Composition Levy

 Composition Levy under GST

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.

(c) An Inter State supplier of Goods

(d) Persons supplying Goods through e-commerce operator

(e) Manufacturers of certain notified goods

Composition Rate

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

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

(c) For others 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 GST-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 dealer, 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.

(c) Composition dealers have to issue Bill of supply instead of Invoice

(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 period 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: - 

(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: -

(a) The date of receipt of goods, or 

(b) The date of payment

(c) 30 days from the date of issue of invoice by the supplier (If it is not possible to determine under (i,ii  & 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; or

(b) 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: -

(a) The date of issue of invoice or

(b) The date of receipt of payment

The time of supply of services where tax is to be paid on reverse charge shall be the earlies 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.

GST REGISTRATION

Registration is the most fundamental requirement for the identification of taxpayers to ensure compliance and to obtain a unique registration number for the purpose of collecting tax on behalf of the Government and to avail ITC accrued on the inward supplies.

enefits of registration

Registration will confer the following advantages to a taxpayer:

1. He is legally recognized as supplier of goods or services.

2. He is legally authorized to collect taxes from his customers and pass on the credit of the taxes paid on the goods or services supplied to the purchasers/recipients.

3. He can claim Input Tax Credit of taxes paid and can utilize the same for payment of taxes due on supply of goods or services.

4. Seamless flow of Input Tax Credit from suppliers to recipients at the national level.

Threshold limit for registration

Registration is mandatory when Aggregate Turnover in a Financial Year exceeds Rs. 20 Lakhs (Aggregate Turnover = Value of Taxable of Supplies+Exempt SupplyScience state Supplies Exports of both Goods and services of persons having the same PAN calculated on all India basis less tax under IGST, CGST, SGST and Cess), except for Special Category States, where the threshold limit for aggregate turnover is Rs. 10 lakhs.

Exemption from registration

Irrespective of the turnover, the following dealers are exempted from Registration: -

1. Supply of exclusively exempted goods

2. Agriculturist for the purpose of Agriculture

Voluntary Registration

A person not liable to be registered under the Act, may get himself registered voluntarily to avail ITC and pass on the ITC to the recipient.

Compulsory Registration 

The following class of persons shall compulsorily register: -

(a) Persons required to deduct tax as TDS (Government Agencies, Department etc.)

(b) Persons required to collect tax as TCS (electronic Commerce operator)

(c) Persons making inter-state Taxable supply:

(d) Casual Taxable person:

(e) Persons who are required to pay tax as e-commerce operators:

(f) Persons who are required to pay tax under reverse charge:

(g) Non-resident taxable person:

Casual taxable person and a non-resident taxable person

A Casual taxable person is one who has a registered business in some State in India but wants to effect supplies in some other state in which he is not having any fixed place of business. Such person needs to register in the State from where he seeks to supply as a Casual taxable person.

A non-Resident taxable person is one who is a foreigner and occasionally want to effect taxable supplies from any State in India, and for that he needs GST registration. GST law prescribes special procedure for registration, as also for extension of the operation period of such Casual or Non-Resident taxable persons.

They have to apply for registration at least five days in advance before making any supply. 

also, registration is granted to them, or period of operation is extended only after they make advance deposit of the estimated tax liability.

Registration process

(a) Application to be filed online within 30 days of becoming liable.

(b) Casual Dealers and non-resident taxable person shall apply at least 5 days prior to the date of commencement of business (Period of Validation is as specified in the application or 90 days from the effective date of registration whichever is earlier and an advance deposit of tax, an amount equivalent to the estimated tax liability of such person).

(c) All the Core Fields (name of business, principal place of business and stakeholders' details, etc.) should be filled up.

(d) Scanned documents to be attached.

(e) Digital Signature or e-Sign should be done.

(f) Application to be processed within 3 common working days.

(g) If application is successful the Registration Certificate will be sent in the PDF format to the e-mail.

(h) All queries to be raised and communicated by the proper officer within 3 common working days-sent in PDF format to the e-mail of the applicant.

(i) Application should reply to query within 7 days- failure will entail automatic rejection by the system.

(j) On receipt of reply, registration should be granted / rejected within 7 days.

(k) Rejection of Application under CGST will be a deemed rejection under SGST and vice-versa.

(l) Deemed Approval, if no query.

Amendment in Registration:

Except for the changes in some core Information in the registration application, a taxable person shall be able to make amendments without requiring any specific approval from the tax authority. In case the change is for legal name of the business or additional place of business, the taxable person will apply for amendment within 15 days. For other changes like the name of day-to-day functionaries, e-mail IDs, mobile numbers etc. no approval of the proper Officer is required, and the amendment can be affected by the taxable person on his own on the common portal.

