An Insight on GST Payments and Refunds!

An Insight on GST Payments and Refunds!

The success of any thought or an idea lies in the action to bring it to fruition. Similarly, the success of any Law lies in its correct implementation. There has been a lot of debate about the benefits of GST and how it will bring substantial changes in the economy. However, what actually matters is its actual implementation by millions of citizens at the ground level without any complications and with minimal errors.

GST is an indirect taxation system and any error in the entire process can lead to substantial financial losses, either for the taxpayer or for the government. Hence it is important for the taxpayer to be aware of the correct tax filing system so as to eliminate or minimise any potential errors. To ensure efficiency and transparency, the system has been designed in a user friendly manner so that every tax payer can file returns online instead of going to a government office or standing in queues waiting for their turn. This not only saves time and resources, it also ensures a quick update of data and makes the entire process seamless in real time.

We have already discussed the various types and forms of GST to be filled. Now, we will talk about how the payment needs to be made and how refunds would be applicable and the entire process for the same.

The first step towards making a payment is to file complete and detailed GSTR 1 and GSTR 2. After that, a dealer is required to file GSTR 3 and then make GST payment. To claim refunds, there are relevant forms to be filled and submitted on time to initiate the process.

Following is the detailed payment process for easier understanding:

Mr.A sells goods to Mr. B

Files GSTR I (details of supply)

Info, from GSTR1 gets reflected in GSTR 2A of Mr. B

Data goes from GSTR 2A to GSTR 2 after buyer i.e Mr. B accepts it.

Mr. B files GSTR 2

Amount of tax paid on purchases gets credited to Electronic Credit Register

Mr. B can start using credit against output tax liability or get refund.

WHAT PAYMENTS ARE TO BE MADE UNDER GST?

GST law has kept the entire process extremely simplistic and tax to be paid is divided into 3:

A. IGST-This is when tax has to be paid when interstate supply of goods is made. It is paid to the centre.

B. CGST-This is to be paid when goods are supplied within a state. Again, this tax is paid to the centre

C. SGST-This tax is also paid when goods are supplied within the state, but is paid to the state.

Here's an example for better understanding

Situation

CGST

SGST IGST

NO YES

YES YES

NO

Goods sold from Kolkata to Delhi

Goods sold within Kolkata

NO

Goods sold from Kolkata to Siliguri

YES

YES

NO

Apart from above mentioned payments, a dealer is required to make the following payment as well:

Tax Deducted at Source (TDS). TDS is a mechanism devised under GST where tax is deducted by the dealer before making the payment to the supplier.

Tax Collected at Source (TCS). This is targeted at e-commerce aggregators. Whenever a dealer sells through e-commerce portal, he will get his payment after deduction of TCS @2%

Reverse Charge: In this case, the liability to pay tax is on the receiver rather than the supplier of goods and services

HOW TO CALCULATE THE GST PAYMENT TO BE MADE?

To calculate the total GST payment, Input Tax Credit (ITC) has to be reduced from the Outward Tax Liability. After that, TDS/TCS shall be reduced from the total GST and net payable amount will be calculated. In this figure, any late fees or interest will be added to arrive at the final amount. Kindly note that ITC cannot be claimed on interest and late fees.

Now, calculation to reach the final amount is different for different dealers, which is as follows:

Regular Dealer: A regular dealer is liable to pay GST on the outward supplies and can also claim ITC on purchases made. The GST payable is the difference between the outward tax liability and the ITC.

Composition Dealer: GST law has made the calculation comparatively easier for composition dealers. They have to pay a fixed percentage of GST on the total outward supplies made. Based on the type of composition dealer, GST will be paid.

Here's how:

Type of Business

CGST

SGST

Total GST

Manufacture

1%

1%

2%

Trader (Goods)

0.5%

0.5%

1%

Supplier for Food/drinks 2.5%

2.5%

5%

For human consumption

Service providers cannot opt for Composition Scheme

WHO IS SUPPOSED TO MAKE THE PAYMENT?

Following dealers are liable to pay GST

Registered dealer is GST liability exists

Registered dealer required to pay tax under reverse Charge Mechanism (RCM)

 E-commerce operator to collect and pay TCS

 Dealers required to deduct TDS

DATE FOR GST PAYMENT

GST Payment is to be made along with the filing of GSTR 3 by the 20th of the next month

WHAT ARE ELECTRONIC LEDGERS?

