficiency or
discrepancy in the application within such time, then the applicant
will have to remove the discrepancy / deficiency within 7 days of
such communication. Thereafter, for either approving the
application or rejecting it, the State and the Central authorities
will have 7 days from the date when the taxable person communicates
removal of deficiencies. In case no response is given by the
departmental authorities within the said time line, the portal
shall automatically generate the registration.
Q 40. What will be the time of response by the applicant if any
query is raised in the online application?
Ans. If during the process of verification, one of the tax
authorities raises some query or notices some error, the same shall
be communicated to the applicant and to the other tax authority
through the GST Common Portal within 3 common working days. The
applicant will reply to the query/rectify the error/ answer the
query within a period of seven days from the date of receipt of
deficiency intimation.
On receipt of additional document or clarification, the relevant
tax authority will respond within seven common working days from
the date of receipt of clarification
.
Q 41. What is the process of refusal of registration?
Ans. In case registration is refused, the applicant will be
informed about the reasons for such refusal through a speaking
order. The applicant shall have the right to appeal against the
decision of the Authority. As per sub-section (2)
of section 26 of the CGST Act, any rejection of application for
registration by one authority (i.e. under the CGST Act / SGST Act)
shall be deemed to be a rejection of application for registration
by the other tax authority (i.e. under the SGST Act / UTGST Act/
CGST Act).
Q 42. Will there be any communication related to the application
disposal?
Ans. The applicant shall be informed of the fact of grant or
rejection of his registration application through an e-mail and SMS
by the GST common portal. Jurisdictional details would be intimated
to the applicant at this stage.
Q 43. Can the registration certificate be downloaded from the GSTN
portal?
Ans. In case registration is granted; applicant can download the
Registration Certificate from the GST common portal.
Q 44. Can cancellation of registration order be revoked?
Ans. Yes, but only in cases where the initial cancellation has been
done by the proper officer suo moto, and not on the request of the
taxable person or his legal heirs. A person whose registration has
been cancelled suo moto can apply to the proper officer for
revocation of cancellation of registration within 30 days from the
date of communication of the cancellation order. The proper officer
may within a period of 30 days from the date of receipt of
application for revocation of cancellation or receipt of
information/clarification, either revoke the cancellation or
reject the application for revocation of cancellation of
registration.
Q 45. Does cancellation of registration impose any tax obligations
on the person whose registration is so cancelled?
Ans. Yes, as per Section 29(5) of the CGST/SGST Act, every
registered taxable person whose registration is cancelled shall pay
an amount, by way of debit in the electronic cash/credit ledger,
equivalent to the credit of input tax in respect of inputs held in
stock and inputs contained in semi-finished or finished goods held
in stock or capital goods or plant and machinery on the day
immediately preceding the date of such cancellation or the output
tax payable on such goods, whichever is higher.
Q 46. What is the difference between casual and non-resident
taxable persons?
Ans. Casual and Non-resident taxable persons are separately defined
in the CGST/SGST Act in Sections 2(20) and 2(77) respectively. Some
of the differences are outlined below:
IMAGE HERE 45- 46
4. Meaning and Scope of Supply
Q 1. What is the taxable event under GST?
Ans. The taxable event under GST shall be the supply of goods or
services or both made for consideration in the course or
furtherance of business. The taxable events under the existing
indirect tax laws such as manufacture, sale, or provision of
services shall stand subsumed in the taxable event known as
‘supply’.
Q 2. What is the scope of ‘supply’ under the GST law?
Ans. The term ‘supply’ is wide in its import covers all forms of
supply of goods or services or both that includes sale, transfer,
barter, exchange, license, rental, lease or disposal made or agreed
to be made for a consideration by a person in the course or
furtherance of business. It also includes import of service. The
model GST law also provides for including certain transactions made
without consideration within the scope of supply.
Q 3. What is a taxable supply?
Ans. A ‘taxable supply’ means a supply of goods or services or both
which is chargeable to goods and services tax under the GST Act.
Q 4. What are the necessary elements that constitute supply under
CGST/SGST Act?
Ans. In order to constitute a ‘supply’, the following elements are
required to be satisfied, i.e.-
(i) the activity involves supply of goods or
services or both;
(ii)
the supply is for a consideration unless otherwise specifically
provided for;
(iii) the supply is made in the course or furtherance of business;
(iv) the supply is made in the taxable territory;
(v) the supply is a taxable supply; and
(vi) the supply is made by a taxable person.
Q 5. Can a transaction in which any one or more of the above
criteria is not fulfilled, be still considered as supply under GST?
Ans. Yes. Under certain circumstances such as import of services
for a consideration whether or not in the course or furtherance of
business (Section 7(1) (b)) or supplies made without consideration,
specified under Schedule-I of CGST /SGST Act, where one or more
ingredients specified in answer to question no.4 are not satisfied,
it shall still be treated as supply for levy of GST.
Q 6. Import of Goods is conspicuous by its absence in Section 7.
Why?
Ans. Import of goods is dealt separately under the Customs Act,
1962, wherein IGST shall be levied as additional duty of customs in
addition to basic customs duty under the Customs Tariff Act, 1975.
Q 7. Are self-supplies taxable under GST?
Ans. Inter-state self-supplies such as stock transfers, branch
transfers or consignment sales shall be taxable under IGST even
though such transactions may not involve payment of consideration.
Every supplier is liable to register under the GST law in the State
or Union territory
from where he makes a taxable supply of goods or services or both
in terms of Section 22 of the model GST law. However, intra-state
self-supplies are not taxable subject to not opting for
registration as business vertical.
Q 8. Whether transfer of title and/or possession is necessary for a
transaction to constitute supply of goods?
Ans. Title as well as possession both have to be transferred for a
transaction to be considered as a supply of goods. In case title is
not transferred, the transaction would be treated as supply of
service in terms of Schedule II (1) (b). In some cases, possession
may be transferred immediately but title may be transferred at a
future date like in case of sale on approval basis or hire purchase
arrangement. Such transactions will also be termed as supply of
goods.
Q 9. What do you mean by “supply made in the course or furtherance
of business”?
Ans. “Business” is defined under Section 2(17) include any trade,
commerce, manufacture, profession, vocation etc. whether or not
undertaken for a pecuniary benefit. Business also includes any
activity or transaction which is incidental or ancillary to the
aforementioned listed activities. In addition, any activity
undertaken by the Central Govt. or a State Govt. or any local
authority in which they are engaged as public authority shall also
be construed as business. From the above, it may be noted that any
activity undertaken included in the definition for furtherance or
promoting of a business could constitute a supply under GST law.
Q 10. An individual buys a car for personal use and after a year
sells it to a car dealer. Will the
transaction be a supply in terms of CGST/SGST Act? Give reasons for
the answer.
Ans. No, because supply is not made by the individual in the course
or furtherance of business. Further, no input tax credit was
admissible on such car at the time of its acquisition as it was
meant for non-business use.
Q 11. A dealer of air-conditioners permanently transfers
an air conditioner from his stock in trade, for personal use at his
residence. Will the transaction constitute a supply?
Ans. Yes. As per Sl. No.1 of Schedule-I, permanent transfer or
disposal of business assets where input tax credit has been availed
on such assets shall constitute a supply under GST even where no
consideration is involved.
Q 12. Whether provision of service or goods by a club or
association or society to its members will be treated as supply or
not?
Ans. Yes. Provision of facilities by a club, association, society
or any such body to its members shall be treated as supply. This is
included in the definition of ‘business’ in section 2(17) of
CGST/SGST Act.
Q 13. What are the different types of supplies under the GST law?
Ans. (i) Taxable and exempt supplies. (ii) Inter-State and
Intra-State supplies, (iii) Composite and mixed supplies and (iv)
Zero rated supplies.
Q 14. What are inter-state supplies and intra-state supplies?
Ans
.
Inter-state and intra-state supplies have specifically been defined
in Section 7(1), 7(2) and 8(1), 8(2) of the IGST Act respectively.
Broadly, where the location of the supplier and the place of supply
are in same state it will be intra-state and where it is in
different states it will be inter-state supplies.
Q 15. Whether transfer of right to use goods will be treated as
supply of goods or supply of service? Why?
Ans. Transfer of right to use goods shall be treated as supply of
service because there is no transfer of title in such supplies.
Such transactions are specifically treated as supply of service in
Schedule-II of CGST/SGST Act.
Q 16. Whether Works contracts and Catering services will be treated
as supply of goods or supply of services? Why?
Ans. Works contracts and catering services shall be treated
as supply of services as both are specified under Sl. No. 6 (a) and
(b) in Schedule-II of the model GST law.
Q 17. Whether supply of software would be treated as supply of
goods or supply of services under GST law?
Ans. Development, design, programming, customization, adaptation,
upgradation, enhancement, implementation of information technology
software shall be treated as supply of services as listed in Sl.
No. 5 (2)(d) of Schedule –II of the model GST law.
Q 18. Whether goods supplied on hire purchase basis will be treated
as supply of goods or supply of services? Why?
Ans. Supply of goods on hire purchase shall be treated
as supply of goods as there is transfer of title, albeit at a
future date.
Q 19. What is a Composite Supply under CGST/ SGST/UTGST Act?
Ans. Composite Supply means a supply made by a taxable person to a
recipient comprising two or more supplies of goods or services, or
any combination thereof, which are naturally bundled and supplied
in conjunction with each other in the ordinary course of business,
one of which is a principal supply. For example, where goods are
packed and transported with insurance, the supply of goods, packing
materials, transport and insurance is a composite supply and supply
of goods is the principal supply.
Q 20. How will tax liability on a composite supply be determined
under GST?
Ans. A composite supply comprising two or more supplies, one of
which is a principal supply, shall be treated as a supply of such
principal supply.
Q 21. What is a mixed supply?
Ans. Mixed Supply means two or more individual supplies of goods or
services or any combination thereof, made in conjunction with each
other by a taxable person for a single price where such supply does
not constitute a composite supply. For example, a supply of package
consisting of canned foods, sweets, chocolates, cakes, dry fruits,
aerated drink and fruit juice when supplied for a single price is a
mixed supply. Each of these items can be supplied separately and it
is not dependent on any other. It shall not be a mixed supply if
these items are supplied separately.
Q 22. How will tax liability on a mixed supply be determined under
GST?
Ans. A mixed supply comprising two or more supplies shall be
treated as supply of that particular supply which attracts the
highest rate of tax
.
Q 23. Are there any activities which are treated as neither a
supply of goods nor a supply of services?
Ans. Yes. Schedule-III of the model GST law lists certain
activities such as (i) services by an employee to the employer in
the course of or in relation to his employment, (ii) services by
any Court or Tribunal established under any law, (iii) functions
performed by members of Parliament, State Legislatures, members of
the local authorities, Constitutional functionaries (iv) services
of funeral, burial, crematorium or mortuary and (v) sale of land
and (vi), actionable claims other than lottery, betting and
gambling shall be treated neither a supply of goods or supply of
services.
Q 24. What is meant by zero rated supply under GST?
Ans. Zero rated supply means export of goods and/or services or
supply of goods and/or services to a SEZ developer or a SEZ Unit.
Q 25. Will import of services without consideration be
taxable under
GST?
Ans. As a general principle, import of services without consideration
will not be considered as supply under GST
in terms of Section 7. However, import of services by a taxable person
from a related person or from any of his other establishments outside
India, in the course or furtherance of business, even without
consideration will be treated as supply in terms of Sl. No.4 of
Schedule I.
5. Time of Supply
Q 1. What is time of supply?
Ans. The time of supply fixes the point when the liability to
charge GST arises. It also indicates when a supply is deemed to
have been made. The CGST/SGST Act provides separate time of supply
for goods and services.
Q 2. When does the liability to pay GST arise in respect of supply
of goods and Services?
Ans. Section12 & 13 of the CGST/SGST Act provides for time of
supply of goods. The time of supply of goods shall be the earlier
of the following namely,
(i)
the date of issue of invoice by the supplier or the last date on
which he is required under Section 31, to issue the invoice with
respect to the supply; or
(ii)
the date on which the supplier receives the payment with respect to
the supply.
Q 3. What is time of supply in case of supply of vouchers in
respect of goods and services?
Ans. The time of supply of voucher in respect of goods and services
shall be;
a)
the date of issue of voucher, if the supply is identifiable at that
point; or
b) the date of redemption of voucher in all other cases.
Q 4. Where it is not possible to determine the time of supply in
terms of sub-section 2, 3, 4of Section 12 or that of Section 13 of
CGST/SGST Act, how will time of supply be determined?
Ans. There is a residual entry in Section 12(5) as well as 13 (5)
which says that if periodical return has to be filed, then the due
date of filing of such periodical return shall
be the time of supply. In other cases, it will be the date on which
the CGST/SGST/IGST is actually paid.
Q 5. What does “date of receipt of payment” mean?
Ans. It is the earliest of the date on which the payment is entered
in the books of accounts of the supplier or the date on which the
payment is credited to his bank account.
Q 6. Suppose, part advance payment is made or invoice issued is for
part payment, whether the time of supply will cover the full
supply?
Ans. No. The supply shall be deemed to have been made to the extent
it is covered by the invoice or the part payment.
Q 7. What is the time of supply of goods in case of tax payable
under reverse charge?
Ans. The time of supply will be the earliest of the following
dates:
a) date of receipt of goods; or
b) date on which payment is made; or
c)
the date immediately following 30 days from the date of issue of
invoice by the supplier.
Q 8. What is the time of supply of service in case of tax payable
under reverse charge?
Ans. The time of supply will be the earlier of the following dates:
a) date on which payment is made; or
b)
the date immediately following sixty days from the date of issue of
invoice by the supplier.
Q 9. What is the time of supply applicable with regard to addition
in the value by way of interest, late fee or penalty or any delayed
payment of consideration?
Ans. The time of supply with regard to an addition in value on
account of interest, late fee or penalty or delayed consideration
shall be the date on which the supplier received such additional
consideration.
Q 10. Is there any change in time of supply, where supply is
completed prior to or after change in rate of tax?
Ans. Yes. In such cases provisions of Section 14 will apply.
Q 11. What is the time of supply, where supply is completed prior
to change in rate of tax?
Ans.
In such cases time of supply will be
(i)
where the invoice for the same has been issued and the payment is
also received after the change in rate of tax, the time of supply
shall be the date of receipt of payment or the date of issue of
invoice, whichever is earlier; or
(ii)
where the invoice has been issued prior to change in rate of tax
but the payment is received after the change in rate of tax, the
time of supply shall be the date of issue of invoice; or
(iii)
where the payment is received before the change in rate of tax, but
the invoice for the same has been issued after the change in rate
of tax, the time of supply shall be the date of receipt of payment;
Q 12. What is the time of supply, where supply is completed after
to change in rate of tax?
Ans.
In such cases time of supply will be
(i)
where the payment is received after the change in rate of tax but
the invoice has been issued prior to the change in rate of tax, the
time of supply shall be the date of receipt of payment; or
(ii)
where the invoice has been issued and the payment is received
before the change in rate of tax, the time of supply shall be the
date of receipt of payment or date of issue of invoice, whichever
is earlier; or
(iii)
where the invoice has been issued after the change in rate of tax
but the payment is received before the change in rate of tax, the
time of supply shall be the date of issue of invoice
Q 13. Let’s say there was increase in tax rate from 18% to 20%
w.e.f.1.6.2017. What is the tax rate applicable when services
provided and invoice issued before change in rate in April 2017,
but payment received after change in rate in June2017?
Ans. The old rate of 18% shall be applicable as services are
provided prior to 1.6.2017.
Q 14. Let’s say there was increase in tax rate from 18% to 20%
w.e.f. 1.6.2017. What is the tax rate
applicable when goods are supplied and invoice issued after change
in rate in June 2017, but full advance payment was already received
in April 2017?
Ans. The new rate of 20% shall be applicable as goods are supplied
and invoice issued after 1.6.2017
Q 15. What is the time period within which invoice has to be issued
for supply of Goods?
Ans. As per Section 31 of CGST/SGST Act a registered taxable person
shall issue a tax invoice showing description, quantity and value
of goods, tax charged thereon and other prescribed particulars,
before or at the time of
(a) removal of goods for supply to the recipient, where supply involves
movement of goods or
(b) delivery of goods or making available thereof to the recipient in other
cases.
Q 16. What is the time period within which invoice has to be issued
for supply of Services?
Ans. As per Section 31 of CGST/SGST Act a registered taxable person
shall, before or after the provision of service, but within a
period prescribed in this behalf, issue a tax invoice showing
description, value of goods, tax payable thereon and other
prescribed particulars.
Q 17. What is the time period within which invoice has to be issued
in a case involving continuous supply of goods?
Ans.
In case of continuous supply of goods, where
successive statements of accounts or successive payments are
involved, the invoice shall be issued before or at the time each
such statement is issued or, as the case may be, each such payment
is received.
Q 18. What is the time period within which invoice has to be issued
in a case involving continuous supply of services?
Ans. In case of continuous supply of services,
(a)
where the due date of payment is ascertainable from the contract,
the invoice shall be issued before or after the payment is liable
to be made by the recipient but within a period prescribed in this
behalf whether or not any payment has been received by the supplier
of the service;
(b)
where the due date of payment is not ascertainable from the
contract, the invoice shall be issued before or after each such
time when the supplier of service receives the payment but within a
period prescribed in this behalf;
(c)
where the payment is linked to the completion of an event, the
invoice shall be issued before or
after the time of completion of that event but within a period prescribed in this behalf.
Q 19. What is the time period within which invoice has to be issued
where the goods being sent or taken on approval for sale?
Ans. The invoice in respect of goods sent or taken on approval for
sale or return shall be issued before or at the time of supply or
six months from the date of approval, whichever is earlier.
6. Valuation in GST
Q 1. What is the value of taxable supply to be adopted for the levy
of GST?
Ans. The value of taxable supply of goods and services shall
ordinarily be ‘the transaction value’ which is the price paid or
payable, when the parties are not related and price is the sole
consideration. Section 15 of the CGST/SGST Act further elaborates
various inclusions and exclusions from the ambit of transaction
value. For example, the transaction value shall not include
refundable deposit, discount allowed subject to certain conditions
before or at the time of supply.
Q 2. What is transaction value?
Ans. Transaction value refers to the price actually paid or payable
for the supply of goods and or services where the supplier and the
recipient are not related and price is the sole consideration for
the supply. It includes any amount which the supplier is liable to
pay but which has been incurred by the recipient of the supply.
Q 3. Are there separate valuation provisions for CGST, SGST and
IGST and for Goods and Services?
Ans. No, section 15 is common for all three taxes and also common
for goods and services.
Q 4. Is contract price not sufficient to determine valuation of
supply?
Ans. Contract price is more specifically referred to as
‘transaction value’ and that is the basis for computing tax.
However, when the price is influenced by factors like relationship
of parties or where certain transactions are deemed to be supply,
which do not have a price, the value has to be determined in
accordance with the GST Valuation Rules.
Q 5. Is reference to GST Valuation Rules required in all cases?
Ans. No. Reference to GST Valuation Rules is required only in cases
where value cannot be determined under sub-section (1) of Section
15.
Q 6. Can the transaction value declared under section 15(1) be
accepted?
Ans. Yes, it can be accepted after examining for inclusions in
section 15(2). Furthermore, the transaction value can be accepted
even where the supplier and recipient are related, provided the
relationship has not influenced the price.
Q 7. Whether post-supply discounts or incentives are to be included
in the transaction value?
Ans. Yes. where the post-supply discount is established as per the
agreement which is known at or before the time of supply and where
such discount specifically linked to the relevant invoice and the
recipient has reversed input tax credit attributable to such
discount, the discount is allowed as admissible deduction under
Section 15 of the model GST law.
Q 8. Whether pre-supply discounts allowed before or at the time of
supply are includible in the transaction value?
Ans. No, provided it is allowed in the course of normal trade
practice and has been duly recorded in the invoice.
Q 9. When are the provisions of the Valuation Rules applicable?
Ans. Valuation Rules are applicable when (i) consideration either
wholly or in part not in money terms;
(ii) parties are related or
supply by any specified category of supplier; and
(iii) transaction value declared is not reliable.
Q 10. What are the inclusions specified in Section 15(2) which
could be added to Transaction Value?
Ans. The inclusions specified in Section15 (2) which could be added
to transaction value are as follows:
a)
Any taxes, duties, cesses, fees and charges levied under any
statute, other than the SGST/CGST Act and the Goods and Services
Tax (Compensation to the States for Loss of Revenue) Act, 2016, if
charged separately by the supplier to the recipient;
b)
Any amount that the supplier is liable to pay in relation to such
supply but which has been incurred by the recipient of the supply
and not included in the price actually paid or payable for the
goods and/or services;
c)
Incidental expenses, such as commission and packing, charged by the
supplier to the recipient of a supply, including any amount charged
for anything done by the supplier in respect of the supply of goods
and/or services at the time of, or before delivery of the goods or
as the case may be supply of the services;
d)
Interest or late fee or penalty for delayed payment of any
consideration for any supply; and
e)
Subsidies directly linked to the price excluding subsidies provided
by the Central and State Government.
7. GST Payment of Tax
Q 1. What are the Payments to be made in GST regime?
Ans. In the GST regime, for any intra-state supply, taxes to be
paid are the Central GST (CGST), going into the account of the
Central Government) and the State/UT GST (SGST, going into the
account of the concerned State Government). For any inter-state
supply, tax to be paid is Integrated GST (IGST) which will have
components of both CGST and SGST. In addition, certain categories
of registered persons will be required to pay to the government
account Tax Deducted at Source (TDS) and Tax Collected at Source
(TCS). In addition, wherever applicable, Interest, Penalty, Fees
and any other payment will also be required to be made.
Q 2. Who is liable to pay GST?
Ans. In general, the supplier of goods or services is liable to pay
GST. However, in specified cases like imports and other notified
supplies, the liability may be cast on the recipient under the
reverse charge mechanism. Further, in some notified cases of
intra-state supply of services, the liability to pay GST may be
cast on e-commerce operators through which such services are
supplied. Also Government Departments making payments to vendors
above a specified limit [2.5 lakh under one contract as per
S.51(1)(d)] are required to deduct tax (TDS) and E-commerce
operators are required to collect tax (TCS) on the net value [i.e.
aggregate value of taxable supplies of goods and/or services but
excluding such value of services on which the operator is made
liable to pay GST under Section 9(5) of the CGST Act, 2017] of
supplies made through them and deposit it with the Government.
Q 3. When does liability to pay GST arises?
Ans. Liability to pay arises at the time of supply of Goods as
explained in Section 12 and at the time of supply of services as
explained in Section13.
The time is generally the earliest of one of the three events,
namely receiving payment, issuance of invoice or completion of
supply. Different situations envisaged and different tax points
have been explained in the aforesaid sections.
Q 4. What are the main features of GST payment process?
Ans. The payment processes under GST Act(s) have the following
features:
•
Electronically generated challan from GSTN Common Portal in all
modes of payment and no use of manually prepared challan;
•
Facilitation for the tax payer by providing hassle free, anytime,
anywhere mode of payment of tax;
• Convenience of making payment online;
• Logical tax collection data in electronic format;
• Faster remittance of tax revenue to the Government Account;
• Paperless transactions;
• Speedy Accounting and reporting;
• Electronic reconciliation of all receipts;
• Simplified procedure for banks
• Warehousing of Digital Challan.
Q 5. How can payment be done?
Ans. Payment can be done by the following methods:
(i)
Through debit of Credit Ledger of the tax payer maintained on the
Common Portal – ONLY Tax can be paid. Interest, Penalty and Fees
cannot be paid by debit in the credit ledger. Tax payers shall be
allowed to take credit of taxes paid on inputs (input tax credit)
and utilize the same for payment of output tax. However, no input
tax credit on account of CGST shall be utilized towards payment of
SGST and vice versa. The credit of IGST would be permitted to be
utilized for payment of IGST, CGST and SGST in that order.
