Varsha

GST Composition Scheme for Service Providers

GST Composition Scheme for Service Providers | Rules, Limits, Merits

Leave a Comment / GST / By / February 14, 2024

GST Composition Scheme for Service Providers: The government has implemented a compositional scheme to help small taxpayers and reduce the burden of compliance. A compositional dealer is required to keep fewer accounts/books and not to file monthly returns. Previously, only the suppliers of goods had access to the scheme.

However, it was announced at the 32nd GST Council that the scheme will now also be available to service providers. The scheme is available from 1 April 2019 for service providers. In this article, let’s understand everything about the composition scheme for service providers under GST notification.

Composition Scheme for Service Provider

The taxpayers who offer services of aggregate annual turnover up to Rs. 50 lakh are entitled to pay tax nominally by the composition scheme for service providers. The following service provider can opt for a composition scheme under GST:

  • Service provider only
  • Goods and services suppliers which means that those suppliers who were not eligible for the composition scheme earlier are now eligible

GST Composition Scheme Rules for Service Provider

The rules for service providers under the GST composition scheme are given below:

  • In the previous financial year, the service provider must have had a turnover of less than Rs. 50 lakh.
  • The supplier should not supply goods that are not taxable.
  • The supplier should not be involved in the production of interstate supplies.
  • The supplier should not deliver via an e-commerce provider.
  • The supplier should not be a taxable individual or a taxable non-resident.
  • Instead of a tax invoice, the supplier must issue a letter of supply. The supplier shall mention the word “taxable individual composition” on the supply bill.
  • It is impossible for the supplier to charge and collect customer tax.
  • The input tax credit cannot be claimed by the supplier.
  • For reverse charge supplies, the supplier shall pay regular tax.
  • The provider cannot supply ice cream or other manufactured whether or not it contains cocoa, bread masala and tobacco.

What Is The Rate Of Service Tax Under The Composition Scheme?

Compliance with the composition scheme by service providers: The taxpayer should only file one annual declaration with a quarterly tax payment (along with a simple declaration). The rate of service tax under the composition scheme is explained below:

Business Type CGST SGST Total GST
Manufacturers and Traders of Goods 0.5% 0.5% 1%
Restaurants 2.5% 2.5% 5%
Service Providers 3% 3% 6%

The value of the provision of exempted services in order to calculate the aggregate annual turnover shall not be taken into account in the continuation of deposits, loans or advancements where the revenue is represented by interest or discount.

Registration Under Composition Scheme for Service Providers

Any service provider (or mixed supplier) who registers for GST for the first time may select an option to pay tax under the composition scheme in Part B of FORM GST REG-01, which will be deemed an intimation to pay tax under the composition scheme. Any notification of a place of business opting for the composition scheme in any State or Union territory is assumed to be a notification for all other places of business registered on the same PAN.

Disadvantages of GST Composition Scheme for Service Providers

The disadvantages of GST Composition schemes for service providers are given below:

  • The input tax credit is not available.
  • Taxes cannot be charged or collected from customers. As a result, under the plan, a taxpayer is personally liable.
  • Exports and interstate transactions are not permitted.

When Can We Opt for GST Composition Scheme?

If someone wants to use the composition scheme, they must do it before the beginning of the financial year. To choose a composition scheme, fill out Form CMP-02. It is not possible to choose a composition scheme in the middle of a financial year. A person who has previously been selected for the scheme is not compelled to do so each year.

GST Returns To Be Filed

For each quarter, the individuals registered under this scheme must file CMP-08. Also, GSTR-4 must be filed for each financial year under GST Returns.

FAQ’s on GST Composition Scheme For Service Providers

Question 1.
Which service provider can opt for a composition scheme under GST?

Answer:
Registered taxpayers who offer services or supply commodities and services may both opt for GST component schemes with aggregate sales of up to 50 Lakhs.

Question 2.
What is the GST limit for service providers?

Answer:
The GST limit for the service provider who falls under normal category states is Rs.20 Lakhs and whereas for Services providers who fall under non-normal category states, the GST limit is Rs. 10 Lakhs.

Question 3.
What is GST composition scheme turnover limit 2020-21?

Answer:
The officials of CBIC has increased the composition scheme turnover limit from Rs 1.0 Crore to Rs. 1.5 Crores. Thus any taxpayer whose turnover is less than Rs. 1.5 crore may opt for the composition scheme of GST.

Factors Affecting Investment Under Section 80C

Factors Affecting Investment Under Section 80C | LIC, PPF, ELSS, NPS

Leave a Comment / Income Tax / By / February 14, 2024

Factors Affecting Investment Under Section 80C: One of the best ways when it comes to saving income tax is to declare all the investments under Section 80C. Any individual or HUF can save up to 1,50,000 just by declaring all the investments and expenses under section 80C of the Income Tax Act.

In the process of saving income tax, many taxpayers end up with so many other problems by investing in too many instruments such as LIC, Bonds, Stocks, FDs and so on. On this page, let’s understand what are the factors that affect investments under Section 80C.

Factors Affecting Investment

New investors are currently making a choice from a wide range of investment opportunities through financial institutions and online investment companies. Irrespective of whether you decide on an investment yourself or using a professional, a number of factors are necessary to take your investment options into consideration.

Some of the factors affecting investment are:

  • Rate of interest (the cost of borrowing)
  • Economic changes
  • Confidence/expectations
  • Environmental developments (productivity of capital)
  • Financial availability by banks
  • Depreciation wage costs, inflation, government policy

Factors Affecting Investment Under LIC

  • Policyholders have ignored some current policy premiums expenditures. In addition, life insurance is typically bought only indirectly for others and for the insured person.
  • Cash surrender values are usually less than the premiums paid over the first several years of policy and, if the policy is surrendered, a policyholder can sometimes not redeem the premiums paid.
  • In particular, the decision on life insurance purchases and placement of the life insurance can be complex when it is used for estate planning, business or complex family situations.
Return on cashback policy 8% to 10% (approx.)
Return on term insurance 0%
Lock-in period for 80C in single premium policy under 2 years from the date of commencement
Lock-in period for 80C in any other policy 2-year premium
Receipt Exempted (any cashback as well as maturity amount)
Liquidity The surrender option is available only after paying a premium for three complete year

Factors Affecting Investment Under Tax Saving Term Deposit

  • Fixed Returns: Although returns do not proceed south, and a certain percentage of returns is guaranteed, the concept prevents greater returns.
  • Lock-in period: FD accounts have a specified lock-in period selected by customers. Prior to maturity, the investment can only be liquidated at the cost of a rate penalty promised, which is only a loss.
  • Limited tax benefits: Although individuals choose to save tax in a safer manner on a five-year tax saver account, the returns from the account are taxable in accordance with the Income Tax Act.

Factors Affecting Investment Under PPF

  • The fact that PPF has a 15-year lock-in period is a major disadvantage. During the first six years, you are unable to withdraw even partially from it.
  • By investing in PPF, you lose your liquidity due to the lock-in period.
  • It is not suitable for those wishing to make significant investments. With a PPF investment, there is a limit of 1.5 lakhs every year.
  • The PPF interest rate may not be able to protect your invested capital in the event of high inflation in the economy.
  • Market-linked products, such as mutual funds, are traditionally considered to deliver higher returns, despite the fact that they give a consistent rate of interest.
  • You can only use PPF in an individual capacity if you want to. Only in the case of a minor can a joint PPF account be formed.

Factors Affecting Investments Under Mutual Funds

  • No Portfolio Control: Investors in the portfolio of mutual funds have no control over their investment funds. Professional fund managers manage and manage mutual funds.
  • Fees for Management: For their management services, investors must pay a charge to fund managers. The charges will increase investors’ expenses.
  • No Return Guarantee: There is no guarantee for investors’ returns from mutual funds. Market risk shall apply to investments in mutual funds.
  • Lock-in-period: Mutual funds will be locked for longer periods of 4 to 6 years. Investors cannot withdraw their funds prior to the maturity period of such investment.
  • About Divergence: The over-diversification of the portfolio is another disadvantage of investing in mutual funds. Portfolio diversification can spread the risk, but it cannot maximise the return. In other words, it is quite difficult to manage a very diverse Portfolio.

