GST Updations

1. What is the meaning of GST? 

The introduction of the GST bill is one of the biggest tax reforms in India. The GST (Goods and services tax) will simplify the current system of taxation. As the name suggests the GST is a tax levied when a consumer buys a good or service, it is a consumer based tax. GST will enable broadening of the tax base, which will further result in reduction in effective rate of tax. 

2. Which other taxes will be replaced by GST?

Central Excise duty(CENVAT)Additional duties of exciseExcise duty levied under Medicinal & Toiletries Preparation ActAdditional duties of Customs (CVD & SAD)Service TaxSurcharges & CessState VAT / Sales TaxCentral Sales TaxPurchase TaxEntertainment Tax (not levied by the local bodies)Luxury TaxEntry Tax (All forms)Taxes on lottery, betting & gamblingSurcharges & Cess

3. All goods or services likely to be covered under GST except :

1. Alcohol for human consumption - State Excise plus VAT2. Electricity - Electricity Duty3. Real Estate - Stamp Duty plus Property Taxes4. Petroleum Products (to be brought under GST from date to be notified onRecommendation of GST Council)

4. Tobacco Products under GST with Central Excise duty.

5. Following are the stages of the GST implementation process  

Step1: Meet our consultant to discuss about your company and we will propose the customized GST Impact Analysis Approach.Step2: We will conduct an interview with the concerned person of your organisation and complete Business Review Questionnaires.Step3: Our consultant analyses and reviews the Business Review Questionnaires (BRQ).Step4: Our consultant prepares GST Impact Advisory Report on GST impact assessment, implications and actions required.Step5: Organize GST training for management and staff.Step6: GST registration and post implementation support.

6. E-Registration under GST

The E- Government has already initiated the process of collecting data of the existing registered dealers Under the VAT, Excise and Service tax laws so as to auto register the Assessee under the GST law Without any further compliance. The key features of the registration process for the new dealers under GST would be as follows:• A simple PAN based registration procedure • A GST identification number a 15 digit common identification number (GSTIN) will be allotted to the applicant.• Deemed registration in case no query is raised within 3 days• Verification may be initiated post registration by the department in certain cases.

7. Persons requiring registration

Following are the persons required to take registration under this act.

Nature of supply	Registration Required
1. Taxable inter-state supply	Yes
2. Exempted inter-state supply	No
3. Intra-state supply(upto Rs 9 Lacs)	No
4. Intra-state supply(exceeding Rs 9 Lacs)	Yes
5. Casual taxable person	Yes
6. Non-resident persons	Yes
7. Input service distributor	Yes
8. Agent or the like	Yes
9. E-commerce operator	Yes
10. Supply through E-commerce operator-Branded or otherwise	Yes
11. Intra-state supply upto Rs 9 Lacs As an agent	Yes
12. Aggregator-supplying services	Yes
13. Persons required to deduct TDS providing intra-state supply upto Rs 9 Lacs.	Yes
14. Reverse charge-for personal use beyond prescribed limit	Yes
15. Reverse charge-other than personal use	Yes

8. Other Aspects of GST• Option available for separate registration for each business vertical• Option of voluntary registration is available.• Every person applying for registration should have PAN number.• Non residents may be granted registration on any other documents as prescribed in absence of PAN number.

GST AND APPLICABILITY

One must register for GST if the aggregate turnover of supply of goods and services is 9 lakhs. The threshold for payment of tax is 10 lakhs. However, in certain cases persons shall be taxable irrespective of the threshold or value of aggregate turnover;

• Persons effecting an inter-state supply

• Persons requiring to pay tax under reverse tax mechanism

• Casual taxable persons i.e. who occasionally undertakes transactions involving supply of goods and services, whether as principal agent or in any other capacity where there is no fixed place of business.

• Non-resident taxable persons

• Persons supplying goods and/or services through an electronic commerce operator

• Job worker, in terms of goods supplied by the job worker after completion of his work

Benefits of the GST Model 

• The Model estimates to bring in

• An increase in GDP

• An increase in international competitiveness

• Increases Foreign Direct Investment.

• Acquiring funds from developed countries may become easier.

• Increases revenue from Direct and Indirect taxes in the country.

• Reduces trade barriers and lowers transaction costs through reduced corruption.

• Traders can benefit by claiming full tax credit on the supply of goods with GST.

• Reduced tax burden at multiple levy point and also for the final customer.

• Traders can avail the credit of service tax and excise duty.

• Credit of import duties will make import cheaper for retailers.