(ii)
In cash by debit in the Cash Ledger of the tax payer maintained on
the Common Portal. Money can be deposited in the Cash Ledger by
different modes, namely, E-Payment (Internet Banking, Credit Card,
Debit Card); Real Time Gross Settlement (RTGS)/ National Electronic
Fund Transfer (NEFT); Over the Counter Payment in branches of Banks
Authorized to accept deposit of GST.
Q 6. When is payment of taxes to be made by the Supplier?
Ans. Payment of taxes by the normal tax payer is to be done on
monthly basis by the 20th of the succeeding month. Cash payments
will be first deposited in the Cash Ledger and the tax payer shall
debit the ledger while making payment in the monthly returns and
shall reflect the relevant debit entry number in his return. As
mentioned earlier, payment can also be debited from the Credit
Ledger. Payment of taxes for the month of March shall be paid by
the 20th of April. Composition tax payers will need to pay tax on
quarterly basis.
Q 7. Whether time limit for payment of tax can be extended or paid
in monthly installments?
Ans. No, this is not permitted in case of self-assessed liability.
In other cases, competent authority has been empowered to extend
the time period or allow payment in instalments. (Section 80 of the
CGST/SGST Act).
Q 8. What happens if the taxable person files the return
but does not
make payment of tax?
Ans. In such cases, the return is not considered as a valid return.
Section 2(117) defines a valid return to mean a return furnished
under sub-section (1) of section 39 on which self-assessed tax has
been paid in full. It is only the valid return that would be used
for allowing input tax credit (ITC) to the recipient. In other
words, unless the supplier has paid the entire self-assessed tax
and filed his return and the recipient has filed his return, the
ITC of the recipient would not be confirmed.
Q 9. Which date is considered as date of deposit of the tax dues –
Date of presentation of cheque or Date of payment or Date of credit
of amount in the account of government?
Ans. It is the date of credit to the Government account.
Q 10. What are E-Ledgers?
Ans. Electronic Ledgers or E-Ledgers are statements of cash and input
tax credit in respect of each registered taxpayer. In addition, each
taxpayer shall also have an electronic tax liability register. Once a
taxpayer is registered on Common Portal (GSTN), two e-ledgers (Cash
&Input Tax Credit ledger) and an electronic tax liability register
will be automatically opened and displayed on his dash board at all
times.
Q 11. What is a tax liability register?
Ans. Tax Liability Register will reflect the total tax liability of a
taxpayer (after netting) for the particular month.
Q 12. What is a Cash Ledger?
Ans. The cash ledger will reflect all deposits made in cash, and
TDS/TCS made on account of the taxpayer. The information will be
reflected on real time basis. This ledger can be used for making any
payment on account of GST.
Q 13. What is an ITC Ledger?
Ans. Input Tax Credit as self-assessed in monthly returns will be
reflected in the ITC Ledger. The credit in this ledger can be used
to make payment of TAX ONLY and not other amounts such as interest,
penalty, fees etc.
Q 14. What is the linkage between GSTN and the authorized Banks?
Ans. There will be real time two-way linkage between the GSTN and
the Core Banking Solution (CBS) of the Bank. CPIN is automatically
routed to the Bank via electronic string for verification and
receiving payment and a challan identification number (CIN) is
automatically sent by the Bank to the Common Portal confirming
payment receipt. No manual intervention will be involved in the
process by any one including bank cashier or teller or the tax
payer.
Q 15. Can a tax payer generate challan in multiple sitting
s?
Ans. Yes, a taxpayer can partially fill in the challan form and
temporarily “save” the challan for completion at a later stage. A
saved challan can be “edited” before finalization.
After the tax payer has finalized the challan, he will generate the
challan,
for use of payment of taxes.
The remitter will have option of printing the challan for his
record.
Q 16. Can a challan generated online be modified?
Ans. No. After logging into GSTN portal for generation of challan,
payment particulars have to be fed in by the tax payer or his
authorized person. He can save the challan midway for future
updation. However once the challan is finalized and CPIN generated,
no further changes can be made to it by the taxpayer.
Q 17. Is there a validity period of challan?
Ans. Yes, a challan will be valid for fifteen days after its
generation and thereafter it will be purged from the System.
However, the tax payer can generate another challan at his
convenience.
Q 18. What is a CPIN?
Ans. CPIN stands for Common Portal Identification Number (CPIN)
given at the time of generation of challan. It is a 14-digit unique
number to identify the challan. As stated above, the CPIN remains
valid for a period of 15 days.
Q 19. What is a CIN and what is its relevance?
Ans. CIN stands for Challan Identification Number. It is a 17-digit
number that is 14-digit CPIN plus 3-digit Bank Code. CIN is
generated by the authorized banks/ Reserve Bank of India (RBI) when
payment is actually received by such authorized banks or RBI and
credited in the relevant government account held with them. It is
an indication that the payment has been realized and credited to
the appropriate government account. CIN is communicated by the
authorized bank to taxpayer as well as to GSTN.
Q 20. What is the sequence of payment of tax where that taxpayer
has liabilities for previous months also?
Ans. Section 49(8) prescribes an order of payment where the
taxpayer has tax liability beyond the current return period. In
such a situation, the order of payment to be followed is: First
self-assessed tax and other dues for the previous period;
thereafter self-assessed tax and other
dues for the current period; and thereafter any other amounts
payable including any confirmed demands under section 73 or 74.
This sequence has to be mandatorily followed.
Q 21. What does the expression “Other dues” referred to above mean?
Ans. The expression “other dues” means interest, penalty, fee or
any other amount payable under the Act or the rules made
thereunder.
Q 22. What is an E-FPB?
Ans. E-FPB stands for Electronic Focal Point Branch. These are
branches of authorized banks which are authorized to collect
payment of GST. Each authorized bank will nominate only one branch
as its E-FPB for pan India Transactions. The E-FPB will have to
open accounts under each major head for all governments. Total 38
accounts (one each for CGST, IGST and one each for SGST for each
State/UT Govt.) will have to be opened. Any amount received by such
E-FPB towards GST will be credited to the appropriate account held
by such E-FPB.
For NEFT/RTGS Transactions, RBI will act as E-FPB.
Q 23. What is TDS?
Ans. TDS stands for Tax Deducted at Source (TDS). As per section
51, this provision is meant for Government and Government
undertakings and other notified entities making contractual
payments where total value of such supply under a contract exceeds Rs. 2.5 Lakhs to suppliers.
While making any
payments under such contracts, the concerned Government/authority
shall deduct 1% of the total payment made and remit it into the
appropriate GST account.
Q 24. How will the Supplier account for this TDS? while filing his
return?
Ans. Any amount shown as TDS will be reflected in the electronic
cash ledger of the concerned supplier. He can utilize this amount
towards discharging his liability towards tax, interest fees and
any other amount.
Q 25. How will the TDS Deductor account for such TDS?
Ans. TDS Deductor will account for such TDS in the following ways:
1.
Such deductors needs to get compulsorily registered under section
24 of the CGST/SGST Act.
2.
They need to remit such TDS collected by the 10th day of the month
succeeding the month in which TDS was collected and reported in
GSTR 7.
3.
The amount deposited as TDS will be reflected in the electronic
cash ledger of the supplier.
4.
They need to issue certificate of such TDS to the deductee within 5
days of crediting the TDS to the govt a/c, failing which fees of
Rs. 100 per day subject to maximum of Rs. 5000/- will be payable by
such deductor.
Q 26. What is Tax Collected at Source (TCS)?
Ans. This provision is applicable only for E-Commerce Operator
under section 52 of CGST/SGST Act. Every E-
Commerce Operator, not being an agent, needs to withhold an amount
calculated at the rate not exceeding one percent of the “ net value of taxable supplies” made through it where the
consideration with respect to such supplies is to be collected by
the operator. Such withheld amount is to be deposited by such
E-Commerce Operator to the appropriate GST account by the 10th of
the next month. The amount deposited as TCS will be reflected in
the electronic cash ledger of the supplier.
Q 27. What does the expression “Net value of taxable supplies”
mean?
Ans. The expression “net value of taxable supplies” means the
aggregate value of taxable supplies of goods or services, other
than services notified under Section 9(5), made during any month by
all registered taxable persons through the operator reduced by the
aggregate value of taxable supplies returned to the suppliers
during the said month.
Q 28. Is the pre-registration of credit card necessary in the GSTN
portal for the GST payment?
Ans. Yes. The taxpayer would be required to pre-register his credit
card, from which the tax payment is intended, with the Common
Portal maintained on GSTN. GSTN may also attempt to put in a system
with banks in getting the credit card verified by taking a
confirmation from the credit card service provider. The payments
using credit cards can therefore be allowed without any monetary
limit to facilitate ease of doing business.
8. Electronic Commerce
Q 1. What is Electronic Commerce?
Ans. Electronic Commerce has been defined to mean the supply o f
goods or services or both, including digital products over digital
or electronic network.
Q 2. Who is an e-commerce operator?
Ans. Electronic Commerce Operator has been defined to mean any
person who owns, operates or manages digital or electronic facility
or platform for electronic commerce.
Q 3. Is it mandatory for e-commerce operator to obtain
registration?
Ans. Yes. The benefit of threshold exemption is not available to
e-commerce operators and they would be liable to be registered
irrespective of the value of supply made by them.
Q 4. Whether a supplier of goods or services supplying through
e-commerce operator would be entitled to threshold exemption?
Ans. No. The threshold exemption is not available to such suppliers
and they would be liable to be registered irrespective of the value
of supply made by them. This requirement, however, is applicable
only if the supply is made through such electronic commerce
operator who is required to collect tax at source.
Q 5. Will an e-commerce operator be liable to pay tax in respect of
supply of goods or services made through it, instead of actual
supplier?
Ans. Yes, but only in case of certain notified services. In such
cases tax shall be paid by the electronic commerce operator if such
services are supplied through it and all the provisions of the Act
shall apply to such electronic commerce operator as if he is the
person liable to pay tax in relation to supply of such services.
Q 6. Will threshold exemption be available to electronic commerce
operators liable to pay tax on notified services?
Ans. No. Threshold exemption is not available to e-commerce
operator who are require to pay tax on notified services provided
through them.
Q 7. What is Tax Collection at Source (TCS)?
Ans. The e-commerce operator is required to collect an amount
calculated at the rate not exceeding one percent of the net value
of taxable supplies made through it, where the consideration with
respect to such supplies is to be collected by such operator. The
amount so collected is called as Tax Collection at Source (TCS).
Q 8. It is very common that customers of e-commerce companies
return goods. How these returns are going to be adjusted?
Ans. An e-commerce company is required to collect tax only on the
net value of taxable supplies. In other words, value of the
supplies which are returned are adjusted in the aggregate value of
taxable supplies.
Q 9. What is meant by “net value of taxable supplies”?
Ans. The “net value of taxable supplies” means the aggregate value
of taxable supplies of goods or services or both, other than the
services on which entire tax is payable by the e-commerce operator,
made during any month by all registered persons through such
operator reduced by the aggregate value of taxable supplies
returned to the suppliers during the said month.
Q 10. Is every e-commerce operator required to collect tax on
behalf of actual supplier?
Ans. Yes, every e-commerce operator is required to collect tax
where consideration with respect to the supply is being collected
by the e-commerce operator.
Q 11. At what time should the e-commerce operator make such
collection?
Ans. The e-commerce operator should make the collection during the
month in which supply was made.
Q 12. What is the time within which such TCS is to be remitted by
the e-commerce operator to Government account?
Ans. The amount collected by the operator is to be paid to
appropriate government within 10 days after the end of the month in
which amount was so collected.
Q 13. How can actual suppliers claim credit of this TCS?
Ans. The amount of TCS deposited by the operator with the
appropriate government will be reflected in the cash ledger of the
actual registered supplier (on whose account such collection has
been made) on the basis of the statement filed by the operator. The
same can be used at the time of discharge of tax liability in
respect of the supplies by the actual supplier.
Q 14. Is the e-commerce operator required to submit any statement?
What are the details that are required to be submitted in the
statement?
Ans. Yes, every operator is required to furnish a statement,
electronically, containing the details of outward supplies of goods
or services effected through it, including the supplies of goods or
services returned through it, and the amount collected by it as TCS
during a month within ten days after the end of such month. The
operator is also required to file an annual statement by 31st day
of December following the end of the financial year in which the
tax was collected.
Q 15. What is the concept of matching in e-commerce provisions and
how it is going to work?
Ans. The details of supplies and the amount collected during a
calendar month, and furnished by every operator in his statement
will be matched with the corresponding details of outward supplies
furnished by the concerned supplier in his valid return for the
same calendar month or any preceding calendar month. Where the
details of outward supply, on which the tax has been collected, as
declared by the operator in his statement do not match with the
corresponding details declared by the supplier
the discrepancy shall be communicated to both persons.
Q 16. What will happen if the details remain mismatched?
Ans. The value of a supply relating to any payment in respect of
which any discrepancy is communicated and which is not rectified by
the supplier in his valid return for the month in which discrepancy
is communicated shall be added to the output liability of the said
supplier, for the calendar month succeeding the calendar month in
which the discrepancy is communicated. The concerned supplier
shall, in whose output tax liability any amount has been added
shall be liable to pay the tax payable in respect of such supply
along with interest on the amount so added from the date such tax
was due till the date of its payment.
Q 17. Are there any additional powers to tax officers available?
Ans. Any authority not below the rank of Deputy Commissioner may
issue a notice to the electronic operator to furnish specified
details within a period of 15 working days from the date of service
of such notice.
9. Job Work
Q 1. What is job work?
Ans. Job work means undertaking any treatment or process by a
person on goods belonging to another registered taxable person. The
person who is treating or processing the goods belonging to other
person is called
‘job worker’ and the person to whom the goods belongs is called
‘principal’.
This definition is much wider than the one given in Notification
No. 214/86 – CE dated 23rd March, 1986. In the said notification,
job work has been defined in such a manner so as to ensure that the
activity of job work must amount to manufacture. Thus the
definition of job work itself reflects the change in basic scheme
of taxation relating to job work in the proposed GST regime.
Q 2. Whether goods sent by a taxable person to a job worker will be
treated as supply and liable to GST? Why?
Ans. It will be treated as a supply as supply includes all forms of
supply such as sale, transfer, etc. However, the registered taxable
person (the principal), under intimation and subject to such
conditions as may be prescribed send any inputs and/or capital
goods, without payment of tax, to a job worker for job work and
from there subsequently to another job worker(s) and shall either
bring back such inputs/capital goods after completion of job work
or otherwise within 1 year/3years of their being sent out or supply
such inputs/capital goods after completion of job work or otherwise
within 1 year / 3 years of their being sent out, from the place of
business of a job worker on payment of tax within India or with or
without payment of tax for export.
Q 3. Is a job worker required to take registration?
Ans. Yes, as job work is a service, the job worker would be required to
obtain registration if his aggregate turnover exceeds the prescribed
threshold.
Q 4. Whether the goods of principal directly supplied from the job
worker’s premises will be included in the aggregate turnover of the job
worker?
Ans. No. It will be included in the aggregate turnover of the
principal. However, the value of goods or services used by the job
worker for carrying out the job work will be included in the value of
services supplied by the job worker.
Q 5. Can a principal send inputs and capital goods directly to the
premises of job worker without bringing it to his premises?
Ans. Yes, the principal is allowed to do so. The input tax credit of
tax paid on inputs or capital goods can also be availed by the
principal in such a scenario. The inputs or capital goods must be
received back within one year or three years respectively failing which
the original transaction would be treated as supply and the principal
would be liable to pay tax accordingly.
Q 6. Can the principal supply the goods directly from the premises of
the job worker without bringing it back to his own premises?
Ans. Yes. But the principal should have declared the premises of an
unregistered job worker as his additional place of business. If the job
worker is a registered person then goods can be supplied directly from
the premises of the job worker. The Commissioner may also notify goods in which case goods sent for job work can be directly supplied from the premises of the job worker.
Q 7. Under what circumstances can the principal directly supply
goods from the premises of job worker without declaring the
premises of job worker as his additional place of business?
Ans. The goods can be supplied directly from the place of business
of job worker without declaring it as additional place of business
in two circumstances namely where the job worker is a registered
taxable person or where the principal is engaged in supply of such
goods as may be notified by the Commissioner.
Q 8. What are the provisions concerning taking of ITC in respect of
inputs/capital goods sent to a job worker?
Ans. Principal shall be entitled to take credit of taxes paid on
inputs or capital goods sent to a job worker whether sent after
receiving them at his place of business or even when such the
inputs or capital goods are directly sent to a job worker without
their being first brought to his place of business. However, the
inputs or capital goods, after completion of job work, are required
to be received back or supplied from job worker’s premises, as the
case may be, within a period of one year or three years of their
being sent out.
Q 9. What happens when the inputs or capital goods are not received
back or supplied from the place of business of job worker within
prescribed time period?
Ans. If the inputs or capital goods are not received back by the
principal or are not supplied from the place of business of job
worker within the prescribed time limit, it
would be deemed that such inputs or capital goods had been supplied
by the principal to the job worker on the day when the said inputs
or capital goods were sent out by the principal (or on the date of
receipt by the job worker where the inputs or capital goods were
sent directly to the place of business of job worker). Thus the
principal would be liable to pay tax accordingly.
Q 1 0 . Some capital goods like jigs and fixtures are
non-usable after their use and normally sold as scrap. What is the treatment of such items in job work provisions ?
Ans. The condition of bringing back capital goods within three
years is not applicable to moulds, dies, jigs and fixtures or
tools.
Q 11. What would be treatment of the waste and scrap generated
during the job work?
Ans. The waste and scrap generated during the job work can be
supplied by the job worker directly from his place of business, on
payment of tax, if he is registered. If he is not registered, the
same would be supplied by the principal on payment of tax.
Q 12. Whether intermediate goods can also be sent for job work?
Ans. Yes. The term inputs, for the purpose of job work, includes
intermediate goods arising from any treatment or process carried
out on the inputs by the principal or job worker.
Q 1 3 . Who is responsible for the maintenance related to job
of proper accounts work ?
Ans. It is completely the responsibility of the principal to
maintain proper accounts of job work related inputs and capital
goods.
Q 14. Are the provisions of job work applicable to all categories
of goods?
Ans. No. The provisions relating to job work are applicable only
when registered taxable person intends to send taxable goods. In
other words, these provisions are not applicable to exempted or
non-taxable goods or when the sender is a person other than
registered taxable person.
Q 15. Is it compulsory that job work provisions should be followed
by the principal?
Ans. No. The principal can send the inputs or capital goods after
payment of GST without following the special procedure. In such a
case, the job-worker would take the input tax credit and supply
back the processed goods (after completion of job-work) on payment
of GST.
Q 16. Should job worker and principal be located in same State or
Union territory?
Ans. No this is not necessary as provisions relating to job work
have been adopted in the IGST Act as well as in UTGST Act and
therefore job-worker and principal can be located either is same
State or in same Union Territory or in different States or Union
Territories.
10. Input Tax Credit
Q 1. What is input tax?
Ans. Input tax means the central tax (CGST), State tax (SGST),
integrated tax (IGST) or Union territory tax (UTGST) charged on
supply of goods or services or both made to a registered person. It
also includes tax paid on reverse charge basis and integrated tax
goods and services tax charged on import of goods. It does not
include tax paid under composition levy.
Q 2. Can GST paid on reverse charge basis be considered as input
tax?
Ans. Yes. The definition of input tax includes the tax payable
under the reverse charge.
Q 3. Does input tax includes tax (CGST/IGST/SGST) paid on input
goods, input services and capital goods?
Ans. Yes, it includes taxes paid on input goods, input services and
capital goods. Credit of tax paid on capital goods is permitted to
be availed in one instalment.
Q 4. Is credit of all input tax charged on supply of goods or
services allowed under GST?
Ans. A registered person is entitled to take credit of input tax
charged on supply of goods or services or both to him which are
used or intended to be used in the course or furtherance of
business, subject to other conditions and restrictions.
Q 5. What are the conditions necessary for obtaining ITC?
Ans. Following four conditions are to be satisfied by the
registered taxable person for obtaining ITC:
(a)
he is in possession of tax invoice or debit note or such other tax
paying documents as may be prescribed;
(b) he has received the goods or services or both;
(c)
the supplier has actually paid the tax charged in respect of the
supply to the government; and
(d) he has furnished the return under section 39.
Q 6. Where the goods against an invoice are received in lots or
instalments, how will a registered person be entitled to ITC?
Ans. The registered person shall be entitled to the credit only
upon receipt of the last lot or installment.
Q 7. Can a person take input tax credit without payment of
consideration for the supply along with tax to the supplier?
Ans. Yes, the recipient can take ITC. But he is required to pay the
consideration along with tax within 180 days from the date of issue
of invoice. This condition is not applicable where tax is payable
on reverse charge basis.
Q 8. What would happen of the ITC taken by the registered person if
he has not paid the consideration along with tax within 180 days
from the date of issue of invoice?
Ans. The amount of ITC would be added to output tax liability of
the person. He would also be required to pay interest.
However, he can take ITC again on payment of consideration and tax.
Q 9. Who will get the ITC where goods have been delivered to a
person other than taxable person (‘bill to’- ‘ship to ’scenarios)?
Ans. It would be deemed that the registered person has received the
goods when the goods have been delivered to a third party on the
direction of such taxable person. So ITC will be available to the
person on whose order the goods are delivered to third person.
Q 10. What is the time limit for taking ITC and reasons therefor?
Ans. A registered person cannot take ITC in respect of any invoice
or debit note for supply of goods or services after the due date
for furnishing the return under section 39 for the month of
September following the end of financial year to which such
invoice/invoice relating to debit note pertains or furnishing of
the relevant annual return, whichever is earlier. So, the upper
time limit for taking ITC is 20
th
October of the next FY or the date of filing of annual return
whichever is earlier.
The underlying reasoning for this restriction is that no change in
return is permitted after September of next FY. If annual return is
filed before the month of September, then no change can be made
after filing of annual return.
Q 11. Where the registered taxable person has claimed depreciation
on the tax component of the cost of capital goods under the
provisions of the Income Tax Act,1961, will ITC be allowed in such
cases?
Ans. The input tax credit shall not be allowed on the said
tax component in respect of which depreciation has been claimed.
Q 12. Is credit of tax paid on every input used for supply of
taxable goods or services or both is allowed under GST?
Ans. Yes, except a small list of items provided in the law, the
credit is admissible on all items. The list covers mainly items of
personal consumption, inputs use of which results into formation of
an immovable property (except plant and machinery),
telecommunication towers, pipelines laid outside the factory
premises, etc. and taxes paid as a result of detection of evasion
of taxes.
Q 13. A taxable person is in the business of information
technology. He buys a motor vehicle for use of his Executive
Directors. Can he avail the ITC in respect of GST paid on purchase
of such motor vehicle?
Ans. No. ITC on motor vehicles can be availed only if the taxable
person is in the business of transport of passengers or goods or is
providing the services of imparting training on motor vehicles.
Q 14. Sometimes goods are destroyed or lost due to various reasons?
Can a person take ITC to the extent of such goods?
Ans. No, a person cannot take ITC with respect to goods lost,
stolen, destroyed or written off. In addition, ITC with respect of
goods given as gifts or free samples are also not allowed.
Q 15. Can a registered person get ITC with respect of goods or
services used for construction of a building for business purposes?
Ans. No. ITC on goods or services by a person for
construction of immovable property, other than plant and machinery,
is not allowed. Plant and machinery cover only apparatus,
equipment, and machinery fixed to earth by foundation or structural
support, and excludes land and building, among other things.
Q 16. What is the ITC entitlement of a newly registered person?
Ans. A person applying for registration can take input tax credit
of inputs held in stock and inputs contained in semi-finished or
finished goods held in stock on the day immediately preceding the
date of grant of registration. If the person was liable to take
registration and he has applied for registration within thirty days
from the date on which he became liable to registration, then input
tax credit of inputs held in stock and inputs contained in
semi-finished or finished goods held in stock on the day
immediately preceding the date on which he became liable to pay tax
can be taken.