FAQs on Factors Affecting Investment Under Section 80C

Question 1.
What are the investments eligible under 80C?

Answer:
Some of the investments which can be made under Section 80C of the income tax act are PPF, NSC, NPS, Tax saver FDs, Post Office Term Deposit, ELSS, ULIP, Senior Citizens Savings Scheme, Sukanya Samridhi Account.

Question 2.
How can I save tax on 2020-21?

Answer:
The best way to save tax is to invest in various tax saving schemes such as Equity-Linked Saving Scheme, NPS, SSY and so on. But one must also be smart enough to know when to opt for the new regime.

Question 3.
Is it good to invest in Post office savings schemes?

Answer:
The rates available under post office savings schemes for various savings instruments vary between 4% and 9%. The fixed deposit interest ranges from 6 to 8%. The interest rate on the fixed deposit of the major banks is currently low in comparison with various saving schemes offered by the Post Office. However, the interest offered by the banks on PPF and SSY schemes is the same as the government determines their interest rate.

TDS on DIvidend on Section 194

TDS On Dividend Section 194 | Exemption Limit, TDS Rate

Leave a Comment / TDS / By / February 13, 2024

TDS on Dividend Section 194: Deducting tax at source is required of the principal officer of an Indian company or a corporation that has made the requisite arrangements for the declaration and payment of any dividend (including dividends on preference shares) to a shareholder who is a resident of India. On this page, let’s learn everything about TDS on Dividend Section 194k in detail.

TDS On Dividend Threshold Limit

If the dividend is paid by any method other than cash, there is no deduction up to Rs. 5000. So the dividend threshold limit on TDS is Rs. 5000/-

When TDS Under Section 194 Is Deducted?

Tax is deducted at the time of crediting the money to the payee’s account or at the time of payment, whichever comes first. This means before making a dividend payment, any TDS applicable must be deducted.

When TDS on Dividend Is Not Applicable?

TDS is not required to be deducted if the following conditions are met:

  • Form 15G or 15H is used to declare dividends covered by section 115-O.
  • The amount of dividend paid or projected to be paid to a shareholder in a financial year does not exceed Rs. 2,500, and it is paid by account payee cheque.
  • Any dividend due to LIC, GIC, or any of their subsidiaries or any other insurer in respect of shares in which they possess or have a full beneficial stake.

TDS Rate on Dividend Section 194

The tax will be deducted at a rate of 10%. (7.5 percent w.e.f. 14.05.2020 to 31.03.2021). TDS will be deducted at a rate of 20% if the income recipient does not provide his PAN to the deductor.

Details TDS Rate
PAN Card Provided 10%
No PAN Card Provided 20%

Also, under Section 197, an assessee might request no TDS or a lower rate of TDS from the assessing officer.

TDS on Dividend for Resident Shareholders

  • If the dividend amount exceeds INR 5,000, the tax rate is 10% (now decreased to 7.5%)
  • In the absence of a PAN, the tax rate is 20%.
  • If Form 15G/15H is submitted, there is no TDS.
  • TDS is not required for certain insurance companies/mutual funds and AIFs.

TDS on Dividend for Non-Resident Shareholders

  • TDS Rate: 20% plus applicable surcharges and cess, or DTAA rates, whichever is more beneficial.
  • Surcharges are limited to a maximum of 15%.
  • TRC must be secured with a statement of PPT, beneficial ownership, and the absence of PE/POEM in India.

Note: The above pointers are applicable only for non-resident shareholders other than FPI.

TDS on Dividend for FPI

The TDS rate for FPI’s is 20% along with applicable surcharges and cess.

Compliance Requirements Under TDS Dividends

  • In the event of any payments to non-residents, filing TDS returns and issuing TDS certificates (Form 15CA) is required.
  • If a payment to a non-resident exceeds INR 5 lakhs, a CA certificate on Form 15CB is required.

FAQ’s on TDS on Dividend Section 194

Question 1.
Is TDS is applicable to dividends?

Answer:
Yes, due to the elimination of the Dividend Distribution Tax (DDT), dividend income becomes taxable in the hands of investors, and tax deduction at source (TDS) becomes applicable on dividend payout under Section 194 of the Income Tax Act.

Question 2.
How can I claim TDS on dividends?

Answer:
Yes, the deductee can claim credit for the tax deducted on Form 16A when submitting an income tax return.

Question 3.
How can I claim TDS exemption in dividends every financial year?

Answer:
Form 15G can be submitted to the corporation or mutual fund paying the dividend by a domestic individual whose projected annual income is below the exemption limit to claim the TDS.

Invoice Terms And Conditions for Indian Business

Invoice Terms And Conditions for Indian Business | Rules, Sample Template

Leave a Comment / GST / By / February 13, 2024

Invoice Terms and Conditions: When you buy a service from a company, you are required to read and sign a document called the “Terms and Conditions.” The usage of the service between the customer and the seller is governed by this written piece of information, which is an important part of the agreement between the buyer and the seller. It has been accepted by law since it demonstrates the service’s dos and don’ts.

A document called “terms and conditions” provides information about the service and accurately explains the company’s rules. Some of the terms and conditions included in any invoice are payment policies, return policies, disclaimer policies, opt-out policies, and so on. On this page let’s learn everything about Invoice Terms and Conditions for Indian businesses in detail.

What Terms And Conditions Should Be On An Invoice?

The terms and conditions for Indian business vary from frim to frim. However, any invoice which has terms and conditions should be devised as follows:

  • Use of basic, uncomplicated, and polite language.
  • Including all of the firm’s and client’s important details.
  • Complete product or service information, including taxes and discounts.
  • The invoice number or reference number.
  • It’s important to mention the payment method.

Invoice Terms And Conditions Template India

Few GST invoice terms and conditions which needs to be included in Indian business are explained below:

  1. Sale Terms and Conditions
  2. Payment Type Terms and Conditions
  3. Advance Payment Terms and Conditions
  4. Warranty Terms and Conditions
  5. Return/Replacement Policy Terms And Conditions
  6. Late Payment Terms And Conditions
  7. Errors And Omissions Excepted

Sale Terms and Conditions

Any possibility of misunderstanding or conflict between the parties will be avoided by clearly defining the terms of sale. As a result, it is critical to include terms of sale such as cost, quantity, single unit cost, delivery date or time of service, and payment method or credit, if applicable.

This is especially important when dealing with cross-border transactions. Mentioning the “liability” of international taxes, tariffs, or any other legislation facilitates the payment procedure.

Payment Type Terms and Conditions

The service provider expects payment right after the goods or service is delivered. It’s also known as “Cash on Delivery” (COD) or “Payable on Receipt” (POR). The transaction or delivery is considered cancelled or invalid if the terms are not followed. It is critical to mention this term or condition, as the client may become displeased if it is not.

Advance Payment Terms and Conditions

It is one of the most common payment terms, in which the service provider requests payment in full or in part before delivering the goods or service. This is common in the service industry and is used to avoid non-payment after the sale. It is common practice to avoid incurring out-of-pocket costs in order to complete a project.

It should be included if handled by the business firm, and likewise, the customer should keep an eye out for such things listed on the contract.

When a client is given credit, there are terms for advance payment. It’s referred to as “Net 7” or “Net 30,” which means pay the balance owed within seven or thirty days of the sales bill’s date. The word informs the client of “when the payment is due.”

However, if the “term Net 7 or Net 30” is not clear to the customer, it can cause confusion. It is therefore recommended to represent in a simple way such as please make the payment within 7 days from Invoice date or so.

The following are some of the abbreviations used in payment terms and conditions:

1% 10 Net 30: If payment is received within 10 days, the customer will receive a 1% discount.
After 10 days, full payment is required, and the overall due date is 30 days from the invoice date.