The taxable person may be eligible to take tax credit on input tax not more than one year from the date of issue of tax invoice relating to supply. However, certain transfers may not be eligible for an input tax claim such as goods and services used primarily for personal use or consumption of employees, or goods and services acquired by the principal in the execution of works contracts of immovable property, other than plant and machinery, or if the taxable person has claimed depreciation on the tax component of the cost of capital goods under Income Tax Act, 1961.

GST AND TRANSITIONAL PROVISIONS

The existing tax payers/persons registered under any of the earlier laws shall be granted provisional registration under the GST law. The provisional registration is valid for 6 months and on furnishing certain information as may be prescribed the certificate of registration will be granted on a final basis.To claim an input tax credit under GST the amount of duty, tax or cess carried forward as per the accounts will be immaterial. The input tax credit carried forward as per the last return under the earlier law for the period ending 31st March 2017 with the day proceeding the day when the GST becomes applicable will only be taken into account.Input tax credit under VAT law will be carried forward as SGST. Swachh Bharat Cess will not be admissible as Opening CGST. If no CENVAT credit on Capital goods was availed during the year the full input tax credit will be available as CGST on 1st April, 2017 if the same is applicable under the earlier law and the GST. CENVAT Credit on capital goods can only be availed as CGST credit in the Electronic Credit Ledger and VAT credit as SGST credit in the very same Electronic Credit Ledger. The CENVAT Credit Rules provides a period of 1 year from the date of issue of invoice for allow ability of CENVAT Credit the same applied to GST law. If an unavailed Input Tax Credit on Capital Goods was availed under the GST law was found to be inadmissible as per the proceedings of the Department such amount will be recovered under the GST law.

GST Registration

It is compulsory to be registered under GST if the existing tax payer is liable to be registered under the Schedule III of the Act within 30 days from the date he becomes liable to registration.

• One can apply for registration voluntarily if not liable to be registered under the Schedule III of the Act.

• In case of multiple business verticals in a state there is an option to obtain separate registration for each business vertical.

• PAN card is mandatory.

• Non-resident taxable person may be granted registration on the basis of any other document as may be prescribed.

• Where a person liable to be registered under this Act fails to obtain registration, the proper officer may, proceed to register such person in a manner as may be prescribed.

• Any specialized agency of the United Nations Organization or any Multilateral Financial Institution and Organization notified under the United Nations (Privileges and Immunities) Act 1947, Consulate or Embassy of foreign countries and any other person or class of persons as may be notified by the Board/Commissioner shall obtain Unique Identity Number for the purposes notified including refund of taxes on the notified supplies of goods and/or services received by them.

• The registration or the Unique Identity Number shall be granted or rejected after due verification in the manner and within the period as may be prescribed.

Returns

Every Registered taxable person must furnish every calendar month in prescribed form and manner, an electronic return

• Of inward and outward supplies of goods and/or services

• Input tax credit availed

• Tax payable

• Tax paid and

• Other particulars as may be prescribed

• Within 20 days after the end of such month

A return furnished by the registered taxable person without payment of full tax due as per the return shall not be treated as a valid return for allowing input tax credit in respect of supplies made by such person

Summary of the due dates

• GSTR 1- Outward supplies made by taxpayer (other than compounding taxpayer and ISD) to be filed by 10th of the next month.

• GSTR 2- Inward supplies received by a taxpayer (other than a compounding taxpayer) to be filed by 15th of the next month.

• GSTR 3- Monthly return (other than compounding taxpayer and ISD) to be filed by 20th of the next month.

• GSTR 4- Quarterly return for compounding Tax Payer to be filed by 18th of the month next to quarter.

• GSTR 5- Periodic return by Non-resident Foreign Taxpayer to be filed last day of registration.

• GSTR 6- Return for Input Service Distributor (ISD) to be filed 15th of the next month.

• GSTR 7- Return for Tax Deducted at Source to be filed 10th of the next month.

• GSTR 8- Annual Return to be filed by 31st December of next financial year.

GST Exemption list

The Centre and states have already agreed to a five-slab structure for GST rates — 5, 12, 18 and 28%, as well as a cess of 28% on sin and luxury goods such as tobacco, big cars and aerated drinks. The cess is likely to be in proportion to duties attracted by these items currently. About 80 items are likely to make it to the exemption list under the proposed goods and services tax (GST), including grains, green coconut, poha, unprocessed green tea leaves, and non-mineral water. Items such as coffee and processed foods like biscuits, Rusk, butter and cheese currently exempted from excise duty, may draw GST. There are currently around 300 items in the exemption list from central excise duty and 90 from the states value added. The government has been pruning the excise exemption list for quite some time. From 542 items in 2011, it has come down 300 items. It should be noted that some petroleum products would come under zero rate till the time the GST Council decides to bring them under GST rates. This means that the state will continue to impose VAT and the Centre excise duty on these items. Zero rated is different from exemption as input credit is given in case an item is zero rated. Or in other words, items drawing zero rates are in the GST chain. This blog contains information on the current available GST Model only. The intention of the blog is to only give an overview of the Model Law. The Model is still being updated; any changes to the information will be fully available after the updates are announced.

