All About Finance

Wednesday, November 27, 2024

GST on Property

GST on Real Estate

When it comes to meeting tax obligations, homebuyers along with property taxes, also have to pay the applicable GST on their property purchase. Over the last few years, several changes have been made to the GST regime directed towards the real estate sector.

Potential investors and homebuyers must scrutinize the implications of GST on real estate to make an informed decision when it comes to investing in this sector.

What is GST on Property in India

GST on property in India refers to the Goods and Services Tax (GST) applied to real estate transactions. Which was introduced by the Indian government in 2017 to harmonies global Taxation frameworks. Before GST on flat purchase, multiple taxes like value-added tax (VAT) services Tax. and central excise were levied on property purchase, making the process complex and less transparent.

Impact of GST on Rent: GST on House Rent and Commercial Property Rent

Are you wondering if you must charge and collect Goods and Services Tax (GST) on the rent received by you? the treatment of GST differs between residential and commercial renting. On the other hand, if you run a business, then rent payment is one of those prominent expenses and you may want to know your eligibility for claiming Input Tax Credit (ITC) on GST paid on the rental expense. Let's understand all these in detail.

GST Taxation on Real Estate:

Particulars

Ready to Move Properties

Under construction properties (house bought under credit linked subsidy scheme)

Under construction properties (excluding the other)

Resale properties

Land purchase and sale

Works contract

Composite Supply of works

Composit supply of works to Govt Authority

Composit supply of use for the general public

Composit supply of works contract for affordable housing

Tax on Rental Inco me in the pre-GST era

During the per-GST era, the landlord had to obtain a service tax registration if their

total taxable services (including the rental income from all properties) exceed Rs 10 lakh per year. As long as the rental income (from all the properties that have been rented out) does not exceed Rs. 10 lakh per year, the landlord would not be attracted to service tax

Under the previous tax regime, commercial properties alone, that were let out would attract service tax. This applies even if a residential property is used for commercial purposes. Service tax was levied at 15% of the rent, for commercial properties. Moreover, the rental income from residential properties did not attract service tax.

GST on New Flats

The GST on new flats is set at 5% directly influencing the ultimate purchase cost. Developers are eligible to receive the input tax credit (ITC) advantage for the supplies and Labour used in constructing the apartment. However, developers don't need to pass this ITC benefit on to the byer. Therefore, the final cost of a new apartment may vary depending on whether or not the developer chooses to transfer the ITC benefit to the buyer. This can affect the overall expense and should be considered when budgeting for a new flat.

GST Calculation on Real Estate

By factoring in the cost of property and the applicable GST rate and other charges, one can easily estimate the GST on property. To break it down, GST liability is computed by adding the State GST and Central GST.

For instance,

Total GST = SGCT + CGST

Notably, this GST regime extends an abatement of 33% of the contract amount as land value.

Example of GST Calculation

This simple example emphasizes how GST is computed on under-construction property.

Suppose an under-construction property is worth Rs. 1000 and is sold to a buyer. The GST on the property in question is computed after factoring in the standard abatement on under-construction property.

So, after deducing the 33% Rs. will be considered as the land value. Subsequently. GST on the property will be computed on the remaining Rs. 770 by implementing the applicable.

Does renting out a property attract GST

According to the GST Act, renting out an immovable property would be treated as a supply of services. GST, however, will be applicable only to certain types of rent such as:

(a) Ehen a property is given out on lease, rent, easement, or licensed to occupy

(b) When any property is leased out (or let out including a commercial industrial, or residential property for business (either or wholly) this type of renting is considered a supply of services and would thus attract tax. When you rent out a residential property for residential purposes, it is exempt from GST. Any other type of lease of renting out of the immovable property for doing business would attract GST at 18%, as it would be treated as a supply of service.

GST Exemptions on Real Estate

Under schedule III of GST Act, 2017, ready-to-move-in properties do not come under the category of goods or services. It is more like an activity of purchase or sale of a property. This is why GST is not applied to ready-to-move Propeties with a legitimate Completion Certificate.

Similarly, individuals will not be required to pay GST on resale properties and purchase and sale of land.

Other than the said exemption, real estate developers are entire to claim the Input Tax Credit on construction material under the GST system. Notably, to claim such benefits, developers need to meet a few specific conditions. for example, to proceed with the claim developers need to

(a) submit invoices/receipts of construction material

(b) The developer must receive goods and services

(d) All pending dues must be cleared

(e) GST must be filed accurately

Who is required to register when the property is rented out to business?

A taxpayer earning more than the exempted threshold will have to register under GST and pay taxes So, if you have given your property to a business, then it is taxable. If you are earning income from business including rent and any other exempted income of more than Rs. 20 lakh per annum. You will have to register yourself under GST.

