GST

 COMPOSITION LEVY

Small taxpayers can opt to pay tax at a flat rate and opt for composition of tax if their annual aggregate turnover is within 75 lakhs. This option is available for certain special category of manufacturers and service providers also. No input tax credit is available for a compounding dealer. compounding dealer cannot issue a tax invoice but only a bill of supply. Compounding dealers are not permitted to collect tax

Persons not eligible for composition

* Supplier of services other than supplier of Restaurant service

* Neither a Casual Taxable person nor a non-Resident Taxable person.

* An Inter State supplier of Goods

* Persons supplying Goods through e-commerce operator

* Manufacturers of certain notified goods

Composition Rates

* For manufacturers, SGST 1% + CGST 1%

* For hotels other than Liquor SGST 2.5% + 2.5%

* For other SGST 0.5% + CGST 0.5%

Return of a Composition dealer

A composition dealer instead of filing monthly return, has to file return for each quarter in GSTR -4 within 18 days after the end of such quarter. In GSTER -4, invoice wise details of inter-state and intra-state supplies received from registered persons as well as unregistered persons, imports of goods and services, consolidated details of outward supplies, consolidated statement of advances paid/advances adjusted on account of receipt of supplies, debit note, and credit note received and issued have to be reported.

Conditions for composition

* With respect to migrated dealer, the Goods in stock should not have been purchased on Inter-state basis/imports/stock Transfer.

* The Goods in stock must not have been purchased from Un-registered Dealers, and it purchased tax has to be paid under Reverse charge mechanism.

* Composition dealers have to issue Bill of supply instead of Invoice.

* In the Bill of supply, such dealer should mention" Composition Taxable person not eligible to collect tax on supplies"

* In sign boards at prominent place of business he shall mention the words "Composition Taxable person"

Cancellation of registration

Failure to file returns for 3 consecutive tax periods will lead to cancellation of registration.

Transitional Provisions

Dealer paying tax in the composition scheme under the earlier law but decided to pay tax under Section 9 of the GST law (i.e. Regular dealer), shall be eligible for ITC in GST on the closing stock of goods purchased locally.

A dealer availing ITC under the earlier law but decided to become a composition dealer under section 10 of the GST law, shall have to pay an amount equivalent to the credit of input tax.

TIME OF SUPPLY OF GOODS

Under GST, the point of taxation, the liability to pay CGST/SGST will arise at the time of supply as determined for goods & services.

The time of supply of Goods shall be the earlier of the following dates, namely: - 1. The date of issue of invoice by the supplier (or the last date on which he is required to issue the invoice) or 2. the date on which the supplier receives the payment with respect to the supply

The time of supply of goods where tax is to be paid on reverse charge shall be the earlier of the following dates, namely: -

1. The date of receipt of goods, or the date of payment or 30 days from the date of issue of invoice by the supplier (If it is not possible to determine under i,ii) or iii), the date of entry of supply in the books of the recipient)

The time of supply of goods in case of vouchers shall be the earlier of the following dates, namely: -

* The date of issue of voucher; or

* The date of redemption of voucher (If the date could not be determined then the date of periodical return filed or the date on which the CGST/SGST is paid

TIME OF SUPPLY OF SERVICES

The time of supply of services shall be the earliest of the following dates, namely: -

1. The date of issue of invoice or 2. The date of receipt of payment.

The time of supply of services where tax is to be paid on reverse charge shall be the earliest of the following dates, namely: -

(a) The date of receipt of payment or (b) 60 days immediate from the date of invoice. If it is not possible to determine under (i) or (ii), the date of entry

PLACE OF SUPPLY OF GOODS

PLACE OF SUPPLY OF SERVICES

(The place of supply of services would be the location of recipient)

Service provided to

1. Registered person --B2B

2. Person other than a Registered person-B2C

Place of Supply

1. Location of Recipient

2. The location of the recipient where the address on record exists; and (" address on record" means the address of the recipient as available in the records of the supplier) the location of the supplier of services in other cases,

INPUT TAX CREDIT

Uninterrupted and seamless chain of input tax credit (hereinafter referred to as, "ITC") is one of the key features of Goods and Services Tax. ITC is a mechanism to avoid cascading of taxes. Cascading of taxes, in simple language, is tax on tax under the present system of taxation, credit of taxes being levied by central Government is not available as set-off for payment of taxes levied by state Governments, and vice versa.

one of the most important features of the GST system is that the entire supply chain would be subject to GST to be levied by Central and state Government concurrently. As the tax charged by the Central or the State Governments would be part of the same tax regime, the credit of tax paid at every stage would be available as set- off for payment of tax at every subsequent stage.