  • CIA: Cash in Advance
  • COD: Cash on Delivery
  • Contra Payment: Customer payments are deducted from supplies purchased by the customer.
  • Net 10: Payment due in 10 days from invoice date
  • Net 30: Payment due in 30 days from invoice date
  • Net 60: Payment due in 60 days from invoice date
  • Net 7: Payment due in 7 days from invoice date
  • Net 90: Payment due in 90 days from invoice date
  • PIA: Payment in Advance

Warranty Terms and Conditions

The warranty terms of the goods or service must be clearly stated on the invoice, as well as the number of days after which the guarantee will no longer be valid. It should also state when the warranty is no longer valid and make it clear that a warranty does not entail a product return. The invoice must include the warranty terms and conditions. The following are some common warranty terms and conditions in Indian business:

  • Warranty Period
  • The person who provides the warranty.
  • The warranty is either provided by the seller or by the original manufacturer.
  • Information on how to contact us. If a third party should be contacted, provide their contact information.
    For example, in the electronics industry, the warranty is provided by the firm, and the company’s service centre should be called rather than the real vendor.
  • Is there a warrant on the premises or not? For example, if the goods are fixed, such as house fittings such as a refrigerator, the service person will come to the location or the person will have to deliver it to the service centre should be mentioned on Invoice terms and conditions.

Return/Replacement Policy Terms And Conditions

Any small business, especially one that sells goods, must have a return policy. The popularity of your product or service will be determined by the number of returns or refund policies. Simultaneously, you can protect yourself from false claims and demands.

These terms will also help you avoid potential losses from returns or refunds. The terms and conditions on an invoice must include points such as:

  • All products returned for refund/replacement or extended on credit must be returned in “saleable” condition with original packaging, according to some sample terms and conditions that can be incorporated into your retail invoice.
  • Restocking charges applied on return or replacement
  • If received damaged goods or items, what actions to be taken.
  • Number of days within which the product will be replaced

Late Payment Terms And Conditions

To improve the relationship between the supplier and the buyer, it is important to educate the client about late payments and the consequences that follow. It’s always good to include the terms and conditions related to late payment such as:

  • Reminding customer about the due date
  • Financial losses you’ve incurred due to the late payment
  • Payment time

Errors And Omissions Excepted

Errors and omissions excepted (E&OE) is a term used to limit legal liability for potentially incorrect or insufficient information provided in a contractual related document like a quotation or specification. It means that if an error or omission in the invoice is discovered later, it can be corrected with appropriate modifications.

FAQ’s on Retail Invoice Terms and Conditions India

Question 1.
Do invoices have terms and conditions?

Answer:
Yes, the Invoice must have terms and conditions.

Question 2.
What is the difference between terms and conditions?

Answer:
The difference between terms and conditions are: a term is a directive in the Purchase and Sale Agreement that describes the contract’s contents and a condition is a clause that must be waived or met by a certain date for the Agreement to take effect.

Question 3.
Write any 5 sample terms and conditions for invoices in Indian business?

Answer:
The 5 commonly used terms and conditions in invoices are:
1. Sale terms
2. Warranty-related Terms & conditions
3. Return & replacement related terms & condition
4. Payment Related Terms & Conditions
5. Delivery Related Terms & Conditions

GST on Freelancers

GST on Freelancers | Registration Procedure, Exemption Limit, Invoicing Rules

Leave a Comment / GST / By / February 6, 2024

GST on Freelancers: The Goods and Services Tax (GST) has impacted every area of India’s economy, whether it is a large company or a small or medium-sized business. Yes, freelancers are included under GST. however, they may or may not be required to pay GST.

Even if you are exempt from GST as a freelancer, it is important to understand how GST works because, if your business grows, you will be required to register under GST. In this article, let’s understand everything about Freelancers under GST in detail.

What is Freelancer Under GST?

A freelancer is someone who is not hired by anyone and is paid on a contract basis by a variety of clients to work on various short and long-term projects. To summarize, a freelancer is a type of service provider who does not have an employer-employee connection, and the GST laws for service providers will apply to freelancers as well.

GST Registration for Freelancers

Not all, but those freelancers falling under the following categories will have to register for GST as a freelancer:

  • When the turnover exceeds Rs. 20 Lakh
  • When the turnover reaches Rs. 10 lakhs which is applicable only for North-east states of India
  • For services covered by OIDAR (Online Information and Database Access and Retrieval)
  • In the case of service exports, any inter-state supply of goods/services necessitates GST registration. Under the IGST Act, export of services is referred to as “zero-rated supplies” and qualifies as an “inter-state supply

Note: The northeastern states under GST are listed below:

  1. Arunachal Pradesh
  2. Assam
  3. Himachal Pradesh
  4. Jammu & Kashmir
  5. Manipur
  6. Meghalaya
  7. Mizoram
  8. Nagaland
  9. Sikkim
  10. Tripura
  11. Uttarakhand

What is OIDAR Services under GST?

OIDAR services are defined as follows under the GST Act:

  • Internet advertising
  • Cloud service provisioning
  • Internet distribution of e-books, music, movies, software, and other intangibles
  • Providing data or information in the electronic form to anyone via a computer network, whether it be for retrieval or otherwise
  • Online gaming services

Should Freelancer Register as a Composite Dealer?

Any service provider is not permitted to use the composition system under the GST Act’s provisions.

A restaurant service provider, on the other hand, is an exception to this rule. As a result, a freelancer cannot choose the composition scheme.

GST Rates on Freelancers

Depending on the type of service provided, freelancers are subject to GST rates of 0%, 5%, 12%, 18%, and 28%. If there isn’t a fixed rate for the service you’re providing, you’ll have to charge your customers 18% GST. For the following services, the GST rate is 18%:

  1. Accounting/Bookkeeping services
  2. Customer care services
  3. Data entry services
  4. Designing services
  5. Domain and hosting services
  6. Language translation services
  7. Management/Consultancy services
  8. Marketing services
  9. Software/App Development services
  10. Technical services
  11. Voice over services

What are the Invoicing Rules for Freelancers?

A freelancer’s invoices should be GST-compliant. The invoice should include all relevant information, such as the service provider’s and recipient’s GSTINs, the SAC of services, the date, and the amount of the service delivered and so on.

Can Freelancer Claim the Input Tax Credit?

With an input tax credit (ITC), you can deduct the tax you already paid on purchases from the GST you pay on your sales. According to GST regulations, all regular taxpayers who are registered for GST can use ITC to reduce their GST payments.

Similarly, a freelancer who is registered can use the taxes paid on services that he has used to provide any service.

For example, for a wedding session, a freelance photographer charges Rs 2,50,000 and a printing service charges Rs 50,000. Refer to the following table for details.

Details Rupees
Photography Services Provided Rs. 2,50,000
GST on O/P Services (18%) Rs. 45,000
Total Amount Rs. 2,95,000
Staffing Charges Paid Rs.50,000
GST on Service Received (18%) Rs. 9,000
Total Payment Rs. 59,000

NET Amount of GST Payable by the Photographer: The net GST payable in this case will be as follows:

GST to be paid on O/P Services Rs. 45,000
GST already paid on Service Received (Input Tax) Rs. 9000
NET GST Payable Rs. 36,000

Freelancers – Documents Required for GST Registration

The list of documents required for GST Registration is given below:

  • Passport size photograph
  • Identity and address proof: a copy of your PAN and Aadhaar card
  • A recent bank statement or a cancelled cheque
  • Electronic signature of the registrar
  • Electricity/Telephone/LPG Bill
  • The agreement for the rental of office space
  • Certificate of no objection

GST Returns for Freelancers

If a freelancer is registered as a normal taxable person, he will be required to file 25 GST returns each year which includes two monthly returns and one yearly return.

The officials of GST can easily trace a freelancer who doesn’t register and collect GST. Because if the TDS is deducted from an individuals payment (by the person making payment to him) or through payments in his bank accounts, the department will still be notified of his turnover. It’s difficult to avoid the gaze of the law because all banks accounts are linked to Aadhar and PAN numbers.

Freelancers – Penalty for Late Filing GST Returns

The officials of GST will also impose a penalty for the individuals who late file the GST returns. The penalty for late filing the GST returns are given below:

  • An Rs.200 late fee will be charged.
  • There will also be an annual interest rate of 18%. The taxpayer will determine this based on the amount of tax to be paid.
  • If the tax is not paid, a minimum penalty of Rs.10,000 would be imposed.
  • The highest penalty for unpaid tax is 10% of the tax full amount.