The threshold limit for applicability of GST for those providing only services is Rs. 20 lakhs, more than the Service Tax limit of Rs. 10 lakhs. this makes many landlords - who were covered under the Services Tax regime be at ease now up to another Ts. 10 lakhs earned.

(Please note that the threshold limit of Rs. 20 lakh excludes special category states, where the limit remains at Rs. 10 lakhs.)

Let us look at an example - Mohan resides in Delhi and has a property in Bangalore that is rented out to Goel Furniture Co. for use as a show room for the Bangalore Property. he is getting a rental income of Rs 50000 monthly or Rs. 6,00,000 per annum alone. under GST, the place of supply shall be the location of the immovable property.

Therefore, even though the person resides in Delhi, the place of supply will always be where the property is situated, which is Bangalore in this example. Here, the total income is below Rs. 20 lakh a year, thus Mohan is excluded from GST applicability

It needs to be noted that, though this property is used for residential purposes, it cannot be said that the rent that is received is that from the residential property as this property is given to a company for their use. How they use the said property is not the deciding factor.

No GST on residential property rented in personal capacity for use as a residence

In the 48th GST Council meeting, the Council clarified that no. GST is payable where a residential dwelling is rented to a registered person if the same is rented it in their personal capacity and for use as their own residence

This means that where a registered person is proprietor of a proprietorship firm, and they have rented out a residential property in their personal/own capacity (and not that of the proprietorship) and the property is for use as their own residence then no GST will be applicable

Wednesday, November 20, 2024

GST

Role and functions of the GST Council

(1) As per Article 279A (4) of the Constitution of India, the GST Council shall make recommendations to the Union and the states on-

(I) the taxes, cesses and surcharges levied by the Centre, the State and the local bodies which may be subsumed 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 sprit (commonly known as petrol), natural gas and aviation turbine fuel.

(iv) mode GST laws, principles of levy, apportionment of IGST and the principles that govern the place of supply.

(v) the threshold limit of turnover below which the goods and services may be exempted from GST.

(vi) the rate including floor rates with bands of GST;

(vii) any special rate or rates for a specified period to raise additional resources during any natural calamity or disaster.

(viii) special provision with respect to the Northeast States, J&K, Himachal Pradesh and Uttarakhand; and

(ix) any other matter relating to the GST, as the Council may decide.

(2) The GST 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 states on the other side; or

(c) between two or more states, arising out of the recommendations of the Council or implementation thereof.

Observations---

As per Art. 279A of the Constitution of India, the GST Council shall make recommendations to the Union and the State. It means that the Union Government and the State Government will have option either to accept or reject any or all the recommendation. The recommendations made by the GST Council will act merely as guidance to the Union as well as to State Government. The Parliament as well as the State Legislatures will be free to exercise their powers since the GST would be levied through separate Central and State Legislations.

Therefore, the decisions of the GST Council should have been binding upon the governments to avoid any contingencies in future.

Thanks

Customs under GST

Indian Customs gears up for GST roll-out

(1) Introduction:

The purpose of this guidance note is to bring clarity about the impact of GST, which would come into force with effect from 01.07.2017, for importers and exporters.

On the imports side there would be no impact on levy of Basic Customs duty, Education Cess, Anti-dumping duty, Safeguard duty and the lie. However, the Additional duties of Customs, which are in common parlance referred to as Countervailing Duty (CVD) and Special Additional duty of Customs (SAD), would be replaced with the levy of Intergrated Goods and Services Tax (IGST), barring a few exceptions, On the exports side, export would be treated as zero-rated supply. Under zero supply IGST paid on export goods, or the input tax credit proportionate to the goods and services consumed in goods exported under bond / LUT would be refunded.

A brief summary of the changes that would impact importers and exporters upon roll out of GST are encapsulated below.

IMPORTS UNDER GST

(II) Duties at the time of import. In the GST regime, IGST Compensation cess will be levied on imports by virtue of sub-sections (7) & (9) of Section 3 of the Customs Tariff Act, 1975. Barring a few commodities such as pan masala, certain petroleum products which attract levy of CVD, majority of imports would attract levy of IGST. Further, a few products such as aerated waters, tobacco products, motor vehicles etc.; would also attract levy of GST Compensation Cess, over and above IGST, IGST AND GST Compensation cess, wherever applicable, would be levied on cargo that would arrive on or after 1st July 2017. It may also be noted that IGST would also be levied on cargo which has arrived prior to 1st July but a bill of entry is filed on or after 1st July 2017. Similarly ex-bond bill of entry filed on or after 1st July 2017 would attract IGST and GST Compensation cess, as applicable. In the case where cargo arrival is after 1st July and an advance bill of entry was filed before 1st July along with the payment of duty, the bill of entry may be recalled and reassessed by the proper officer for levy of IGST and GST compensation Cess, as applicable