Under this new system, most of the indirect taxes levied by Central and the State Government on supply of goods or services or both, would be combined to gather under a single levy

GST comprises of the following levies:

1. Central Goods and Services Tax (CGST) (on intra-state supply of goods or services or both)

2. State Goods and Services Tax (SGST) (on intra-state supply of goods or services or both.)

3. Integrated Goods and Services Tax (IGST) (on inter-state supply of goods or services or both. In case of import of goods also, the present levy of countervailing Duty (CVD) and special Additional Duty (SAD) would be replaced by IGST)

Input Tax Credit

 Sec - 16- Eligibility and conditions for taking input tax credit

16.(I) Every registered person shall, subject to such conditions and restrictions as may be prescribed and, in the manner, specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.

(2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless, -

(a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed.

(b) he has received the goods or services or both. Explanation, - For the purposes of this clause, it shall be deemed that the registered person has received the goods where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise.

(c) Subject to the provision of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilization of input tax credit admissible in respect of the said supply; and

(d) he has furnished the return under section 39: Provided that where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment:

Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed:

Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon

(3) Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income -tax Act, 1961, the input tax credit on the said tax component shall not be allowed

(4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier.

Apportionment of credit and blocked credits

17(I) - Where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business

(2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.

(3) The value of exempt supply under sub-section (2) shall be such as may be prescribed and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to cluse (b) of paragraph 5 of schedule II, sale of building.

(4) A banking company or a financial institution including a non-banking financial company, engaged in supplying services by way of accepting deposits, extending loans or advances shall have the option to either comply with the provisions or sub-section (2), or avail of, every month, an amount equal to fifty per cent. of the eligible input tax credit on inputs, capital goods and input services in that month and the rest shall lapse:

Provided that the option once exercised shall not be withdrawn during the remaining part of the financial year:

Provided further that the restriction of fifty percent. shall not apply to the tax paid on supplies made by one registered person to another registered person having the same permanent account Number.

(5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (!) of section 18, input tax credit shall not be available in respect of the following, namely: -

(a) Motor vehicles and other conveyances except when they are used- (i) for making the following taxable supplies, namely: -

(A) further supply of such vehicles or conveyances; or (B) transpiration of passengers; or

(C) imparting training on driving, flying, navigating such vehicles or conveyances.

(ii) for Transporation of goods.

(b) The following supply of goods or services or both -

(I) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where an inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply; - 

(ii) membership of a club, health and fitness center.

(iii) rent-a-cab, life insurance and health insurance except were

(A) The Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; or  

(B) such inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply: and

(iv) travel benefits extended to employees on vacation such as leave or home travel concession.

(c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service.

(d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or Bothe are used in the course or furtherance of business

Explanation - For the purposes of clause (c) and (d), the expression "construction" includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property:

(e) goods or services or both on which tax has been paid under section 10.

(f) goods or services or both used for personal consumption.

(g) goods or services or both received by a nonresident taxable person except on goods imported by him

(h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and any tax paid in accordance with the provisions of section 74,129 and 130

(6) The Government may prescribe the manner in which the credit referred to in sub- sections (1) and (2) may be attributed

Explanation. - For the purposes of this Chapter and Chapter VIJ, the expression " plant and machinery" means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes-

(i) land, building or any other civil structures:

(ii) telecommunication towers: and

(iii) pipelines laid outside the factory premises.

Sec 18- Availability of credit in special circumstances.

18(I) Subject of such conditions and restrictions as may be prescribed ------------------

(a) a person who has applied for registration under this Act within thirty days from the date on which he becomes liable to registration and has been granted such registration shall be entitled to take credit of input tax in respect of input held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date from which he becomes liable to pay tax under the provisions of this Act;

(b) a person who takes registration under sub- section (3) of section 25 shall be entitled to take credit of input tax in respect of input 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.

(c) Where any registered person ceases to pay tax under section 10, he shall be entitled to take credit or input tax in respect of inputs held in stock, inputs contained in semi-finished or finished goods held in stock and on capital goods on the day immediately preceding the date from which he becomes liable to pay tax under section -9

Provided that the credit on capital goods shall be reduced by such percentage points as may be prescribed

(d)Where an exempt supply of goods or services or both by a registered person become a taxable supply, such person shall be entitled to take credit of input tax in respect of input held in stock and inputs contained in semi-finished goods held in stock relatable to such exempt supply and on capital goods exclusively used for such exempt supply on the day immediately preceding the date from which such supply becomes taxable:

Composit and Mixed Supply

 COMPOSITE SUPPLY

Section 2 (30) - " Composite supply" means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, 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.

Illustration. - 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 a principal supply.

Section 2 (90). - " principal supply" means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary.

Mixed Supply

Section 2 (74) " 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.

Illustration. -- A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately.

Tax Liability 

Section 8 - The tax liability on a composite or a mixed supply shall be determined in the following manner; namely: -

(a) 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; and 

  (b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax.