Cancellation of registration

Cancellation of registration can be done in the following circumstances

(a) Transfer of business or discontinuation of business or merger.

(b) Death of the proprietor.

(c) Change in the constitution of business. (Partnership Firm may be changed to sole Proprietorship due to death of one of the two partners, leading to change in PAN)

(d) Person no longer liable to be registered (Except when he is voluntarily registered)

(e) Registered taxable person has contravened provisions of the Act or Rules.

(f) A composition supplier has not furnished returns for 3 consecutive tax periods / any other taxable person has not furnished returns for a continuous period of 6 months.

(g) Non-commencement of business within 6 months form date of registration by a person who has registered voluntarily.

(h) Where registration has been obtained by means of fraud, willful misstatement or suppression of facts, the registration may be cancelled with retrospective effect.

Revocation of cancellation of registration:

Application for revocation should be made within 30 days from the date of service of cancellation order. The proper officer can revoke cancellation / reject application.

Direct Taxx Law

 ROLE OF COMPANY SECREATARIES IN DIRECT TAX LAW

The company Secretaries as experienced tax professionals can assist in resolving various challenges such as keeping abreast with tax regulations, efficiently manage compliances, address uncertain tax positions, among many others. The Company Secretaries can provide with an insight into how to best work to meet the business needs.

THE FOLLOWING ARE THE KEY IMPORTANT AREAS UNDER THE DIRECT TAX REGIME WHERE A COMPANY SECRETARIES CAN PLAY A VITAL ROLE.

TAX COMPLIANCE:      As the complexities of businesses increase, the amount of time spent by professionals in cracking up the law codes increase. However, tax and regulatory systems of even the most developed countries cannot keep pace with the developments across each industry as businesses emerge day by day. These also bring out the requirements for new compliances and the challenges of meeting them every single day. More detailed Income Tax Return forms including disclosures on tax residency certificates and details of foreign assets, and higher penalties for non-disclosures require businesses to gear up for efficient tax compliance.

FOLLOWING ARE THE AREAS OR AVENUES WHERE COMPANY SSECRETARIES CNA ASSIST CLIENT:

(@) Assist in obtaining Permanent Account Number "PAN No" Tax Deduction/Collection Account Number "TAN No."

@ Filling of Income tax Returns

@ Filling of TDS/TCS Returns

@ Tax payroll assistance

@ Income tax clearance certificate

@ Tax Residency Certificate

@ Establishing tax efficient Indian business presence for an MNC.

@ Planning a heavy capital outlay in the existing business

@ Addressing concerns about cash flow and examining tax inefficiencies

@ Ensuring that the tax function is aligned with the business plan

@ Assessing the impact of any tax and regulatory changes/amendments

REPRESENTATION SERVICES:

The Appellate hierarchy in India consists of assessing officer, first appellate authority Appellate Tribunal, High Cout and Supreme Court. The Company Secretaries can provide the following range of services comprise of:

1. Assisting in filling appeals before the appellate authorities and complying with appellate requirements and procedure.

2. Determining the appeal strategy and approach and drafting of legal submissions.

3.In-house service of the expert counsel with experience in representation before appellate authorities

4. Advising on the course of action to be adopted before revenue authorities to mitigate the risk of penal consequences

5. Reviewing pending litigation and other uncertain tax positions, to comment on adequacy of defense, probability of success and prevention of recurrence

6. Assisting the external legal counsel in preparing or representing for appeals. writ petition and special leave petition before the Supreme Court and court subordinate to it (High

 Court)

TO PROVIDE ADVANCED KNOWLEDGE ON PRACTICAL APPLICATION OF DIRECT TAX PRACTICE.

A. Computation of Income under the head of Capital Gains: Chargeability, Capital Gains, Capital Assets & Transfer, Types of Capital Gains, Mode of Computation of Capital Gains, Exemptions and Deduction, Special Provision - Slump sale, Compulsory Acquisition, Fair market value, Reference to valuation officer, Practical case studies.

B. An overview of Income Tax Act, 1961: Background, Important definitions, Residential status, Basis of charge, Scope of Total Income tax rates in accordance with the applicable Finance Act for the relevant assessment year.

C. Computation of Income under the head of Salary: Salary- coverage, Employer and Employee Relationship, Allowances, Monetary and Non-Monetary Perquisites - Valuation and Taxability, profits in lieu of Salary, Deductions against Salary, Incomes exempt from Tax and not includible in "Salary" Deduction to be made from salary in respect Fund the provisions of the Provident Fund and Miscellaneous Provisions of Act 1952 and Tax treatment of employers'  contribution to provident Fund, tax Deduction at source on Salary and Compliances, Practical case studies.