(III) Duty Calculation: IGST rate: IGST rate have been notified through notification 01/2017 - Integrated Tax (Rate), dated 28-06-2017. IGST rate on any product can be ascertained by selecting the correct SL No. as per description of goods and tariff headings in the relevant schedules of the notification. Importers are advised to familiarize themselves with IGST and GST Compensation cess rates, schedule and exemptions which are available on CBEC website. The Customs duty calculator would be made available on CBEC and ICEGATE website. There are seven rates prescribed for IGST - Nil,0.25%, 3%, 5%, 12%,18% and 28%. The actual rate applicable to an item would depend on its classification and would be specified in Schedules notified under section 5 of the IGST Act, 2017. The rates applicable to goods of Chapter 98 are as under:

(#) 9801 - Project Imports - 18%

(#) 9802 - Laboratory chemicals - 18%

(#) 9803 - Passenger baggage - Nuk /Rate

(#) 9804 - Specified Drugs and medicines for personal use -5%

(#) 9804 - Other drugs and medicines for personal use - 12%

(#) 9804 - All other dutiable goods for personal use -28%

Likewise different rates of tax have been notified for goods attracting Compensation Cess which is leviable on 55 item descriptions (of supply). These rates are mostly ad valorem. But some also attract either specific rates (e.g. coal) or mixed rates (ad valorem + specific) as for cigarettes, The coverage of the goods under GST compensation cess is available on CBEC website along with their HSN codes and applicable cess rates. The IGST Rates of Goods, Chapter wise IGST rate, GST Compensation Cess rates, IGST Exemption/Concession are available on CBEC website for trade and departmental officer as well.

VALUATIN AND METHOD OF CALCULATION: IGST is leviable on the value of imported goods and for calculating integrated tax on any imported article, the value of such imported goods would be the aggregate of -

(i) the value of imported article determined under sub- section (1) of section 14 of the Customs Act, 1962 or the tariff value fixed under sub-section (2) of the that section and

(ii) any duty of Customs chargeable on that article under section 12 of the Customs Act, 1962 and any sum chargeable on that article under any law for the time being in force as an addition to, or as duty of Customs but does not include to the tax referred in the sub-section 7 (IGST) and sub-section 9 (Compensation Ccess)

The value of the imported article for the purpose of levying GST Compensation cess shall be, assessable value plus Basic customs Duty levied under the Act, and any sum chargeable on the goods under any law for the time being in force, as an addition to, and in the same manner as, a duty of customs. These would include education cess or higher education cess as well as anti-dumping and safeguard duties. The inclusion of anti-dumping duties and safeguard duty in the value for levy of IGST and Compensation Cess is an important change. These were not hitherto included in the value for the levy of additional duty of customs (CVD) or Special additional Duty (SAD). The IGST paid shall not be added to the value for the purpose of calculating Compensation Cess.

Although BCD, Education Cesses and IGST would be applicable in majority of cases, however, for some products CVD, SAD OR IGSI Compensation cess may also be applicable. For different scenarios the duty calculation process has been illustrated in Annexure -1 of this document.

(IV) Changes in import procedures:

Importer Exporter Code (IEC): In GST regime, GSTIN would be use for credit flow of IGST paid on import of goods. Therefore. GSTIN would be the key identifier. GSTN is not applicable, UN or PAN would be accepted as IEC. It is advised that all importers need to quote GSTIN in their Bills of Entry in addition in IEC. In due course of time IEC would be replaced by PAN/ GSTIN.

Bill of Entry Regulations and Format: To capture additional details in the Bill of entry such as GSTIN, IGST rate and amount, GST Compensation Cess and amount, the electronic as well as manual formats of Bill of entry including Courier Bill of entry are being amended. For the benefit of the trade, modified Forms have been hosted on the departmental website, www.cbec.gov.in. Further, suitable notifications shall be issued to amend the relevant regulations and introduce modified Forms.

(V) Import under Export Promotion Schemes and duty payment through EXM scrips:

Under the GST regime, Customs duties will be exempted on imports made under export promotion schemes namely EPCG, DEEC (Advance License) and DFIA, IGST and COMPENSATION cess will have to be paid on such imports.

The EXIM scrips under the export incentive schemes of chapter 3 of FTP (for example MEIS and SEIS) can be utilized only for payment of Customs duties or additional duties of Customs, on items not covered by GST at the time of import. The scrips cannot be utilized for payment of integrated Tax and compensation Cess. Similarly, scrips cannot be used for payment of CGST, SGST or IGST for domestic procurements.