Q 17. A person becomes liable to pay tax on 1st August, 2017and has
obtained registration on 15th August, 2017. Such person is eligible
for input tax credit on inputs held in stock as on:
(a) 1st August, 2017
(b) 31st July, 2017
(c) 15th August, 2017
(d)
He cannot take credit for the past period
Ans. 31 st July, 2017.
Q 18. What is the eligibility of input tax credit on inputs in
stock for a person who obtains voluntary registration?
Ans. The person who obtains voluntary registration is
entitled to take the input tax credit of input tax on inputs in
stock, inputs in semi- finished goods and finished goods in stock,
held on the day immediately preceding the date of registration.
Q 19. What would be input tax eligibility in cases where there is a
change in the constitution of a registered person?
Ans. The registered person shall be allowed to transfer the input
tax credit that remains unutilized in its electronic credit ledger
to the new entity, provided that there is a specific provision for
transfer of liabilities.
Q 20. Where goods or services or both received by a taxable person
are used for effecting both taxable and non-taxable supplies,
whether the input tax credit is available to the registered taxable
person?
Ans. The input tax credit of goods or services or both attributable
only to taxable supplies can be taken by registered person. The
manner of calculation of eligible credit would be provided by
rules.
Q 21. If input tax credit is allowed only in respect of goods or
services or both for effecting taxable supplies, would it not lead
to loss of input tax credit on exempt supplies when exported?
Ans. Zero-rated supplies have been covered within taxable supplies
for the purpose of allowing input tax credit. The scope of
zero-rated supply is provided in the Integrated Goods and Services
Tax Act which includes even exempt supplies.
Q 22. Which of the following is included for computation of taxable
supplies for the purpose of availing credit?
(a) Zero-rated supplies
(b) Exempt supplies
(c) Both
Ans. Zero rated supplies.
Q 23. Where goods or services received by a registered person are
used partly for the purpose of business and partly for other
purposes, whether the input tax credit is available to the person?
Ans. The input tax credit of goods or services or both attributable
only to the purpose of business can be taken by registered person.
The manner of calculation of eligible credit would be provided by
rules.
Q 24. A person paying tax under compounding scheme crosses the
compounding threshold and becomes a regular taxable person. Can he
avail ITC and if so from what date?
Ans. He can avail ITC in respect of inputs held in stock and inputs
contained in semi-finished or finished goods held in stock and on
capital goods (reduced by prescribed percentage points) on the day
immediately preceding the date from which he ceases to be eligible
for composition scheme. The manner of calculation of eligible
credit would be provided by rules.
Q 25. Are there any special provisions in respect of banking
companies?
Ans. A banking company or a financial institution including a
non-banking financial company engaged in supply of specified
services would either avail proportionate credit or avail 50% of
the eligible input tax credit.
Q 26. Mr. A, a registered person was paying tax under composition
scheme up to 30
th
July, 2017. However, w.e.f 31
st
July, 2017, Mr. A becomes liable to pay tax under regular scheme.
Is he eligible for ITC?
Ans. Mr. A is eligible for input tax credit on inputs held in stock
and inputs contained in semi-finished or finished goods held in
stock and capital goods (reduced by such percentage points as may
be prescribed) as on 30
th
July, 2017.
Q 27. Mr. B applies for voluntary registration on 5
th
June, 2017 and obtained registration on 22
nd
June, 2017. Mr. B is eligible for input tax credit on inputs in
stock as on…………..
Ans. Mr. B is eligible for input tax credit on inputs held in stock
and inputs contained in semi-finished or finished goods held in
stock as on 21
st
June, 2017. Mr. B cannot take input tax credit in respect of
capital goods.
Q 28. What would happen to the input tax credit availed by a
registered person who opts for composition scheme or where the
goods or services or both supplied by him become wholly exempt?
Ans. The registered person has to pay an amount equal to the input
tax credit in respect of stocks held on the day immediately
preceding the date of exercise of option or date of exemption. In
respect of capital goods, the payable amount would be calculated by
reducing by a prescribed percentage point. The payment can be made
by debiting electronic credit ledger, if there is sufficient
balance in the credit ledger, or by debiting electronic cash
ledger. If any balance remains in the credit ledger, it would
lapse.
Q 29. Is there any restriction on period for availment of ITC?
Ans. In cases of new registration, change from composition to
normal scheme, from exempt to taxable supplies, the concerned
person cannot avail ITC after the expiry of one year from the date
of issue of tax invoice relating to such supply.
Q 30. What happens where the details of inward supplies furnished
by the recipient do not match with the outward supply details
furnished by the supplier in his valid return?
Ans. In case of mismatch, the communication would be made to the
both parties. If the mismatch is not rectified, then the amount
will be added to the output liability of recipient in the return
for the month succeeding the month in which discrepancy is
communicated.
Q 31. Is input tax credit allowed only after matching?
Ans. No, input tax credit is allowed provisionally for two months.
The supply details are matched by the system and discrepancies are
communicated to concerned supplier and recipient. In case mismatch
continues, the ITC taken would be reversed automatically.
Q 32. Can provisionally allowed ITC be used for payment of all
liabilities?
Ans. No, provisionally allowed ITC can be used only for the payment
of self-assessed output tax in the return.
Q 33. What will be the tax impact when capital goods on which ITC
has been taken are supplied by taxable person?
Ans. In case of supply of capital goods or plant and machinery on
which input tax credit has been taken, the registered person shall
pay an amount equal to the input tax credit taken on the said
capital goods or plant and machinery reduced by the percentage
points as may be specified in this behalf or the tax on the
transaction value of such capital goods, whichever is higher.
Q 34. What is the tax implication of supply of capital goods by a
registered person who had taken ITC on such capital goods?
Ans. The registered person would pay an amount equal to ITC reduced
by prescribed percentage point or tax on the transaction value,
whichever is higher. But in case of refractory bricks, moulds and
dies, jigs and fixtures when these are supplied as scrap, the
person can pay tax on the transaction value.
11. Concept of Input Service Distributor in GST
Q 1. What is Input Service Distributor (ISD)?
Ans. ISD means an office of the supplier of goods or services or
both which receives tax invoices towards receipt of input services
and issues a prescribed document for the purposes of distributing
the credit of central tax (CGST), State tax (SGST)/ Union territory
tax (UTGST) or integrated tax (IGST) paid on the said services to a
supplier of taxable goods or services or both having same PAN as
that of the ISD.
Q 2. What are the requirements for registration as ISD?
Ans. An ISD is required to obtain a separate registration even
though it may be separately registered. The threshold limit of
registration is not applicable to ISD. The registration of ISD
under the existing regime (i.e. under Service Tax) would not be
migrated in GST regime. All the existing ISDs will be required to
obtain fresh registration under new regime in case they want to
operate as an ISD.
Q 3. What are the documents for distribution of credit by ISD?
Ans. The distribution of credit would be done through a document
especially designed for this purpose. The said document would
contain the amount of input tax credit being distributed.
Q 4. Can an ISD distribute the input tax credit to all suppliers?
Ans. No. The input tax credit of input services shall be
distributed only amongst those registered persons who have used the
input services in the course or furtherance of business.
Q 5. It is not possible many a times to establish a one-to-one link
between quantum of input services used in the course or furtherance
of business by a supplier. In such situations, how distribution of
ITC by the ISD is to be done?
Ans. In such situations, distribution would be based on a formula.
Firstly, distribution would be done only amongst those recipients
of input tax credit to whom the input service being distributed are
attributable. Secondly, distribution would be done amongst the
operational units only. Thirdly, distribution would be done in the
ratio of turnover in a State or Union territory of the recipient
during the period to the aggregate of all recipients to whom input
service being distributed is attributable. Lastly, the credit
distributed should not exceed the credit available for
distribution.
Q 6. What does the turnover used for ISD cover?
Ans. The turnover for the purpose of ISD does not include any duty
or tax levied under entry 84 of List I and entry 51 and 54 of List
II of the Seventh Schedule to the Constitution.
Q 7. Is the ISD required to file return?
Ans. Yes, ISD is required to file monthly return by 13th of the
following month.
Q 8. Can a company have multiple ISD?
Ans. Yes, different offices like marketing division, security
division etc. may apply for separate ISD.
Q 9. What are the provisions for recovery of excess/wrongly
distributed credit by ISD?
Ans. The excess/wrongly distributed credit can be recovered from
the recipients of credit along with interest by initiating action
under section 73 or 74.
Q 10. Whether CGST and IGST credit can be distributed by ISD as
IGST credit to recipients located in different States?
Ans. Yes, CGST credit can be distributed as IGST and IGST credit
can be distributed as CGST by an ISD for the recipients located in
different States.
Q 11. Whether SGST / UTGST credit can be distributed as IGST credit
by an ISD to recipients located in different States?
Ans. Yes, an ISD can distribute SGST /UTGST credit as IGST for the
recipients located in different States.
Q 12. Whether the ISD can distribute the CGST and IGST Credit as
CGST credit?
Ans. Yes, CGST and IGST credit can be distributed as CGST credit by
an ISD for the recipients located in same State.
Q 13. Whether the SGST/ UTGST and IGST Credit can be distributed as
SGST/UTGST credit?
Ans. Yes, ISD can distribute SGST and IGST credit as SGST / UTGST
credit for the recipients located in same State.
Q 14. How to distribute common credit among all the recipients of
an ISD?
Ans. The common credit used by all the recipients can be
distributed by ISD on pro rata basis i.e. based on the turnover of
each recipient to the aggregate turnover of all the recipients to
which credit is distributed.
Q 15. The ISD may distribute the CGST and IGST credit to recipient
outside the State as_______ (a) IGST
(b) CGST
(c) SGST
Ans. (a) IGST.
Q 16. The ISD may distribute the CGST credit within the State
as____
(a) IGST
(b) CGST
(c) SGST
(d) Any of the above.
Ans. (b) CGST.
Q 17. The credit of tax paid on input service used by more than one
supplier is ________
(a)
Distributed among the suppliers who used such input service on pro
rata basis of turnover in such State.
(b) Distributed equally among all the suppliers.
(c) Distributed only to one supplier.
(d) Cannot be distributed.
Ans. (a) Distributed among the suppliers who used such
input service on pro rata basis of turnover in such State.
Q 18. Whether the excess credit distributed could be recovered from
ISD by the department?
Ans. No. Excess credit distributed can be recovered along with
interest only from the recipient and not ISD. The provisions of
section 73 or 74 would be applicable for the recovery of credit.
Q 19. What are the consequences of credit distributed in
contravention of the provisions of the Act?
Ans. The credit distributed in contravention of provisions of Act
could be recovered from the recipient to which it is distributed
along with interest.
12. Returns Process and matching of Input Tax Credit
Q 1. What is the purpose of returns?
Ans.
a) Mode for transfer of information to tax administration;
b) Compliance verification program of tax administration;
c)
Finalization of the tax liabilities of the taxpayer within
stipulated period of limitation; to declare tax liability for a
given period;
d) Providing necessary inputs for taking policy decision;
e)
Management of audit and anti-evasion programs of tax
administration.
Q 2. Who needs to file Return in GST regime?
Ans. Every person registered under GST will have to file returns in
some form or other. A registered person will have to file returns
either monthly (normal supplier) or quarterly basis (Supplier
opting for composition scheme). An ISD will have to file monthly
returns showing details of credit distributed during the particular
month. A person required to deduct tax (TDS) and persons required
to collect tax (TCS) will also have to file monthly returns showing
the amount deducted/collected and other details as may be
prescribed. A non-resident taxable person will also have to file
returns for the period of activity undertaken.
Q 3. What type of outward supply details are to be
filed in the return?
Ans. A normal registered taxpayer has to file the outward supply
details in GSTR-1 in relation to various types of supplies made in
a month, namely outward supplies to registered persons, outward
supplies to unregistered persons (consumers), details of
Credit/Debit Notes, zero rated, exempted and non-GST supplies,
exports, and advances received in relation to future supply.
Q 4. Is the scanned copy of invoices to be uploaded along with
GSTR-1?
Ans. No scanned copy of invoices is to be uploaded. Only certain
prescribed fields of information from invoices need to be uploaded.
Q 5. Whether all invoices will have to be uploaded?
Ans. No. It depends on whether B2B or B2C plus whether Intra-state
or Inter-state supplies.
For B2B supplies, all invoices, whether Intra-state or Inter-state
supplies, will have to be uploaded. Why So? Because ITC will be
taken by the recipients, invoice matching is required to be done.
In B2C supplies, uploading in general may not be required as the
buyer will not be taking ITC. However still in order to implement
the destination based principle, invoices of value more than Rs.2.5
lacs in inter-state B2C supplies will have to be uploaded. For
inter-state invoices below Rs. 2.5 lacs and all intra-state
invoices, state wise summary will be sufficient.
Q 6. Whether description of each item in the invoice will have to
be uploaded?
Ans. No. In fact, description will not have to be uploaded. Only
HSN code in respect of supply of goods and Accounting code in
respect of supply of services will have to be fed. The minimum
number of digits that the filer will have to upload would depend on
his turnover in the last year.
Q 7. Whether value for each transaction will have to be fed? What
if no consideration?
Ans. Yes. Not only value but taxable value will also have to be
fed. In some cases, both may be different.
In case there is no consideration, but it is supply by virtue of
schedule 1, the taxable value will have to be worked out as
prescribed and uploaded.
Q 8. Can a recipient feed information in his GSTR-2 which has been
missed by the supplier?
Ans. Yes, the recipient can himself feed the invoices not uploaded
by his supplier. The credit on such invoices will also be given
provisionally but will be subject to matching. On matching, if the
invoice is not uploaded by the supplier, both of them will be
intimated. If the mismatch is rectified, provisional credit will be
confirmed. But if the mismatch continues, the amount will be added
to the output tax liability of the recipient in the returns for the
month subsequent to the month in which such discrepancy was
communicated.
Q 9. Does the taxable person have to feed anything in the GSTR-2 or
everything is auto-populated from GSTR-1?
Ans. While a large part of GSTR-2 will be auto-populated, there are
some details that only recipient can fill like details of imports,
details of purchases from non-registered
or composition suppliers and exempt/non-GST/nil GST supplies etc.
Q 10. What if the invoices do not match? Whether ITC is to be given
or denied? If denied, what action is taken against supplier?
Ans. If invoices in GSTR-2 do not match with invoices in
counter-party GSTR-1, then such mismatch shall be intimated to the
supplier. Mismatch can be because of two reasons. First, it could
be due to mistake at the side of the recipient, and in such a case,
no further action is required. Secondly, it could be possible that
the said invoice was issued by supplier but he did not upload it
and pay tax on it. In such a case, the ITC availed by the recipient
would be added to his output tax liability, in short, all
mismatches will lead to proceedings if the supplier has made a
supply but not paid tax on it.
Q 11. What will be the legal position in regard to the reversed
input tax credit if the supplier later realizes the mistake and
feeds the information?
Ans. At any stage, but before September of the next financial year,
supplier can upload the invoice and pay duty and interest on such
missing invoices in his GSTR-3 of the month in which he had earlier
failed to upload the invoice. The recipient shall be eligible to
reduce his output tax liability to the extent of the amount in
respect of which the supplier has rectified the mis-match. The
interest paid by the recipient at the time of reversal will also be refunded
to the recipient by crediting the amount in corresponding head of his electronic cash ledger.
Q 12. What is the special feature of GSTR-2?
Ans. The special feature of GSTR-2 is that the details of
supplies received by a recipient can be auto populated on the basis
of the details furnished by the counterparty supplier in his
GSTR-1.
Q 13. Do tax payers under the composition scheme also need to file
GSTR-1 and GSTR-2?
Ans. No. Composition tax payers do not need to file any statement
of outward or inward supplies. They have to file a quarterly return
in Form GSTR-4 by the 18
th of the month after the end of the quarter. Since they are not
eligible for any input tax credit, there is no relevance of GSTR-2
for them and since the credit of tax paid under Composition Levy is
not eligible
,
there is no relevance of GSTR-1 for them. In their return, they
have to declare summary details of their outward supplies along
with the details of tax payment. They also have to give details of
their purchases in their quarterly return itself, most of which
will be auto populated.
Q 14. Do Input Service Distributors (ISDs) need to file separate statement of outward and inward supplies with
their return?
Ans. No, the ISDs need to file only a return in Form GSTR-6 and the
return has the details of credit received by them from the service
provider and the credit distributed by them to the recipient units.
Since their return itself covers these aspects, there is no
requirement to file separate statement of inward and outward
supplies.
Q 15. How does a taxpayer get the credit of the tax deducted at
source on his behalf? Does he need to produce TDS certificate from
the deductee to get the credit?
Ans. Under GST, the deductor will be submitting the
deductee wise details of all the deductions made by him in his
return in Form GSTR-7 to be filed by 10th of the month next to the
month in which deductions were made. The details of the deductions
as uploaded by the deductor shall be auto populated in the GSTR-2
of the deductee. The taxpayer shall be required to confirm these
details in his GSTR-2 to avail the credit for deductions made on
his behalf. To avail this credit, he does not require to produce
any certificate in physical or electronic form. The certificate
will only be for record keeping of the tax payer and can be
downloaded from the Common Portal.
Q 16. Which type of taxpayers need to file Annual Return?
Ans. All taxpayers filing return in GSTR-1 to GSTR-3, other than
ISD’s, casual/non-resident taxpayers, taxpayers under composition
scheme, TDS/TCS deductors, are required to file an annual return.
Casual taxpayers, non-resident taxpayers, ISDs and persons
authorized to deduct/collect tax at source are not required to file
annual return.
Q 17. Is an Annual Return and a Final Return one and the same?
Ans. No. Annual Return has to be filed by every registered person
paying tax as a normal taxpayer. Final Return has to be filed only
by those registered persons who have applied for cancellation of
registration. The Final return has to be filed within three months
of the date of cancellation or the date of cancellation order.
Q 18. If a return has been filed, how can it be revised
if some changes are required to be made?
Ans. In GST since the returns are built from details of individual
transactions, there is no requirement for having a revised return.
Any need to revise a return may arise due to the need to change a
set of invoices or debit/ credit notes. Instead of revising the
return already submitted, the system will allow changing the
details of those transactions (invoices or debit/credit notes) that
are required to be amended. They can be amended in any of the
future GSTR-1/2 in the tables specifically provided for the
purposes of amending previously declared details.
Q 19. How can taxpayers file their returns?
Ans. Taxpayers will have various modes to file the statements and
returns. Firstly, they can file their statement and returns
directly on the Common Portal online. However, this may be tedious
and time consuming for taxpayers with large number of invoices. For
such taxpayers, an offline utility will be provided that can be
used for preparing the statements offline after downloading the
auto populated details and uploading them on the Common Portal.
GSTN has also developed an ecosystem of GST Suvidha Providers (GSP)
that will integrate with the Common Portal.
Q 20. What precautions, a taxpayer is required to take for a hassle
free compliance under GST?
Ans. One of the most important things under GST will be timely
uploading of the details of outward supplies in Form GSTR-1 by 10th
of next month. How best this can be ensured will depend on the
number of B2B invoices that the taxpayer issues. If the number is
small, the taxpayer can upload all the information in one go.
However, if the number of invoices is
large, the invoices (or debit/ credit notes) should be uploaded on
a regular basis. GSTN will allow regular uploading of invoices even
on a real time basis. Till the statement is actually submitted, the
system will also allow the taxpayer to modify the uploaded
invoices. Therefore, it would always be beneficial for the
taxpayers to regularly upload the invoices. Last minute rush will
make uploading difficult and will come with higher risk of possible
failure and default. The second thing would be to ensure that
taxpayers follow up on uploading the invoices of their inward
supplies by their suppliers. This would be helpful in ensuring that
the input tax credit is available without any hassle and delay.
Recipients can also encourage their suppliers to upload their
invoices on a regular basis instead of doing it on or close to the
due date. The system would allow recipients to see if their
suppliers have uploaded invoices pertaining to them. The GSTN
system will also provide the track record about the compliance
level of a tax payer, especially about his track record in respect
of timely uploading of his supply invoices giving details about the
auto reversals that have happened for invoices issued by a
supplier. The Common Portal of GST would have pan India data at one
place which will enable valuable services to the taxpayers. Efforts
are being made to make regular uploading of invoices as easy as
possible and it is expected that an enabling eco-system will be
developed to achieve this objective. Taxpayers should make
efficient use of this ecosystem for easy and hassle free compliance
under GST.
Q 21. Is it compulsory for a taxpayer to file return by himself?
Ans. No. A registered taxpayer can also get his return filed
through a Tax Return Preparer, duly approved by the Central or the
State tax administration.
Q 22. What is the consequence of not filing the return within the prescribed date?
Ans. A registered person who files return beyond the prescribed
date will have to pay late fees of rupees one hundred for every day
of delay subject to a maximum of rupees five thousand. For failure
to furnish Annual returns by due date, late fee of Rs. One hundred
for every day during which such failure continues subject to a
maximum of an amount calculated at a quarter percent [0.25%] of his
turnover in a state, will be levied.
Q 23. What happens if ITC is taken on the basis of a document more
than once?
Ans. In case the system detects ITC being taken on the same
document more than once (duplication of claim), the amount of such
credit would be added to the output tax liability of the recipient
in the return. [section 42(6)]
Q 24. Whether the amount of credit detected by the system on
account of mis-match between GSTR-1 and GSTR-2 and recovered as
output tax can be reclaimed?
Ans. Yes, once the mismatch is rectified by the supplier by
declaring the details of the invoices or debit notes, as the case
may be, in his valid return for the month/quarter in which the
error had been detected. The said amount can be reclaimed by way of
reducing the output tax liability during the subsequent tax period.
[section 42(7)]. Similar provisions have also been made in Section
43 of the Act in respect of the credit notes issued by the
supplier.
13. Assessment and Audit
Q 1. Who is the person responsible to make assessment of taxes
payable under the Act?
Ans. Every person registered under the Act shall himself assess the
tax payable by him for a tax period and after such assessment he
shall file the return required under section 39.
Q 2. When can a taxable person pay tax on a
provisional basis?
Ans. As a taxpayer has to pay tax on self-assessment basis, a
request for paying tax on provisional basis has to come from the
taxpayer which will then have to be permitted by the proper
officer. In other words, no tax officer can suo-moto order payment
of tax on provisional basis. This is governed by section 60 of
CGST/SGST Act. Tax can be paid on a provisional basis only after
the proper officer has permitted it through an order passed by him.
For this purpose, the taxable person has to make a written request
to the proper officer, giving reasons for payment of tax on a
provisional basis. Such a request can be made by the taxable person
only in such cases where he is unable to determine:
a) the value of goods or services to be supplied by him, or
b)
determine the tax rate applicable to the goods or services to be
supplied by him.
In such cases the taxable person has to execute a bond in the
prescribed form, and with such surety or security as the proper
officer may deem fit.
Q 3. What is the latest time by which final assessment is required
to be made?
Ans. The final assessment order has to be passed by the proper
officer within six months from the date of the communication of the
order of provisional assessment. However, on sufficient cause being
shown and for reasons to be recorded in writing, the above period
of six months may be extended:
a)
by the Joint / Additional Commissioner for a
further period not exceeding six months, and
b) by the Commissioner for such further period as he may deem fit
not exceeding fours.
Thus, a provisional assessment can remain provisional for a maximum
of five years.
Q 4. Where the tax liability as per the final assessment is higher
than in provisional assessment, will the taxable person be liable
to pay interest?
Ans. Yes. He will be liable to pay interest from the date the tax
was due to be paid originally till the date of actual payment.
Q 5. What recourse may be taken by the officer in case proper
explanation is not furnished for the discrepancy detected in the
return filed, while conducting scrutiny under section 61 of CGST
ACT?