These are the ledgers maintained electronically on GST portal. They are of the following three types:

1. Cash Ledger: It reflects all deposits made in cash along with TDS/TCS made on behalf of the taxpayer. This can be used for making any payment on account of GST.

2. Credit Ledger: Input Tax Credit (ITC) as self-assessed in monthly returns shall be reflected here. The credit in here can be used only to pay tax and not anything else like interest, penalty, fees etc.

3. Liability Ledger: Total tax liability of a taxpayer for a particular month shall be visible in this ledger and it will be automatically displayed on GST Taxpayer's dashboard

Types of Electronic Ledgers

Cash Ledger

This ledger will reflect all deposits made in cash, and TDS orfand) TCS made on account of the taxpayer. This ledger can be used for making any payment on account of GST

Credit ledger

ITC as self-assessed in monthly retums will be reflected here. The credit in this ledger can be used to make payment of TAX ONLY and no other amounts such as interest, penalty, fees etc

Liability Ledger

The total tas Bability of a taxpayer (after netting) for the particular month will be shown here. This Ledger will be automatically displayed on a GST Tax payer's dashboard

HOW TO MAKE GST PAYMENT?

Such payments can be made by either of the following two ways:

1. Through Credit Ledger

2. Through Cash Ledger: Payment can be made both online and offline after generating a challan on the GST portal. Any tax payment above Rs. 10,000/- has to be compulsorily paid online only.

PENALTY FOR NON-PAYMENT OR DELAYED PAYMENT

If GST is short paid, unpaid or paid late, interest 18% is required to be paid by the dealer

Along with that a penalty needs to be paid and it shall be the higher of Rs. 10,000 or 10% of the tax short paid or unpaid.

Let's have a look at the refund process. Under GST, the claim refund process has been simplified to avoid confusions. The entire process is online and even the time limits have been set for the same.

WHEN CAN REFUND BE CLAIMED?

If excess tax has been paid, refund can be claimed. Some of the scenarios when refund is claimed are:

 Dealer exports (including deemed export) goods/services under claim of rebate or refund

ITC accumulation due to output being exempt or nil-rated

Refund of tax paid on purchases made by Embassies or UN bodies

Tax refund for international tourists

Finalisation of provisional assessment

Refunds

Finalization of Provisional Assessment

Refund of Input Taxes in case of Exports

Refund of Pre-Deposit

Payment under wrong head

Refund of Taxes paid by UN/Embassies

Excess Payment

HOW TO CALCULATE GST REFUND?

Here's an example to understand the calculation.

Let's consider a dealer's liability for the month of December is Rs. 25,000/- But he ends up paying Rs. 2.5 lakhs. Now this excess of Rs. 2.25 lakhs as GST payment can be claimed as refund. The GST law allows the dealer a time limit of 2 years from the date of payment to claim refund.

HOW TO CLAIM REFUND?

You can submit the refund application in Form RFD 01 within two years from the date of payment or as per the individual case. This form needs to be certified by a chartered accountant.

To ensure more and more people join the GST regime on their own and become a part of it actively without being forced and threatened, the entire payment and refunds process has been kept simple and easy to understand and follow.

What is the Future of Goods and Services Tax in India?

Future is always determined by the lessons learnt from the successes and failures of the past and the actions taken in the present. This holds absolutely true for Goods and Services Tax (GST) in India, India's biggest and most transformational tax reform! We shied away from capitalism and remained a closed economy for the longest time since Independence in 1947 until the status quo was challenged owing to slump in economy. When it wasn't possible anymore to remain isolated from the global economy, the governments in power learnt their lessons from the past and opened up the nation's economy. Step by step we started growing and then a need was felt to change the entire taxation system of the country to help it achieve its potential and become a potent force in the country.

However, it's always a challenge to bring sweeping reforms in a country as big and diversified as India because the need to generate consensus and chalk out the detailed roadmap is always chaotic. There are multiple forces working pulling things in different directions simultaneously and hence the process to bring about change is massively difficult.