(VI) Baggage: Full exemption from IGST has been provided on passenger baggage. However, basic customs duty shall be leviable at the rate of 35% and education cess as applicable on the value which is in excess of the duty free allow acnes provided under the Baggage Rules, 2016

(VII) EOUs and SEZ.: EOUs/ EHTPs/STPs will be allowed to import goods without payment of basic customs duty (BCD) as well additional duties leviable under Section 3 (1) and 3(5) of the customs Tariff Act. GST would be leviable on the import of input goods or services, or both used in the manufacture by EOUs which can be taken as input tax credit (ITC). This ITC can be utilized for payment of GST taxes payable on the goods cleared in the DTA or refund of unutilized ITC can be claimed under Section 54 (3) of CGST Act. In the GST regime, clearance of goods in DTA will attract GST besides payment of amount equal to BCD exemption availed on inputs used in such finished goods. DTA clearances of goods, which are not under GST, would attract Central Excise duties as before

(VIII) Refunds of SAD paid on imports:

The need for SAD refunds arose mainly on account of the fact that traders or dealers of imported goods were unable to take credit of this duty (which was a Central Tax) while discharging their VAT or Sales tax liability (which was State levy) on subsequent sale of the goods. Unless corrected through a mechanism such as refund (of one of the taxes) this would have resulted in "double" payment of tax. with the introduction of GST on 01.07.2017, credit of "eligible duties " in respect of input held in stock and inputs contained in semi-finished or finished goods held in stock, is permissible to registered persons not liable to be registered under the existing law (for instance, VAT dealers) under transitional provision (Section 140(3) of the CGST Act). Further, eligible duties as defined in sub-section (10) include SAD. In other words, dealers / traders can take ITC of SAD paid on goods imported prior to 1st July 2017. Sub-section (5) of section 140 also allows a registered person to take credit of eligible duties in respect of inputs received on or after 1st July 2017 but the duty on which has been paid under the existing law. These provisions taken together ensure that SAD paid by dealers/ traders can be set-off against their GST liability as and when imported goods are supplied by them in the domestic market. However, certain items which are out of the GST net would be eligible for SAD refunds as earlier.

(XI) Imports and Input Tax Credit (ITC) In GST regime, input tax credit of the integrated tax (IGST) and GST Compensation Cess shall be available to the importer and later to the recipients in the supply chain, however the credit of basic customs duty (BCD) would not be available. In order to avail ITC of IGST and GST Compensation Cess, an importer has to mandatorily declare GST Registration number (GSTIN) in the Bill of Entry. Provisional IDs issued by GSTN can be declared during the transition period. However, importers are advised to complete their registration process for GSTIN as ITC of IGST would be available based on GSTIN declared in the Bill of Entry. Input tax credit shall be availed by a registered person only it all the applicable particulars as prescribed in the Invoice Rules are contained in the said document, and the relevant information, as contained in the said document, is furnished in FORM GSTR -2 by such person.

Customs EDI system would be interconnected with GSTN for validation of ITC. Furter. Bill of Entry data in non- EDI locations would be digitized and used for validation of input tax credit provided by GSTIN.

Wednesday, November 6, 2024

GST Provision In India

GST Provision in India

GST stands for Goods and Services Tax, GST law is an indirect tax which has come into force on July 1, 2017, across India. GST has replaced many indirect taxes in one law i.e. GST Law in India is comprehensive, multi-stage, destination-based tax.

Though, GST is a tax levied in India. However, there are various transactions, when it may be applicable on Non-Residents also (including NRIs, OCLs, foreign citizens). Hereunder are certain relevant terms and provisions in relation to Non-Resident:

Non-Resident Taxable Person (NRTP)

Under GST Law ' non-resident taxable person' is defined as any person who occasionally undertakes transactions involving the supply of goods or services, or both, whether as principal or agent or in any other capacity, but who has no fixed place of business or residence in India.

Registration Requirement of NRTP

Section 24 of the GST law specifies a mandatory requirement for registration for a non-resident taxable person without any threshold limit of Rs 20 lakh/10 lakh is not available to Non-Resident Taxable person. Hence, any Non-resident, who is falling in the definition of Non-Resident Taxable person, is required to obtain GST Registration irrespective of whether the business is involved in a one-time. transaction or frequent taxable transactions.

Registration Procedure for a Non-Resident Taxable person

(a) Every person, who falls within the definition of Non-Resident Taxable person, has to apply for GST registration at least 5 days prior to the commencement of business.

(b) For GST registration, NRTP shall have to provide its Tax ID or Unique number of its own country.

(c) Application for registration need not be like normal applicants. Application can be submitted in simplified form ie REG-09

(d) NRTP need not to have a PAN of India and it can use its valid passport instead.

(e) Further in the case of a high sea sale as per the GST Law provisions every person who supplies from the territorial waters of India shall have to obtain registration in the coastal state or Union territory nearest to appropriate baseline.

(f) Egg if any high -sea sale occurs near the shore of Haldia, the GST registration shall be taken in the state of West Bengal.