Ans. If the taxable person does not provide a satisfactory
explanation within 30 days of being informed (extendable by the
officer concerned) or after accepting discrepancies, fails to take
corrective action in the return for the month in which the
discrepancy is accepted, the Proper Officer may take recourse to
any of the following provisions:
(a) Proceed to conduct audit under Section 6 5 of the Act;
(b)
Direct the conduct of a special audit under Section 66 which is to
be conducted by a Chartered Accountant or a Cost Accountant
nominated for this purpose by the Commissioner; or
(c)
Undertake procedures of inspection, search and seizure under
Section 67 of the Act; or
(d)
Initiate proceeding for determination of tax and other dues under
Section 73 or 74 of the Act.
Q 6. If a taxable person fails to file the return required under law
(under section 39 (monthly/quarterly), or 45 (final return), what legal recourse is available to the tax officer?
Ans. The proper officer has to first issue a notice to the
defaulting taxable person under section 46 of CGST/SGST Act
requiring him to furnish the return within a period of fifteen
days. If the taxable person fails to file return within the given
time, the proper officer shall proceed to assess the tax liability
of the return defaulter to the best of his judgement taking into
account all the relevant material available with him. (Section 62).
Q 7. Under what circumstances can a best judgment assessment order
issued under section 60 be withdrawn?
Ans. The best judgment order passed by the Proper Officer under
section 62 of CGST/SGST Act shall automatically stand withdrawn if
the taxable person
furnishes a valid return for the default period (i.e. files the
return and pays the tax as assessed by him), within thirty days of
the receipt of the best judgment assessment order.
Q 8. What is the time limit for passing assessment order u/s 62
(Best Judgment) and 63 (Non-filers)?
Ans. The time limit for passing an assessment order under section
62 or 63 is five years from the due date for furnishing the annual
return.
Q 9. What is the legal recourse available in respect of a person
who is liable to pay tax but has failed to obtain registration?
Ans. Section 63 of CGST/SGST Act provides that in such a case, the
proper officer can assess the tax liability and pass an order to
his best judgment for the relevant tax periods. However, such an
order must be passed within a period of five years from the due
date for furnishing the annual return for the financial year to
which non-payment of tax relates.
Q 10. Under what circumstances can a tax officer initiate Summary
Assessment?
Ans. As per section 64 of CGST/SGST Act, Summary Assessments can be
initiated to protect the interest of revenue when:
a)
the proper officer has evidence that a taxable person has incurred
a liability to pay tax under the Act, and
b)
the proper officer believes that delay in passing an assessment
order will adversely affect the interest of revenue.
Such order can be passed after seeking permission from the
Additional Commissioner / Joint Commissioner.
Q 11. Other than appellate remedy, is there any other recourse
available to the taxpayer against a summary assessment order?
Ans. A taxable person against whom a summary assessment order has
been passed can apply for its withdrawal to the jurisdictional
Additional/Joint Commissioner within thirty days of the date of
receipt of the order. If the said officer finds the order
erroneous, he can withdraw it and direct the proper officer to
carry out determination of tax liability in terms of section 73 or
74 of CGST/SGST Act. The Additional/Joint Commissioner can follow a
similar course of action on his own motion if he finds the summary
assessment order to be erroneous (section 64 of CGST/SGST Act).
Q 12. Is summary assessment order to be necessarily passed against
the taxable person?
Ans. No. In certain cases, like when goods are under transportation
or are stored in a warehouse, and the taxable pe r son in respect of such goods cannot b e ascertained, the person in
charge of such goods shall be deemed to be the taxable person and
will be assessed to tax (proviso to Section 64 of CGST/SGST Act).
Q 13. Who can conduct audit of taxpayers?
Ans. There are three types of audit prescribed in the GST Act(s) as
explained below:
(a)
Audit by Chartered Accountant or a Cost Accountant: Every
registered person whose turnover exceeds the prescribed limit,
shall get his accounts audited by a
chartered accountant or a cost accountant. (Section 35(5) of the
CGST/SGST Act)
(b)
Audit by Department: The Commissioner or any officer of CGST or
SGST or UTGST authorized by him by a general or specific order, may
conduct audit of any registered person. The frequency and manner of
audit will be prescribed in due course. (Section 65 of the
CGST/SGST Act)
(c)
Special Audit: If at any stage of scrutiny, inquiry, investigations
or any other proceedings, if department is of the opinion that the
value has not been correctly declared or credit availed is not with
in the normal limits, department may order special audit by
chartered accountant or cost accountant, nominated by department.
(Section 66 of the CGST/SGST Act)
Q 14. Whether any prior intimation is required before conducting
the audit?
Ans. Yes, prior intimation is required and the taxable person
should be informed at least 15 working days prior to conduct of
audit.
Q 15. What is the period within which the audit is to be completed?
Ans. The audit is required to be completed within 3 months from the
date of commencement of audit. The period is extendable for a
further period of a maximum of 6 months by the Commissioner.
Q 16. What is meant by commencement of audit?
Ans. The term ‘commencement of audit’ is important because audit
has to be completed within a given time frame in reference to this
date of commencement. Commencement of audit means the later of the
following:
a) the date on which the records/accounts called
for by the audit authorities are made available to them, or
b)
the actual institution of audit at the place of business of the
taxpayer.
Q 17. What are the obligations of the taxable person when he
receives the notice of audit?
Ans. The taxable person is required to:
a) facilitate the verification of accounts/records available or
requisitioned by the authorities,
b)
provide such information as the authorities may require for the
conduct of the audit, and
c) render assistance for timely completion of the audit.
Q 18. What would be the action by the proper officer upon
conclusion of the audit?
Ans. The proper officer shall, on conclusion of audit, within 30
days inform the taxable person about his findings, reasons for
findings and the taxable person’s rights and obligations in respect
of such findings.
Q 19. Under what circumstances can a special audit be instituted?
Ans. A special audit can be instituted in limited circumstances
where during scrutiny, investigation, etc. it comes to the notice
that a case is complex or the revenue stake is high. This power is
given in section 66 of CGST /SGST Act.
Q 20. Who can serve the notice of communication for special audit?
Ans. The Assistant / Deputy Commissioner is to serve the
communication for special audit only after prior
approval of the Commissioner.
Q 21. Who will do the special audit?
Ans. A Chartered Accountant or a Cost Accountant so nominated by
the Commissioner may undertake the audit.
Q 22. What is the time limit to submit the audit report?
Ans. The auditor will have to submit the report within 90 days or
within the further extended period of 90 days.
Q 23. Who will bear the cost of special audit?
Ans. The expenses for examination and audit including the
remuneration payable to the auditor will be determined and borne by
the Commissioner.
Q 24. What action the tax authorities may take after the special
audit?
Ans. Based on the findings / observations of the special audit,
action can be initiated under Section 73 or Section 74 of the
CGST/SGST Act.
14. Refunds
Q 1. What is refund?
Ans. Refund has been discussed in section 54 of the CGST/SGST Act.
“Refund” includes
(a) any balance amount in the electronic cash ledger so claimed in
the returns,
(b)
any unutilized input tax credit in respect of (i) zero rated
supplies made without payment of tax or, (ii) where the credit has
accumulated on account of rate of tax on inputs being higher than
the rate of tax on output supplies (other than nil rated or fully
exempt supplies),
(c)
tax paid by specialized agency of United Nations or any
Multilateral Financial Institution and Organization notified under
the United Nations (Privileges and Immunities) Act, 1947, Consulate
or Embassy of foreign countries on any inward supply
Q 2. Can unutilized Input tax credit be allowed as refund?
Ans. Unutilized input tax credit can be allowed as refund in
accordance with the provisions of sub-section (3) of section 54 in
the following situations: -
(i) Zero rated supplies made without payment of tax;
(ii)
Where credit has accumulated on account of rate of tax on inputs
being higher than the rate of taxes on output supplies (other than
nil rated or fully exempt supplies)
However, no refund of unutilized input tax credit shall be allowed
in cases where the goods exported out of India are subjected to
export duty, and also in the case where the supplier of goods or
services or both avails of drawback in respect of central tax or
claims refund of the integrated tax paid on such supplies.
Q 3. Can unutilized ITC be given refund, in case goods Exported
outside India are subjected to export duty?
Ans. Refund of unutilized input tax credit is not allowed in cases
where the goods exported out of India are subjected to export duty
- as per the second proviso to Section 54(3) of CGST/SGST Act.
Q 4. Will unutilized ITC at the end of the financial year (after
introduction of GST) be refunded?
Ans. There is no such provision to allow refund of such unutilized
ITC at the end of the financial year in the GST Law. It shall be
carried forward to the next financial year.
Q 5. Suppose a taxable person has paid IGST/ CGST/SGST mistakenly
as an Interstate/intrastate supply, but the nature of which is
subsequently clarified. Can the CGST/SGST be adjusted against
wrongly paid IGST or vice versa?
Ans. The taxable person cannot adjust CGST/SGST or IGST with the
wrongly paid IGST or CGST/SGST but he is entitled to refund of the
tax so paid wrongly - Sec.77 of the CGST/SGST Act.
Q 6. Whether purchases made by Embassies or UN are taxed or
exempted?
Ans. Supplies to the Embassies or UN bodies will be taxed, which
later on can be claimed as refund by them in terms of Section 54(2)
of the CGST/SGST Act. The claim has to be filed in the manner
prescribed under CGST/SGST Refund rules, before expiry of six
months from the last day of the month in which such supply was
received.
[The United Nations Organization and Consulates or Embassies are
required to take a Unique Identity Number [section 26(1) of the
CGST/SGST Act] and purchases made by them will be reflected against
their Unique Identity Number in the return of outward supplies of
the supplier(s)]
Q 7. What is the time limit for taking refund?
Ans. A person claiming refund is required to file an application
before the expiry of two years from the “relevant date” as given in
the Explanation to section 54 of the CGST/SGST Act.
Q 8. Whether principle of unjust enrichment will be applicable in
refund?
Ans. The principle of unjust enrichment would be applicable in all
cases of refund except in the following cases: -
i.
Refund of tax paid on zero-rated supplies of goods or services or
both or on inputs or input services used in making such zero-rated
supplies
ii.
Unutilized input tax credit in respect of (i) zero rated supplies
made without payment of tax or, (ii) where the credit has
accumulated on account of rate of tax on inputs being higher than
the rate of tax on output supplies
iii.
refund of tax paid on a supply which is not provided, either wholly
or partially, and for which invoice has not been issued;
iv.
refund of tax in pursuance of Section 77 of CGST/SGST Act i.e. tax
wrongfully collected and paid to Central Government or State
Government
v.
if the incidence of tax or interest paid has not been passed on to
any other person;
vi.
such other class of persons who has borne the incidence of tax as
the Government may notify.
Q 9. In case the tax has been passed on to the
consumer, whether refund will be sanctioned?
Ans. Yes, the amount so refunded shall be credited to the Consumer
Welfare Fund - Section 57 of the CGST/SGST Act
Q 10. Is there any time limit for sanctioning of refund?
Ans. Yes, refund has to be sanctioned within 60 days from the date
of receipt of application complete in all respects. If refund is
not sanctioned within the said period of 60 days, interest at the
rate notified will have to be paid in accordance with section 56 of
the CGST/SGST Act.
However, in case where provisional refund to the extent of 90% of
the amount claimed is refundable in respect of zero-rated supplies
made by certain categories of registered persons in terms of
sub-section (6) of section 54 of the CGST/SGST Act, the provisional
refund has to be given within 7 days from the date of
acknowledgement of the claim of refund.
Q 11. Can refund be withheld by the department?
Ans. Yes, refund can be withheld in the following circumstances:
i.
If the person has failed to furnish any return till he files such
return;
ii.
If the registered taxable person is required to pay any tax,
interest or penalty which has not been stayed by the appellate
authority/Tribunal/ court, till he pays such tax interest or
penalty;
The proper officer can also deduct unpaid taxes, interest, penalty,
late fee, if any, from the refundable amount – Section 54(10) (d)
of the CGST/SGST Act
iii. The Commissioner can withhold any refund, if, the order of
refund is under appeal and he is of
the opinion that grant of such refund will adversely affect revenue
in the said appeal on
account of malfeasance or fraud committed - Sec.54 (11) of the
CGST/SGST Act.
Q 12. Where the refund is withheld under Section 54(11) of the CGST/SGST Act, will the taxable person be given
interest?
Ans. If as a result of appeal or further proceeding the taxable
person becomes entitled to refund, then he shall also be entitled
to interest at the rate notified [section 54(12) of the CGST/SGST
Act].
Q 13. Is there any minimum threshold for refund?
Ans. No refund shall be granted if the amount is less than
Rs.1000/-. [Sec.54 (14) of the CGST/SGST Act]
Q 14. How will the refunds arising out of existing law be paid?
Ans. The refund arising out of existing law will be paid as per the
provisions of the existing law and will be made in
cash and will not be available as ITC.
Q 15. Whether refund can be made before verification of documents?
Ans. In case of any claim of refund to a registered person on
account of zero rated supplies of goods or services or both (other
than registered persons as may be notified), 90% refund may be
granted on provisional basis before verification subject to such
conditions and restrictions as may be prescribed in accordance with
sub-section 6 of section 54 of the CGST/SGST Act.
Q 16. In case of refund under exports, whether BRC is necessary for
granting refund?
Ans. In case of refund on account of export of goods, the refund
rules do not prescribe BRC as a necessary document for filing of
refund claim. However, for export of services details of BRC is
required to be submitted along with the application for refund.
Q 17. Will the principle of unjust enrichment apply to exports and
supplies to SEZ Units?
Ans. The principle of unjust enrichment would not be applicable to
zero-rated supplies [i.e. exports and supplies to SEZ units]
Q 18. How will the applicant prove that the principle of unjust
enrichment does not apply in his case?
Ans. Where the claim of refund is less than Rs.2 Lakh, a
self-declaration by the applicant based on the documentary or other
evidences available with him, certifying that the incidence of tax
has not been passed on to any other person would make him eligible
to get refund. However, if the claim of refund is more than Rs.2
Lakh, the applicant is required to submit a certificate from a
Chartered Accountant or a Cost Accountant to the effect that the
incidence of tax has not been passed on to any other person.
Q 19. Today under VAT/CST merchant exporters can purchase goods
without payment of tax on furnishing of a declaration form. Will
this system be there in GST?
Ans. There is no such provision in the GST law. They will have to
procure goods upon payment of tax and claim refund of the tax paid
or the unutilized input tax credit in accordance with section
54(1)/54(3) of the CGST/SGST Act.
Q 20. Presently under Central law, exporters are allowed to obtain
duty paid inputs, avail ITC on it and export goods upon payment of
duty (after utilizing the ITC) and thereafter claim refund of the
duty paid on exports. Will this system continue in GST?
Ans.
Yes. In terms of Section 16 of the IGST Act, a
registered taxable person shall have the option either to export
goods/services without payment of IGST under bond or letter of
undertaking and claim refund of ITC or he can export goods/services
on payment of IGST and claim refund of IGST paid.
Q 21. What is the time period within which an acknowledgement of a
refund claim has to be given?
Ans. Where an application relates to a claim for refund from the
electronic cash ledger as per sub-section (6) of section 49 of the
CGST/SGST Act made through the return furnished for the relevant
tax period the acknowledgement will be communicated as soon as the
return is furnished and in all other cases of claim of refund the
acknowledgement will be communicated to the applicant within 15
days from the date of receipt of application complete in all
respect.
Q 22. What is the time period within which provisional refund has
to be given?
Ans. Provisional refund to the extent of 90% of the amount claimed
on account of zero-rated supplies in terms of sub-section (6) of
section 54 of the CGST/SGST Act has to be given within 7 days from
the date of acknowledgement of complete application for refund
claim.
Q 23. Is there any specified format for filing refund
claim?
Ans. Every claim of refund has to be filed in Form GST RFD 1.
However, claim of refund of balance in electronic cash ledger can
be claimed through furnishing of monthly/quarterly returns in Form
GSTR 3, GSTR 4 or GSTR 7, as the case may be, of the relevant
period.
Q 24. Is there any specified format for sanction of refund claim?
Ans. The claim of refund will be sanctioned by the proper officer
in Form GST RFD-06 if the claim is found to be in order and payment
advice will be issued in Form GST RFD-05. The refund amount will
then be electronically credited to the applicants given bank
account.
Q 25. What happens if there are deficiencies in the refund claim?
Ans. Deficiencies, if any, in the refund claim has to be pointed
out within 15 days. A form GST RFD-03 will be issued by the proper
officer to the applicant pointing out the deficiencies through the
common portal electronically requiring him to file a refund
application after rectification of such deficiencies.
Q 26. Can the refund claim be rejected without assigning any
reasons?
Ans. No. When the proper officer is satisfied that the claim is not
admissible he shall issue a notice in Form GST RFD-08 to the
applicant requiring him to furnish a reply in GST RFD -09 within
fifteen days and after consideration of the applicant’s reply, he
can accept or reject the refund claim and pass an order in Form GST
RFD-06 only.
15. Demands and Recovery
Q 1. Which are the applicable sections for the purpose of recovery
of tax short paid or not paid or amount erroneously refunded or
input tax credit wrongly availed or utilized?
Ans. Section
73
deals with the cases where there is no invocation of
fraud/suppression/mis-statement etc. Section
74
deals with cases where the provisions related to
fraud/suppression/mis-statement etc. are invoked.
Q 2. What if person chargeable with tax, pays the amount along with
interest before issue of show cause notice under section 73?
Ans. In such cases notice shall not be issued by the proper
officer. {sec.73 (6)}
Q 3. If show cause notice is issued under Section 73 and thereafter
the noticee makes payment along with applicable interest, is there
any need to adjudicate the case?
Ans. If the person pays the tax along with interest within 30 days
of issue of notice, no penalty shall be payable and all proceedings
in respect of such notice shall be deemed to be concluded. {sec.73 (8)}
Q 4. What is the relevant date for issue of Show Cause Notice?
Ans.
(i)
In case of section 73(cases other than fraud/ suppression of
facts/willful misstatement), the relevant date shall be counted
from the due date for filing of annual return for the financial
year to which demand relates to.
The SCN has to be adjudicated within at period of three years from
the due date of filing of annual return. The SCN is required to be
issued at least three months prior to the time limit set for
adjudication.
{sec.73(2&10)}
(ii)
In case of section 74(cases involving fraud/ suppression of
facts/willful misstatement), the relevant date shall be counted
from the due date for filing of annual return for the financial
year to which demand relates to. The SCN has to be adjudicated
within at period of five years from the due date of filing of
annual return. The SCN is required to be
issued at least six months prior to the time limit set for
adjudication.
{sec.74(2&10)}
Q 5. Is there any time limit for adjudication the cases?
Ans:
(i)
In case of section 73(cases other than fraud/ suppression of
facts/willful misstatement), the time limit for adjudication of
cases is 3 years from the due date for filing of annual return for
the financial year to which demand relates to or the date of
erroneous refund/ITC wrongly availed. {sec.73(10)}
(ii)
In case of section 74(cases of fraud/suppression of facts/willful
misstatement), the time limit for adjudication is 5 years from the
due date for filing of annual return for the financial year to
which demand relates to or the date of erroneous refund/ITC wrongly
availed. {sec.74(10)}
Q 6. Is there any immunity to a person chargeable with tax in cases
of fraud/suppression of facts/ willful misstatement, who pays the
amount of demand along-with interest before issue of notice?
Ans. Yes. Person chargeable with tax, shall have an option to pay
the amount of tax along with interest and penalty equal to 15%
percent of the tax involved, as ascertained either on his own or
ascertained by the proper officer, and on such payment, no notice
shall be issued with respect to the tax so paid. {sec. 74(6)}
Q 7. If notice is issued under Section 74 and thereafter the
noticee makes payment, is there any need to adjudicate the case?
Ans. Where the person to whom a notice has been issued under
sub-section (1) of section 74, pays the tax along with interest
with penalty equal to 25% of such tax within 30 days of issue of
notice, all proceedings in respect of such notice shall be deemed
to be concluded. {sec.74 (8)}
Q 8. In case a notice is adjudicated under Section 74 and order
issued confirming tax demand and penalty, does the noticee have any
option to pay reduced penalty?
Ans. Yes. if any person pays the tax determined by the order along
with interest and a penalty equivalent to 50% of such tax within
thirty days of the communication of order, all proceedings in
respect of the said tax shall be deemed to be concluded . {sec.74 (11)}
Q 9. What will happen in cases where notice is issued but order has
not been passed under section 73 & 74 within time specified for
adjudication under these sections?
Ans. Section 75 (10) provides for deemed conclusion of the
adjudication proceedings if the order is not issued within time
limit prescribed under these sections.
Q 10. What happens if a person collects tax from another person but
does not deposit the same with Government?
Ans. It is mandatory to pay amount, collected from other person
representing tax under this act, to the government. For any such
amount not so paid, proper officer may issue SCN for recovery of
such amount and penalty equivalent to such amount. {Sec.76 (1&2)}
Q 11. In case the person does not deposit tax collected in
contravention of Section 76(1), what is the proper course of action
to be taken?
Ans. SCN may be issued and if so, an order shall be passed
following Principles of natural justice within one year of date of
issue of such notice. {sec.76 (2 to 6)}
Q 12. What is the time limit to issue notice in cases under Section
76 i.e. taxes collected but not paid to Government?
Ans. There is no time limit. Notice can be issued on detection of
such cases without any time limit.
Q 13. What are the modes of recovery of tax available to the proper
officer?
Ans. The proper officer may recover the dues in following manner:
a)
Deduction of dues from the amount owned by the tax authorities
payable to such person.
b)
Recovery by way of detaining and selling any goods belonging to
such person;
c)
Recovery from other person, from whom money is due or may become
due to such person or who holds or may subsequently hold money for
or on account of such person, to pay to the credit of the Central
or a State Government;
d)
Distrain any movable or immovable property belonging to such
person, until the amount payable is paid. If the dues not paid
within 30days, the said property is to be sold and with the
proceeds of such sale the amount payable and cost of sale shall be
recovered.
e)
Through the Collector of the district in which such person owns any
property or resides or carries on his business, as if it was an
arrear of land revenue.
(f)
By way of an application to the appropriate Magistrate who in turn
shall proceed to recover the amount as if it were a fine imposed by
him.
(g)
Through enforcing the bond /instrument executed under this Act or
any rules or regulations made thereunder.
(h)
CGST arrears can be recovered as an arrear of SGST and vice-versa.
{sec.79 (1,2,3,4)}
Q 14. Whether the payment of tax dues can be made in installments?
Ans. On receipt of any such request, Commissioner/Chief
Commissioner may extend the time for payment or allow payment of
any amount due under the Act, other than the amount due as per the
liability self-assessed in any return, by such person in monthly
installments not exceeding
twenty four, subject to payment of interest under section
50 with such limitations and conditions as may be prescribed. However,
where there is default in payment of any one installment on its due
date, the whole outstanding balance payable on such date shall
become payable and recovered without any further notice . {sec.80}
Q 15. What is the course of recovery in cases where the tax demand
confirmed is enhanced in appeal/ revision proceedings?
Ans. The notice of demand is required to be served only in respect
of the enhanced dues. In so far as the amount already confirmed
prior to disposal of appeal/revision, the recovery proceedings may
be continued from the stage at which such proceedings stood
immediately before such disposal of appeal/revision. (Sec.84(a))
Q 16. If a taxable person with pending tax dues, transfers his
business to another person, what would happen to the tax dues?
Ans. The person, to whom the business is transferred, shall jointly
and severally be liable to pay the tax, interest or penalty due
from the taxable person up to the time of such transfer, whether
such dues has been determined before such transfer, but has
remained unpaid or is determined thereafter. {Sec. 85(1)}
Q 17. What happens to tax dues where the Company (taxable person)
goes into liquidation?
Ans. When any company is wound up, every appointed receiver of
assets (“Liquidator”) shall give intimation of his appointment to
Commissioner within 30 days. On receipt of such intimation
Commissioner may notify amount sufficient to recover tax
liabilities/dues to the liquidator within 3
months. {Sec. 88(1,2)}
Q 18. What is the liability of directors of the Company (taxable
person) under liquidation?