Freelancers Claiming GST Refund

If you export services, the GST law allows you to receive a GST refund into your bank account for the following reasons:

  • GST charged and paid to the government at the time of export of services on the input services/goods utilised to provide such export of service.

The following are the most important requirements for claiming GST refunds:

  • The FIRC is charged for proving the export of services.
  • The reimbursement request must be submitted within 24 months of the month in which the services were exported.

FAQs on GST on Freelancers

Question 1.
Do freelancers need to pay GST?

Answer:
Yes, those freelancers, whose threshold limit is exceeding Rs. 20 Lakhs will have to pay 18% of GST on income earned from the freelanced services.

Question 2.
Do individual consultants need GST?

Answer:
Yes, the individual consultants will be needed to register for GST as a service provider if the suppliers annual turnover exceeds Rs.20 lakh (not applicable for the North-Eastern States) or if the suppliers turnover exceeds Rs.10 lakh if they belong to North-Eastern states.

Question 3.
What is the GST exemption limit for freelancers?

Answer:
The exemption limit has been increased to INR 40 lakhs per year in the recent declaration by the Finance Ministry. When freelancers earn more than INR 40 lakhs per year, they must register for GST. The exemption for north-eastern and hilly states has been increased to INR 20 lakhs.

Steps by Step Process to Apply for Import Export Code Online (IEC)

Steps by Step Process to Apply for Import Export Code Online (IEC) | Documents & Fees

Leave a Comment / Finance / By / February 6, 2024

Steps by Step Process to Apply for Import Export Code Online (IEC): Import Export Code is also known as IEC, is a 10 digit unique code that is assigned by the officials of the Director-General of Foreign Trade (DFGT) for the individuals who are involved in import or export products and services from other countries. Usually, the Import Export Code is assigned to individuals’ PAN numbers or organisations PAN numbers for the purpose of importing/exporting any product, good, or service, as well as to qualify for many Export Development Council or DGFT incentives.

To obtain an IEC Code, one must submit all the documents and follow the appropriate procedures so that the Indian government may verify one’s identity as a person or a business. In this article, let’s understand everything about how to apply for IEC code online. Read on to find more.

What Are The Documents Required for IEC Code?

Before getting into the details of the IEC online application process, one will have to keep the necessary documents handy to process the application form hassle-free. The documents required for applying Import-Export Code online are given below:

  • A copy of a person’s PAN card or an organisations PAN card, or a company’s PAN card
  • Voter ID or Aadhar card, or passport copy of an individual
  • Cancelled cheque copies of individuals or firms current bank accounts
  • Copy of the premise or a copy of the rental agreement, or a copy of the electric bill
  • A self-addressed envelope for registered mail delivery of the IEC certificate

How To Register for IEC (Import/Export Code) Online?

IEC Registration Steps: Import Export Code is a 14 step registration process, and the detailed step by step on how to register for IEC has been explained below:

Step 1: Visiting DFGT Website

  • Visit the official website of the Directorate General of Foreign Trade – Click Here.
  • The DFGT page will look like the following image.
  • On the homepage, you will find so many options such as IEC FAQs, Apply for IEC, Update IEC, Link IEC and so on.

IEC Registartion Process

Step 2: Click on the button “Apply for IEC”

  • On the homepage, move to the section “Register for your IEC“.
  • Here you will find so many options such as “IEC Help & FAQs, Apply for IEC, Link Your IEC, Update IEC“.
  • Click on “Apply for IEC“, as shown in the image below.

IEC Registartion Process

Step 3: Select Register Type

  • As soon as you click on Apply for IEC, a new page will open.
  • Here navigate to “Register“.
  • Now click on “Register User As” and select the Register Type from any of the 4 options, such as:
    1. Importer/Exporter
    2. Certifying Authority – CA, CMA, CS, CE
    3. Technical Authorities
    4. Foreign Importer Exporter

Import Export Code registartion process

Step 4: Enter Basic Details For IEC Registration Online Process

Now enter the basic details such as:

  • First Name
  • Last Name
  • Email ID
  • Mobile Number
  • Pincode
  • District
  • State
  • City

how to apply for IEC online

Step 5: Request for OTP – One Time Password

  • After entering the basic details, enter the Captcha Code as shown on the screen. If the Captcha Code is not visible, refresh the code.
  • Now check the box which reads “By registering you agree to our terms & conditions“.
  • Click on the “Send OTP” button.

how to apply for IEC online
Step 6: Verification of OTP for IEC Online Registration

  • As soon you click on “Send OTP“, an OTP will be sent to your registered mobile number and Email ID.
  • Now verify your basic details as displayed on the screen.
  • Enter the OTP you have received to your Mobile Phone and Email ID, as shown in the image below.
  • Click on “Register“

iec registartion
Step 7: Login into the IEC Dashboard

Once you click on the “Register” button, temporary login credentials will be sent to registered devices. Now login with the help of those credentials.

iec login
Once you’re logged in, go to your dashboard and update the new password.

Step 8: Apply for IEC

  • As soon as you “Log in“, click on “My Dashboard” and select “Importer Exporter Code“.
  • Now Click on “Apply for IEC“.

apply for IEC

Step 9: Filling the IEC Application Form & Uploading Documents

  • A new page will open. Click on “Start Fresh Application“.
  • In the General Information section, fill in the blanks. A red asterisk (*) has been placed in front of all mandatory fields.
  • Note the Draft will only be saved if all of the mandatory fields in the “Basic Details” and “Firm Address Details” sections are completed.  

application form of IEC
Fill in all of the relevant information for any Director, Proprietor, Partner, Karta, or Managing Trustee. All needed information, such as the PAN number and mobile number, must belong to the individual whose information you are filling out. Click “ADD” once you’ve filled out all of the appropriate options.

Upload necessary documents in the required fields.

Step 10: Enter Bank Details in IEC Registration Form

Enter Account Number, Account Holder Name, IFSC code, Bank Name, Branch Name, and evidence (Canceled Bank Cheque / Bank Passbook) in the Bank Account section.

Note:

  • The Account Holder’s name must match the Firm’s name.
  • The bank account information will be verified using the Public Financial Management System (PFMS).

Bank details of IEC
Step 11: Declaration for IEC Registration

  • In the “Other Details (Exports Sectors preferred)” section, fill in the boxes. Select the reason for applying for IEC or where this IEC will be used by answering the question “Why are you applying for IEC or where will this IEC be used?”
  • Accept the terms and conditions by checking the box under-declaration and entering your address.

IEC Signup
Step 12: IEC Digital Signature

  • Check the Application Summary and then sign the application using a digital token or Aadhaar by clicking the Sign button.

IEC Digital Signature
Step 13: Process the IEC Payment

Confirm and complete the payment for the application. You will be transferred to the Payment Gateway for payment (Bharatkosh). The fee for applying for an IEC is Rs 500. After a successful payment, the user will be transferred to the DGFT website, where the receipt will be shown and can be downloaded.

If a payment fails, please wait an hour for the money to be reflected by the Payment Gateway (BharatKosh)

iec payment details

Step 14: Reviewing Successful IEC Application

The IEC Certificate will be sent to the user’s email address (as used when applying for IEC), and if necessary, the IEC Certificate can be downloaded by logging into the DGFT website and using the “Print Certificate” feature in the “Manage IEC” section.

The IEC must be communicated to CBIC, and the transmission status may be found by going to “My IEC” and looking at the “CBIC Transmission Status” on the IEC Status bar.

iec registration sucessfull iec receipt

IEC Registration Fees

The import-export license registration fees is tabulated below:

Details Fees
Import Export Fees for Aayaat Niryaat Form no. 2A 0
IEC Fees for Filing at DGFT 0
Professional Fees for IEC Code
 Rs. 999
Govt. Fees for IEC Code
 Rs. 500

Sample Format of IEC Certificate

The sample format of the Import Export Code certificate will look like the following image.
Export-Import-Code-Sample

FAQs on IEC Registration Process

Question 1.
What are the government fees for the IEC code in India?

Answer:
According to the latest notification, the application fee for an IEC code is Rs 500, which can be paid online using e-wallets, Net Banking, Credit or Debit Cards. And the government or official fees for obtaining an IEC Code in India are Rs. 500.