This is the reason that despite introducing GST in 2006, it took almost 11 years for it to be actually implemented. Ever since GST was introduced in parliament in the year 2006, it has been a highly debatable

topic, as it was proposed as an indirect tax reform. Also, GST was proposed to replace multiple taxes and give way to unified tax system in India. The basic formulation of GST was to conquer the problems with the current taxation system, that Indian government and citizens were facing, like corruption, uneven and over burdening taxes, GST waited for many years to get passed in the parliament and to get implemented, even after a fool proof roadmap was framed.

3rd August, 2016 was the day when finally the bill got passed and GST was decided to get implemented from 1st July, 2017.

Now, that GST is fully applicable, and Indian citizens are becoming well versed with the idea and benefits of the reform, let us take a look at the possible future of GST in the nation:

1. Increased Tax Base and Income: Before GST, a lot of small, medium and even large enterprises

were out of the tax bracket and only a few people ended up paying taxes on behalf of the entire nation. In future, GST will ensure more and more individuals and organisations will be part of the tax base and end up paying taxes. This means additional income for both the state as well as central governments resulting in development and prosperity for the entire country

2. Uniformity in Taxes: Since GST has subsumed multiple taxes, uniformity in taxes resulting due to GST's implementation means less confusion, less ambiguity and even lesser reasons to stay out of the tax regime. GST will find broader acceptance from citizens due to its simplistic mechanism and bringing everyone at par on an equal level.

3. Single Tax System: Even though GST has been launched with four different tax slabs, the ultimate

goal is to reduce them further and end up with just two or probably a single tax for the entire country. Currently, the need for multiple taxes is due to difference in income across the country. Someone buying a packet of salt can't be asked to pay the same tax as someone buying a luxury car. However, once the system settles down, economy grows and a viable pattern emerges, GST rates shall come down thereby making one nation one tax' a reality!

4. Investments and Economic Growth: With clear policies and transparent tax structure, it will become easier to do business in the country. The economic barriers will come down and more investment will flow in, both from within and outside the country. More organisations will try to do business with and in India and that augurs well for the economic growth of the country. Unfavourable tax regime puts off many organisations from doing businesses in such nations. With GST in effect, it offers an additional sop for multination companies to set up shop and be a part of India's economic growth story.

5. Employment Generation: With more investment, economic growth and ease of doing business, employment generation can gather pace. Given India's socio-cultural setup, most of the workforce is either in the unorganised sector or being employed in the small and medium sector. With most enterprises becoming part of the new tax regime, the businesses will grow in the long term and result in more employment generation.

6. Lesser Black Economy: Fighting black money is a tough challenge and an ongoing process. The shadow economy, as it is called, may never disappear, but shall be greatly reduced as the chances of evading taxes, working outside the tax regime and being part of unorganised trade shall be vastly eliminated.

7. User Friendly: The best part about GST that will happen in the future is that it will become more and more user friendly as the government is taking constant feedback from ordinary citizens and industry bodies to make necessary changes in the system. Within a quarter of GST getting implemented,

a lot of changes have happened on the ground level that include tweaking in tax slabs on various products and services, ensuring easing of the process to make exporters competitive vis a vis global firms, adequate checks and balances to iron out and wrinkles and the likes. Once this tax regime is implemented in its true spirit and form, the government will not have to force the citizens to join it, but it shall be voluntarily accepted as the benefits for all will make it compulsory to adapt

With GST in place, there will be seamless flow of tax through the stages of distribution channel, no paperwork as all the things will be done computerized, which will benefit the administrative system, and this benefit will be passed down to the common people in shape of better infrastructure, corruption-less state of affairs and peace of mind.

HOW GST SOLVES PRESENT PROBLEMS

UTILIZATION

ADIANISTRATI CONVENIENCE

REDUCE COMPLIANCE COST

CHARGEABLE AT EACH TRANSACTION

DIRECT SALES

STOCK TRANSFER

SIMPLIFY TAX STRUCTUA

UNIFIED COMPREHE

FILE A SINGLE RETURN

VALUE-ADDED

GST

DESTINATION BASED CONSUMPTION TAX

TAXABLE EVENT IS SUPPLY NOT SALES OR RENDER

So far, GST carries a bright future in the nation. It is expected to work effectively and efficiently, to enhance production and to increase country's GDP. It is a game changer for the nation and all the stakeholders will unite and develop something which will be beneficial to the entire Indian Industry.