Encouraging entrepreneurship and proposals for progressive reforms in India

Context

India as the destination for manufacturing, it’s ranking in World Bank's ‘Ease of Doing Business’ has slipped further. It takes 30 days and 13 procedures to register a company in Mumbai, while in New Zealand it takes just half a day. India has been ranked at 142 among 189 countries in the latest World Bank's "Ease of Doing Business" report, a drop by two places from the last year's ranking. A high ranking (a low numerical rank) means that the regulatory environment is conducive to business operation.

Government policies for reforms

The Companies Act, 2013 aims to pave the way for a more modern and dynamic legislation, to enable growth and greater regulation of the corporate sector in India. The revolutionary new concept of ‘One Person Company’ (OPC) is a step forward to facilitate more business friendly corporate regulations in India. OPC will give the young businessman all benefits of a private limited company which categorically means they will have access to credits, bank loans, limited liability, legal protection for business, access to market etc. all in the name of a separate legal entity.

Till recently, if you wanted to set up a private company, you needed at least one other person because the law mandated a minimum of two shareholders. So, for the person wanting to venture alone, the only option was proprietorship, an onerous task since it is not legally recognized as a separate entity. The concept of One Person Company (OPC) in India was introduced through the Companies Act, 2013 to support entrepreneurs who on their own are capable of starting a venture by allowing them to create a single person economic entity. Now, after the recent amendment to the Companies Act, there may be hope for the budding entrepreneur. The bill that aims to bring in sweeping changes in the corporate world has also opened the doors for the entrepreneur looking to set up a company all by himself. This has been made possible by bringing in the concept of One Person Company (OPC). OPC provides a whole new bracket of opportunities for those who look forward to start their own ventures with a structure of organized business.

Though the concept of OPC is new in India but it is a very successful form of business in UK and several European countries since a very long time now. Currently, it is a grey area, and only time will tell how well this works in India. A one person company is a paradigm shift in the Indian corporate regime, bringing it at par with global standards. But other than the technical change that the minimum membership been reduced from two to one, no purpose is being served with respect to relaxation in paper works and procedural formalities.

Of course, India made starting a business easier by considerably reducing the registration fees, but at the same time also made it more difficult by introducing a requirement to file a declaration before the commencement of business operations.

Features of the UK model of company law

Here comes the significance of a developed country like UK which stands in the 8th position in the World Bank’s Index when it comes to ease of formation where most small private limited companies don’t need an audit of their annual accounts - unless the company’s articles of association say it must or enough shareholders ask for one. The principal concessions available to a small company in the United Kingdom are:

•        reduced statutory disclosure requirement for the full accounts;

•        exemption from the requirement to prepare group accounts;

•        the eligibility to apply the Financial Reporting Standard for Small Entities (FRSSE);

•        the eligibility to file abbreviated accounts;

•        additional exemptions for dormant companies; and

•        exemption from audit.

•        cost of forming a company in the UK is only £14 which is nearly about 1400 INR

•        All the filings only after 18 months

Proposals for reform

Even though our Company law is amended recently, the amendment couldn’t serve any beneficial purpose for the new businesses and entrepreneurs, apart from the new concept of One Person Company. The basic reform to be brought about is that the existing companies act may be progressively amended to streamline following the registration formalities and relax the minimum registered capital requirements when setting up a company in India.

(i)      Minimum 24 month’s may be granted as a settling period for new companies as free from all the filings costs except formation cost

(ii)     No audit requirements for companies with turnover up to 10 lacs.

(iii)    In turn provide opportunities to the new companies to utilize the settling period to find more market, sales and business opportunities

(iv)    Facilitate an alternative to the new born companies to dissolve within the initial settling period itself in case if unsuccessful

(v)     Unlike the other developed countries as most of the government policies are not properly communicated in our country, it is high time that an Automatic Digital Reminder is needed as part of the Digital India Program to inform the entrepreneurs of the plain law and procedures to be followed with respect to formation so that there can be no confusion or bureaucratic delay which will ultimately help the entrepreneurs to know in advance what to do. 

These reforms if brought about properly,  could save many a businesses in India, a considerably good amount of money, a year, in accountancy and administration costs by relaxing the requirement to conduct a financial audit whereby it would be seen as a big advantage of being a small company. This would serve to foster and encourage the entrepreneurship spirit of the youth of the state whereby ultimately resulting in more employment creation rather than formalities creation.