Question 2.
What is IEC registration?

Answer:
Import Export Code (IEC) is a 10-digit code used by businesses and individuals to import and export products and services. The DGFT (Director General of Foreign Trade), Ministry of Commerce and Industries, Government of India, issues this code.

Question 3.
Which DSC is required for the IEC code?

Answer:
If you want to get an Import or Export License in India, you’ll need a Class 3 DSC. You’ll also need a class 3 DSC if you want to register the business or licence in the name of a single representative.

TDS Payment And Interest On Late Payment

TDS Payment And Interest On Late Payment | Due Dates, Late Filing Fees

Leave a Comment / TDS / By / February 6, 2024

TDS Payment And Interest On Late Payment: An employer’s TDS compliance requirements do not end with the deduction of taxes from salary. It is important for an employer will have to file quarterly TDS returns for tax deducted from pay. TDS Returns are quarterly statements provided by deductors to the Income Tax (IT) department. It keeps track of all TDS-related transactions over the course of a quarter.

The filing of TDS returns is not as simple as it appears. The IRS may issue a notice if there is any omission or misstatement of information. In this article, let’s understand how TDS payment is made and what is the interest attracted for late paying of TDS.

TDS Return Filing Due Date for FY 2020-21

The TDS payment due date for March 2021 has been extended due to the spread of the COVID-19 situation in the country. The extended TDS return due dates are tabulated below:

Month of Deduction Quarter Ending The due date for all deductors to pay TDS via challan(including govt. deductors) Due Date for filing of Return for the financial year 2020-21 for all the deductors
April 30th June 7th May 31st March 2021
May 7th June
June 7th July
July 30th September 7th August 31st March 2021
August 7th September
September 7th October
October 31st December 7th November 31st Jan 2021
November 7th December
December 7th Jan
January 31st March 7th Feb 31st May 2021
February 7th March
March 7th April (for govt. deductors)
30th April (for other deductors)

How To Pay TDS Online?

Follow the steps as listed below to pay TDS through the e-tax payment system:

  • Step 1: Visit the official website of ePayment for TIN – Click Here
  • Step 2: Move to the section “TDS/TCS” and click on “Proceed“.

tin website for tds payment

  • Step 3: A new page will open. Now enter all the details such as Tax Applicable (Tax Deducted/Collected At Source From), Payment Type, Mode of Payment, Tax Deduction Account No, Address and other details.
  • Step 4: A confirmation page would appear when the data is submitted. Now the taxpayer should validate the information given in the challan.
  • Step 5: Once the information is validated by the taxpayer, the page will be redirected to the bank’s net-banking page, where the payment will be made, as specified in the challan.
  • Step 6: Now the taxpayer will have to visit his/her bank’s net-banking page using the user-id and password provided by the bank to make the TDS payment.
  • Step 7: A challan counterfoil including the Challan Identification Number (CIN), payment details, and the bank name via which the e-payment was made would be provided after a successful TDS Payment. The counterfoil will act as evidence for the TDS payment made.
  • Step 8: After a week of making the TDS payment using the CIN produced, you can check the status of the challan via the NSDL-TIN website’s “Challan Status Inquiry.”

Late Fees for TDS Return

One will be fined Rs 200 each day (two hundred) till your TDS return is filed under Section 234E as TDS late payment fee. That is one will have to pay this fine for each day you are late until the fine equals the amount you are required to pay as TDS.

TDS Late Fee Payment Online Example:

If your payable TDS amount is Rs 5000 on May 13th, and you file your Q1 return on November 17th instead of July 31st. Counting to the 17th of November, the delay is 105 days.

So Rs 200 x 105 days = Rs 21,000;

But while this is larger than Rs 5000, you will only have to pay Rs 5000 as a late filing fee. In addition, you must pay interest for late TDS deposits.

What Is Interest On The Late Deduction Of TDS?

You must pay interest under Section 201(1A) if you fail to deposit TDS after deduction on time. From the date TDS was deducted to the actual date of deposit, interest is calculated at a rate of 1.5% per month. It’s important to note that this is should be determined on a monthly basis rather than by the number of days, thus a partial month counts as a full month.

Section Default Nature Due to COVID-19, interest subject to TDS/TCS amount has been reduced Period for which interest is to be paid
201(1A)(i) Tax is not deducted at source, in full or in part. 1% per month From the time when taxes are deductible until the time when they are really deducted
201(1A)(ii) Non-payment of tax, in whole or in part, after deduction of tax 1.5% per month
Only for due dates between March 20 and June 29, 2020, 0.75% per month or part of a month will be charged for remittance delays beyond the due date.
If the balance is not paid before the 30th of June, a standard interest of 1.5% will be charged.		 From the date of deduction to the date of payment

TDS Payment Penalty

As a consequence of the lockdown, the government has waived all penalty provisions for the period between March 20th and June 30th, 2020, in accordance with Ordinance 2020.

However, a penalty equal to the amount that was deducted/collected or remitted may be levied within the normal course of business.

Prosecution of Section 276B

If a person fails to pay to the Central Government’s credit: he shall be punished with rigorous imprisonment for a term not less than three months but not more than seven years and a fine for the tax deducted at source as required by or under the requirements of Chapter XVII-B.

Penalty for Late Filing of TDS Return

  1. Fee for late filing (Section 234E): Until the TDS Return is filed, the deductor must pay INR 200. The penalty, however, should not exceed the amount of TDS for which a statement filing was necessary.
  2. Penalties (Section 271H): An individual who fails to file the TDS statement by the due date shall be subject to a minimum penalty of INR 10,000, which may be increased to INR 1,000,000 under this section. This penalty is in addition to the late filing charge imposed by Section 234E.

Note: Section 271H will also cover the cases of incorrect TDS Return Filing.

No Penalty Under Section 271H For TDS

If an individual meets the following conditions, no penalty under Section 271H will be imposed in the case of a late TDS/TCS return filing:

  • Late TDS return filing fees and interest (if any) to be paid to the credit of the Government
  • TDS/TCS return to be filed before the expiry of a one-year period from the stated due date
  • TDS/TCS return to be filed before the expiration of a one-year period from the specified due date

FAQs On TDS Interest And Penalty

Question 1.
What is the interest for late payment of TDS?

Answer:
The interest rate will be calculated at 1.5% per month from the date of the deduction of TDS on the current deposit date.

Question 2.
Is there any penalty for the revised TDS return?

Answer:
Yes, a minimum of Rs.10,000 and a maximum of Rs.1.00,000 penalty may be levied if the deductor/collector files the wrong TDS/TCS return.

Question 3.
What is the late filing fee for payment of TDS?

Answer:
Until the TDS Return is filed, the deductor must pay INR 200. However, the TDS late filing fee should not exceed the actual TDS amount to be filed.

Time of Taxation GST

Time of Taxation GST | Time of Supply of Goods Under GST

Leave a Comment / GST / By / February 6, 2024

Time of Taxation GST: The point at which goods or services are regarded to have been supplied is referred to as the point of taxation. We can determine the tax rate, value, and due dates for payment of taxes at the point of taxation. The point of taxation, i.e., the requirement to pay CGST / SGST, will emerge for goods and services under GST at the time of supply as determined. Time of supply for products and time of supply for services are treated separately. In this article, let’s understand everything about the Time of taxation under GST. Read on to find out more.

What is Time of Supply in GST?

The point in time when goods/services are considered supplied is referred to as the time of supply. Knowing the ‘time’ assists the seller in determining the tax payment due date. At the time of supply, CGST/SGST or IGST must be paid. Goods and services each have their own foundation for determining when they will be delivered.

Note: Section 148 of the CGST Act of 2017 confers powers on the Government to notify certain classes of registered persons and the special procedures to be followed, including the GST registration, returns, payment of taxes or administration of these people (on the recommendation of the GST Council).

How Time of Supply is Determined?

The earliest of the following dates shall determine the time of supply of goods:

  • the date of invoice issuance (or the last day by which invoice should have been issuance)
    OR
  • the date of payment receipt -whichever is earlier.

If the supplier receives an amount in excess of the invoice amount of up to Rs. 1000, the time of supply for the extra amount is the date of invoice issue (at the option of the supplier). Here for (a), the supply is presumed to have been made to the extent that the invoice or payment covers it (as the case may be).