GST FAQs and Answers

1. WHAT IS GST?

The Goods and Services Tax (GST) is a tax on the supply of goods and services in the country. It is essentially a tax only on the value addition at each stage and a supplier at each stage is permitted to set-off, through a input tax credit mechanism le. the tax paid on the purchase of goods and services is available for set-off against the tax to be paid on the supply of goods and services. The Act, Rules and the rate of GST across all Indian States are expected to be uniform.

2. HOW DOES THE PROPOSED GST WORK?

Below is an indicative illustration for the levy and set-off of GST in three stages of the supply chain:

Stage of supply chain

Purchase value of input (INR)

100

150

175

Value addition (INR)

50

25

15

Sale value (INR)

150

175

190

Rate of GST

18%

18%

18%

GST on output(INR)

27

31.5

34.2

18

27

31.5

GST on input (INR)

Net GST-GST on output-input tax credit (i.e. tax on value addition) (INR)

Manufacturer

Whole Seller

Retailer

27-18-9

31.55-27-4.5

33.2-31.55-2.7

3. HOW WOULD A TRANSACTION OF THE SUPPLY OF GOODS AND SERVICES WITHIN A PARTICULAR STATE BE TAXED SIMULTANEOUSLY UNDER

CENTRAL GST (CGST) AND STATE GST (SGST)?

The proposed GST in India would be based on the 'dual GST model which envisages that both the central and state governments will simultaneously tax all transactions within a particular state involving the supply of goods and services under CGST Act and SGST Act, respectively. These taxes are deposited by the tax payers electronically and will go directly into the respective government's CGST/SGST accounts

Under the current regime, the powers to tax services and manufacturing transactions are with the central government whereas the power to tax sale transactions is with the State governments exclusively.

4. WHAT WILL BE THE MECHANISM TO TAX INTER-STATE TRANSACTIONS?

All inter-state supply of goods and services will be taxed under an Integrated GST (IGST) Act. The rate of GST under the IGST Act would broadly be equal to the sum total of CGST plus SGST rates added together. The IGST is to be deposited into an IGST Account administered by the central government and will be distributed between the central government and the consuming states on a mutually-agreed formula.

The collection mechanism of IGST is as under.

The inter-State seller may utilise the input tax credit of IGST, CGST and SGST on his/her purchases to pay IGST

5. WHAT ARE THE PROPOSED TAXES TO BE SUBSUMED UNDER GST?

The central taxes proposed to be subsumed under CGST include:

Central Excise duty

Additional Excise duties

Excise Duty levied under the Medicinal and Toiletries Preparation Act

 Service Tax levied under Chapter V of the Finance Act, 1994

 Additional Customs Duty, commonly known as Countervailing Duty (CVD)

 Special Additional Duty of Customs (SAD)

Central Sales Tax

Surcharges

Central Cesses.

The state taxes proposed to be subsumed under GST are:

 VAT/Sales tax

Entertainment tax (unless it is levied by the local bodies)

 Luxury tax

Taxes on lotteries, betting and gambling

 State cess and surcharges in so far as they relate to supply of goods and services

Entry tax

 Octroi/Local body tax

6. WHAT ARE THE GOODS/SECTORS THAT WILL BE OUT OF PURVIEW OF

GST?

The goods'sectors that will be out of the GST ambit include alcohol and specified petroleum products ie. petroleum crude, high speed diesel, motor spirit, aviation turbine fuel and natural gas. Petroleum products will be inducted into GST at a later date. Alcohol will continue to attract state excise duty and VAT Tobacco and tobacco based products will attract both excise duty and GST. Taxes such as stamp duty, toll tax, road tax, electricity duty etc. will not be part of GST

7. WHAT WOULD BE THE RATE STRUCTURE UNDER GST?

The proposed rate structure consists of 5, 12, 18, 28 and 28 per cent + cess besides goods which are taxed at nil rate (fully exempt). GST Tariff may be referred to, to know tax rate for respective goods and services

8. WHAT WILL BE THE THRESHOLD LIMIT AND COMPOUNDED LEVY UNDER GST?

The minimum threshold is INR2 million of aggregate turnover in a financial year. However in certain states the limit is reduced to INR1 million. Composition scheme is available for turnovers upto INR5 million and rate of tax would be as specified under Section 10 of the CGST Act.