Ans: When any private company is wound up and any tax or
other
dues determined whether before or after liquidation that remains
unrecovered, every person who was a director of the company during
the period for which the tax was due, shall jointly and severally
be liable for payment of dues unless he proves to the satisfaction
of the Commissioner that such non-recovery is not attributed to any
gross neglect, misfeasance or breach of duties on his part in
relation to the affairs of the company. {Sec.88(3),89}
Q 19. What is the liability of partners of a partnership firm
(Taxable person) to pay outstanding tax?
Ans. Partners of any firm shall jointly and severally be liable for
payment of any tax, interest or penalty.
Firm/ partner shall intimate the retirement of any partner to the
Commissioner by a notice in writing.
Liability to pay tax, interest or penalty up to the date of such
retirement, whether determined on that date or subsequently, shall
be on such partner.
If no intimation is given within one month from the date of
retirement, the liability of such partner shall continue until the
date on which such intimation is received by the Commissioner . {Sec.90}
Q 20. What happens to the tax liability of a taxable person, whose
business is carried on by any guardian/ trustee or agent of a
minor?
Ans. Where the business in respect of which any tax is payable is
carried on by any guardian / trustee / agent of a minor or other
incapacitated person on behalf of and for the benefit of such
minor/incapacitated person, the tax, interest or penalty shall be
levied upon and recoverable from such guardian / trustee / agent . {Sec.91}
Q 21. What happens when the estate of a taxable person is under the
control of Court of Wards?
Ans. Where the estate of a taxable person owning a business in
respect of which any tax, interest or penalty is payable is under
the control of the Court of Wards/ Administrator General / Official
Trustee / Receiver or Manager appointed under any order of a Court,
the tax, interest or penalty shall be levied and recoverable from
such Court of Wards/Administrator General / Official Trustee /
Receiver or Manager to the same extent as it would be determined
and recoverable from a taxable person. {Sec.92}
16. Appeals, Review and Revision in GST
Q 1. Whether any person aggrieved by any order or decision passed
against him has the right to appeal?
Ans. Yes. Any person aggrieved by any order or decision passed
under the GST Act(s) has the right to appeal under Section 107. It
must be an order or decision passed by an “adjudicating authority”.
However, some decisions or orders (as provided for in Section 121)
are not appealable.
Q 2. What is the time limit to file appeal to Appellate Authority
(AA)?
Ans. For the aggrieved person, the time limit is fixed as 3 months
from the date of communication of order or decision. For the
department (Revenue), the time limit is 6 months within which
review proceedings have to be completed and appeal filed before the
AA
Q 3. Whether the appellate authority has any powers to condone the
delay in filing appeal?
Ans. Yes. He can condone a delay of up to one month from the end of
the prescribed period of 3/6 months for filing the appeal
(3+1/6+1), provided there is “sufficient cause” as laid down in the
section 107(4).
Q 4. Whether the appellate authority has any powers to allow
additional grounds not specified in the appeal memo?
Ans. Yes. He has the powers to allow additional grounds if he is
satisfied that the omission was not wilful or unreasonable.
Q 5. The order passed by Appellate Authority has to be communicated
to whom?
Ans. Appellate Authority has to communicate the copy of order to
the appellant, respondent and the adjudicating authority with a
copy to jurisdictional Commissioner of CGST and SGST/UTGST.
Q 6. What is the amount of mandatory pre-deposit which should be
made along with every appeal before Appellate Authority?
Ans. Full amount of tax, interest, fine, fee and penalty arising
from the impugned order as is admitted by the appellant and a sum
equal to 10% of remaining amount of tax in dispute arising from the
order in relation to which appeal has been filed.
Q 7. Can the Department apply to AA for ordering a higher amount of
pre-deposit?
Ans No
Q 8. What about the recovery of the balance amount?
Ans. On making the payment of pre-deposit as above, the recovery of the
balance amount shall be deemed to be stayed, in terms of section 107(7)
Q 9. Whether in an appeal the AA can pass an order enhancing the
quantum of duty/ fine/ penalty/
reduce the amount of refund/ITC from the one passed by the original
authority?
Ans. The AA is empowered to pass an order enhancing the
fees or penalty or fine in lieu of confiscation or reducing the
amount of refund or input tax credit provided
the appellant has been given reasonable opportunity of
showing cause against the proposed detrimental order. (First
Proviso to Section 107(11)).
In so far as the question of enhancing the duty or deciding wrong
availment of ITC is concerned, the AA can do so only after giving
specific SCN to the appellant against the proposed order and the
order itself should be passed within the time limit specified under
Section 73 or Section 74. (Second Proviso to Section 107(11)).
Q 10. Does the AA have the power to remand the case back to the
adjudicating authority for whatever reasons?
Ans. No. Section 107(11) specifically states that the AA shall,
after making such inquiry as may be necessary, pass such order, as
he thinks just and proper, confirming, modifying or annulling the
decision or order appealed against,but shall not refer the case back to the
authority that passed the decision or order.
Q 11. Can any CGST/SGST authority revise any order passed under the
Act by his subordinates?
Ans. Section 2(99) of the Act defines “Revisional Authority” as an
authority appointed or authorised under this Act for revision of
decision or orders referred to in
section 108. Section 108 of the Act authorizes such “revisional
authority” to call for and examine any order passed by his
subordinates and in case he considers the order of the lower
authority to be erroneous in so far as it is prejudicial to revenue
and is illegal or improper or has not taken into account certain
material facts, whether available at the time of issuance of the
said order or not or in consequence of an observation by the
Comptroller and Auditor General of India, he may, if necessary, he
can revise the order after giving opportunity of being heard to the
noticee.
Q 12. Can the “ revisional authority” order for staying of operation of any order
passed by his subordinates pending such revision?
Ans. Yes.
Q 13. Are there any fetters to the powers of “
revisional authority” under GST to revise orders of subordinates?
Ans. Yes. The “revisional authority” shall not revise any order if
(a)
the order has been subject to an appeal under section 107 or under
section 112 or under section 117 or under section 118; or
(b)
the period specified under section 107(2) has not yet expired or
more than three years have expired after the passing of the
decision or order sought to be revised.
(c)
the order has already been taken up for revision under this Section
at any earlier stage.
Q 14. When the Tribunal is having powers to refuse to admit the
appeal?
Ans. In cases where the appeal involves –
• tax amount or input tax credit or
•
the difference in tax or the difference in input tax credit
involved or
•
amount of fine, fees or amount of penalty determined by such order,
does not exceed Rs 50,000/- , the Tribunal has discretion to refuse
to admit such appeal. (Section 112(2) of the Act)
Q 15. What is the time limit within which appeal has to be filed
before the Tribunal?
Ans. The aggrieved person has to file appeal before Tribunal within
3 months from the date of receipt of the order appealed against.
Department has to complete review proceedings and file appeal
within a period of six months from the date of passing the order
under revision.
Q 16. Can the Tribunal condone delay in filing appeal before it
beyond the period of 3/6 months? If so, till what time?
Ans. Yes, the Tribunal has powers to condone delay of a further
three months, beyond the period of 3/6 months provided sufficient
cause is shown by the appellant for such delay.
Q 17. What is the time limit for filing memorandum of cross
objections before Tribunal?
Ans. 45 days from the date of receipt of appeal.
Q 18. Whether interest becomes payable on refund of pre-deposit
amount?
Ans. Yes. As per Section 115 of the Act, where an amount deposited
by the appellant under sub-section (6) of section 107 or under
sub-section (8) of section 112 is required to be refunded
consequent to any order of the Appellate Authority or of the
Appellate Tribunal, as the case may be, interest at the rate
specified under section 56 shall be payable in respect of such
refund from the date of payment of the amount till the date of
refund of such amount.
Q 19. An appeal from the order of Tribunal lies to which forum?
Ans. Appeal against orders passed by the State Bench or Area
Benches of the Tribunal lies to the High Court if the High Court is
satisfied that such an appeal involves a substantial question of
law. (Section 117(1)). However, appeal against orders passed by the
National Bench or Regional Benches of the Tribunal lies to the
Supreme Court and not High Court. (Under section 109(5) of the Act,
only the National Bench or Regional Benches of the Tribunal can
decide appeals where one of the issues involved relates to the
place of supply.)
Q 20. What is the time limit for filing an appeal before the High
Court?
Ans. 180 days from the date of receipt of the order appealed
against. However, the High Court has the power to condone further
delay on sufficient cause being shown.
17. Advance Ruling
Q 1. What is the meaning of Advance Ruling?
Ans. As per section 95 of CGST/SGST Law and section 12 of UTGST
law, ‘advance ruling’ means a decision provided by the authority or
the Appellate Authority to an applicant on matters or on questions
specified in section 97(2) or 100(1) of CGST/SGST Act as the case
may be, in relation to the supply of goods and/or services proposed
to be undertaken or being undertaken by the applicant.
Q 2. Which are the questions for which advance ruling can be
sought?
Ans. Advance Ruling can be sought for the following questions:
(a) classification of any goods or services or both;
(b)
applicability of a notification issued under provisions of the GST
Act(s);
(c)
determination of time and value of supply of goods or services or
both;
(d)
admissibility of input tax credit of tax paid or deemed to have
been paid;
(e)
determination of the liability to pay tax on any goods or services
under the Act;
(f) whether applicant i s required to be registered under the Act;
(g)
whether any particular thing done by the applicant with respect to
any goods or services
amounts to or results in a supply of goods or services, within the
meaning of that term.
Q 3. What is the objective of having a mechanism of Advance Ruling?
Ans. The broad objective for setting up such an authority is to:
i.
provide certainty in tax liability in advance in relation to an
activity proposed to be undertaken by the applicant;
ii. attract Foreign Direct Investment (FDI);
iii. reduce litigation;
iv.
pronounce ruling expeditiously in transparent and inexpensive
manner.
Q 4. What will be the composition of Authority for advance rulings
(AAR) under GST?
Ans. ‘Authority for advance ruling’ (AAR) shall comprise one m e m
b e r C GS T a n d o ne m e m b er S GS T / U T GS T . They will be
appointed by the Central and State government respectively.
Q 5. Is it necessary for a person seeking advance ruling to be
registered?
Ans. No, any person registered under the GST Act(s) or desirous of
obtaining registration can be an applicant. (Section 95(b))
Q 6. At what time an application for advance ruling be made?
Ans. An applicant can apply for advance ruling even before taking
up a transaction (proposed supply of goods or services) or in
respect of a supply which is being undertaken. The only restriction
is that the question being raised is already not pending or decided
in any proceedings in the case of applicant.
Q 7. In how much time will the Authority for Advance Rulings have
to pronounce its ruling?
Ans. As per Section 98(6) of CGST/SGST Act, the Authority shall
pronounce its ruling in writing within ninety days from the date of
receipt of application.
Q 8. What is the Appellate authority for advance ruling (AAAR)?
Ans. Appellate authority for advance ruling (AAAR), shall be
constituted under the SGST Act or UTGST Act and such AAAR shall be
deemed to be the Appellate Authority under the CGST Act in respect
of the respective state or Union Territory. An applicant, or the
jurisdictional officer, if aggrieved by any advance ruling, may
appeal to the Appellate Authority.
Q 9. How many AAR and AAAR will be constituted under GST?
Ans. There will be one AAR and AAAR for each State.
Q 10. To whom will the Advance Ruling be applicable?
Ans. Section 103 provides that an advance ruling
pronounced by AAR or AAAR shall be binding only on the applicant
who sought it in respect of any matter referred to in 97 (2) and on
the jurisdictional tax authority of the applicant. This clearly
means that an advance ruling is not applicable to similarly placed
taxable persons in the State. It is only limited to the person who
has applied for an advance ruling.
Q 11. Whether the advance ruling have precedent
value of a
judgment of the High Court or the Supreme Court?
Ans. No, the advance ruling is binding only in respect of the
matter referred. It has no precedent value. However, even for
persons other than applicant, it does have persuasive value.
Q 12. What is the time period for applicability of Advance Ruling?
Ans. The law does not provide for a fixed time period for which the
ruling shall apply. Instead, in section 1 0 3 (2 ) , it is provided
that advance ruling shall be binding till the period when the law,
facts or circumstances supporting the original advance ruling have
changed. Thus, a ruling shall continue to be in force so long as
the transaction continues and so long as there is no change in law,
facts or circumstances.
Q 13. Can an advance ruling given be nullified?
Ans. Section 104(1) provides that an advance ruling shall be held
to be ab initio void if the AAR or AAAR finds that
the advance ruling was obtained by the applicant by fraud or
suppression of material facts or misrepresentation of facts. In
such a situation, all the provisions of the GST Act(s) shall apply
to the applicant as if such advance ruling had never been made (but
excluding the period when advance ruling was given and up to the
period when the order declaring it to be void is issued). An order
declaring advance ruling to be void can be passed only after
hearing the applicant.
Q 14. What is the procedure for obtaining Advance Ruling?
Ans. Section 97 and 98 deals with procedure for obtaining advance
ruling. Section 97 provides that the applicant desirous of
obtaining advance ruling should make application to AAR in a
prescribed form and manner. The format of the form and the detailed
procedure for making application will be prescribed in the Rules.
Section 98 provides the procedure for dealing with the application
for advance ruling. The AAR shall send a copy of application to the
officer in whose jurisdiction the applicant falls and call for all
relevant records. The AAR may then examine the application along
with the records and may also hear the applicant. Thereafter AAR
will pass an order either admitting or rejecting the application.
Q 15. Under what circumstances will the application for Advance
Ruling be compulsorily rejected?
Ans. Application has to be rejected if the question raised in the
application is already pending or decided in any proceedings in the
case of applicant under any of the provisions of GST Act(s) If the application is rejected, it should be by way of a speaking order giving the reasons for rejection.
Q 16. What is the procedure to be followed by AAR once the
application is admitted?
Ans. If the application is admitted, the AAR shall pronounce its
ruling within ninety days of receipt of application. Before giving
its ruling, it shall examine the application and any further
material furnished by the applicant or by the concerned
departmental officer.
Before giving the ruling, AAR must hear the applicant or his
authorized representative as well as the jurisdictional officers of
CGST/SGST/UTGST.
Q 17. What happens if there is a difference of opinion amongst
members of AAR?
Ans. If there is difference of opinion between the two members of
AAR, they shall refer the point or points on which they differ to
the AAAR for hearing the issue. If the members of AAAR are also
unable to come to a common conclusion in regard to the point(s)
referred to them by AAR, then it shall be deemed that no advance
ruling can be given in respect of the question on which difference
persists at the level of AAAR.
Q 18. What are the provisions for appeals against order of AAR?
Ans. The provisions of appeal before AAAR are dealt in section 100
and 101 of CGST/SGST Act or section 14 of the UTGST Act.
If the applicant is aggrieved with the finding of the AAR, he
can file an appeal with AAAR. Similarly, if the concerned
or jurisdictional officer of CGST/SGST/UTGST does not agree with
the finding of AAR, he can also file an appeal with AAAR. The word
concerned officer of CGST/SGST means an officer who has been
designated by the CGST/SGST administration in regard to an
application for advance ruling. In normal circumstances, the
concerned officer will be the officer in whose jurisdiction the
applicant is located. In such cases the concerned officer will be
the jurisdictional CGST/SGST officer.
Any appeal must be filed within thirty days from the receipt of the
advance ruling. The appeal has to be in prescribed form and has to
be verified in prescribed manner. This will be prescribed in the
Model GST Rules.
The Appellate Authority must pass an order after hearing the
parties to the appeal within a period of ninety days of the filing
of an appeal. If members of AAAR differ on any point referred to in
appeal, it shall be deemed that no advance ruling is issued in
respect of the question under appeal.
Q 19. Whether Appeal can be filed before High Court or Supreme
Court against the ruling of Appellate Authority for Advance
Rulings?
Ans The CGST /SGST Act do not provide for any appeal against the
ruling of Appellate Authority for Advance Rulings. Thus no further
appeals lie and the ruling shall be binding on the applicant as
well as the jurisdictional officer in respect of applicant.
However, Writ Jurisdiction may lie before Hon’ble High
Court or the Supreme Court.
Q 20. Can the AAR & AAAR order for rectification of mistakes in
the ruling?
Ans. Yes, AAR and AAAR have power to amend their order to rectify
any mistake apparent from the record within a period of six months
from the date of the order. Such mistake may be noticed by the
authority on its own accord or may be brought to its notice by the
applicant or the concerned or the jurisdictional CGST/SGST officer.
If a rectification has the effect of enhancing the tax liability or
reducing the quantum of input tax credit, the applicant or the
appellant must be heard before the order is passed. (Section 102)
18. Settlement Commission [Omitted]
Omitted as the chapter is no longer there in the Final GST Act(s)
19. Inspection, Search, Seizure and Arrest
Q 1. What is the meaning of the term “Search”?
Ans. As per law dictionary and as noted in different judicial
pronouncements, the term ‘search’, in simple language, denotes an
action of a government machinery to go, look through or examine
carefully a place, area, person, object etc. in order to find
something concealed or for the purpose of discovering evidence of a
crime. The search of a person or vehicle or premises etc. can only
be done under proper and valid authority of law.
Q 2. What is the meaning of the term “Inspection”?
Ans. ‘Inspection’ is a new provision under the CGST/SGST Act. It is
a softer provision than search to enable officers to access any
place of business of a taxable person and also any place of
business of a person engaged in transporting goods or who is an
owner or an operator of a warehouse or godown.
Q 3. Who can order for carrying out “Inspection” and under what
circumstances?
Ans. As per Section 67 of CGST/SGST Act, Inspection can be carried
out by an officer of CGST/SGST only upon a written authorization
given by an officer of the rank of Joint Commissioner or above. A
Joint Commissioner or an officer higher in rank can give such
authorization only if he has reasons to believe that the person
concerned has done one of the following:
i. suppressed any transaction of supply;
ii. suppressed stock of goods in hand;
iii. claimed excess input tax credit;
iv. contravened any provision of the CGST/SGST Act to evade tax;
v.
a transporter or warehouse owner has kept goods which have escaped
payment of tax or has kept his accounts or goods in a manner that
is likely to cause evasion of tax.
Q 4. Can the proper officer authorize Inspection of any
assets/premises of any person under this Section?
Ans. No. Authorization can be given to an officer of CGST/ SGST to
carry out inspection of any of the following:
i. any place of business of a taxable person;
ii.
any place of business of a person engaged in the business of
transporting goods whether or not he is a registered taxable
person;
iii.
any place of business of an owner or an operator of a warehouse or
godown.
Q 5. Who can order for Search and Seizure under the provisions of
CGST Act?
Ans. An officer of the rank of Joint Commissioner or above can
authorize an officer in writing to carry out search and seize
goods, documents, books or things. Such authorization can be given
only where the Joint Commissioner has reasons to believe that any
goods liable to confiscation or any documents or books or things
relevant for any proceedings are hidden in any place.
Q 6. What is meant by ‘reasons to believe’?
Ans. Reason to believe is to have knowledge of facts
which, although not amounting to direct knowledge, would cause a
reasonable person, knowing the same facts, to reasonably conclude
the same thing. As per Section 26 of the IPC, 1860, “A person is
said to have ‘reason to believe’ a thing, if he has sufficient
cause to believe that thing but not otherwise.” ‘Reason to believe’
contemplates an objective determination based on intelligent care
and evaluation as distinguished from a purely subjective
consideration. It has to be and must be that of an honest and
reasonable person based on relevant material and circumstances.
Q 7. Is it mandatory that such ‘reasons to believe’ has to be
recorded in writing by the proper officer, before issuing
authorization for Inspection or Search and Seizure?
Ans. Although the officer is not required to state the reasons for
such belief before issuing an authorization for search, he has to
disclose the material on which his belief was formed. ‘Reason to
believe’ need not be recorded invariably in each case. However, it
would be better if the materials / information etc. are recorded
before issue of search warrant or before conducting search.
Q 8. What is a Search Warrant and what are its contents?
Ans. The written authority to conduct search is generally called
search warrant. The competent authority to issue search warrant is
an officer of the rank of Joint Commissioner or above. A search
warrant must indicate the existence of a reasonable belief leading
to the search. Search Warrant should contain the following details:
i. the violation under the Act,
ii. the premise to be searched,
iii. the name and designation of the person authorized for search,
iv.
the name of the issuing officer with full designation along with
his round seal,
v. date and place of issue,
vi. serial number of the search warrant,
vii. period of validity i.e. a day or two days etc.
Q 9. When do goods become liable to confiscation under the
provisions of CGST/SGST Act?
Ans. As per section 130 of SGST/SGST Act, goods become liable to
confiscation when any person does the following:
(i)
supplies or receives any goods in contravention of any of the
provisions of this Act or rules made thereunder leading to evasion
of tax;
(ii)
does not account for any goods on which he is liable to pay tax
under this Act;
(iii)
supplies any goods liable to tax under this Act without having
applied for the registration;
(iv)
contravenes any of the provisions of the CGST/ SGST Act or rules
made thereunder with intent to evade payment of tax.
Q 10. What powers can be exercised by an officer during valid
search?
Ans. An officer carrying out a search has the power to search for
and seize goods (which are liable to confiscation) and documents,
books or things (relevant for any proceedings
under CGST/SGST Act) from the premises searched. During search, the
officer has the power to break open the door of the premises
authorized to be searched if access to the same is denied.
Similarly, while carrying out search within the premises, he can
break open any almirah or box if access to such almirah or box is
denied and in which any goods, account, registers or documents are
suspected to be concealed. He can also seal the premises if access
to it denied.
Q 11. What is the procedure for conducting search?
Ans. Section 67(10) of CGST/SGST Act prescribes that searches must
be carried out in accordance with the provisions of Code of
Criminal Procedure, 1973. Section 100 of the Code of Criminal
Procedure describes the procedure for search.
Q 12. What are the basic requirements to be observed during Search
operations?
Ans. The following principles should be observed during Search:
•
No search of premises should be carried out without a valid search
warrant issued by the proper officer.
•
There should invariably be a lady officer accompanying the search
team to residence.
•
The officers before starting the search should disclose their
identity by showing their identity cards to the person in-charge of
the premises.
• The search warrant should be executed before the start of the
search by showing the same to the person in-charge of the premises
and his signature should be taken on the body of the search warrant
in token of having seen the same. The signatures of
at least two witnesses should also be taken on the body of the
search warrant.
•
The search should be made in the presence of at least two
independent witnesses of the locality. If no such inhabitants are
available
willing, the inhabitants of any other locality should be asked to
be witness to the search. The witnesses should be briefed about the
purpose of the search.
•
Before the start of the search proceedings, the team of officers
conducting the search and the accompanying witnesses should offer
themselves for their personal search to the person in-charge of the
premises being searched. Similarly, after the completion of search
all the officers and the witnesses should again offer themselves
for their personal search.
•
A Panchnama / Mahazar of the proceedings of the search should
necessarily be prepared on the spot. A list of all goods, documents
recovered and seized/detained should be prepared and annexed to the
Panchnama/Mahazar. The Panchnama / Mahazar and the list of goods/
documents seized/detained should invariably be
signed by charge/ owner the search is officer(s) duly search. Wthe witnesses ,the in-of the premises before whom
conducted and also by the authorized for conducting the
•
After the search is over, the search warrant duly executed should
be returned in original to the issuing officer with a report
regarding the outcome of the search. The names of the officers who
participated in the search may also be
written on the reverse of the search warrant.
•
The issuing authority of search warrant should maintain register of
records of search warrant issued and returned and used search
warrants should be kept in records.
•
A copy of the Panchnama / Mahazar along with its annexure should be
given to the person in-charge/owner of the premises being searched
under acknowledgement.
Q 13. Can a CGST/SGST officer access business premises under any
other circumstances?
Ans. Yes. Access can also be obtained in terms of Section 65 of
CGST/SGST Act. This provision of law is meant to allow an audit
party of CGST/SGST or C&AG or a cost accountant or chartered
accountant nominated under section 66 of CGST/SGST Act, access to
any business premises without issuance of a search warrant for the
purposes of carrying out any audit, scrutiny, verification and
checks as may be necessary to safeguard the interest of revenue.