(g) In relation to NRTP GST registration initially a temporary reference number gets generated electronically by the common portal. The purpose of the temporary number is to advance deposit of tax in his electronic cash ledger and an acknowledgment will be issued thereafter.

GST Advance Tax payment by Non-Resident Taxable Person

(a) GST Provision provide that non-resident taxable person is required to make and advance deposit of GST. This advance payment of tax shall be of an amount equivalent to the estimated tax liability of such person for the period for which registration is being sought.

(b) At the end of GST registration period on submission of final returns, any tax, which is excess paid, shall be refunded to the NRTP.

(c) GST registration period, which is initially applied by the NRTP, can be extended by the non-resident taxable person. For the same, an application using the form GST REG -11 should be furnished electronically on GST Common portal.

Above information can be helpful on doubts of NRIs, Expatriates and other Non-Residents in relation to GST Provisions in India such as:

(a) What are the GST provisions in relation to NRIs, OCLs, Foreign companies, Foreign Citizen?

(b) Whether GST is applicable on Non-Residents also such as NRIs, OCLs, Foreign Companies?

(c) I am working with world organization based outside India. Ido services to that organization on consultant basis. Whether GST is applicable on same and what are the provisions?

OTHER TRANSACTIONS

Other than NRTP, GST provisions are also applicable on various other transactions incurred by Non-Residents, such as:

(a) Renting of Immovable Property in India eg if an NRI is holding an immovable property in India and the same is being used for commercial/ business purposes then GST provisions shall be applicable on that transaction.

(b) Consulting services provided by Non-residents to Indian residents. On such transactions under the import rules, GST may be applicable as per the transactions.

(c) Also, on fact-to-fact basis, GST provisions may be applicable on various other transactions, where NRIs, OCLs, PIOs, Expatriates, Foreign Companies, Other Non-residents are involved.

GST Registration for Foreigners

Following the implementation of the GST framework, the Government of India mandated that all foreign non-resident taxpayers obtain GST registration when supplying goods or services to residents within the country. If you are planning to supply goods or services to India, securing a GST registration is not just a compliance measure but a key step in establishing your business presence is one of the world's most vibrant markets.

Recognizing the Importance of this registration. India filings offer specialized services to facilitate the GST registration process for foreigners. With expert guidance and streamlined procedures, we simplify the complexities of tax compliance, making it easier for international businesses to thrive in India.

Contact our expert team today to easily get your GST registration. we'll guide you smoothly through each step for a worry- free process.

Non- Resident Taxable Person

A "Non-Resident Taxable Person" under the Goods and Services Tax (GST) framework in India refers to any individual or business entity that conducts transactions involving the supply of goods or services, or both, within India but does not have a fixed place of business or residence in the country. This includes entities operating in India occasionally, in any capacity such as principal, agent, or any other manner, but with their base of operations or residence outside of India. The GST law mandates that this non-resident volume or frequency of their transactions in India.

GST Registration for Foreigners

GST Registration in India is a compulsory process for foreign individuals or entities that supply goods or services in India without a permanent establishment or residence in the country. This registration category is specifically designed for those who may not regularly operate in India but engage in economic activities or transactions under the GST regime.

The process involves obtaining a unique GSTIN (Goods and services Tax identification Number), Which allows these non-resident businesses to comply with GST laws, including filling GST Tax returns and paying applicable taxes on their transactions within India.

GST Registration Requirements for Non-resident Taxable Persons

For nonresident taxable persons engaging in taxable transactions within India, the GST registration requirements are as follows:

(a) Documentation for Business entities: Business entries based outside India must include their tax identification number (TIN) or a unique identification number recognized by their home country's government in their GST registration application. Alternatively, if available, they can provide their Indian Permanent Account Number (PAN)

(b) Mandatory Registration: Regardless of transaction volume, registration under GST is compulsory for non-resident taxable parsons. There's no minimum threshold for registration.

(c) Ineligibility for Composition Levy: Non-resident taxable persons are not eligible to opt for the composition levy scheme under GSt, which allows for a simplified tax payment process and compliance for small taxpayers.

(d) Advance Registration Requirement: Registration for GST must be completed at least five days before beginning business operations in India.

(e) Passport Required for Registration: A valid passport is required for GST registration and serves as the primary documentary evidence.

Validity of NRI GST Registration

The NRI GST registration is valid for the period specified in the App application or ninety days from the effective date of registration, whichever is earlier.

Procedure for GST Registration for NRIs

The GST registration has two main phases: Provisional Registration and final Registration. each phase entails specific steps to ensure compliance with the GST regulations in India

Provisional GST registration for NRI

Provisional registration under GST for non-resident taxable persons is a temporary GST registration granted before obtaining the final GST registration. This provisional status allows non-resident individuals or business entities to start their business activities in India in compliance with the GST laws without having to wait for the completion of the full registration process.