Highlights of Union Budget 2017-18

 The Union Budget 2017 focuses on improving the domestic economy especially in the rural areas with clear focus towards farmers, poor and the under privileged and infrastructure with increased stress on an efficient tax administration while maintaining fiscal prudence.

Another speciality of this budget its enthusiasm on youth empowerment. Budget introduced quality education programmes such as measuring learning outcomes in schools, innovation fund for secondary education, reforms in UGC so as to improve higher education, providing market relevant training, etc for energising the youth.

The Budget 2017 left much to be desired for the start-ups. The budget which focused more on digital economy of the country gave some concessions to the start-ups while holding out some of the major demands of the start-up community.

Here are the salient features of Direct Tax proposals

1.     Reduction in Income tax rate from 10% to 5 % for individuals having income between Rs 2.5Lakhs – Rs 5Lakhs. This is clear cut reduction in 50% rate for the above slab.

All other categories of tax payers in subsequent brackets will get a benefit of Rs 12,500/-.

But in order to avoid the duplication effect, the budget proposed to reduce the rebate (u/s 87A) of Rs 5,000 to Rs 2,500.

That means no income tax for income up to Rs 3Lakhs. For the income class up to Rs 4.5Lakhs, there will be no income tax if they utilize the deductions under Chapter VI A.

The below table will bring out clear cut impact of the change: 

Income Slab Before	Tax Rate Before	Income Slab Now	Tax Rate Now
Up to Rs 250,000/-	NIL	Up to Rs 250,000/-	NIL
Rs 250,001 to Rs 500,000/-	10%	Rs 250,001 to Rs 500,000/-	5%
Rs 500,001 to Rs 10,00,000/-	20%	Rs 500,001 to Rs 10,00,000/-	20%
Above Rs 10,00,000/-	30%	Above Rs 10,00,000/-	30%

2.     There will be an additional surcharge of 10% on individual income above Rs 50Lakhs up to Rs 1Crore. Surcharge of 15% on income above Rs 1Crore will remain continued.

3.     Regarding maintenance of books of accounts for individuals, threshold limit has been increased from present turnover of Rs 10Lakhs to Rs 25Lakhs or income from present Rs 1.2Lakhs to Rs 2.5Lakhs. It’s a slight relief for individuals and HUF’s.

4.     Simple one page return for people with an annual income of Rs 5Lakh other than business income.

5.     People filing I-T returns for the first time will not come under any government scrutiny.

6.     For revision of return, time period has been reduced to twelve months from completion of financial year at par with the time period of filing of return

7.     With regard to Capital Gain tax, holding period has been reduced from 3 years to 2 years for transfer of immovable property. It has also been proposed to shift the base year of indexation from 1 April 1981 to 1 April 2001 for all classes of assets including immovable property.

8.     Restriction on cash transactions:

a)    transactions above Rs 300,000/- should be done through an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account and not in cash.

b)    any payment in cash above Rs 10,000/- (present limit Rs 20,000/-) to a person in a day, shall not be allowed as deduction in computation

9.     There is a big and rewarding relief to the small and medium sized enterprises which account for 96% of our industry. Income tax rate has been reduced from 30% to 25% with turnover up to Rs. 50Crores. It’s a boost to SME’s & MSME’s sector.

10.     There is a big relaxation for the small and medium tax payers who opt for presumptive taxation scheme. If their turnover is below Rs. 2Crore they can compute their deemed or presumptive income @6% (present rate 8%), provided the receipts are in digital or banking means.

Also, those who opt for presumptive taxation scheme shall be liable for get his books of accounts audited if the turnover exceeds Rs.2Crore.

11.     Section 79 of the Income Tax Act, 1961 allows for carry forward of losses of a company for seven years and then set-off against the profits of the future years. However, there was a restriction on carry forward and set-off of losses if 51% of shareholding didn’t remain intact in the year of loss and in the year of set-off. 

But, in respect of carry forward of losses for start ups, the condition of continuous holding of voting rights of 51% has been relaxed as long as the original investment of the promoter is not diluted. Not only that, the profit linked exemption available for 3 out of 5 years has been changed to 3 out of 7 years.

Start-up

Start-up means an entity, incorporated or registered in India not prior to five years, with annual turnover not exceeding INR 25Crore in any preceding financial year, working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.

Some essential points to be considered are:

a.     Such an entity should not be formed by splitting up or reconstruction of a business already in existence

b.    The entity shall cease to be a ‘Start-up’ if its turnover for the previous financial years has exceeded INR 25Crores or it has completed 7 (present 5) years from the date of incorporation/ registration.

c.      Start-up shall be eligible for tax benefits only after it has obtained certification from the Inter-Ministerial Board, setup for such purpose.