Section 23 of the CGST Act specifies persons who are not required to be registered (e.g. a farmer, a person having wholly exempt turnover etc.) Section 24 of the CGST Act specifies persons who are required to take registration irrespective of the turnover (eg. persons making inter-State supply, casual taxable persons, non-resident taxable persons etc.)

9. HOW WILL IMPORTS BE TAXED UNDER GST?

Under the proposed GST regime, though the levy of Basic Customs Duty (BCD) on import of goods is set to continue, the additional customs duty, the current Special Additional Duty (SAD) will be replaced by IGST. While the full set-off will be available of the IGST paid on import of goods and services, BCD paid on import will not be eligible for set-off. In the case of import of services, an IGST on reverse charge basis will be levied and credit of the same will be available to the importer- recipient in accordance with the law.

10. HOW WILL THE CREDIT MECHANISM WORK UNDER GST?

Both CGST and SGST are two parallel taxes under the 'dual GST regime levied simultaneously on goods and services. Therefore, the cross utilization of CGST input tax credit for payment of SGST output tax lability and vice versa will not be permitted. However, the GST credit pool is fungible with CGST and SGST and the same can be used for payment of IGST, CGST and SGST and vice versa. The order of utilization of the IGST credit will be first towards IGST, then CGST and the balance towards SGST liability. Similarly an SGST credit can be utilized first towards SGST liability and then towards IGST, whereas a CGST credit will be used first toward CGST and then towards IGST

11.WHY DOES THE INTRODUCTION OF GST REQUIRE A CONSTITUTIONAL AMENDMENT?

The Indian Constitution clearly demarcates the powers of taxation between the central and state governments. While the centre is empowered to tax services and goods up to the stage of production,

the states are authorized to levy tax on the sale of goods. The states do not have the power to levy tax on supply of services while the centre does not have power to levy tax on the sale of goods. Under the proposed 'dual GST regime, all services and goods will be simultaneously taxed by both the state and central governments. Therefore, it is mandatory for the restriction imposed by the Constitution to be amended to enable the states and central governments to tax goods and services simultaneously.

12.WHAT WOULD BE THE POINT OF LEVYING GST ON THE SUPPLY OF GOODS?

At present, India follows an origin-based tax system and therefore the point of taxation is at the origin of sale and the originating state keeps the tax so collected, irrespective of where the consumer is located. Under the proposed GST regime, which is a multi-point levy (i. e. levied at each value addition in the value chain), the tax will move with goods and will be credited to the account of the destination state based on the place of supply as determined under the IGST Act. The GST will be charged on supply and point of levy will be as determined as per time of supply under Section 12 of the CGST Act

13. WHAT WOULD BE THE POINT OF LEVY OF GST ON SUPPLY OF SERVICES?

GST on services will be a tax on supply and the point of levy will be as determined in terms of Section 13 of the CGST Act. The revenue will be remitted to the State where the service is consumed based on the place of supply as determined under the IGST Act. By default, the place of supply of services shall be the place where the service recipient is located in the case of B2B transactions and place of the service provider in the case of B2C transactions. However, there are exceptions to this rule.

14.WHAT WOULD THE PROCESS OF REGISTRATION BE UNDER THE PROPOSED GST REGIME FOR NEW BUSINESSES/APPLICANTS?

Each taxpayer will be allotted a state-wise Permanent Account Number (PAN) based 15-digit Goods and Services Taxpayer Identification Number (GSTIN). Those tax payers who are already registered under the current state or central tax regime, are migrated to the common portal and granted GST registration suo motu with a request to provide additional information where required.

A new applicant would be allowed to apply for registration on the common portal without prior enrolment.

15.WHAT WOULD BE THE PROCESS OF REGISTRATION UNDER GST FOR EXISTING BUSINESSES/APPLICANTS?

Under the current regime, tax payers are separately registered with the state and/or with central tax administrations or with both based on their business activity. In the GST regime, a taxpayer will have to obtain state wise registration. Even within a state, the taxpayer will have an option to obtain multiple registrations for different business verticals.

16.WHAT ARE THE CONTENTS OF A TAX INVOICE TO BE ISSUED UNDER GST REGIME?

A registered assessee supplying taxable goods/services shall issue at the time of supply, a tax invoice showing complete details of the transaction viz., name, address and GSTIN of the assessee's name, address and GSTIN of the buyer/service recipient, date of invoice, value of goods/service, description of goods/service, rate and value of CGST, SGST or IGST, signature of taxpayer, etc.