Final GST registration

Final registration under GST for non-resident taxable persons solidifies their tax obligations and compliance status within India, transitioning from a provisional to a permanent GST registration. This process ensures that non-residents engaging in taxable transactions within India are fully integrated into the GST system.

Application for Final Registration: To convert the provisional registration into a final one, the NRI must submit an application electronically using FORM GST REG-26. This step is similar to the procedure followed by resident taxpayers.

Information Furnishing: Required information must be furnished within three months of applying for final registration. This is critical for validating the provisional registration.

Discrepancies and Show-Cause Notice: In cases where the information provided is found to be incorrect or incomplete, a show-cause notice using FORM GST REG-27 may be issued. The applicant will then be given a reasonable opportunity to be neared.

Conversely, if the applicant's response satisfactorily addresses the concerns, the show-cause notice can be nullified with an order issued via FORM GST REG-20, leading to final registration.

Authorized Signatory: All applications made by NRIs must be signed by an authorized signatory who is a resident of India and possesses a valid PAN. This individual acts on behalf of the NRI for GST compliance purposes.

India Filings experts can guide you through obtaining GST registration for NRIs.

Suppose the NRI wishes to extend the registration beyond the initially approved period (up to ninety days or the period specified in the application). In that case, they must file an extension application using Form GST REG-11 before the current registration expires.

(a) This extension also requires an additional advance tax deposit for the extended period.

(b) This detailed procedure ensures that NRIs are well-informed and prepared to meet all regulatory requirements for conducting taxable transactions in India under the GST regime.

Input Tax Credit

A non-resident taxable person is not eligible to claim input tax credit for any goods or services, except for those directly imported foods. However, the taxes paid by a non-resident taxable person can be utilized as a credit by the respective recipients.

GST Returns Filings for Foreigners

A non-resident taxable person must electronically submit a GST return using FORM GSTR-5. This return, which includes outward and inward supply details, must be filed. Any due tax, interest, penalty, fees, or other charges under the Act of regulations must be paid withing thirteen days following the end of a calendar month or seven days after the registration validity period expires, whichever comes first.

Refund of Advance Tax

The advance tax paid by a non-resident taxable person will be eligible for a refund only after submitting all necessary returns for the duration their registration certificate was valid. The application for a refund can be made in section 13 of FORM GSTR -5.

Sunday, November 3, 2024

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

(a) Supplier of services other than Supplier of Restaurant service

(b) Neither a casual Taxable person nor a Non-Resident Taxable person.

(d) Persons supplying Goods through e-commerce operator

(e) Manufacturers of certain notified goods

Composition Rates

(a) For manufacturers, SGST 1% + CGST 1%

(b) For hotels other than Liquor SGST 2.5% + CGST 2.5%

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 GSTR -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

(a) With respect to migrated dealers, the Goods in stock should not have been purchased on Inter-State basis/imports/stock Transfer.

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

(d) In the bill of supply, such dealer should mention "Composition Taxable person not eligible to collect tax on supplies"

(e) 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.

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 avoids 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 being levied by Central Government is not available as set- off for payment of taxes levied by State Government, 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 state.

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 together under a single levy.

GST comprises of the following levies:

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

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

(c) 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 available as set- off for payment of tax at every subsequent stage.

Conditions for claiming ITC

(I) Taxpayer should possess tax invoice or debit note or any other tax paying documents issued by supplier registered under the GST Act.

(ii) He should have received the goods or services or both.

(iii) Supplier should have reported the supply in the returns and should have paid tax.

ITC not allowed in the following circumstances

(i) ITC not allowed for a composition dealer.

(ii) ITC not allowed for goods or services received by a nonresident taxable person except on goods imported by him.

(iii) ITC not allowed for goods or services used for personal consumption

(iv) ITC not allowed for Goods lost/stolen/destroyed/returned or disposed of by way of gift/free samples.

Time limit for claiming ITC

ITC for a supply received in a financial year has to be claimed any time before the filing of returns for the month of September (of the following financial year) or the relevant annual return whichever is earlier.

TIME OF SUPPLY OF GOODS

Under GST, the point of taxation, i.e. 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: -

(a) The date of issue of invoice by the supplier (or the last date on which he is required to issue the invoice)

(b) 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: -

(i) The date of receipt of goods or (ii) 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: -

(a) The date of issue 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

JOB WORK

Job-work means 'any treatment or process undertaken by person on goods belonging to another registered person. The one who does the said job would be termed as 'job worker'. The ownership of the goods does not transfer to the job-worker, but it rests with the principal. The job worker is required to carry out the process specified by the principal on the goods.

Registration of a job worker

Job work is a service. Job worker is required to obtain registration if his aggregate turnover exceeds Rs. 20 lakhs.

Procedural aspects for job work

(a) A registered person under intimation can send/receive inputs or capital goods without payment of tax, provided the input or capital goods are brought back within one year (for input) and three years (for capital goods) of their being sent out.

