FAQs On GST – Goods and Service Tax

Introduction

1.What is GST?

GST (Goods and service tax) is a centralized tax structure on goods and services throughout the country. It is consumption tax that is collected on the basis of the value added at each stage. Moreover this sort of centralized tax structure stands at eliminating multiple tax structures in the country and eliminates the cascading effect (i.e tax on tax) through a system of free flow in input tax credits.

2. How will it benefit the country?

• By bringing together various taxes, it would mitigate the ill effect of cascading taxes and make way for a common market throughout the country.
• Revenue growth of the nation as it increases the tax base.
• Reduction of the taxes paid on goods which are currently at 25% to 30%
• Would spur the growth of the economy in the long run

3. What are the Central and State level taxes that come under GST?

At the Central level taxes such as Central Excise Duty, Additional Excise Duty, Service Tax, Additional Customs Duty, and Special Additional Duty of Customs will come under its ambit. Following the taxes at the State level, taxes such as State Value Added Tax/Sales Tax, Entertainment Tax, Entry tax, Purchase Tax, Luxury tax, and Taxes on lottery, betting and gambling will be included under its ambit.

4. Commodities that do not come under GST

Electricity, Alcohol for human consumption, petroleum products are kept away from the ambit of Goods and Services tax currently.

5. Why is GST necessary for India?

• Provide a common market
• Reduce transaction costs
• Increase in government revenues
• Improve ease of doing business
• Expected to increase GDP growth by 2 to 2.5%
• Increase in FDI

Components

1.What are the components that come under the GST?

The two major components that hold the GST in the administration of its laws are the Central GST and the State GST. These two wings of the nation all together levy taxes on every transaction of supply of goods and services except on exempted goods and services.

2. Functions of GST council

The council is assigned to make recommendations on to the Union and State on matters regarding the addition of various taxes, cess and supplement in GST, details of goods and services will be subjected to GST or will be exempted from it. The council is also assigned to make special provisions for the following States within the country such as, Jammu and Kashmir, Arunachal Pradesh, Meghalaya, Tripura etc.

Registration

1. What is the advantage of taking GST Registration?

• Legally recognised as the supplier of goods and services.
• Legally authorised to collect tax from his purchasers and also pass on the credit of the taxes to his recipients

2. Can a person without GST registration claim ITC and collect tax?

A person without GST registration can neither collect GST from his customers nor claim any input tax credit of GST paid by him.

E-Commerce

1.What is E-commerce?

Electronic commerce means the supply or receipt of goods and/or services, or transmitting of funds or data, over an electronic network, primarily the internet, by using any of the applications that rely on the internet, but are not limited to e-mail, instant messaging, shopping carts, web services, UDDI, File Transfer Protocol (FTP) and Electronic Data Interchange (EDI) whether or not the payment is conducted online and whether or not the ultimate delivery of the goods and/or services is done by the operator.

2. Who is as aggregator?

Any person who manages/owns an electronic platform by any means of application or any device which acts as bridge in connecting the potential customer with that of the person providing the service would be known as an aggregator. For example Uber is an aggregator.

3. Is it mandatory for e-commerce operator to obtain GST Registration?

As per the provision the threshold exemption is not available to the e-commerce operators. Hence they would be liable to register themselves irrespective of the value of supply made by them.

4. What is Tax Collected at source?

The e-commerce operator is required to deduct an amount payable to the actual supplier in respect of the supply of goods/services through such operator. The amount so deducted from the supplier would be known as Tax Collected at source.

5. Can the actual supplier actually take claim of the credit of this TCS?

The amount so deducted as TCS would be remitted to the government by the aggregator at the time of filing the return. When the actual supplier is filing his returns, he can claim such amount as refund to discharge his liability of tax.

Valuation

1.What is valuation under GST law?

According to GST laws, a taxable value is the price paid or payable for the supply provided, wherein the supplier and the recipient are not related to each other and the price is the sole focus. In simple any taxes, fees, charges imposed under any law other than CGST Act, SGST Act, and UTGST Act, expenses incurred by the recipient on behalf of the supplier and incidental expenses like commission and packing incurred by the supplier are also to be added to the price to arrive at the business value.

2. What will be the value for second hand goods under GST?

In terms of second hand goods such as pre-used-goods, if the selling price is less than the purchase price, the negative value will be ignored. Such ignorance of negative profit falls in with refund provisions. Those who purchase second hand goods after the payment of tax to the supplier will be monitored and governed under this valuation rule only when they fail to avail input tax credit on input supply. If otherwise, then individuals will be administered by the normal GST valuation.

3. Basics of allowing of discounts in valuation for GST?

A discount in any form or name such as cash, trade, quantity, and turnover discounts is deductible from the total value so as to arrive at a taxable value only if specified in the invoice. Discounts given after delivery of goods and services can also be excluded only on the basis that such a discount is built on the terms and conditions of the agreement between the supplier and the recipient. Therefore input tax credits are reversed by the recipient.

4. What are the expenses included under taxable value?

Any taxes, cesses, duties and charges levied under any other statute including expenses incurred by the recipient on behalf of the supplier are included under taxable value. Other incidental expenses such as commission and packing, charged by the supplier to the recipient and subsidies that are directly linked to the price of the good or service are some of the basic expenses that come under taxable value.

5. What will be the value of a token, voucher, or coupon?

The value of a token, voucher, or a coupon, or a stamp which is considered usable against the supply of goods or services will be considered equal to the money value of goods or services. In this case both goods and services are usable against such token, voucher, stamp, or voucher.

GST on Imports and Exports

1. What is the scheme of taxation of imports in GST?

According to the IGST Act, imports of goods in India will be deemed to be supplied in terms of inter-state trade or commerce. In terms of integrated tax on goods imported into the country, GST will be levied and collected in accordance with of Section 3 of the Customs Tariff Act, 1975 and its valuation will be determined in accordance to the law put forth by it.

2. How will the tax treatment of export goods under GST be levied?

Export goods and services are treated as zero rated supplies, and a registered person who is taxable   exporting goods and services will be eligible to claim refund on the following criteria:

• Export under bond without payment of Integrated GST and claim refund of unutilized input tax credit.
• Export on payment of Integrated GST and claim refund of the tax so paid on goods and services exported. 3.

3. What would be the tax treatment of warehouse goods under GST?

Provisions under the Customs Act, 1962 are applicable for the deposit of imported goods into a warehouse including clearance of goods from the warehouse for home consumption are all listed under the provisions made by the act. However, the Taxation Laws Act, 2017 provides for the inclusion of a warehouse by defining it as customs area. This is done to ensure an importer would not require to pay IGST at the time of removal 0f goods from customs station to a bonded warehouse.

4. What are the criteria on which you can claim tax for exports and deemed exports?

Refunds can be achieved only by filing application in Form GST RFD-01. The GST Act is modulated in a way to provide a detailed procedure for claiming refund and will help ease working capital blockage for exporters.

5. What is GST Compliance Rating?

Every person registered under GST will be given a numerical rating by the government based on their record of compliances, which will be available in the public domain.