17. HOW AND WHEN SHOULD THE RETURNS BE FILED?

A common e-retum for CGST, SGST and IGST is proposed in the draft law. Returns, that allow the auto-population of data from the vendors and automated matching of invoices, shall be filed online by a normal/casual taxpayer in a sequential manner within different cut-off dates. The various due dates proposed for the filing of returns are as follows:

S.No. Return/Ledger

GSTR1

Description of Applicable Form

Due Date

Outward supplies made by taxpayer (other than compounding taxpayer and ISD)

10 of the next month

GSTR2

Inward supplies received by a taxpayer (other than a compounding taxpayer and ISD)

15 of the next month

GSTR3

Monthly return (other than compounding taxpayer and ISD)

20 of the next month

GSTR4

Quarterly retum for compounding Taxpayer

18 of the month next to quarter

GSTR5

Periodic return by Non-Resident Foreign Taxpayer

Last day of registration

GSTRE6

Return for Input Service Distributor (ISD)

13 of the next month

GSTR7

Return for Tax Deducted at Source

10 of the next month

GSTR8

Annual retum

31 December of next financial year

It may be noted that most of the returns are auto generated by the GSTN system and the dealer is expected to validate the data and also fill in the missing data. It is also to be noted that the payment of the tax due, is a must for filing valid returns under the GST regime.

18. WHAT IS THE MODE OF PAYMENT OF TAX?

The payment of tax is in electronic mode with a common 'challan' (Le. document for payment of taxes) for all the taxes under three different modes of payment:

Internet banking including credit card/debit cards

Payments through RTGS/NEFT

Over the counter payments (for payments up to INR10,000/- per tax period) in cash cheque or Demand Draft (DD).

19. HOW WOULD EXPORTS BE TAXED UNDER GST?

Exports are zero rated under GST which means that there shall be not tax and input taxes will be refunded.

20. WHEN CAN A TAX PAYER GO FOR A REFUND IN THE GST REGIME? HOW WILL THE REFUND PROCEDURE WORK UNDER THE PROPOSED GST LAW?

The refund regime is expected to be simplified under GST as opposed to the current manual verification system. The refund can be obtained in the following scenarios:

Refunds on exports

Refunds of carry forward input tax credit granted only in case of an inverted duty structure.

21. HOW DOES THE DISPUTE RESOLUTION MECHANISM WORK UNDER THE PROPOSED GST REGIME?

An elaborate adjudication and appellate procedure is prescribed under the GST law. A separate appellate Tribunal called the Goods and Services Tax Appellate Tribunal shall be formed to deal with disputes.

22. WHAT HAPPENS TO VARIOUS EXEMPTIONS INCLUDING AREA-BASED EXEMPTIONS GRANTED IN THE PRESENT REGIME, UNDER THE GST FRAMEWORK?

Minimal exemptions and concessions are expected under the GST regime. However, the tenure of certain exemptions such as the area-based tax exemptions granted by the governments would extend to the GST regime and the governments may have to honor the commitments.

Since tax exemption may not be possible under the GST regime, these exemption may still be granted in the form of post-tax cash refund schemes after the collection of tax, so that the GST chain is not disturbed.

While no new exemption would be allowed, the existing special industrial area scheme may

23. WHAT EXACTLY IS THE CONCEPT OF DESTINATION BASED TAX ON CONSUMPTION?

The tax would accrue to the taxing authority which has jurisdiction over the place of consumption which is also termed as place of supply.

24. HOW ARE THE DISPUTES GOING TO BE RESOLVED UNDER THE GST REGIME?

The Constitution (one hundred and first amendment) Act, 2016 provides that the Goods and Services Tax Council shall establish a mechanism to adjudicate any dispute:

Between the Government of India and one or more States; or

Between the Government of India and any State or States on one side and one or more other Sates on the other side, or

 Between two or more States, arising out of the recommendations of the Council or implementation thereof.

25. WHAT IS THE PURPOSE OF COMPLIANCE RATING MECHANISM?

As per Section 149 of the CGST/SGST Act, every registered person shall be assigned a compliance rating

based on the record of compliance in respect of specified parameters. Such ratings shall also be placed in the public domain. A prospective client will be able to see the compliance ratings of suppliers and take a decision as to whether to deal with a particular supplier or not. This will create healthy competition amongst taxable persons.