(b) The principal is allowed to do so. The tax paid on input or capital goods (ITC) can be claimed by the principal provided the inputs or capital goods are received back within one year and three years respectively.

(Provided the principal had declared the unregistered job worker's premises as his additional place of business or if the job worker is a registered person or if supply of such goods are notified by the commissioner.)

If the inputs or capital goods are not received back or are not supplied from the place of business of the job worker within the prescribed time limit, it would be treated as supply and the principal would be liable to pay tax.

Saturday, November 2, 2024

Income Tax

Last Income Tax Slab and

Rates-FY2024-25/AY 2025-26

The financial minister Nirmala Sitharaman has made Chages in the income tax slabs under the new tax regime in Budget 2024. The new income tax slabs under the new tax regime have retrospectively come into effect from 1st April 2024 for the current financial year 2014-25. The changes in income tax slabs of new tax regime were announced in July 2024 as government presented its full budget after the Lok Sabha elections 2024. Remember there were no. changes announced by the government in the interim budget announced in February 2024

Not all the tax slabs have been changed in the new tax regime. Only two tax slabs under the tax regime. Only two tax slabs under the new tax regime have been changed in the Budget 2024. The changes in the income tax slabs raise the upper limit in two slabs by Rs. 1 Lakh.

The current Rs. 3 Lakh - Rs. 6 Lakh slab has become Rs 3 lakh - Rs.7 lakh; and the Rs.6 lakh - Rs. 9 lakh slabs have become Rs. 7 -Rs 10 lakhs. This means people earning Rs 7 lakh would be taxed at 5% instead of 10 earlier; and those earning Rs. 10 lakhs would be taxed at 10% instead of 15% earlier.

This income tax slabs under the new tax regime are as follows: Rs. 0 - Rs. 3,00,000 - 0%, Rs 3,00,001 and Rs.7,00,000 - 5%, Rs 7,00,001and Rs 10,00,000-10%, Rs 10,00,001 and Rs. 12,00,000 and Rs. 15,00,000-20% and 15,00,001 and above - 30%

Apart from making Chages in the two-income tax slabs in the new tax regime, the finance minister has announced Chages in the standard deduction limit and employer's contribution to employee's NPS account available in the new tax regime. Even standard deduction available for family pensioners have been changed under the new tax regime. No. other changes, such as tax rebate available under the Section 87A, surcharge rate applicable for incomes exceeding Rs.50 lakh, have been made in the new tax regime.

The new tax regime continues to offer tax rebate of up to Rs. 25,000 for taxable incomes not exceeding Rs. 7 lakhs. Further, no Chage in surcharge for those earning more than Rs. 2 Crore.

The Chages have been made to make the new tax regime attractive. However, no changes have been made in the old tax regime. The income tax slab, rates and other income tax rules have not been changed under the old tax regime.

The old rules will continue to apply under the old tax regime. This means that higher deduction available under the new tax regime for standard deduction and employer's contribution will not be available in the old tax regime. Further, tax, rebate or Rs. 12,500 will continue to be available under the old tax regime if the taxable incomes do no exceed Rs. 5 lakhs. The main difference between the old and new tax regime is the availability of usual deductions and tax exemptions. The new tax regime does not allow deduction of common deductions such as Section 80C deduction up to Rs. 1.5 lakh for specified investments and expenditures, Section 80D deduction up to Rs. 25,000/Rs 50,000 for health insurance premium paid and Section 80TTA deduction of up to Rs 10,000 for interest earned from savings accounts of bank and post office, among others.

The income tax slabs applicable under the old tax regime depends on the age of individual.

The old tax regime offered multiple basic income exemption limits depending on the ae of the taxpayer. For individuals below 60 years of age, the basic income exemption limit is Rs 2.5 lakhs. For senior citizens aged 60 years and above but below 80 years, the basic exemption limit is Rs. 3 lakhs. For super senior citizens aged 80 years and above, the basic exemption limit is Rs. 5 lakhs.

Currently, the new tax regime is the default tax regime. An individual who wants to opt for the old tax regime now has to specifically choose it while filing income tax return. When new tax regime was introduced in FY 2020-21, it was an optional tax regime, they knew tax regime has lower tax rates as compared with the old tax regime. if individuals opt for the new tax regime, they can now claim only two deductions - Standard deduction of Rs, 50,000 from salary/pension income and Section 80CCD (2) for empolyer'scontribution to the employee's account.

Currently, a taxpayer having business income waiting to continue with the old tax regime in a financial year, will specifically have to opt for it. Once opted, they would have once in a lifetime option to switch to new tax regime. Once new tax regime is opted, they cannot opt for old tax regime again.