D. Computation of Income from Sources: Taxation of Dividend u/s 2(22)(a) to (e), provisions relating to Gifts, Deductions, other Miscellaneous Provisions, Practical Case Studies.

E. Computation of Income under the head of House Property: Chargeability owner of house property, Determination of Annual Value, Deduction from Net Annual Value, Treatment of Unrealized Rent, Arrears of Rent, Exemptions, Computation of income from a let-out House Property, Self-Occupied Property, practical Case Studies.

F. Computation of Total Income and Tax Liability

GST

 Filling of information by manufacturers of Pan Masala and Tobacco taxpayers

Please refer to the notification NOTIFICATION no 04/2024 - Central Tax dated 05-01-2024 to seek information from taxpayers dealing in the goods mentioned therein. two forms have been notified vide this notification namely GST SRM-I and GST SRM-II. The former pertains to the registration and disposal of machines while the latter asks for information on inputs and output during a month. Form GST SRM-I meant for registration of machines has already been made available on the portal w.e.f. 15-05-2024. Concerned taxpayers are using the same of the registration of machines and other information asked therein.

Now, the second form namely, Form GST SRM-II is also available on the portal. Taxpayer dealing int eh manufacture of Pan Masala and Tobacco products can now report the details of input and outputs procured and consumed for the relevant month.

GST Council and its functions

What is GST council

1. In accordance with newly inserted Art. 279A of the Constitution of India, the president shall, within 60 days from the date of commencement of the Constitution (101st Amendment) Act, 2016, by order, constitute a Council to be called the Goods and Services Tax Council (GST Council, in short).

2. Exercising these powers, the President has constituted the GST Council on 15 September 2016 withe the following members

(a) The Union Finance Minister ....... chairperson

(b) The Union Minister of State in charge of Revenue or Finance.... Member

(c) The Minister in charge of Finance or Taxation or any other Minister nominated by each state Government .... Members

 

3. While discharging the functions conferred by this Article, the GST Council shall be guided by the need for a harmonized structure of goods and services tax and for the development of a harmonized national market for goods and services.

Manner of decision by the GST Council

1. The GST Council shall determine the procedure in the performance of its functions.

2. One-half of the total number of members of the GST Council shall constitute the quorum at its meetings.

3. Every decision of the GST Council shall be taken at a meeting, by a majority of not less than three-fourths of the weighted votes of the members present and voting, in accordance with the following principles, namely.

(a) the vote of the Central Government shall have a weightage of one third of the total votes cast, and

(b) the votes of all the State Governments taken together shall have a weightage of two-thirds of the total votes cast, in that meeting.

Supply - meaning, time and valuation

1. Levy of GST is based upon the term "supply". Taxability under the GST depends upon supply of goods and services.

2. Ther terms sale, purchase, service provider and service receiver are irrelevant for the purposes of GST Act.

3. The term "supply" has not been defined in the Constitution of India. However, it has been defined under the Model GST Act.

4. Therefore, the first step is to know whether a person, who is engaged in the business has made any supply of goods and/or services; and whether these supplies are taxable under the GST.

Time of supply of services subject to reverse charge (Section 13(5)

Time of supply shall be earliest of the following dates:

(a) The date of debit in the books of accounts.

(b) The date on which the payment is made (earliest of credit date in the books of accounts or debit date in the bank account).

(c) The date of receipt of invoice; or 

(d) the date of debit in the books of accounts.

Time of supply of services which ceases (Section 13 (6)

In a case where the supply of services ceases under a contract before the completion of the supply, such services shall be deemed to have been provided at the time when the supply ceases.

Meaning of the term "IGST" and its need

(a) IGST stands for' Integrated Goods and Services Tax.

(b) The scope of IGST Model is that Centre would levy IGST, which would be almost equal to (CGST + SGST) in the State of supply, on all inter-state transactions of taxable goods and services with appropriate provisions for consignment or stock transfer of goods and services.

(c) Power to impose GST on supply of the goods and services in the course of inter-state trade or commerce vests with the Central Government. Therefore, the

Model Integrated Goods and Services Tax (IGST) Law has also been released to determine situs of such supply.

(d) Inter-state supplier shall pay IGST on value addition after adjusting available credit of IGST, CGST, and SGST on his inward supplies.