26. ARE ACTIONABLE CLAIMS LIABLE TO GST?

As per section 2(52) of the CGST/SGST Act actionable claims are to be considered as goods. Schedule III read with Section 7 of the CGST/SGST Act lists the activities or transactions which shall be treated neither as supply of goods nor supply of services. The Schedule lists actionable claims other than lottery, betting and gambling as one of such transactions. Thus only lottery, betting and gambling shall be treated as supplies under the GST regime. All the other actionable claims shall not be supplies.

27. ARE TRANSACTION IN SECURITIES BE TAXABLE IN GST?

Securities have been specifically excluded from the definition of goods as well as services. Thus, the transaction in securities shall not be liable to GST.

28. WHAT IS THE CONCEPT OF INFORMATION RETURN?

Information return is based on the idea of verifying the compliance levels of registered persons through information procured from independent third party sources. As per section 150 of the CGST/SGST Act, many authorities who are responsible for maintaining records of registration or statement of accounts or any periodic return or document containing details of payment of tax and other details of transaction of goods or services or both or transactions related to a bank account or consumption of electricity or transaction of purchase, sale or exchange of goods or property or right or interest in a property under any law for the time being in force, are mandated to furnish an information return of the same in respect of such periods, within such time, in such form and manner and to such authority or agency as may be prescribed. Failure to do so may result in penalty being imposed as per Section 123.

29. DIFFERENT COMPANIES HAVE DIFFERENT TYPES OF ACCOUNTING SOFTWARE PACKAGES AND NO SPECIFIC FORMAT ARE MANDATED FOR KEEPING RECORDS. HOW WILL DEPARTMENT BE ABLE TO READ INTO

THESE COMPLEX SOFTWARE? As per Section 153 of the CGST/SGST Act, having regard to the nature and complexity of a case and in the interest of revenue, department may take assistance from an expert at any state of scrutiny, inquiry,

investigation or any other proceedings.

30. IS THERE ANY PROVISION IN GST FOR TAX TREATMENT OF GOODS RETURNED BY THE RECIPIENT?

Yes, Section 34 deals with such situations. Where the goods supplied are returned by the recipient, the registered person (supplier of goods) may issue to the recipient a credit note containing the prescribed particulars. The details of the credit note shall be declared by the supplier in the returns for the month during which such credit note was issued but not later than September following the end of the year in which such supply was made or the date of filing of the relevant annual return, whichever is earlier. The details of the credit note shall be matched with the corresponding reduction in claim for input tax credit

by the recipient in his valid return for the same tax period or any subsequent tax period and the claim for reduction in output tax liability by the supplier that matches with the corresponding reduction in claim for ITC by the recipient shall be finally accepted and communicated to both parties.

31. WHETHER SUPPLIES MADE WITHOUT CONSIDERATION WILL ALSO COME WITHIN THE PURVIEW OF SUPPLY UNDER GST?

Yes, but only those activities which are specified in Schedule I to the CGST Act/SGST Act. The said provision has been adopted in IGST Act as well as in UTGST Act also.

32. WILL GIVING AWAY ESSENTIAL COMMODITIES BY A CHARITABLE INSTITUTION BE TAXABLE ACTIVITY?

In order to be a supply which is taxable under GST, the transaction should be in the course or furtherance of business. As there is no quid pro quo involved in supply for charitable activities, it is not a supply under GST

33. WHO CAN NOTIFY A TRANSACTION TO BE SUPPLY OF GOODS OR SERVICES?

Central Government or State Government, on the recommendations of the GST Council, can notify an activity to be the supply of goods and not supply of services or supply of services and not supply of goods or neither a supply of goods nor a supply of services

34. WHAT ARE COMPOSITE SUPPLY AND MIXED SUPPLY? HOW ARE THESE TWO DIFFERENT FROM EACH OTHER?

Composite supply is a supply consisting of two or more taxable supplies of goods or services or both or any combination thereof, which are bundled in natural course and are supplied in conjunction with each other in the ordinary course of business and where one of which is a principal supply. For example, when a consumer buys a television set and he also gets warranty and a maintenance contract with the TV, this supply is a composite supply. In this example, supply of TV is the principal supply, warranty and maintenance service are ancillary.