Whereas for (b), the date of receipt of payment shall be the earlier of:

  1. the date on which he entered the payment in his books;
  2. the date on which he entered the payment in his books;
  3. the date on which he entered the payment in his books;
  4. the date on which he or when the payment is credited to his bank account.

Let’s now understand the time of supply with an example:

Example:

  • (a) invoice date: 28 June 2021
  • (b) payment date: 10 June 2021
  • (c) date when supplier entered payment in books: 11 July 2021.

Therefore, the deadline for supply is 28 June 2021.

Time of Supply Under Reverse Charge

The recipient of goods/services, rather than the seller, are responsible for paying the tax. The time of supply in the case of reverse charge should be the earliest of the following dates:

  • (a) the date of receipt of goods
    OR
  • (b) the date of payment
    OR
  • (c) the date immediately succeeding THIRTY days from the date of the supplier’s invoice issuing (60 days for services)

If the time of provision under (a), (b), or (c) cannot be determined, the time of supply should be the date of entry in the recipient’s books of account.

The date of payment shall be the earlier of:

  • (a) The date on which the recipient recorded the payment in his books; or
  • (b) The date on which the recipient entered the payment in his books.
    OR
  • (b) the date on which his bank account is debited for the payment.

Time of Supply Under Reverse Charge Example

Now let’s understand time of supply under reverse charge with an example:

  • (a) Date of receipt of goods: May 15, 2021
  • (b) Date of payment: July 15, 2021
  • (c) Date of invoice: June 1, 2021
  • (d) Date of entry in receiver’s books: May 18, 2021

15th May 2021 is the deadline for products delivery. If the time of supply under (a), (b), or (c) could not be identified for some reason, the date of entrance would be the 18th of May 2021.

Time of Supply for Vouchers

If the supply of vouchers can be established at that point, the time of supply is

  • (a) the date of issuing of the voucher
    OR
  • (b) the date of redemption of the voucher in all other situations

When Time of Supply Cannot Be Determined

If the above provisions cannot be used to determine the time of supply, it will be

  • (a) the date on which a periodic return must be filed or
  • (b) the date on which the CGST/SGST is paid, in any case.

The tax collection event in the GST regime will be the earliest of the dates listed above. The different events that trigger the tax levy, such as issuing an invoice/making a payment in the case of a provision of goods/services or the completion of an event in the case of a supply of service, confirm that the government wants to collect tax as soon as possible. The ‘time’ of supply is determined by a number of factors.

As a result, monitoring and reconciling revenue based on financials and GST will be difficult for enterprises.

FAQ’s on Time of Supply of Goods under GST

Question 1.
What is the time limit for issue of invoice under GST for goods?

Answer:
An invoice must be generated before or after the supply of services. However, if the invoice is produced after the service has been provided, it must be done within the required time frame of 30 days from the date of service supply, according to invoicing guidelines.

Question 2.
What is the time of supply of service for the supply of taxable services up to Rs 1000 in excess of the amount indicated in the taxable invoice?

Answer:
If a taxable service provider gets an amount up to Rs. 1000 in excess of the invoice amount, the time of supply for the extra amount is the date of invoice issue (at the option of the supplier).

Question 3.
What is time of supply of goods in case of forward charge?

Answer:
A forward charge is a tax levy that the provider is required to collect and remit to the credit of the federal or state government. The advance charge mechanism is used to levy and collect tax on most transactions under the present tax framework (also called Direct Charge).

Question 4.
What is the point of taxation under GST for services?

Answer:
The point at which goods or services are regarded to have been rendered is referred to as the point of taxation. The point of taxation allows us to calculate the tax rate, value, and payment deadlines.

GST Accounting Entries for Interstate, Intrastate, Imported Goods Asset

GST Accounting Entries for Interstate, Intrastate, Imported Goods Asset

Leave a Comment / GST / By / February 6, 2024

GST Accounting Entries: The goods and services tax which is also known as GST has replaced the majority of indirect taxes. It has resulted in the “One Nation, One Tax” system. In comparison to the previous VAT and excise systems, GST accounting is simpler.

However, GST accounting entries in the books of accounts must be understood and passed on a regular basis. Thus any individual who has done GST registration online and falls under registered taxable person is required to preserve and maintain books of account for five years. It’s important to confirm that there are few or no discrepancies between the books of accounts and GST returns like GSTR-1, GSTR-2B, and GSTR-3B. It would also help in the proper and timely reconciliation of yearly accounts in preparation for GSTR-9 filing for the financial year. In this article, let’s understand everything about Accounting entries under GST in detail.

VAT and Excise Accounting

Earlier Excise, VAT, CST, and service tax all required their own set of accounts. And also the input tax credit could not be claimed for taxes set by the central government and taxes levied by the states. As a result, multiple ledger accounts were required.

To overcome this, GST was introduced. GST has been able to eliminate the requirement for several ledger accounts, reducing the number to just a few. Apart from accounts like purchase, sales, and stock, here’s a list of the few ledger accounts that businesses required to keep under the previous regime:

  1. Excise Payable A/C (for manufacturers)
  2. CENVAT credit A/C (for manufacturers)
  3. Output VAT A/C
  4. Input VAT A/C
  5. Input Service Tax A/C
  6. Output Service tax A/C

Accounting Under GST Regime

Indirect taxes such as excise, VAT, and service tax, are now combined into a single account under GST. Now let’s consider Mr X is a person who is a trader, then he will have to keep the following accounts expect Purchase details, Sales and Stocks for each GST Identification Number (GSTIN):

  • Input Cess A/C
  • Input CGST A/C
  • Input IGST A/C
  • Input SGST A/C
  • Output Cess A/C
  • Output CGST A/C
  • Output IGST A/C
  • Output SGST A/C
  • Electronic Cash Ledger (to be kept up to date on the government’s GST portal in order to deposit and pay GST in cash)

How To Pass Accounting Entries Under GST?

Let’s understand how to pass GST accounting entries with the help of examples.

GST Accounting Entries for Intrastate Transactions

The GST accounting entries for intrastate transactions represent the transactions within the state. Let’s understand how to pass accounting entries under GST under Intrastate transactions within an example.

  • Mr. A spent Rs. 2,00,000 on local purchases (intrastate).
  • In the same state, he sold them for Rs. 3,00,000.
  • He paid Rs. 10,000 in legal consulting fees.
  • He spent Rs. 40,000 on furniture for his office from XYZ Furniture (assuming CGST of 8% and SGST of 8%).
Details Debit (Amount in Rupees) Credit (Amount in Rupees)
Purchase A/C Dr.  300,000
Input IGST A/C Dr.  48,000
           To Creditors A/C  348,000
Debtors A/C Dr.  348,000
             To Sales A/C  300,000
             To Output CGST A/C  24,000
             To Output SGST A/C  24,000
Debtors A/C Dr.  232,000
             To Sales A/C  200,000
             To Output IGST A/C  32,000
Telephone Expenses A/C ..Dr.  10,000
Input CGST A/C ..Dr.  800
Input SGST A/C ..Dr.  800
             To Bank A/C  11,600
Office Equipment A/C…Dr.  24,000
Input CGST A/C Dr.  1,920
Input SGST A/C Dr.  1,920
             To ABC Furniture Shop A/C  27,840
Setoff against CGST output
Output CGST Dr. 18,720
           To Input CGST A/C 2,720
           To Input IGST A/C 16,000
Setoff against SGST output
Output SGST Dr. 2,720
           To Input SGST A/C 2,720
Setoff against IGST output
Output IGST Dr. 32,000
           To Input IGST A/C 32,000
Final payment
Output CGST A/C Dr. 5,280
Output SGST A/C Dr. 21,280
             To Electronic Cash Ledger A/C 26,560
1047440 1047440
  • CGST = 16,000+800+3,200 = Rs. 20,000 Total Input
  • SGST = 16,000+800+3,200 = Rs. 20,000 Total Input
  • CGST total output = 24,000
  • SGST total output = 24,000
  • As a result, the net CGST payment is 24,000-20,000 = 4,000.
  • SGST payable net = 24,000 – 20,000 = 4,000
  • Thus, Rs. 48,000 output liability has been balanced by an Rs. 40,000 input tax credit.
  • As a result, the CGST net tax liability is Rs. 4,000 and the SGST net tax liability is Rs. 4,000.

