Goods and Service Tax is an indirect tax which was launched on 1st July 2017, subsuming several taxes and levies such as central excise duty, services tax, additional customs duty, surcharges, state-level value added tax and Octroi. Until the introduction of GST, the indirect tax system in India was highly fragmented. There were multiplicity of taxes, laws and procedures. The imposition of tax on tax was a grave problem. There was no continuity in the flow of Input Tax Credit. All of this led to the introduction of “One Nation – One Tax “ i.e GST. GST is levied on all transactions such as sale, transfer, purchase, barter, lease, or import of goods and/or services. India has adopted dual GST model, meaning both the Centre and State Government administer the GST regime.
This law was introduced much earlier than the organizations expected and is still new. There have been amendments every other day. Whilst there is increase in transparency and ease of administrative paperwork, the GST System has also increased compliance requirements, regulations and the need for technology adoption.
At BCL India, we have a team of experts specialized in Indirect tax, to assist you with the registration, compliance, departmental audits and statutory audit, all under one roof.
GST – Governing Acts and the segments
GST is a consumption-based tax, thus, taxes are paid to the state where the goods or services are consumed and not to the state in which they are produced. The taxes collected are CGST, SGST and IGST. To understand the incidence of these taxes one should know about the concept of supply, place, value and time of supply.
CGST stands for Central Goods and Service Tax, SGST stands for State Goods and Service Tax and IGST stands for Integrated Goods and Service Tax. CGST and SGST are levied on intra state supply of goods and services whilst IGST is levied on interstate supply of goods and services. Supply of goods or services where the location of the supplier and the place of supply of goods or services are in the same State or same Union territory shall be treated as intra-State supply.
Whereas inter state supply refers to supply of goods or services, where the location of the supplier and the place of supply are in two different States or two different Union territories or a State and a Union territory. Import of services and goods are also considered as Inter state supply.
To ensure tax compliance, identification of tax payer is a must. Registration under the Act is a mandatory requirement. It is through registration the business entity obtains a 15 digit unique number referred to as GSTIN. The first 2 digits of the GSTIN is the State code, next 10 digits are the PAN of the legal entity, the next two digits are for entity code, and the last digit is check sum number. A certificate of registration is also made available to the applicant on the GSTN common portal.
The business entity can collect tax from its customers or claim any input tax credit only after obtaining registration. If you are registered under GST law, you are legally recognized as supplier of goods or services, authorized to collect tax from the customers and can claim input tax credit of taxes paid on procurement of goods and services.
Threshold limits for registration
However, small businesses having aggregate turnover below the threshold limit can voluntarily opt for registration. There are also certain cases where the business entities are called upon to obtain mandatory registration irrespective of their turnover.
Penalty for non registration under GST shall be INR 10,000/- (ten thousand rupees) or ten percent (10%) of the tax due from such person/supplier, whichever is higher.
Businesses registered under GST must adhere to invoicing compliance as per the GST law. The registered supplier is required to produce a tax invoice with every sale of goods or services. Tax invoice is the primary document evidencing the supply and vital for availing input tax credit.
These invoices must be compliant to the rules and should have fields such as name, address and GSTIN of the supplier, consecutive serial number, date of its issue; name, address and GSTIN or UIN of the recipient; name and address of the recipient and the address of delivery, along with the name of State and its code; HSN code of goods or Accounting Code of services; description of goods or services; total value and taxable value of supply of goods or services or both taking into account discount or abatement; rate and amount of tax (central tax, State tax, integrated tax, Union territory tax or cess) ; place of supply along with the name of State, whether the tax is payable on reverse charge basis and signature or digital signature of the supplier or his authorized representative
Non-adherence to invoicing guidelines will attract a penalty of Rs. 10,000 or 100% tax due (whichever is higher) for not issuance of invoice and Rs. 25,000 for incorrect invoicing.
Under GST, a regular taxpayer needs to furnish monthly returns and one annual return. GST return is a document that will contain all the details of your sales, purchases, tax collected on sales (output tax) and tax paid on purchases (input tax) and is required to be filed on the GST portal
Business should file returns monthly/quarterly/yearly based on the type of business activity carried out. Generally, a taxpayer is required to file:
The GST Law permits refund of unutilised ITC on account of zero-rated supplies and on account of inverted duty structure. Refund can be claimed for various scenarios specifically mentioned under the law. The claim is submitted through a refund application with necessary details in the GST Portal.
The CBIC aims at streamlining the procedures about refunds under GST for which a standardized form has been created to make claims for refunds. The claim and sanctioning procedure are completely online and time bound, however, such claim for refund should be supported with requisite documents and evidence. The law also requires that the claim for refund should be made within the period of 2 years from the relevant date.
GST Notices are the departmental communications sent to the taxpayer that either demand for explanation or information from the taxpayers or some actions. These notices are also sent to remind or caution the taxpayer of any defaults or for non-compliance of the Act. The notices are aimed at resolving the issues without having the need to go to court which is not time and cost effective.
Some of the common notices received by the taxpayers are:
The response to these notices should be filed by the taxpayer within the stipulated time, Failure to respond to these notices would attract a huge penalty. Response to the notices will be a difficult task in the absence of subject experts and we are here to assist you to in filing the response and close the loops.
GST Audit is a legal procedure carried out by the Commissioner or the officer authorized by him to verify the details of the ‘records’ and the ‘books of account’ of the registered person. The procedure is carried out to ensure that the turnover declared, taxes paid, refunds claimed, and input tax credits claimed are valid. It also checks the compliance with GST Regulations.
A notice will be sent to the auditees 15 days prior to the date of audit. The audit will be completed within 3 months and can be extended up to 6 months in some cases. The registered person can make rectification to the filed returns if any omission/incorrect details are discovered during the audit subject to the payment of interest for the default.
Our team has an experience of more than a decade in handling the indirect tax assessments, audit and due diligence and is versatile in its approach. With the expertise gained over the years, BCL India is capable of handling and managing the departmental audits at ease.