Mixed supply is combination of more than one individual supplies of goods or services or any combination thereof made in conjunction with each other for a single price, which can ordinarily be supplied separately. For example, a shopkeeper selling storage water bottles along with refrigerator. Bottles and the refrigerator can easily be priced and sold separately.

35. WHAT IS THE TREATMENT OF COMPOSITE SUPPLY AND MIXED SUPPLY UNDER GST?

Composite supply shall be treated as supply of the principal supply. Mixed supply would be treated as supply of that particular goods or services which attracts the highest rate of tax.

36. ARE ALL GOODS AND SERVICES TAXABLE UNDER GST?

Supplies of all goods and services are taxable except alcoholic liquor for human consumption. Supply of petroleum crude, high speed diesel, motor spirit (commonly nown as petrol), natural gas and aviation

turbine fuel shall be taxable with effect from a future date. This date would be notified by the Government on the recommendations of the GST Council.

37. WHAT IS MEANT BY REVERSE CHARGE?

It means the liability to pay tax is on the recipient of supply of goods and services instead of the supplier of such goods or services in respect of notified categories of supply.

38. IS THE REVERSE CHARGE MECHANISM APPLICABLE ONLY TO SERVICES?

No, reverse charge applies to supplies of both goods and services, as notified by the Government on the recommendations of the GST Council

39. WHAT WILL BE THE IMPLICATIONS IN CASE OF RECEIPT OF SUPPLY FROM UNREGISTERED PERSONS?

In case of receipt of supply from an unregistered person, the registered person who is receiving goods or services shall be liable to pay tax under reverse charge mechanism.

40. CAN ANY PERSON OTHER THAN THE SUPPLIER OR RECIPIENT BE LIABLE TO PAY TAX UNDER GST?

Yes, the Central/State government can specify categories of services the tax on which shall be paid by the electronic commerce operator, if such services are supplied through it and all the provisions of the Act shall apply to such electronic commerce operator as if he is the person liable to pay tax in relation to supply of such services.

41. WHAT IS THE THRESHOLD FOR OPTING TO PAY TAX UNDER THE COMPOSITION SCHEME?

The threshold for composition scheme is Rs 50 lakh of aggregate turnover in the preceding financial year. The benefit of composition scheme can be availed up to the turnover of Rs 50 lakh in current financial year.

42. WHAT ARE THE RATES OF TAX FOR COMPOSITION SCHEME?

There are different rates for different sectors. In normal cases of supplier of goods (Le traders), the composition rate is 0.5% of the turnover in a State or Union territory. If the person opting for composition scheme is manufacturer, then the rate is 1 per cent of the turnover in a State or Union territory. In case of restaurant services, it is 2.5 per cent of the turnover in a State or Union territory. These rates are under one Act, and same rate would be applicable in the other Act also. So, effectively, the composition rates (combined rate under CGST and SGST/UTGST) are 1 per cent, 2 per cent and 5 per cent for normal supplier, manufacturer and restaurant service respectively

43. A PERSON AVAILING COMPOSITION SCHEME DURING A FINANCIAL YEAR CROSSES THE TURNOVER OF RS 50 LAKH DURING THE COURSE OF THE YEAR I.E. SAY HE CROSSES THE TURNOVER OF RS 50 LAKH IN DECEMBER?

WILL HE BE ALLOWED TO PAY TAX UNDER COMPOSITION SCHEME FOR THE REMAINDER OF THE YEAR I.E. TILL 31ST MARCH?

No. The option availed shall lapse from the day on which his aggregate turnover during the financial year exceeds Rs 50 lakh.

44. WILL A TAXABLE PERSON, HAVING MULTIPLE REGISTRATIONS, BE ELIGIBLE TO OPT FOR COMPOSITION SCHEME ONLY FOR A FEW OF REGISTRATIONS?

All registered persons having the same Permanent Account Number (PAN) have to opt for composition scheme. If one registered person opts for normal scheme, others become ineligible for composition scheme.

45. CAN COMPOSITION SCHEME BE AVAILED OF BY A MANUFACTURER AND A SERVICE SUPPLIER?

Yes, a manufacturer can opt for composition scheme generally. However, a manufacturer of goods, which would be notified on the recommendations of the GST Council, cannot opt for this scheme. This scheme is not available for services sector, except restaurants.

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