However, a written authorization is to be issued by an officer of
the rank of Commissioner of CGST or SGST. This provision
facilitates access to a business premise which is not registered by
a taxable person as a principal or additional place of business but
has books of accounts, documents, computers etc. which are required
for audit or verification of accounts of a taxable person.
Q 14. What is meant by the term ‘Seizure’?
Ans. The term ‘seizure’ has not been specifically defined in the
Model GST Law. In Law Lexicon Dictionary, ‘seizure’ is defined as
the act of taking possession of property by an officer under legal
process. It generally implies taking
possession forcibly contrary to the wishes of the owner of the
property or who has the possession and who was unwilling to part
with the possession.
Q 15. Does GST Act(s) have any power of detention of goods and
conveyances?
Ans. Yes, under Section 129 of CGST/SGST Act, an officer
has power to detain goods along with the conveyance (like a truck
or other types of vehicle) transporting the goods. This can be done
for such goods which are being transported or are stored in transit
in violation of the provisions of CGST/SGST Act. Goods which are
stored or are kept in stock but not accounted for can also be
detained. Such goods and conveyance shall be released after payment
of applicable tax or upon furnishing security of equivalent amount.
Q 16. What is the distinction in law between ‘Seizure’ and
‘Detention’?
Ans. Denial of access to the owner of the property or the person
who possesses the property at a particular point of time by a legal
order/notice is called detention. Seizure is taking over of actual
possession of the goods by the department. Detention order is
issued when it is suspected that the goods are liable to
confiscation. Seizure can be made only on the reasonable belief
which is arrived at after inquiry/investigation that the goods are
liable to confiscation.
Q 17. What are the safeguards provided in GST Act(s) in respect of
Search or Seizure?
Ans. Certain safeguards are provided in section 67 of
CGST/SGST Act in respect of the power of search or seizure. These
are as follows:
i. Seized goods o r documents should n o t be retained beyond the
period necessary for their examination;
ii.
Photocopies of the documents can be taken by the person from whose
custody documents are seized;
iii. For seized goods, if a notice is not issued within
six months of its seizure, goods shall be returned to the person
from whose possession it was seized. This period of six months can
be extended on justified grounds up to a further period of maximum
six months;
iv.
An inventory of seized goods shall be made by the seizing officer;
v.
Certain categories of goods to be specified under CGST Rules (such
as perishable, hazardous etc.) can be disposed of immediately after
seizure;
vi.
Provisions of Code of Criminal Procedure 1973 relating to search
and seizure shall apply. However, one important modification is in
relation to sub-section (5) of section 165 of Code of Criminal
Procedure – instead of sending copies of any record made in course
of search to the nearest Magistrate empowered to take cognizance of
the offence, it has to be sent to the Principal Commissioner/
Commissioner of CGST/ Commissioner of SGST.
Q 18. Is there any special document required to be carried during
transport of taxable goods?
Ans. Under section 68 of CGST /SGST Act, a person in charge of a
conveyance carrying any consignment of goods of value exceeding a
specified amount may be required to carry a prescribed document as
may be prescribed.
Q 19. What is meant by the term “arrest”?
Ans. The term ‘arrest’ has not been defined in the CGST/SGST Act.
However, as per judicial pronouncements, it denotes ‘the taking
into custody of a person under some lawful command or authority’.
In other words, a person is said to be arrested when he is taken
and restrained of his liberty by power or colour of lawful warrant.
Q 20. When can the proper officer authorize ‘arrest’ of any person
under CGST / SGST Act?
Ans. The Commissioner of CGST/SGST can authorize a CGST/SGST
officer to arrest a person if he has reasons to believe that the
person has committed an offence attracting a punishment prescribed
under section 132(1) (a), (b), (c),
(d) or Sec 132(2) of the CGST/SGST Act. This essentially means that
a person can be arrested only where the tax evasion is more than 2
crore rupees or where a he has been convicted earlier under CGST
Act.
Q 21. What are the safeguards provided under CGST /SGST Act for a
person who is placed under arrest?
Ans. There are certain safeguards provided under section 69 for a
person who is placed under arrest. These are:
a. If a person is arrested for a cognizable
offence, he must be informed in writing of the grounds of arrest
and he must be produced before a magistrate within 24 hours of his
arrest;
i.
If a person is arrested for a non-cognizable and bailable offence,
the Deputy/ Assistant Commissioner of CGST/SGST can release him on
bail and he will be subject to the same provisions as an officer
in-charge of a police station under section 436 of the Code of
Criminal Procedure, 1973;
ii.
All arrest must be in accordance with the provisions of the Code of
Criminal Procedure,1973 relating to arrest.
Q 22. What are the precautions to be taken during arrest?
Ans. The provisions of the Code of Criminal Procedure, 1973 (2 of
1974) relating to arrest and the procedure thereof must be adhered
to. It is therefore necessary that all field officers of CGST/SGST
be fully familiar with the provisions of the Code of Criminal
Procedure, 1973.
One important provision to be taken note of is section 57 of
Cr.P.C., 1973 which provides that a person arrested without warrant
shall not be detained for a longer period than, under the
circumstances of the case, is reasonable but this shall not exceed
twenty four hours (excluding the journey time from place of arrest
to the Magistrate’s court). Within this period, as provided under
section 56 of Cr.P.C., the person making the arrest shall send the
person arrested without warrant before a Magistrate having
jurisdiction in the case.
In a landmark judgment in the case of D.K. Basu v. State
of West Bengal reported in 1997 (1) SCC 416, the Hon’ble Supreme Court has
laid down specific guidelines required to be followed while making arrests.
While this is in relation to police, it needs to be followed by all
departments having power of arrest. These are as under:
i. The police personnel carrying out the arrest and handling the
interrogation of the arrestee should bear accurate, visible and clear
identification and name tags with their designations. The particulars of
all such police personnel who handle interrogation of the arrestee must be
recorded in a register.
ii. The police officer carrying out the arrest shall prepare a memo of
arrest at the time of arrest and such memo shall be attested by at least
one witness, who may be either a member of the family of the arrestee or a
respectable person of the locality from where the arrest is made. It shall
also be counter signed by the arrestee and shall contain the time and date
of arrest.
iii. A person who has been arrested or detained and is being held in
custody in a police station or interrogation center or other lock up, shall
be entitled to have one friend or relative or other person known to him or
having interest in his welfare being informed, as soon as practicable, that
he has been arrested and is being detained at the particular place, unless
the attesting witness of the memo of arrest is himself such a friend or a
relative of the arrestee.
iv. The time, place of arrest and venue of custody of an arrestee must be
notified by the police where the next friend or relative of the arrestee
lives outside the district or town through the Legal Aid
Organization in the District and the police station of the area concerned
telegraphically within a period of 8 to 12 hours after the arrest.
v. An entry must be made in the diary at the place of detention regarding
the arrest of the person which shall also disclose the name of the next
friend of the person who has been informed of the arrest and the names and
particulars of the police officials in whose custody the arrestee is.
vi. The arrestee should, where he so requests, be also examined at the time
of his arrest and major and minor injuries, if any present on his/her body,
must be recorded at that time. The
‘Inspection Memo’ must be signed both by the arrestee and the police
officer effecting the arrest and its copy provided to the arrestee.
vii. The arrestee should be subjected to medical examination by the trained
doctor every 48 hours during his detention in custody by a doctor on the
panel of approved doctors appointed by Director, Health Services of the
concerned State or Union Territory, Director, Health Services should
prepare such a panel for all Tehsils and Districts as well.
viii. Copies of all the documents including the memo of arrest, referred to
above, should be sent to the Magistrate for his record.
ix. The arrestee may be permitted to meet his lawyer during interrogation,
though not throughout the interrogation.
x. A police control room should be provided at all district and State
headquarters where information regarding the arrest and the place
of custody of the arrestee shall be communicated by the officer causing the
arrest, within 12 hours of effecting the arrest and at the police control
room it should be displayed on a conspicuous notice board.
Q 23. What are the broad guide lines for arrest
followed in CBEC?
Ans. Decision to arrest needs to be taken on case-to-case basis considering
various factors, such as, nature and gravity of offence, quantum of duty
evaded or credit wrongfully availed, nature and quality of evidence,
possibility of evidences being tampered with or witnesses being influenced,
cooperation with the investigation, etc. Power to arrest has to be
exercised after careful consideration of the facts of the case which may
include:
i. to ensure proper investigation of the offence;
ii. to prevent such person from absconding;
iii. cases involving organized smuggling of goods or evasion of customs
duty by way of concealment;
iv. master minds or key operators effecting proxy/ benami imports/exports
in the name of dummy or non-existent persons/IECs, etc.;
v. where the intent to evade duty is evident and element of mensrea/guilty
mind is palpable;
vi. prevention of the possibility of tampering with evidence;
vii. intimidating or influencing witnesses; and
viii. large amounts of evasion of duty or service tax at least exceeding
one crore rupees.
Q 24. What is a cognizable offence?
Ans. Generally, as per Cr. PC, cognizable offence means serious category of
offences in respect of which a police officer has the authority to make an
arrest without a warrant and to start an investigation with or without the
permission of a court. However, GST being a special legislation, only the
officers, duly empowered under the Act can act as above.
Q 25. What is a non-cognizable offence?
Ans. Non-cognizable offence means relatively less serious offences in
respect of which a police officer does not have the authority to make an
arrest without a warrant and an investigation cannot be initiated without a
court order, except as may be authorized under special legislation.
Q 26. What are cognizable and non-cognizable offences under CGST Act?
Ans. In section 132 of CGST Act, it is provided that the offences relating
to taxable goods and /or services where the amount of tax evaded or the
amount of input tax credit wrongly availed or the amount of refund wrongly
taken exceeds Rs. 5 crore, shall be cognizable and non-bailable. Other
offences under the act are non-cognizable and bailable.
Q 27. When can the proper officer issue summons under CGST Act?
Ans. Section 70 of CGST/SGST Act gives powers to a duly authorized
CGST/SGST officer to call upon a person by issuing a summon to present
himself before the officer issuing the summon to either give evidence or
produce a document or any other thing in any inquiry which an officer is
making. A summons to produce documents or other things may be for the
production of certain specified
documents or things or for the production of all documents or things of a
certain description in the possession or under the control of the person
summoned.
Q 28. What are the responsibilities of the person so summoned?
Ans. A person who is issued summon is legally bound to attend either in
person or by an authorized representative and he is bound to state the
truth before the officer who has issued the summon upon any subject which
is the subject matter of examination and to produce such documents and
other things as may be required.
Q 29. What can be the consequences of non-appearance to summons?
Ans. The proceeding before the official who has issued summons is deemed to
be a judicial proceeding. If a person does not appear on the date when
summoned without any reasonable justification, he can be prosecuted under
section 174 of the Indian Penal Code (IPC). If he absconds to avoid service
of summons, he can be prosecuted under section 172 of the IPC and in case
he does not produce the documents or electronic records required to be
produced, he can be prosecuted under section 175 of the IPC. In case he
gives false evidence, he can be prosecuted under section 193 of the IPC. In
addition, if a person does not appear before a CGST/ SGST officer who has
issued the summon, he is liable to a penalty up to Rs 25,000/- under
section 122(3)(d) of CGST/SGST Act.
Q 30. What are the guidelines for issue of summons?
Ans. The Central Board of Excise and Customs (CBEC)
in the Department of Revenue, Ministry of Finance has issued guidelines from time to time to ensure that summons
provisions are not misused in the field. Some of the important highlights
of these guidelines are given below:
i. summons are to be issued as a last resort where assesses are not
co-operating and this section should not be used for the top management;
ii. the language of the summons should not be harsh and legal which causes
unnecessary mental stress and embarrassment to the receiver;
iii. summons by Superintendents should be issued after obtaining prior
written permission from an officer not below the rank of Assistant
Commissioner with the reasons for issuance of summons to be recorded in
writing;
iv. where for operational reasons, it is not possible to obtain such prior
written permission, oral/ telephonic permission from such officer must be
obtained and the same should be reduced to writing and intimated to the
officer according such permission at the earliest opportunity;
v. in all cases, where summons are issued, the officer issuing summons
should submit a report or should record a brief of the proceedings in the
case file and submit the same to the officer who had authorized the
issuance of summons;
vi. senior management officials such as CEO, CFO, General Managers of a
large company or a Public Sector Undertaking should not generally be issued
summons at the first instance. They should be summoned only when there are
indications in the investigation of their involvement in the
decision making process which led to loss of revenue.
Q 31. What are the precautions to be observed while issuing summons?
Ans. The following precautions should generally be observed when summoning
a person: -
(i) A summon should not be issued for appearance where it is not justified.
The power to summon can be exercised only when there is an inquiry being
undertaken and the attendance of the person is considered necessary.
(ii) Normally, summons should not be issued repeatedly. As far as
practicable, the statement of the accused or witness should be recorded in
minimum number of appearances.
(iii) Respect the time of appearance given in the summons. No person should
be made to wait for long hours before his statement is recorded except when
it has been decided very consciously as a matter of strategy.
(iv) Preferably, statements should b e recorded during office hours;
however, an exception could be made regarding time and place of recording
statement having regard to the facts in the case.
Q 32. Are there any class of officers who are required to assist CGST/SGST
officers?
Ans. Under section 72 of CGST/SGST Act, the following officers have been
empowered and are required to assist CGST/SGST officers in the execution of
CGST/SGST Act. The categories specified are as follows:
i. Police;
ii. Railways
iii. Customs;
iv. Officers of State/UT/ Central Government engaged in collection of GST;
v. Officers of State/UT/ Central Government engaged in collection of land
revenue;
vi. All village officers;
vii. Any other class of officers as may be notified by the Central/State
Government.
20. Offences, Penalties, Prosecution and
Compounding
Q 1. What are the prescribed offences under CGST/SGST Act?
Ans. The CGST/SGST Act codifies the offences and penalties in Chapter XVI.
The Act lists 21 offences in section 122, apart from the penalty prescribed
under section 10 for availing compounding by a taxable person who is not
eligible for it. The said offences are as follows: -
1) Making a supply without invoice or with false/ incorrect invoice;
2) Issuing an invoice without making supply;
3) Not paying tax collected for a period exceeding three months;
4) Not paying tax collected in contravention of the CGST/SGST Act for a
period exceeding 3 months;
5) Non deduction or lower deduction of tax deducted at source or not
depositing tax deducted at source under section 51;
6) Non collection or lower collection of or non-payment of tax collectible
at source under section 52;
7) Availing/utilizing input tax credit without actual receipt of goods
and/or services;
8) Fraudulently obtaining any refund;
9) Availing/distributing input tax credit by an Input Service Distributor
in violation of Section 20;
10) Furnishing false information or falsification of financial records or
furnishing of fake accounts/ documents with intent to evade payment of tax;
11) Failure to register despite being liable to pay tax;
12) Furnishing false information regarding registration particulars either
at the time of applying for registration or subsequently;
13) Obstructing or preventing any official in discharge of his duty;
14) Transporting goods without prescribed documents;
15) Suppressing turnover leading to tax evasion;
16) Failure to maintain accounts/documents in the manner specified in the
Act or failure to retain accounts/documents for the period specified in the
Act;
17) Failure to furnish information/documents required by an officer in
terms of the Act/Rules or furnishing false information/documents during the
course of any proceeding;
18) Supplying/transporting/storing any goods
liable to confiscation;
19) Issuing invoice or document using GSTIN of another person;
20) Tampering/destroying any material evidence;
21) Disposing of /tampering with goods detained/ seized/attached under the
Act.
Q 2. What is meant by the term penalty?
Ans. The word “penalty” has not been defined in the CGST/SGST Act but
judicial pronouncements and principles of jurisprudence have laid down the
nature of a
penalty as:
• a temporary punishment or a sum of money imposed by statute, to be paid
as punishment for the commission of a certain offence;
• a punishment imposed by law or contract for doing or failing to do
something that was the duty of a party to do.
Q 3. What are the general disciplines to be followed while imposing
penalties?
Ans. The levy of penalty is subject to a certain disciplinary regime which
is based on jurisprudence, principles of natural justice and principles
governing international trade and agreements. Such general discipline is
enshrined in section 126 of the Act. Accordingly—
• no penalty is to be imposed without issuance of a show cause notice and
proper hearing in the matter, affording an opportunity to the person
proceeded against to rebut the allegations levelled against him,
• the penalty is to depend on the totality of the facts and circumstances
of the case,
• the penalty imposed is to be commensurate with the degree and severity of
breach of the provisions of the law or the rules alleged,
• the nature of the breach is to be specified clearly in the order imposing
the penalty,
• the provisions of the law under which the penalty has been imposed is to
be specified.
Section 126 further specifies that, in particular, no substantial penalty
is to be imposed for —
• any minor breach ( minor breach has been defined as a
violation of the provisions in a case where the tax involved is less than
Rs.5000), or
• a procedural requirement of the law, or
• an easily rectifiable mistake/omission in documents (explained in the law
as an error apparent on record) that has been made without fraudulent
intent or gross negligence.
Further, wherever penalty of a fixed amount or a fixed percentage has been
provided in the CGST/SGST Act, the same shall apply.
Q 4. What is the quantum of penalty provided for in the CGST /SGST Act?
Ans. Section 122(1) provides that any taxable person who has committed any
of the offences mentioned in section 122 shall be punished with a penalty
that shall be higher of the following amounts:
• The amount of tax evaded, fraudulently obtained as refund, availed as
credit, or not deducted or collected or short deducted or short collected,
or
• A sum of Rs. 10,000/-.
Further Section 122(2) provides that any registered person who has not paid
tax or makes a short payment of taxon supplies shall be a liable to penalty
which will be the higher of:
• 10% of the tax not paid or short paid, or
• Rs. 10,000/-
Q 5. Is any penalty prescribed for any person other than the taxable
person?
Ans. Yes. Section 122(3) provides for levy of penalty extending to Rs.
25,000/- for any person who-
• aids or abets any of the 21 offences,
• deals in any way (whether receiving, supplying, storing or transporting)
with goods that are liable to confiscation,
• receives or deals with supply of services in contravention of the Act,
• fails to appear before an authority who has issued a summon,
• fails to issue any invoice for a supply or account for any invoice in his
books of accounts.
Q 6. What is the penalty provided for any contravention for which no
separate penalty has been prescribed under CGST/SGST Act?
Ans. Section 125 of the CGST/SGST Act provides that any person who
contravenes any provision of the Act or the rules made under this Act for
which no separate penalty has been prescribed shall be punishable with a
penalty that may extend to Rs. 25,000/-
Q 6. What action can be taken for transportation of goods without valid
documents or attempted to be removed without proper record in books?
Ans. If any person transports any goods or stores any such goods while in
transit without the documents prescribed under the Act (i.e. invoice and a
declaration) or supplies or stores any goods that have not been recorded in
the books or accounts maintained by him,
then such goods shall be liable for detention along with any vehicle on
which they are being transported.
Where owner comes forward: - Such goods shall be released on payment of the
applicable tax and penalty equal to 100% tax or upon furnishing of security
equivalent to the said amount.
In case of exempted goods, penalty is 2% of value of goods or Rs 25,000/-
whichever is lesser.
Where owner does not come forward: - Such goods shall be released on
payment of the applicable tax and penalty equal to 50% of value of goods or
upon furnishing of security equivalent to the said amount.
In case of exempted goods, penalty is 5% of value of goods or Rs 25,000/-
whichever is lesser.
Q 7. What is the penalty prescribed for a person who opts for composition
scheme despite being ineligible for the said scheme?
Ans. Section 10(5) provides that if a person who has paid under composition
levy is found as not being eligible for compounding then such person shall
be liable to penalty to an amount equivalent to the tax payable by him
under the provisions of the Act i.e. as a normal taxable person and that
this penalty shall be in addition to the tax payable by him.
Q 8. What is meant by confiscation?
Ans. The word ‘confiscation’ has not been defined in the Act. The concept
is derived from Roman Law wherein it meant seizing or taking into the hands
of emperor, and transferring to Imperial “fiscus” or Treasury. The word
“confiscate” has been defined in Aiyar’s Law Lexicon as to
“appropriate (private property) to the public treasury by way of penalty;
to deprive of property as forfeited to the State.”
In short in means transfer of the title to the goods to the Government.
Q 9. Under which circumstances can goods be confiscated under CGST/SGST
Act?
Ans. Under Section 130 of the CGST Act, goods shall be liable to
confiscation if any person:
• supplies or receives any goods in contravention of any provision of this
Act and such contravention results in evasion of tax payable
under the Act, or
• does not account for any goods in the manner required under the Act, or
• supplies goods that are liable to tax under the Act without applying for
registration, or
• uses any conveyance as a means of transport for carriage of goods in
contravention of the provisions of CGST/SGST Act (unless used without
knowledge of owner)
• contravenes any provision of the Act/Rules with the intention of evading
payment of tax.
Q 10. What happens to the goods upon confiscation of goods by the proper
officer?
Ans. Upon confiscation, the title in the confiscated goods shall vest in
the Government and every Police officer to whom the proper officer makes a
request in this behalf, shall assist in taking possession of the goods.
Q 11. After confiscation, is it required to give option
to the person to redeem the goods?
Ans. Yes. In terms of section 130(2), the Owner or the person in-charge of
the goods liable to confiscation is to be given the option for fine (not
exceeding market price of confiscated goods) in lieu of confiscation. This
fine shall be in addition to the tax and other charges payable in respect
of such goods.
Q 12. Can any conveyance carrying goods without cover of prescribed
documents be subject to confiscation?
Ans. Yes. Section 130 provides that any conveyance carrying goods without
the cover of any documents or declaration prescribed under the Act shall be
liable to confiscation. However, if the owner of the conveyance proves that
the goods were being transported without cover of the required
documents/declarations without his knowledge or connivance or without the
knowledge or connivance of his agent then the conveyance shall not be
liable to confiscation as aforesaid.
Q 13. What is Prosecution?
Ans. Prosecution is the institution or commencement of legal proceeding;
the process of exhibiting formal charges against the offender. Section 198
of the Criminal Procedure Code defines “prosecution” as the institution and
carrying on of the legal proceedings against a person.
Q 14. Which are the offences which warrant prosecution under the CGST/SGST
Act?
Ans. Section 132 of the CGST/SGST Act codifies the major offences under the
Act which warrant institution of criminal proceedings and prosecution. 12
such major
offences have been listed as follows:
a) Making a supply without issuing an invoice or upon issuance of a
false/incorrect invoice;
b) Issuing an invoice without making supply;
c) Not paying any amount collected as tax for a period exceeding 3 months;
d) Availing or utilizing credit of input tax without actual receipt of
goods and/or services;
e) Obtaining any fraudulent refund)
f) evades tax, fraudulently avails ITC or obtains refund by an offence not
covered under clause (a) to (e);
g) Furnishing false information or falsification of financial records or
furnishing of fake accounts/ documents with intent to evade payment of tax;
h) Obstructing or preventing any official in the discharge of his duty;
i) Dealing with goods liable to confiscation i.e. receipt, supply, storage
or transportation of goods liable to confiscation;
j) Receiving/dealing with supply of services in contravention of the Act;
k) tampers with or destroys any material evidence or documents
l) Failing to supply any information required of him under the Act/Rules or
supplying false information;
m) Attempting to commit or abetting the commission of any of the offences
at (a) to (l) above.
Q 17. What is the punishment prescribed on conviction of any offence under
the CGST/SGST Act?
Ans. The scheme of punishment provided in section 132(1) is as follows:
Offence involving-- Punishment (Imprisonment
extending to--)
Tax evaded exceeding - 5 years and fine
Rs. 5 crore or repeat
offender 250 lakh
Tax evaded between Rs. 2 3 years and fine
crore and Rs.5 crore
Tax evaded between Rs.1 1 years and fine
crore and Rs.2 crore
• False records 6 months
• Obstructing officer
• Tamper records
Q 15. What are cognizable and non-cognizable offences under CGST/SGST Act?