Composite or Mixed Supply - Issues

Schedule II - Activities to be treated as supply of goods or supply of services

Composite supply

The following composite supplies shall be treated as a supply of services, namely- (a) works contract as defined in clause (119) of section 2; and  (b) supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply of service is for cash, deferred payment or other valuable consideration.

Flyer on Composite and Mixed Supply - 

A work contract and restaurant services are classic examples of composite supplies, however the CGST Act (Schedule II - SI No. 6)

identifies both as supply of services and chargeable to specific rate of tax mentioned against such services (works contract and restaurants)

AMC Contract:

(a) Spares @ 12% and Repair Services @ 18%

(b) Spares @ 28% and Repair Services @ 18%

(c) Spares @ 28% & 18% and Repair services @ 18%

GST Tariff Schedule

Explanation (iii) to the notification - 

Tariff item, sub-heading, heading and chapter shall mean respectively a tariff items, sub-heading and chapter as specified in the First Schedule to the customs Tariff Act, 1975

Explanation (iv) to the notification - 

The rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 including the Section and chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification

General Rules of Interpretation

Rule 1 - > The titles of Sections, Chapters and Sub-Chapters are provided for ease of reference only. 

>for legal purposes, classification shall be determined according to the terms of the leadings and any relative Section or chapter Notes and, 

> provided such headings or Notes do not otherwise require, according to the following provisions:

Rule 2 (a) - > Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the complect or finished article.

> It shall also be taken to include a reference to that article complete or finished (or failing to be classified as complete or finished by virtue of this rule) presented unassembled or dis-assembled.

Rule 2 (b)- > Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances.   

> Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance

> The classification of goods consisting of more than one material or substance shall be according to the principles or rule 3.

General Rules of Interpretation

Rule -3 When by application of Rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be affected as follows:

Rule 3 (a) > The heading which provides the most specific description shall be preferred to headings providing a more general description.

> However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or the part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.

Rule 3 (b) Mixtures, composite goods consisting of different material or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3 (a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable

Rule 3 (C) When goods cannot be classified by

reference to 3 (a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.

Goods imported in sets > During import of goods imported in sets - General Rules of Interpretation of the customs Tariff Act will apply

> Such goods cleared as such in domestic market - Whether provisions of: Composite or Mixed supply will be attracted? OR whether General Rules for Interpretation of the customs Tariff Act, 1975 will prevail over CGST Act? 

                            

GST REGISTRATION

 Advisory for Biometric - Based Aadhar Authentication and

Document Verification for GST Registration Applicants of Jammu & Kashmir and West Bengal

This is to inform taxpayers about recent development concerning the application process for GST registration. It is advised to keep the following key points in mind during the registration process.

1. Rule 8 of the GST Rules, 2017 has been amended to provided that an applicant can be identified on the common portal, based on data analysis and risk parameters for Biometric-based Aadhaar Authentication and taking a photograph of the applicant along with the verification of the original copy of the documents uploaded with the application.

2. The above-said functionality has been developed by GSTN. It has been rolled out in Jammu & Kashmir and West Bengal on 02nd August 2024

3. The said functionality also provides for the document verification and appointment booking process. After the submission of the application in Form GST REG-01, the applicant will receive either of the following links in the e-mail,

(a) A Link for OTP-based Aadhaar Authentication OR

(b) A link for booking an appointment with a message to visit a GST Suvidha Kendra (GSK) along with the details of the GSK and jurisdiction, for Biometric-based Aadhaar Authentication and document verification (The intimation e- mail)

4. If the applicant receives the link for OTP- based Aadhaar Authentication as mentioned in point 3 (a), she/he can proceed with the application as per the existing process.

5. However, if the applicant receives the link as mentioned in point3(b), she/he will be required to book the appointment to visit the designated GSK, using the link provided in the e-mail. Once the applicant gets the confirmation of appointment through e-mail (the appointment confirmation e-mail), She/he will be able to visit the designated GSK as per the chosen schedule.

6. At the time of the visit of GSK, the applicant is required to carry the following details

(a) a copy (hard/soft) of the appointment confirmation e-mail

(b) The details of jurisdiction as mentioned in the intimation e-mail

(c) Aadhar card and PAN Card (Original Copies)

(d) the original documents that were uploaded with the application, as communicated by the intimation e-mail

7. The biometric authentication and document verification will be done at the GSK. for all required individuals as per the GST application Form REG -01 

8. The application is required to choose an appointment for the biometric verification during the maximum permissible for the application as indicated in the intimation e-mail In such cases. ARNs will be generated once the Biometric-based Aadhaar Authentication process and document verification are completed

9. The feature of booking an appointment to visit a designated GSK is now available for the applicant of Jammu & Kashmir and west Bengal.

10. The operation days and house of GSKs will be as per the guidelines provided by the administration in your respective state