GST Accounting Entries for Inter-State Transactions

Mr. X bought products worth Rs. 3,00,000 from outside the country. He made a local sale for Rs. 3,00,000. He made a profit of Rs.2,00,000 outside of the state. He paid his Rs. 10,000 phone charge. He paid Rs. 24,000 (locally) for an air conditioner for his office, assuming CGST of 8% and SGST of 8%.

Particulars Debit Amount in Rupees Credit Amount in Rupees
Purchase A/C Dr.  300,000
Input IGST A/C Dr.  48,000
           To Creditors A/C  348,000
Debtors A/C Dr.  348,000
             To Sales A/C  300,000
             To Output CGST A/C  24,000
             To Output SGST A/C  24,000
Debtors A/C Dr.  232,000
             To Sales A/C  200,000
             To Output IGST A/C  32,000
Telephone Expenses A/C ..Dr.  10,000
Input CGST A/C ..Dr.  800
Input SGST A/C ..Dr.  800
             To Bank A/C  11,600
Office Equipment A/C…Dr.  24,000
Input CGST A/C Dr.  1,920
Input SGST A/C Dr.  1,920
             To ABC Furniture Shop A/C  27,840
Setoff against CGST output
Output CGST Dr. 18,720
           To Input CGST A/C 2,720
           To Input IGST A/C 16,000
Setoff against SGST output
Output SGST Dr. 2,720
           To Input SGST A/C 2,720
Setoff against IGST output
Output IGST Dr. 32,000
           To Input IGST A/C 32,000
Final payment
Output CGST A/C Dr. 5,280
Output SGST A/C Dr. 21,280
             To Electronic Cash Ledger A/C 26,560
1047440 1047440
  • CGST input total =800+1920=2,720
  • CGST output total = 24,000
  • SGST input total =800+1920=2,720
  • SGST output total = 24,000
  • Input of IGST numbers 48,000
  • IGST output total = 32,000

Any IGST credit will be used to balance IGST first, then CGST. So, out of the entire input IGST of Rs. 48,000, it will first be set off totally against IGST. Then deduct Rs.16,000 from the total to account for CGST. Only Rs. 26,560 of the total liability of Rs. 80,000 is payable.

Particulars CGST SGST IGST
Output liability 24,000 24,000 32,000
Less: Input tax credit
   CGST (Telephone+Office) 2,720
   SGST (Telephone+Office) 2,720
   IGST 16,000 32,000
Amount payable 5,280 21,280 NIL

Entry for Purchase of Goods under GST

The example of booking input under GST is explained below:

Sr. No. Particulars Debit Amount in Rupees Credit Amount in Rupees
If purchases are made within the state (Intra State)
1 Purchase A/C Dr.  200,000
Input CGST A/C Dr.  16,000
Input SGST A/C …Dr.  16,000
              To Creditors or Cash BankA/C  232,000
If purchases are made from other states (Inter-State)
2 Purchase A/C Dr.  300,000
Input IGST A/C Dr.  48,000
              To Creditors or Cash BankA/C  348,000
If purchases are  made from Outside India (Import)
3 Purchase A/C Dr.  200,000
Input IGST A/C Dr.  32,000
              To Creditors or Cash BankA/C  200,000
              To IGST Payable A/C.  32,000
(Reverse charge mechanism applies here)

Entry for Sale of Goods

The example of booking Output liability under GST is explained below:

Sr. No. Particulars Debit Amount in Rupees Credit Amount in Rupees
If Sales are made within the state (Intra State) 
1 Debtors  A/C.or Cash/Bank  A/C.–Dr 216,000
To Sales  A/C. ————— Cr.  200,000
To Output CGST  A/C. —– Cr.  16,000
To Output SGST  A/C.  —– Cr.  16,000
If sales are made from other states (Inter-State) 
2 Debtors  A/C.or Cash/Bank  A/C.–Dr 232,000
To Sales  A/C. ————— Cr.  200,000
To Output IGST  A/C. —– Cr.  32,000
If sales are made outside the Country (Export) 
3 Debtors  A/C. or Cash/Bank  A/C. -Dr. 200,000
To Sales (Export)  A/C. ————-Cr.  200,000
(Export sale is Exempt)

Example of GST Entry for Expenditure Incurred for Business Purpose

Sr. No. Particulars Debit Amount in Rupees
 Credit Amount in Rupees
If any expenditures are incurred within the state (Intra State)
1 Expenditure  A/C Dr.  200,000
Input CGST A/C Dr.  16,000
Input SGST A/C …Dr.  16,000
              To Creditors or Cash BankA/C  232,000
If expenditures are incurred from other states (Inter-State)
2 Expenditure  A/C Dr.  300,000
Input IGST A/C Dr.  48,000
              To Creditors or Cash BankA/C  348,000
If expenditures are incurred from Outside India (Import)
3 Expenditure  A/C Dr.  200,000
Input IGST A/C Dr.  32,000
              To Creditors or Cash BankA/C  200,000
              To IGST Payable A/C.  32,000
(Reverse charge mechanism applies here)

Examples Of GST Entry for Purchase Of Asset

Sr. No. Particulars Debit Amount in Rupees Credit Amount in Rupees
If an asset is purchased within the state
1 Asset  A/C Dr.  200,000
Input CGST A/C Dr.  16,000
Input SGST A/C …Dr.  16,000
              To Creditors or Cash BankA/C  232,000
If an asset is purchased from other states (Inter-State)
2 Asset  A/C Dr.  300,000
Input IGST A/C Dr.  48,000
              To Creditors or Cash BankA/C  348,000
If an asset is purchased  from another Country  (Import)
3 Asset  A/C Dr.  200,000
Input IGST A/C Dr.  32,000
              To Creditors or Cash BankA/C  200,000
              To IGST Payable A/C.  32,000
(Reverse charge mechanism applies here)

Entry for Set Off & Payment GST

To set off & Payment Output SGST 

Output SGST A/C. ——Dr.

To Input SGST A/C. ——Cr.

To Input IGST A/C.** ——- Cr.

To Electronic Cash ledger A/C. ——Cr.

(** Input IGST credit is allowed for setting off Output SGST liability. But after setting of Output IGST liability, Output CGST liability. )

To set off & Payment Output CGST 

Output CGST A/C. ——Dr.

To Input CGST A/C. —– Cr.

To Input IGST A/C.** ——- Cr.

To Electronic Cash ledger A/C. ——Cr.

(** Input IGST credit is allowed for setting off Output CGST liability. But after setting Output IGST liability. )

To set off & Payment Output IGST 

Output IGST A/C. ——Dr.

To Input IGST A/C. —– Cr.

To Electronic Cash ledger A/C. —– Cr.

GST Entry When GST TDS has been Deducted along with Income Tax TDS

To book Income (In case of Intrastate Transaction)

Debtor/Cash A/c. ———-Dr.

Income Tax TDS A/c. ——Dr.

CGST TDS A/c.  ————-Dr.

SGST TDS A/c.   ————-Dr.

To Income A/c. ————-Cr.

To CGST A/c.  —————Cr.

To SGST A/c.  —————Cr.

To book Income (In case of Interstate Transaction)

Debtor/Cash A/c. ———-Dr.

Income Tax TDS A/c. ——Dr.

IGST TDS A/c.  ————-Dr.

To Income A/c. ————-Cr.

To IGST A/c.  —————Cr.

Period of Retention of Accounts

From the due date of submitting the Annual Return for the relevant year, every registered taxable person is required to preserve and maintain books of account for five years. The taxpayer must reconcile his or her books of accounts with the GST returns filed during the financial year at the end of the fiscal year. Any differences discovered when comparing data between books and GST returns must be corrected in books or disclosed in subsequent GST returns.