Ans. In terms of Section 132(4) and 132(5) of CGST/SGST Act
• all offences where the evasion of tax is less than Rs.5 crores shall be
non-cognizable and bailable,
• all offences where the evasion of tax exceeds Rs.5 crores shall be
cognizable and non- bailable.
Q 16. Is prior sanction of competent authority mandatory for initiating
prosecution?
Ans. Yes. No person shall be prosecuted for any offence without the prior
sanction of the designated authority.
Q 17. Is ‘mensrea’ or culpable mental state necessary for prosecution under
CGST/SGST Act?
Ans. Yes. However, Section 135 presumes the existence of a state of mind
(i.e. “culpable mental state” or mensrea) required to commit an offence if
it cannot be committed without such a state of mind
Q 18. What is a culpable state of mind?
Ans. While committing an act, a “culpable mental state” is a state of mind
wherein-
• the act is intentional;
• the act and its implications are understood and controllable;
• the person committing the act was not coerced and even overcomes hurdles
to the act committed;
• the person believes or has reasons to believe that the act is contrary to
law.
Q 19. Can a company be proceeded against or prosecuted for any offence
under the CGST/SGST Act?
Ans. Yes. Section 137 of the CGST/SGST ACT provides that every person who
was in-charge of or responsible to a company for the conduct of its
business shall, along-with the company itself, be liable to be proceeded
against and punished for an offence committed by the company while such
person was in-charge of the affairs of the company. If any offence
committed by the company—
• has been committed with the consent/ connivance of, or
• is attributable to negligence of—
any officer of the company then such officer shall be deemed to be guilty
of the said offence and liable to be proceeded against and punished
accordingly.
Q 20. What is meant by compounding of offences?
Ans. Section 320 of the Code of Criminal
Procedure defines “compounding” as to forbear from
prosecution for consideration or any private motive.
Q 21. Can offences under CGST/SGST Act be compounded?
Ans. Yes. As per section 138 of the CGST/SGST Act, any offence, other than
the following, may upon payment of the prescribed (compounding) amount be
compounded and such compounding is permissible either before or after the
institution of prosecution:
• Offences numbered 1 to 6 of the 12 major offences (outlined in Q. 16
above), if the person charged with the offence had compounded earlier in
respect of any of the said offences;
• Aiding/abetting offences numbered 1 to 6 of the 12 major offences, if the
person charged with the offence had compounded earlier in respect of any of
the said offences;
• Any offence (other than the above offences) under any SGST Act/IGST Act
in respect of a supply with value exceeding Rs.1 crore, if the person
charged with the offence had compounded earlier in respect of any of the
said offences;
• Any offence which is also an offence under NDPSA or FEMA or any other Act
other than
CGST/SGST;
Compounding is to be permitted only after payment of tax, interest and
penalty and compounding shall not affect any proceeding already instituted
under any other law.
Q 22. Are there any monetary limits prescribed for compounding of offence?
Ans. Yes. The lower limit for compounding amount is to be the greater of
the following amounts: -
• 50% of tax involved, or
• Rs. 10,000.
The upper limit for compounding amount is to be greater of the following
amounts: -
• 150% of tax involved or
• Rs. 30,000.
Q 23. What is the consequence of compounding of an offence under CGST/SGST
Act?
Ans. Sub-section (3) of section 138 provides that on payment of compounding
amount no further proceeding to be initiated under this Act and criminal
proceeding already initiated shall stand abated.
21. Overview of the IGST Act
Q 1. What is IGST?
Ans. “Integrated Goods and Services Tax” (IGST) means tax levied under the
IGST Act on the supply of any goods and/ or services in the course of
inter-State trade or commerce.
Q 2. What are inter-state supplies?
Ans. A supply of goods and/or services in the course of inter-State trade
or commerce means any supply where the location of the supplier and the
place of supply are in different States, two different union territory or
in a state and union territory Further import of goods and services,
supplies to SEZ units or developer, or any supply that is not an intra
state supply. (Section 7 of the IGST Act).
Q 3. How will the Inter-State supplies of Goods and Services be taxed under
GST?
Ans. IGST shall be levied and collected by Centre on inter-state supplies.
IGST would be broadly CGST plus SGST and shall be levied on all inter-State
taxable supplies of goods and services. The inter-State seller will pay
IGST on value addition after adjusting available credit of IGST, CGST, and
SGST on his purchases. The Exporting State will transfer to the Centre the
credit of SGST used in payment of IGST. The Importing dealer will claim
credit of IGST while discharging his output tax liability in his own State.
The Centre will transfer to the importing State the credit of IGST used in
payment of SGST. The relevant information is also submitted to the Central
Agency which will act as a clearing house mechanism, verify the claims and
inform the
respective governments to transfer the funds.
Q 4. What are the salient features of the draft IGST Law?
Ans. The draft IGST law contains 25 sections divided into9 Chapters. The
law, inter alia, sets out the rules for determination of the place of
supply of goods. Where the supply involves movement of goods, the place of
supply shall be the location of goods at the time at which the movement of
goods terminates for delivery to the recipient. Where the supply does not
involve movement of goods, the place of supply shall be the location of
such goods at the time of delivery to the recipient. In the case of goods
assembled or installed at site, the place of supply shall be the place of
such installation or assembly. Finally, where the goods are supplied on
board a conveyance, the place of supply shall be the location at which such
goods are taken on board.
The law also provides for determination of place of supply of service where
both supplier and recipient are located in India (domestic supplies) or
where supplier or recipient is located outside India (international
supplies). This is discussed in details in the next Chapter.
It also provides for certain other specific provisions like payment of tax
by online information and database access service provider located outside
India to an unregistered person in India, upon taking registration in
India, under the IGST Act, following a simplified provision (section 14 of
the IGST Act),
Q 5. What are the advantages of IGST Model?
Ans. The major advantages of IGST Model are:
a. Maintenance of uninterrupted ITC chain on inter-State transactions;
b. No upfront payment of tax or substantial blockage of funds for the
inter-State seller or buyer;
c. No refund claim in exporting State, as ITC is used up while paying the
tax;
d. Self-monitoring model;
e. Ensures tax neutrality while keeping the tax regime
simple;
f. Simple accounting with no additional
compliance burden on the taxpayer;
g. Would facilitate in ensuring high level of compliance and thus higher
collection efficiency. Model can handle ‘Business to Business’ as well as
‘Business to Consumer’ transactions.
Q 6. How will imports/exports be taxed under GST?
Ans. All imports/exports will be deemed as inter-state supplies for the
purposes of levy of GST (IGST). The incidence of tax will follow the
destination principle and the tax revenue in case of SGST will accrue to
the State where the imported goods and services are consumed. Full and
complete set-off will be available as ITC of the IGST paid on import on
goods and services. Exports of goods and services will be zero rated. The
exporter has the option either to export under bond without payment of duty
and claim refund of ITC or pay IGST at the time of export and claim refund
of IGST. The IGST on imports is leviable under the provisions of the
Customs Tariff Act and shall be levied at
the time of imports along with the levy of the Customs Act (Section 5 of
the IGST Act)
Q 7. How will the IGST be paid?
Ans. The IGST payment can be done utilizing ITC or by cash. However, the use of ITC for payment of IGST will be done using the following hierarchy, -
• First available ITC of IGST shall be used for payment of IGST;
• Once ITC of IGST is exhausted, the ITC of CGST shall be used for payment
of IGST;
• If both ITC of IGST and ITC of CGST are exhausted, then only the dealer
would be permitted to use ITC of SGST for payment of IGST.
Remaining IGST liability, if any, shall be discharged using payment in
cash. GST System will ensure maintenance of this hierarchy for payment of
IGST using the credit.
Q 8. How will the settlement between Centre, exporting state and importing
state be done?
Ans. There would be settlement of account between the Centre and the states
on two counts, which are as follows-
• Centre and the exporting state: The exporting state shall pay the amount
equal to the ITC of SGST used by the supplier in the exporting state to the
Centre.
• Centre and the importing state: The Centre shall pay the amount equal to
the ITC of IGST used by a dealer for payment of SGST on intra- state
supplies.
The settlement would be on cumulative basis for a state taking into account
the details furnished by all the dealer in the settlement period. Similar
settlement of amount would also be undertaken between CGST and IGST
account.
Q 9. What treatment is given to supplies made to SEZ units or developer?
Ans: Supplies to SEZ units or developer shall be zero rated in the same
manner as done for the physical exports. Supplier shall have option to make
supplies to SEZ without payment of taxes and claim refunds of input taxes
on such supplies (section 16 of the IGST Act).
Q 10. Are business processes and compliance requirement same in the IGST
and CGST Acts?
Ans: The procedure and compliance requirement are same for processes likes
registration, return filing and payment of tax. Further, the IGST act
borrows the provisions from the CGST Act as relating to assessment, audit,
valuation, time of supply, invoice, accounts, records, adjudication, appeal
etc. (Section 20 of the IGST Act)
22. Place of Supply of Goods and Service
Q 1. What is the need for the Place of Supply of Goods and Services under
GST?
Ans. The basic principle of GST is that it should effectively tax the
consumption of such supplies at the destination thereof or as the case may
at the point of consumption. So place of supply provision determines the
place i.e. taxable jurisdiction where the tax should reach. The place of
supply determines whether a transaction is intra-state or inter-state. In
other words, the place of Supply of Goods or services is required to
determine whether a supply is subject to SGST plus CGST in a given State or
union territory or else would attract IGST if it is an inter-state supply.
Q 2. Why are place of supply provisions different in respect of goods and
services?
Ans. Goods being tangible do not pose any significant problems for determination of their place of consumption. Services being intangible pose problems w.r.t determination of place of supply mainly due to following factors:
(i) The manner of delivery of service could be altered easily. For example,
telecom service could change from mostly post-paid to mostly pre-paid;
billing address could be changed, billers address could be changed, repair
or maintenance of software could be changed from onsite to online; banking
services were earlier required customer to go to the bank, now the customer
could avail service from anywhere;
(ii) Service provider, service receiver and the service provided may not be
ascertainable or may easily be suppressed as nothing tangible moves and
there would hardly be a trail;
(iii) For supplying a service, a fixed location of service provider is not
mandatory and even the service recipient may receive service while on the
move. The location of billing could be changed overnight;
(iv) Sometime the same element may flow to more than one location, for
example, construction or other services in respect of a railway line, a
national highway or a bridge on a river which originate in one state and
end in the other state. Similarly, a copy right for distribution and
exhibition of film could be assigned for many states in single transaction
or an advertisement or a programme is broadcasted across the country at the
same time. An airline may issue seasonal tickets, containing say 10 leafs
which could be used for travel between any two locations in the country.
The card issued by Delhi metro could be used by a person located in Noida,
or Delhi or Faridabad, without the Delhi metro being able to distinguish
the location or journeys at the time of receipt of payment;
(v) Services are continuously evolving and would thus continue to pose
newer challenges. For example, 15-20 years back no one could have thought
of DTH, online information, online banking, online booking of tickets,
internet, mobile telecommunication etc.
Q 3. What proxies or assumptions in a transaction can be used to determine
the place of supply?
Ans. The various element involved in a transaction in services can be used
as proxies to determine the place of supply. An assumption or proxy which
gives more appropriate result than others for determining the place of
supply, could be used for determining the place of supply. The same are
discussed below:
(a) location of service provider;
(b) the location of service receiver;
(c) the place where the activity takes place/ place of performance;
(d) the place where it is consumed; and
(e) the place/person to which actual benefit flows
Q 4. What is the need to have separate rules for place of supply in respect
of B2B (supplies to registered persons) and B2C (supplies to unregistered
persons) transactions?
Ans. In respect of B2B transactions, the taxes paid are taken as credit by
the recipient so such transactions are just pass through. GST collected on
B2B supplies effectively create a liability for the government and an asset
for the recipient of such supplies in as much as the recipient is entitled
to use the input tax credit for payment of future taxes. For B2B
transactions the location of recipient takes care in almost all situations
as further credit is to be taken by recipient. The recipient usually
further supplies to another customer. The supply is consumed only when a
B2B transaction is further converted into B2C transaction. In respect of
B2C transactions, the supply is finally consumed
and the taxes paid actually come to the government.
Q 5. What would be the place of supply where goods are removed?
Ans. The place of supply of goods shall be the location of the goods at the
time at which the movement of goods terminates for delivery to the
recipient. (Section 10 of IGST Act)
Q 6. What will be the place of supply if the goods are delivered by the
supplier to a person on the direction of a third person?
Ans. It would be deemed that the third person has received the goods and
the place of supply of such goods shall be the principal place of business
of such person. (Section 10 of IGST Act)
Q 7. What will be the place of supply where the goods or services are
supplied on board a conveyance, such as a vessel, an aircraft, a train or a
motor vehicle?
Ans. In respect of goods, the place of supply shall be the location at
which such goods are taken on board. (Section 10 of IGST Act)
However, in respect of services, the place of supply shall be the location
of the first scheduled point of departure of that conveyance for the
journey. (Section 12 and 13 of IGST Act)
Q 8. What is the default presumption for place of supply in respect of B2B
supply of services?
Ans. The terms used in the IGST Act are registered taxpayers and
non-registered taxpayers. The presumption in case of supplies to registered
person is the location of such person. Since the recipient is registered,
address of recipient is always there and the same can be taken as proxy for
place of supply.
Q 9. What is the default presumption for place of supply in respect of
unregistered recipients?
Ans. In respect of unregistered recipients, the usual place of supply is
location of recipient. However, in many cases, the address of recipient is
not available, in such cases, location of the supplier of services is taken
as proxy for place of supply.
Q 10. The place of supply in relation to immovable property is the location of immovable property. Suppose a road is constructed from Delhi to Mumbai covering multiple states. What will be the place of supply?
Ans. Where the immovable property is located in more than one State, the
supply of service shall be treated as made in each of the States in
proportion to the value for services separately collected or determined, in
terms of the contract or agreement entered into in this regard or, in the
absence of such contract or agreement, on such other reasonable basis as
may be prescribed in this behalf. (The Explanation clause to section 12(3)
of the IGST Act, for domestic supplies)
Q 11. What would be the place of supply of services provided for organizing
an event, say, IPL cricket series which is held in multiple states?
Ans. In case of an event, if the recipient of service is registered, the
place of supply of services for organizing the event shall be the location
of such person.
However, if the recipient is not registered, the place of supply shall be
the place where event is held. Since the event is being held in multiple
states and a consolidated amount is charges for such services, the place of
supply shall be taken as being in each state in proportion to the value of
services so provided in each state. (The Explanation clause to section
12(7) of the IGST Act)
Q 12. What will be the place of supply of goods services by way of
transportation of goods, including mail or courier?
Ans. In case of domestic supply: If the recipient is registered, the
location of such person shall be the place of supply.
However, if the recipient is not registered, the place of supply shall be
the place where the goods are handed over for transportation (section 12 of
the IGST Act.
For international supplies: The place of supply of transport
services, other than the courier services, shall be the destination of
goods. For courier, the place of supply of services is where goods are
handed over to courier. However, if the courier services are performed even
partially in India, the place of supply shall be deemed as India (section
13(3),13(6) and 13(9) of the IGST Act).
Q 13. What will be the place of supply of passenger transportation service,
if a person travels from Mumbai to Delhi and back to Mumbai?
Ans. If the person is registered, the place of supply shall be the location of recipient. If the person is not registered, the place of supply for the forward journey from Mumbai to Delhi shall be Mumbai, the place where he embarks.
However, for the return journey, the place of supply shall be Delhi as the
return journey has to be treated as separate journey. (The Explanation
clause to section 12(9) of the IGST Act)
Q 14. Suppose a ticket/ pass for anywhere travel in India is issued by M/s
Air India to a person. What will be the place of supply?
Ans. In the above case, the place of embarkation will not be available at
the time of issue of invoice as the right to passage is for future use.
Accordingly, place of supply cannot be the place of embarkation. In such
cases, the default rule shall apply. (The proviso clause to section 12(9)
of the IGST Act)
Q 15. What will be the place of supply for mobile
connection? Can it be the location of supplier?
Ans. For domestic supplies: The location of supplier of mobile services
cannot be the place of supply as the mobile companies are providing
services in multiple states and many of these services are inter-state. The
consumption principle will be broken if the location of supplier is taken
as place of supply and all the revenue may go to a few states where the
suppliers are located.
The place of supply for mobile connection would depend on whether the
connection is on postpaid or prepaid basis. In case of postpaid
connections, the place of supply shall be the location of billing address
of the recipient of service.
In case of pre-paid connections, the place of supply shall be the place
where payment for such connection is received or such pre-paid vouchers are
sold. However, if the recharge is done through internet/e-payment, the
location of recipient of service on record shall be the taken as the place
of service.
For international supplies: The place of supply of telecom services is the
location of the recipient of service.
Q 16. A person in Goa buys shares from a broker in Delhi on NSE (in
Mumbai). What will be the place of supply?
Ans. The place of supply shall be the location of the recipient of services
on the records of the supplier of services. So Goa shall be the place of
supply.
Q 17. A person from Mumbai goes to Kullu-Manali
and takes some services from ICICI Bank in Manali. What will be the place
of supply?
Ans. If the service is not linked to the account of person, place of supply
shall be Kullu i.e. the location of the supplier of services. However, if
the service is linked to the account of the person, the place of supply
shall be Mumbai, the location of recipient on the records of the supplier.
Q 18. A person from Gurgaon travels by Air India flight from Mumbai to
Delhi and gets his travel insurance done in Mumbai. What will be the place
of supply?
Ans. The location of the recipient of services on the records of the
supplier of insurance services shall be the place of supply. So Gurgaon
shall be the place of supply. (proviso clause to section 12(13) of the IGST
Act)
23. GSTN and Frontend Business Process on GST Portal
Q 1. What is GSTN?
Ans. Goods and Services Tax Network (GSTN) is a not-for-profit,
non-government company promoted jointly by the Central and State
Governments, which will provide shared IT infrastructure and services to both central and state governments including tax payers and
other stakeholders. The Frontend services of Registration, Returns,
Payments, etc. to all taxpayers will be provided by GSTN. It will be the
interface between the government and the taxpayers.
Q 2. What was need to create
GSTN?
Ans. The GST System Project is a unique and complex IT initiative. It is
unique as it seeks, for the first time to establish a uniform interface for
the tax payer and a common and shared IT infrastructure between the Centre
and States. Currently, the Centre and State indirect tax administrations
work under different laws, regulations, procedures and formats and
consequently the IT systems work as independent sites. Integrating them for
GST implementation would be complex since it would involve integrating the
entire indirect tax ecosystem so as to bring all the tax administrations
(Centre, State and Union Territories) to the same level of IT maturity with
uniform formats and interfaces for taxpayers and other external
stakeholders. Besides, GST being a destination based tax, the inter- state
trade of goods and services (IGST) would need a robust settlement mechanism
amongst the States and the Centre. This is possible only when there is a
strong
IT Infrastructure and Service back bone which enables capture, processing
and exchange of information amongst the stakeholders (including taxpayers,
States and Central Government, Bank and RBI). To achieve these objectives
GSTN was created.
Q 3. What is the genesis of GSTN?
Requirements of strong IT Infrastructure was discussed in the 4th meeting
of 2010 of the Empowered Committee of State Finance Ministers held on
21/7/2010. In the said meeting the EC approved creation of an ‘Empowered
Group on IT Infrastructure for GST’ (referred to as EG) under the
chairmanship of Dr. Nandan Nilekani with Additional Secretary (Rev), Member
(B&C) CBEC, DG (Systems), CBEC, FA Ministry of Finance, Member
Secretary EC and five state commissioners of Trade Taxes (Maharashtra,
Assam, Karnataka, West Bengal and Gujarat) as members. The Group was
mandated to suggest, inter alia, the modalities for setting up a National
Information Utility (NIU/ SPV) for implementing the Common Portal to be
called GST Network (GSTN) and recommend the structure and terms of
reference for the NIU/ SPV, detailed implementation strategy and the road
map for its creation in addition to other items like training, outreach
etc.
In March 2010, TAGUP constituted by the Ministry of Finance had recommended
that National Information Utilities should be set up as private companies
with a public purpose for implementation of large and complex Government IT
projects including GST. Mandate of TAGUP was to examine the technological
and systemic issues relating to the various IT projects such as GST, TIN,
NPS,
etc.
The EG had seven meetings between 2nd August 2010 and 8th August 2011 to
discuss the modalities. After due deliberations, the EG recommended
creation of a Special Purpose Vehicle for implementing the GST System
Project. To enable efficient and reliable provision of services in a
demanding environment, the EG recommended a non-Government structure for
the GSTN SPV with Government equity of 49% (Centre – 24.5% and States –
24.5%) after considering key parameters such as independence of management,
strategic control of Government, flexibility in organizational structure,
agility in decision making and ability to hire and retain competent human
resources.
In view of the sensitivity of the role of GSTN and the information that
would be available with it, the EG also considered the issue of strategic
control of Government over GSTN. The Group recommended that strategic
control of the Government over the SPV should be ensured through measures
such as composition of the Board, mechanisms of Special Resolution and
Shareholders Agreement, induction of Government officers on deputation, and
agreements between GSTN SPV and Governments. Also, the shareholding pattern
would ensure that the Centre individually and States collectively are the
largest stakeholders at 24.5% each. In combination, the Government
shareholding at 49% would far exceed that of any single private
institution.
EG also brought out the need to have technology specification to run this
company so that there is 100 percent matching of returns. The business
knowledge resides with the officials of Government of India and States.
However, professionals with sophisticated technology knowledge will be
required to run this company independently, similar to NSDL which is
working
professionally and independently. EG also recommended a non-government
company as that will have operational freedom.
These recommendations were presented before the Empowered Committee of
State Finance Ministers in its 3rd meeting of 2011 held on 19th August 2011
and in the 4th meeting of 2011 of the EC held on 14th Oct 2011. The
proposal of the EG on IT infrastructure for GST regarding GSTN and
formation of a not-for-profit section 25 company with the strategic control
of the Government were approved by the Empowered Committee of State Finance
Ministers (EC) in its meeting held on14.10.11.
The note of Department of Revenue for setting up a Special Purpose Vehicle
to be called Goods and Services Tax Network (GSTN-SPV) on the lines
mentioned above was considered by the Union Cabinet on 12th April 2012 and
approved. The Union cabinet also approved the following:
i. Suitable and willing non-government institutions will be identified and
firmed up by the Ministry of Finance to invest in GSTN-SPV prior to its
incorporation.
ii. The strategic control of the Government over the SPV would be ensured
through measures such as composition of the Board, mechanisms
of Special Resolution and Shareholders Agreement, induction of Government
officers on deputation, and agreements between GSTN SPV and Governments.
iii. The Board of Directors of GSTN SPV would comprise 14 Directors with 3
Directors from the Centre, 3 from the States, a Chairman of the
Board of Directors appointed through a joint approval mechanism of Centre
and States, 3 Directors from private equity stake holders, 3 independent
Directors who would be persons of eminence and a CEO of the GSTN SPV
selected through an open selection process.
iv. Relaxation in relevant rules to enable deputation of Government
officers to the GSTN SPV for exercise of strategic control and for bringing
in necessary domain expertise.
v. GSTN SPV would have a self- sustaining revenue model, where it would be
able to levy user charges on the tax payers and the tax authorities
availing services.
vi. GSTN SPV to be the exclusive national agency responsible for delivering
integrated indirect Tax related services involving multiple tax
authorities. Accordingly, any other service provider seeking to deliver
similar integrated services would be required to enter into a formal
arrangement with GSTN SPV for the services.
vii. A one- time non- recurring Grant- in aid of Rs. 315 crores from the
Central Government towards functioning of the SPV for a three- year period
after incorporation.
Q 4. What is the equity structure and Revenue Model of GSTN?