Income tax slabs for FY 2024 - 25 (AY 2025-26), FY 2023-24(AY 2024-25) under the new tax regime

The income tax slabs in the new tax regime have been tweaked for the current FY 2024-25(AY 2025-26). The changes in the income tax slabs raised the upper limit in two labs by Rs. 1 lakh. The Rs. 3 lakhs - Rs. 6 lakhs slab become Rs. 3 lakh - Rs. 7 lakhs; and the Rs. 6 lakh- Rs. 9 lakh slabs have become Rs. 7 lakh- Rs 10 lakh.

The changes in the new tax regime have been made to make it more attractive vis-a-vis old tax regime. In February 2023, the changes were announced in the new tax regime to make it more attractive for the individual taxpayers. Some of these changes were - introduction of standard deduction, rising basic exemption limit, hike in tax rebate under section 87A for taxable income up to Rs 7 lakh and so on.

Here are the new income tax slabs under new tax regime.

Income tax slabs under new tax regime for FY 2024-25

Income tax slabs (Rs) Income Tax rate (%)

From 0 to 3,00,000 0

From 3,00,001 to 7,00,000 5

From 7,00,001 to 10,00,000 10

From 10,00,001 to 12,00,000 15

From 12,00,001 to 15,00,000 20

From 15,00,001 and above 30

Changes made in the new tax regime in Budget 2024

Apart from tweaking income tax slabs, some changes were also made in the new tax regime. Changes announced in the new tax regime are as follows:

(a) new tax regime is the default tax regime. An individual has an option to opt for the old tax regime in any financial year, provided there is no business income

(b) Basic exemption limit of Rs 3 lakh for all individual taxpayers irrespective of their age

(d) Highest surcharge rate for those earning above Rs 2 crore is 25%

Income tax slabs under new tax regime for FY 2023-24(AY 2024-25)

For those filing income tax return for previous financial year 2023-24, the income tax slabs under the new tax regime are different. Following are the income tax slabs under new tax regime for FY 2023-24 (AY 2024-25) that will be used for ITR filing:

Income tax slabs (Rs) Income tax rate (%)

From 0 to 3,00,000 0

From 3,00,001 to 6,00,000 5

From 6,00,001 to 9,00,000 10

From 9,00,001 to 12,00,000 15

From 12,00,001 to 15,00,000 20

From 15,00,001 and above 30

Income tax slab rates for FY 2024-25 (AY 2025-26), FY 2023-24(AY2024-25), FY 2022-23(AY 2023-24), FY 2021-22 (AY 2022-23) under old tax regime

There are no Chages in the income tax slabs of the old tax regime in the July Budge 2024. Remember, income tax slabs under the new tax regime are tweaked. It will mean that anyone choosing the old tax regime for the current financial year 2024-25 (1st April 2024 and 31 March 2025) will calculate the income tax payable at the same rates as in FY 2023-24 (1st April 2023 and 31st March 2024).

Under the old tax regime, income tax slabs applicable to an individual depend on the age of an individual in a particular financial year. Hence, the basic exemption limit will also be different for individuals.

For an individual below 60 years of age, the basic exemption limit is or Rs 2.5 lakh. For senior citizens (aged 60 years and above but below 80 years) the basic income exemption limit is of Rs. 3 lakhs. For super senior citizens (aged 80 years and above), the basic income exemption limit is Rs. 5 lakhs. For non-resident individuals, the basic income exemption limit is of Rs. 2.5 lakh irrespective of age.

Given below are the income tax rates for FY 2024-25(AY2025-26), FY 2023-24 (AY 2024-25), FY 2022-23(AY 2023-24) and FY 2021-22 (AY 2022-23) under the old tax regime.

Income tax slabs for individuals under old tax regime

Income tax slabs (Rs) Income tax rate (%)

From 0 to 2,50,000 0

From 2,50,001 to 5,00,000 5

From 5,00,001 to 10,00,000 20

From 10,00,001 and above 30

Income tax slabs for senior citizens under old tax regime

Income tax slabs (Rs) Income tax rates (%)

From o to 5,00,000 0

From 5,00,001 to 10,00,000 20

From 10,00,001 to above 30

Comparison of income tax slabs under the old and new tax regime for FY 2024-25 (AY 2025-26)

Taxable income Old Tax Regime New Tax Regime

0 to Rs 2,50,000 0% 0%

Rs 2,50,001 to 3,00,000 5% 0%

Rs 3,00,001 to 5,00,000 5% 5%

Rs 5,00,001 to 7,00,000 20% 5%

Rs 7,00,001 to 10,00,000 20% 10%

Rs 10,00,001 to 12,00,000 30% 15%

Rs 12,00,001 to 15,00,000 30% 20%

Rs 15,00,001 and above 30% 30%

How to calculate income tax payable under new tax regime

For those salaried individuals who are continuing with the new tax regime for the current financial year, 2024-25