(e) The exporting state shall transfer to the Centre the credit of SGST used in payment of IGST. The Importing dealer shall claim credit of IGST while discharging his output tax liability in his own state. The Centre shall transfer to the importing state the credit of IGST used in payment of SGST.

(f) The relevant information shall also be submitted to the central agency which shall act as a clearing house, verify the claims and inform the respective government to transfer the funds.

(g) Needs for IGST Mechanism: In respect of B2B transactions, the taxes paid are taken as credit by the recipient. For B2B transactions, the location of recipient takes care of situations as further credit is to be taken by recipient since the recipient usually further supplies to another customer. The supply is consumed only when a B2B transactions further converted into a B2C transaction.

Tax on import of services

Import of services into India is taxable by the central government through reverse charge method. In relation to any taxable service provided by any person which is located in a non-taxable territory and received by any person located in the taxable territory (India, then J &K), service tax shall be payable by the recipient of such service.

Supply - meaning, time and valuation

 Supply - meaning, time and valuation

Introduction:

(1) Levy of GST is based upon the term "supply". Taxability under the GST depends upon supply of goods and services.

(2) The terms sale, purchase, service provider and service receiver are irrelevant for the purposes of GST Act.

(3) The term "supply" has not been defined in the Constitution of India. However, it has been defined under the Model GST Act.

(4) Therefore, the first step is to know whether a person, who is engaged in the business has made any supply of goods and/or services; and whether these supplies are taxable under GST.

Meaning of supply:

Meaning of the term "supply" (Section 3)

(I) Supply includes all forms of supply (goods and/or services) and includes agreeing to supply when they are

(a) for a consideration; and

(b) in the course or furtherance of business.

(ii) The term "supply" includes-

(a) Sale. 

(b) Transfer.

(c) Barter:

(d) Exchange.

(e) License.

(f) Rental.

(g) Transaction between principal and agent.

(h) Supply of any branded service by an aggregator, For example: Ola, Uber etc.

(iii) " Supply" includes importation of service

The term 'supply' also includes importation of a service, whether or not for a consideration and whether or not in the course or furtherance of business.

This implies that import of services even for personal consumption would qualify as 'supply' and therefore, such importer of service would be liable to tax, subject to the threshold limit.

Imposition of this tax is of the nature of basic customs duty, which is levied on importation of goods, irrespective of nature of use of these goods, whether for personal consumption or commercial use. now importation of service for personal purposes would be subject to GST.

Such services would be liable to tax under reverse charge mechanism.

For example, a father pays fees for on - line coaching obtained from a teacher located in USA for coaching of JMAT course for his son. Even if receipt of the service is not for furtherance of business, he would be liable to pay GST under reverse charge mechanism if the amount exceeds the threshold limit.

(iv) The term "supply" also includes matters listed in Schedule II

Schedule II of the Model Law comprise various circumstances and situations when the activity shall be considered as supply of as service. These matters, in brief, are under.

(v) The Central/State Government may, upon recommendation of the GST Council, by notification, specify the transactions that to be treated as 

(a) a supply of goods, and not as a supply of services; or

(b) a supply of services, and not as a supply of goods; or

(c) neither a supply of goods nor a supply of services.

Whether the term "supply" includes stock transfer within the entity.

Yes. Transfer of goods/services by one unit to another of the same entity is covered within the term "supply". Generally, supply includes all transfers from one GSTIN to another.

Whether consideration is necessary for levying GST

No. Certain supplies which are even without consideration have also been included in the definition of "Supply". These are listed in Schedule I ---

(a) Permanent transfer of business assets.

For example, transfer of mobile/computer by an employer to his employee after its use for a certain period.

(b) Disposal of Business assets.

For example, sale of vehicle by a garment trader. This clause would also include those cases where business asset is transferred by the partnership firm to its retiring partner in settlement of this dues.

(c) Temporary application of business assets to private use.

For example, vehicle, capitalized in the books of a proprietorship firm, is used by the proprietor for personal use.

Another Example: The cable owner uses his taxis during the marriage of his son. As per this clause, he is liable to pay GST on the said use as if the same has been hired.

(d) Services put to a personal or non-business use.

For example, preparing and filling of income tax return of a friend of relative by one of the partners of CA firm.

(e) Assets retained after deregistration.

For example, at the time deregistration, it is assumed that business activities are discontinued, and assets are sold. Where assets are not sold, but retained by the entity at the time deregistration, it would be deemed as supply.

(f) Supply of goods and/or services by one taxable person to another taxable person or non-taxable person in the course or furtherance of business,

For example, free supplies, gifts, diaries and calendar distributed to clients at the time of festival

Role and functions of the GST Council

 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.