Ans. (a) Equity Structure: - In compliance of the Cabinet decision, GST
Network was registered as a not-for-profit, non-Government, private limited
company under section 8 of the Companies Act, 1956 with the following
equity structure:
Central Govt 24.5%
State Govts 24.5%
HDFC 10%
HDFC Bank 10%
ICICI Bank 10%
NSE Strategic Investment Co 10%
LIC Housing Finance Ltd 11%
The GSTN in its current form was created after taking approval of the
Empowered Committee of State Finance Ministers and Union Government after
due deliberations over a long period of time.
(b) Revenue Model: An amount of 315 Cr. was approved by the Govt. of India
as Grants-in-Aid for initial setting up of the GSTN-SPV in 2013. During the
period 31.03.2013 to 31.03.2016, an amount of Rs 143.96 Crores was released
as Grant-In-Aid to GSTN out of Rs 315 Crores approved by Govt of India. Out
of the grant-in-aid received, only Rs. 62.11 Cr was spent during this
period in setting of the Company and making it functional. The balance
grant was returned to Govt. of India. During FY 2016-17, GSTN has got loan
sanctioned from a commercial bank to meet expenditure over setting up the
IT Platform to provide services to the Center and States through GST portal
and developing the backend for 27 States and Union Territories. The Revenue
model for GSTN has been approved by the Empowered Committee of State
Finance Ministers under which user charges will be paid by the Centre and
States/UTs equally on behalf of taxpayers and other stakeholders for
availing services from the GST Portal. The user charges will be shared
equally by the Centre and the States. The user charges for States will be
apportioned amongst them based on
number of registered taxpayers.
Q 5. What services will be rendered by GSTN?
Ans. GSTN will render the following services through the Common GST Portal:
(a) Registration (including existing taxpayer migration, a process which
began on 8th Nov 2016);
(b) Payment management including payment Gateways and integration with
banking systems;
(c) Return filing and processing;
(d) Taxpayer management, including account management, notifications,
information, and status tracking;
(e) Tax authority account and ledger Management;
(f) Computation of settlement (including IGST
Settlement) between the Centre and States ; Clearing
house for IGST;
(g) Processing and reconciliation of GST on import and integration with EDI
systems of Customs;
(h) MIS including need based information and business intelligence;
(i) Maintenance of interfaces between the Common GST Portal and tax
administration systems;
(j) Provide training to stakeholders;
(k) Provide Analytics and Business Intelligence to tax authorities; and
(l) Carry out research and study best practices.
Q 6. What is the interface system between GSTN and the States/CBEC?
Ans. In GST regime, while taxpayer facing core services of applying for
registration, uploading of invoices, filing of return, making tax payments
shall be hosted by GST System, all the statutory functions (such as
approval of registration, assessment of return, conducting investigation
and audit
etc.) shall be conducted by the tax authorities of States and Central
governments.
Thus, the frontend (GST Portal services) shall be provided by GSTN and the
backend modules shall be developed by states and Central Government
themselves. However, 27 states (termed as Model-2 states) have asked GSTN
to develop their backend modules also. The CBEC and rest of the 9 states
(Model 1) have decided to develop and host the back-end modules themselves.
For Model 1 states/ CBEC full data (registration, return, payment etc.)
submitted by taxpayers will be shared with them for information and
analysis as deemed fit by them.
Q 7. What will be the role of GSTN in registration?
Ans. The application for Registration will be made Online on GST Portal.
Some of the key data like PAN, Business Constitution, Aadhaar, CIN/DIN etc.
(as applicable) will be validated by the GST Portal online with the
respective agency i.e. CBDT, UID, MCA etc., thereby ensuring minimum need
for submission of documentation.
The application data along with supporting
scanned documents shall be sent by GSTN to
states/ Centre, which in turn shall send the query, if any, o r approval or
rejection intimation and digitally signed registration to GSTN for eventual
download by the taxpayer.
Q 8. What is the role of Infosys in GSTN?
Ans. GSTN has engaged M/S Infosys as a single Managed Service Provider
(MSP) for the design, development and deployment of GST system, including
all application software, tools and Infrastructure and for operating &
maintaining the system for a period of 5 years from the Go-Live date.
Q 9. What are the basic features of GST common portal?
Ans. The GST portal (www.gst.gov.in ) is accessible over Internet (by
Taxpayers and their CAs/Tax Advocates etc.) and Intranet by Tax Officials
etc. The portal is going to be one single common portal for all GST related
services e.g.–
i. Tax payer registration (New, surrender, cancelation, amendment etc.);
ii. Invoice upload, auto-drafting of Purchase register of buyer, GST
Returns filing on stipulated dates for each type of return (GSTR [1,2,3,5,
9.etc];
iii. Tax payment by creation of Challan and integration
with agency Banks;
iv. ITC and Cash Ledger and Liability Register;
v. MIS reporting for tax payers, tax officials and other stakeholders;
vi. BI/Analytics for Tax officials.
Q 10. What is the concept of GST Eco-system?
Ans. A common GST system will provide linkage to all State/UT Commercial
Tax departments, Central Tax authorities, Taxpayers, Banks and other
stakeholders. The eco-system consists of all stakeholders starting from
taxpayer to tax professional to tax officials to GST portal to Banks to
accounting authorities. The diagram given below depicts the whole GST
eco-system.
IMAGE HERE PG 205
Q 11. What is GSP (GST Suvidha Provider)?
Ans. GST System will provide a GST portal for taxpayers to access the GST
System and do all the GST compliance activities. But there will be wide
variety of tax payers (SME, Large Enterprise, Micro Enterprise etc.) which
may require different kind of facilities like converting their
purchase/sales register data in GST compliant format, Integration of their
Accounting Packages/ERP with GST System etc., various kind of dashboards to
view Matched/Mismatched ITC claims, Tax liability, Filing status etc. As
invoice level filing is required, so large organizations may require an
automated way to interact with GST system as it may be practically
impossible for them to upload large number of invoices through a web
portal. So an eco- system is required, which can help such taxpayers in GST
compliance.
As Tax payer convenience will be the key to success of GST regime, this
eco-system will also provide Tax payer options of using third party
applications, which can provide different kind of interfaces on
desktop/mobile for them to be GST compliant.
All above reasons require an eco-system of third party service providers,
who have access to GST System and capability to develop such applications.
These service providers have been given a generic name, GST Suvidha
Providers or GSP.
Q 12. What will be the role of GST Suvidha Providers (GSP)?
Ans. GSP will be developing applications having features like return
filing, reconciliation of purchase register data with auto populated data
for acceptance/rejection/Modification, dashboards for taxpayers for quick
monitoring of GST compliance activities. they may also provide role based
access to divide various GST related activities like uploading invoice,
filing returns etc., among different set of users inside a company (medium
or large companies will need it), Applications for Tax Professional to
manage their client’s GST compliance activities, Integration of existing
accounting packages/ERP with GST System, etc.
Q 13. What are the benefits to taxpayers in using the GSPs?
Ans. At the outset it is clarified that all required functions under GST
can be performed by a taxpayer at the GST portal. GSP is an additional
channel being made available for performing some of the functions and use
of their services is optional. Some of the specific solution(s) which could be offered by the GSPs to meet specific requirements of Taxpayers for
GST compliance are given below:
1. Conversion of their current invoice format generated by their existing
accounting software, which could be in csv, pdf, excel, word format, into
GST compliant format.
2. Reconciliation of auto populated data from GST portal with their
purchase register data, where purchase register data can be on excel, csv
or in any proprietary database and uploaded data from GST format could be
in json/csv.
3. Organization having various branches will need a way to upload branch
wise invoices, as GST System will only provide one user-id/password for GST
system access. An application having role based access and different view
for different branches will be needed.
4. A company registered in multiple States may require unified view of all
branches in one screen,
5. GST professionals will need some specific applications to manage and
undertake GST compliance activities for their client Tax payers from one
dashboard, etc.
Above are just a few illustrations. There will be many more requirements of
different sets of Tax payers. These requirements of taxpayers can be met by
GSPs.
Q 14. What are the functions which a taxpayer will perform at the GST
Common Portal being developed and maintained by GSTN for the taxpayers?
Ans. GST Common Portal is envisaged as one-stop-shop for all requirements under GST for the taxpayers. Illustrative list of
functions that can be performed by taxpayers through GST Portal managed by
GSTN are:
§ Application for registration as well as amendment in registration,
cancellation of registration and profile management;
§ Payment of taxes, including penalties, fines, interest, etc. (in terms of
creation of Challan as payment will take place at bank’s portal or inside a
bank premises);
§ Change of status of a taxpayer from normal to Compounding and vice-versa;
§ Uploading of Invoice data & filing of various statutory
returns/Annual statements;
§ Track status of return/tax ledger/cash ledger etc. using unique
Application Reference Number (ARN) generated on GST Portal.
§ File application for refund etc.
§ Status review of return/tax ledger/cash ledger
Q 15. What will be the role of tax officers from State and Central Govt in
respect of the GST system being developed by GSTN?
Ans. The officers will use information/ application submitted by taxpayer
on GST Portal for following statutory functions:
• Approval/rejection for enrollment/registration of taxpayers;
• Tax administration (Assessment / Audit /Refund / Appeal/ Investigation
etc.);
• Business Analytics, MIS and other statutory functions.
Q 16. Will GSTN generate a unique identification for each invoice line in
GSTN system?
Ans. No, GSTN will not generate any new identification. The combination of
Supplier’s GSTIN, Invoice no and Financial year will make each Invoice
unique.
Q 17. Can invoice data be uploaded on day to day basis?
Ans. Yes, GST Portal will have functionality for taxpayers to upload
invoice data on any time basis. Early upload of invoices by supplier
taxpayer will help receiver taxpayer in early reconciliation of data in
Invoices as well as help supplier taxpayer in avoiding last minute rush of
uploading returns on the last day.
Q 18. Will GSTN provide tools for uploading invoice data on GST portal?
Ans. Yes, GSTN will provide spreadsheet like tools (such as Microsoft
Excel), free of cost, to taxpayers to enable them to compile invoice data
in the same and generate files which can then be uploaded on GST portal.
This will be an offline tool which can be used to input/capture invoice
data without being online and then generate final files in compatible
format for uploading to GST portal.
Q 19. Will GSTN be providing mobile based Apps to view ledgers and other
accounts?
Ans. The GST portal is being designed in such a way that it can be seen on
any smart phone. Thus ledgers like cash ledger, liability ledger, ITC
ledger etc. can be seen on a mobile phone using compatible browsers.
Q 20. Will GSTN provide separate user ID and password for GST Practitioner
to enable them to work on behalf of their customers (Taxpayers) without
requiring user ID and password of taxpayers, as happens today?
Ans. Yes, GSTN will be providing separate user ID and Password to GST
Practitioner to enable them to work on behalf of their clients without
asking for their user ID and passwords. They will be able to do all the
work on behalf of taxpayers as allowed under GST Law.
Q 21. Will tax payer be able to change the GST Practitioner once chosen in
above mentioned facility?
Ans. Yes, a taxpayer may choose a different GST Practitioner by simply
unselecting the previous one and then choosing a new GST Practitioner on
the GST portal.
Q 22. Will existing taxpayers under Central Excise or Service Tax or State
VAT have to apply for fresh registration under GST?
Ans. No, the existing taxpayers under taxes which are to be subsumed under
GST and whose PAN have been validated from CBDT database will not be
required to apply afresh. They will be issued provisional GSTIN by GST
portal, which will be valid for six months. Such taxpayers will be required
to provide relevant data as per GST enrollment form online on GST Portal.
On completion of data filing the status of taxpayer will change to
Migrated. On appointed day the status of taxpayer will change to Active and
he will be able to comply with requirements of GST regime for payment of
taxes, filing of returns etc., on GST Portal.
GSTN has issued Provisional IDs and passwords to all such taxpayers and the
same has been shared with tax authorities for conveying the same to the
taxpayers. Enrolment of existing taxpayers for GST started at GST portal on
8th November 2016 and by end of March 2017 a large number of them have
activated the Provisional ID and many have completed the migration process.
More details are available at https://www.gst.gov.in/help
Q 23. What material will be provided by GSTN, on various aspects of working
on GST portal, for the benefit of taxpayers?
Ans. GSTN is preparing Computer Based Training materials (CBT’s) which have
videos embedded into them for each process to be performed on the GST
portal. These will be put on the GST portal as well as on the website of
all tax authorities. Apart from CBT’s, Various User Manuals, FAQ’s etc.,
will also be placed on GST Portal for education of the taxpayers. Apart
from it, a helpdesk has been set up for the taxpayers for logging of their
tickets via mail (helpdesk@gst.gov.in) or phone (0124-4688999). CBT, FAQ
and User Manual for enrolment process are available at
https://www.gst.gov.in/help.
Q 24. Will the return and registration data furnished by the taxpayers on
the GST Common Portal will remain Confidential?
Ans. Yes, all steps are being taken by GSTN to ensure the confidentiality
of personal and business information furnished by the taxpayers on GST
Common Portal. This will be done by ensuring Role Based Access Control
(RBAC) and encryption of critical data of taxpayers both during transit and
in storage. Only the authorized tax authorities will be able to see and
read the data.
Q 25. What are the security measures being taken by GSTN to ensure security
of the GST system?
Ans. GST Systems project has incorporated state of art security framework
for data and service security. Besides high end firewalls, intrusion
detection, data encryption at rest as well as in motion, complete audit
trail, tamper proofing using consistent hashing algorithms, OS and host
hardening etc., GSTN is also establishing a primary and secondary Security
Operations Command & Control center, which will proactively monitor and
protect malicious attack in real time. GSTN is also ensuring secure coding
practices through continuous scanning of source code & libraries being
used in GST system to protect against commonly known and unknown threats.
24. Transitional Provisions
Q 1. Will CENVAT credit (or VAT credit) carried forward in the last return
prior to GST under existing law be available as ITC under GST?
Ans. A registered person, other than a person opting to pay tax under
composition scheme, shall be entitled to take credit in his electronic
credit ledger the amount of CENVAT (or VAT credit) credit carried forward
in the return of the last period before the appointed day, subject to the
conditions stated therein. (Section 140(1) of the CGST/SGST Act)
Q 2. What are those conditions?
Ans. The conditions are that: -
(i) the said amount of credit is admissible as input tax credit under this
Act;
(ii) the registered person has furnished all the returns required under the
existing law (i.e. Central Excise and VAT) for the period of six months
immediately preceding the appointed date;
(iii) the said amount of credit does not relate to goods sold under
notifications no. ……and claiming refund of VAT paid thereon
Under SGST law there will be one more condition as given below: -
So much of the said credit as is attributable to any claim related to
section 3, sub-section (3) of section 5, section 6, section 6A or
sub-section (8) of section 8 of
the Central Sales Tax Act, 1956 that is not substantiated in the manner,
and within the period, prescribed in rule 12 of the Central Sales Tax
(Registration and Turnover) Rules, 1957 shall not be eligible to be
credited to the electronic credit ledger:
However, an amount equivalent to the credit specified above shall be
refunded under the existing law when the said claims are substantiated in
the manner prescribed in rule 12 of the Central Sales Tax (Registration and
Turnover) Rules, 1957.
Q 3. A registered person, say, purchases capital goods under the existing
law (Central Excise) in the June quarter of 2017-18. Though the invoice has
been received within 30th June but the capital goods are received on 5th
July, 2017 (i.e. in GST regime). Will such a person get full credit of
CENVAT in GST regime?
Ans. Yes, he will be entitled to credit in 2017-18 provided such a credit
was admissible as CENVAT credit in the existing law and is also admissible
as credit in CGST - section 140(2) of the CGST Act.
Q 4. VAT credit was not available on items 'X' & 'Y' as capital goods
in the existing law (Central Excise). Since they are covered in GST, can
the registered taxable person claim it now?
Ans. He will be entitled to credit only when ITC on such goods are
admissible under the existing law and is also admissible in GST. Since
credit is not available under the existing law on such goods, the said
person cannot claim it in GST – proviso to section 140(2) of the SGST Act.
Q 5. Assuming the registered person has wrongly enjoyed the credit (Refer
to Q4) under the existing law, will the recovery be done under the GST Law
or the existing law?
Ans. The recovery relating to ITC wrongfully enjoyed, unless recovered
under the existing law, will be recovered as arrears of tax under GST.
Q 6. Give two examples of registered taxable persons who are not liable to
be registered under the existing law (Central Excise / VAT) but are
required to be registered under GST?
Ans. A manufacturer having a turnover of say Rs 60 lakh who is enjoying SSI
exemption under the existing law will have to be registered under GST as
the said turnover exceeds the basic threshold of Rs 20 lakh - section 22.
A trader having turnover below the threshold under VAT but, making sales
through e-commerce operator will be required to be registered in GST. There
will be no threshold for such person(s) – section 24.
Q 7. Will ITC be allowed to a service provider on VAT paid inputs held as
stock on the appointed day?
Ans. Yes, he will be entitled to input tax credit on inputs held in stock
in accordance with the provisions of section 140(3).
Q 8. A registered person has excess ITC of Rs 10, 000/- in his last VAT
return for the period immediately preceding the appointed day. Under GST he
opts for composition scheme. Can he carry forward the aforesaid excess ITC
to GST?
Ans. The registered person will not be able to carry forward the excess ITC
of VAT to GST if he opts for composition scheme – Section 140(1).
Q 9. Sales return under CST (i.e. Central Sales Tax Act) is allowable as
deduction from the turnover within six months? If, say, goods are returned
in GST regime by a buyer within six months from appointed day, will it
become taxable in GST?
Ans. Where tax has been paid under the existing law [CST, in this case] on
any goods at the time of sale, not being earlier than six months prior to
the appointed day, and such goods are returned by the buyer after the
appointed day, the sales return will be considered as a supply of the said
buyer in GST and tax has to be paid on such supply, if, –
(i) the goods are taxable under the GST Law; and
(ii) the buyer is registered under the GST Law. However, the seller is
entitled to refund of such tax
[CST, in this case] paid under the existing law if the aforesaid buyer is
an unregistered person under GST and
the goods are returned within 06(six) months (or within the extended period
of maximum two months) from the appointed day and the goods are
identifiable - Section 142(1).
Q 10. Shall a manufacturer or a job worker become liable to pay tax if the
inputs or semi-finished goods sent for job work under the existing law are
returned after completion of job work after the appointed day?
Ans. No tax will be payable by the manufacturer or the job worker under the
following circumstances: –
(i) Inputs/ semi-finished goods are sent to the job worker in accordance
with the provisions of the existing law before the appointed day.
(ii) The job worker returns the same within six months from the appointed
day (or within the extended period of maximum two months).
(iii) Both the manufacturer and the job worker declare the details of
inputs held in stock by the job worker on the appointed day in the
prescribed form.
The relevant sections are 141(1), 141(2) & 141 (4).
However, if the said inputs/semi- finished goods are not returned within
six months (or within the extended
period of maximum two months), the input tax credit availed is liable to be
recovered.
Q 11. What happens if the job worker does not return the goods within the
specified time?
Ans. Tax will be payable by the job worker on the said goods if they are
not returned to the place of business of the manufacturer within six months
(or within the extended period of maximum two months) from the appointed
day – Section 141(1), 141(2)
Q 12. Can a manufacturer transfer have finished goods sent for testing
purpose to the premises of any other taxable person?
Ans. Yes, a manufacturer can transfer finished goods sent for testing
purpose to the premise of any other registered person on payment of tax in
India or without payment of tax for exports within six months (or within
the extended period of maximum two months)– section 141(3)
Q 13. If finished goods removed from a factory for carrying out certain
processes under existing law are returned on or after the appointed day,
whether GST would be payable?
Ans. No tax under GST will be payable if finished goods removed from
factory prior to the appointed day to any other premise for carrying out
certain processes are returned to the said factory after undergoing tests
or anyother process within six months (or within the extended period of maximum
two months) from the appointed day - section 141(3).
Q 14. When tax shall become payable in GST on manufactured goods sent to a
Job worker for carrying out tests or any other process not amounting to
manufacture under the existing law?
Ans. Tax will be payable in GST on manufactured goods sent to a job worker
prior to the appointed day for carrying out tests or any process not
amounting to manufacture under the existing law if such goods are not
returned to the manufacturer within six months (or within the extended
period of maximum two months) from the appointed day. Further, the input
tax credit enjoyed by the manufacturer will liable to be recovered if the
aforesaid goods are not returned within six months from the appointed day.
– Section 141(3)
Q 15. Is extension of two months as discussed in section 141 automatic?
Ans. No, it is not automatic. It may be extended by the Commissioner on
sufficient cause being shown.
Q 16. What is the time limit for issue of debit/credit note(s) for revision
of prices?
Ans. The taxable person may issue the debit/credit note(s) or a
supplementary invoice within 30 days of the price
revision.
In case where the price is revised downwards the taxable person will be
allowed to reduce his tax liability only if the recipient of the invoice or
credit note has reduced his ITC corresponding to such reduction of tax
liability–section 142(2).
Q 17. What will be the fate of pending refund of tax/interest under the
existing law?
Ans. The pending refund claims will be disposed of in accordance with the
provisions of the existing law – section 142(3).
Q 18. What will be fate of any appeal or revision relating to a claim of
CENVAT/ITC on VAT which is pending under the existing law? If say, it
relates to output liability then?
Ans. Every proceeding of appeal, revision, review or reference relating to
a claim for CENVAT/input tax credit or any output tax liability initiated
whether before, on or after the appointed day, will be disposed of in
accordance with the existing law and any amount of credit of CENVAT/ input
tax credit or output tax found admissible for refund will have to be
refunded in accordance with the existing law. However, any amount which
becomes recoverable will have to be recovered as arrears of tax under the
GST Law---Section 142(6)/142(7).
Q 19. If the appellate or revisional order goes in
favour of the assessee, whether refund will be made in GST? What will
happen if the decision goes against the assessee?
Ans. The refund will be made in accordance with the provisions of the
existing law only. In case any recovery is to be made then, unless
recovered under existing law, it will be recovered as an arrear of tax
under GST – sections 142(6) & 142(7)
Q 20. How shall the refund arising from revision of return(s) furnished
under the existing law be dealt in GST?
Ans. Any amount found to be refundable as a consequence of revision of any
return under the existing law after the appointed day will be refunded in
cash in accordance with the provisions of the existing law – section
142(9)(b).
Q 21. If any goods or services are supplied in GST, in pursuance of
contract entered under existing law, which tax will be payable?
Ans. GST will be payable on such supplies– section 142(10) of the CGST Act.
Q 22. Tax on a particular supply of goods/services is leviable under the
existing law. Will GST be also payable if the actual supply is made in GST
regime?
Ans. No tax will be payable on such supply of
goods/services under GST to the extent the tax is leviable under the
existing law – section 142(11).
Q 23. In pursuance of any assessment or adjudication proceedings
instituted, after the appointed day, under the existing law, an amount of
tax, interest, fine or penalty becomes refundable. Shall such amount be
refundable under the GST law?
Ans. No refund of such amount will be made in cash under the existing law –
section 142(8)(b) of the CGST Act.
Q 24. If services are received by ISD under the earlier law, can the ITC
relating to it be distributed in GST regime?
Ans. Yes, irrespective of whether the invoice(s) relating to such services
is received on or after the appointed day – section 140(7) of the CGST Act.
Q 25. Where any goods are sold on which tax was required to be deducted at
source under State VAT law and an invoice was also issued before the
appointed day, shall deduction of tax at source shall be made under this
Act if the payment is made after the appointed day?
Ans. No, in such case no deduction of tax at source shall be made under
GST.
Q 26. Goods were sent on approval not earlier than six months before the
appointed day but are returned to the seller after 6 months from the
appointed day, will tax be payable under GST?
Ans. Yes, if such goods are liable to tax under GST and the person who has
rejected or has not approved the goods, returns it after 6 months (or
within the extended period of maximum two months) from the appointed day.
In that case tax shall also be payable by the person who has sent the goods
on approval basis- section 142(12).
COMMENTS