Leave Travel Concession Section 10(5)

Leave Travel Concession Under Section 10(5) of Income Tax Act

Leave a Comment / Income Tax / By / February 3, 2024

Leave Travel Concession Section 10(5): The leave travel allowance shall be an allowance granted by an employer for traveling with or without a family in India to his employee. Under certain conditions under Section 10(5) and Rule 2B, the amount received as LTA shall be tax-free under the Income Tax. LTA is sometimes also referred to as leave travel concession (LTC).

Leave Travel Concession Rules

There are certain LTC -Leave Travel Concession rules which are set by the officials of Income Tax and they are:

  • An exemption from the maximum limits is permitted to the amount paid for travel via air, rail, or bus. The amount paid for other costs like hotel rooms, food, etc. is not permitted.
  • The maximum deduction is the allowance received actually.
  • Leave Travel Concession is not applicable to accommodation or food costs.
  • For two journeys made in a 4 calendar year block the LTA exemption may be claimed (Jan to Dec). This 4-year block is currently between 2014 and 2017. If there is not a claim of two exemptions in a 4-year block then the first year of the following block may receive one exemption.
  • Allowance for international travel expenses is not permitted.
  • Allowance is permitted only for costs incurred in travelling with himself or family members. There is no exemption if a person pays for the trip of friends and/or distant relatives.
  • An exemption is only permitted if the applicant travels as well. Where only families travel, deductions are not permitted.
  • Only two surviving children are exempted from this. In the following two cases, however, more than two children are exempted from this requirement.
    • All children who have survived born before 1 October 1998
    • After the first child, there are multiple births
  • If the former employer receives such allowance following the retirement or termination of service, LTA exemption may also be taken.

Maximum Deduction Under Leave Travel Concession

The concession amount in this section does not in any case exceed the amount actually incurred.

  • Airways Travel: The airfare is exempt from the shortest route or from the smallest amount spent.
  • Travel by Rail: First-class fare on the shorter route or less would be exempted.
  • The location and source of the trip are connected by rail, but the journey is completed by a different mode of transport.
  • The travel locations are neither partially nor fully connected by rail but are connected by an additional system of public transport.
  • Neither the source nor the destination is connected via rail or any other public transport system.

LTC or Leave Travel Concession Cash Voucher Scheme

In October 2020, Finance Minister N.Sitharaman announced the LTC Cash voucher scheme to boost requests in the Indian economy, which was in disorder. During the 2021 Union Budget, it was formally approved. The scheme allows you to claim a tax exemption from LTC without travel if:

  • Customers can purchase goods and services worth at least 3 times the LTC price and at least 12% GST.
  • The shopping period should be from 12 October 2020 to 31 May 2021 (deadline extended by two months from 31st March 2021)
  • Only digital payments should be made with the GST number and the amount paid, which is clearly mentioned on the invoice.
  • The maximum exemption per person is Rs. 36,000, which can be claimed.

For example, you should spend at least Rs.180,000 (60,000X3) on a tax discount if you and your family are entitled to an LTC of Rs. 60,000. Although GST would exceed Rs. 2.00,000 by the last invoice value, your baggage costs would be significantly less.

How To Claim Leave Travel Concession in Income Tax Return?

Under Income Tax Returns, in ITR -1, salary income shall be filled in “Salaries income” after all exempt payments have been exempted. Note one must not fill out the details separately. In the case of ITR – 2, 3, 4, in paragraph 2 of the “salary” table the amount of allowance that is exempt and in paragraph 7(i) of the same sheet the amount of LTA that is to be exempt must be filed.
how to claim ltc in itr

FAQ’s on Leave Travel Concession

Question 1.
What is the difference between LTA and LTC?

Answer:
LTA and LTC are not two different terms. Leave Travel Allowance is otherwise known as Leave Travel Concession which is a tax break that an employee can use to travel to India for self-employed and family members.

Question 2.
How does leave travel concession work?

Answer:
The travel allowance shall be an employer’s allowance for an employee to cover travel costs when the employee is on leave from work. Under the Income Tax Act, the leave travel concession is tax-free. The exemption is only available if certain conditions are satisfied.

Question 3.
What is the new LTC scheme?

Answer:
In October 2020, the Central Government announced the cash voucher system for the LTC (Leave Travel Concession). This scheme allows public employees and employees of the private sector to claim tax benefits in place of LTC, by buying goods and services.

What Is Pro Forma Invoice Format And Status Under GST

What Is Pro Forma Invoice Format And Status Under GST | Sample Template, Purpose

Leave a Comment / GST / By / February 1, 2024

What Is Pro Forma Invoice Format And Status Under GST: Pro Forma is derived from Latin which means “for the sake of form” or “as a matter of form”. A pro forma invoice serves as a preliminary invoice that informs customers of the final price and authorises vendors to begin work. Pro forma invoices are generally sent before a service or a delivery of products is completed. They provide buyers with a final total cost and sellers with a more accurate estimate of future payment. In this article, let’s understand everything about the Pro Forma Invoice format under GST in detail.

What is Pro Forma Invoice Format?

A pro forma invoice is a document that details the specifics of products or services that have yet to be delivered to the buyer/customer. It gives an estimate of the cost of the items or services that are offered. It also includes an estimate of any commissions, applicable taxes, the shipment’s weight, and shipping charges, among other things.

In general, an enquiring buyer/customer receives a pro forma invoice from a supplier/retailer.

When Pro Forma Invoice is Issued?

Generally, before selling or provide a service, a Pro Forma invoice is generated. If a customer wants a document for goods or services that have not yet been provided, a supplier may issue a pro forma invoice. As a result, it is frequently sent prior to the tax/commercial invoice.

The amount on the final invoice will be the same as or similar to the amount on the pro forma invoice. For a smooth delivery procedure, pro forma invoices are more commonly utilised for customs purposes on imports or exports.

For example, a two-wheeler customer might agree to the price of a cycle on a pro forma invoice. When the bike is ready, the supplier will send it, and the customer will pay when the invoice is received.

What is the Purpose of a Pro Forma Invoice?

The Pro Forma Invoice is issued for the following purposes:

  • To estimate the sale price of items that have yet to be delivered or services that have yet to be given (estimated total cost).
  • To offer the consumer an understanding of the contents to be transported, the worth of the goods, shipping time, and so on.
  • Declare the supplier’s commitment to the buyer to deliver the goods or services described at the prices specified.
  • Pro forma invoices are also useful when two businesses are doing business for the first time.

Proforma Invoice Format

The specific format of a pro forma invoice is not prescribed by law, but it is given as part of acceptable business practices. A pro forma invoice may resemble a commercial invoice in appearance. It should, however, be clearly labelled “pro forma” and may additionally state, “This is not a GST invoice.” The pro forma invoice is simply an estimate, and it should not be paid until the job has been completed and the final tax invoice has been given.

What Information is Required on a Proforma Invoice?

Proforma invoices should include details that include ordinary invoices such as contact information, invoice issue date, a description of the products or services given, the total amount payable, and any applicable VAT. However, the following details must be present on Pro Forma Invoice template:

  • Invoice number that is unique
  • Date of preparation/publication
  • The supplier’s address
  • Prospective buyer’s address
  • Description of goods or services, including unit pricing and sum for each budget item
  • The pro forma invoice’s validity
  • Sale terms that have been proposed
  • Payment terms proposed if any
  • If any “Customs Authorities” certifications are necessary,
  • Signature of an authorised representative of the supplier’s company

What Does a Pro Forma Invoice Look Like?

The sample format of the Pro Forma invoice under Pre-GST laws will look like the following image.

Sample Format of Pro forma invoice under Pre-GST laws
The sample format of pro forma invoice under GST law will look like the following image:
Sample format of Pro forma invoice under GST law

What is the Difference Between a Pro Forma Invoice and an Invoice?

The difference between Proforma Invoice and an Invoice is tabulated below:

Invoice
Pro Forma invoice
The term “invoice” refers to a commercial document delivered by a supplier to a customer that contains information on the goods or services that were provided to him as well as a notice that payment is required.
A pro forma invoice is a document that provides information regarding the particulars of the goods or services yet to be delivered to the buyer/customer.
It notifies the amount to be paid after the product or service is purchased
It notifies the amount to be paid before the product or service is purchased
It is issued when the product is purchased
It is issued before the product is purchased
When the sale is confirmed, it is issued to the customer
When the sale is created, it is issued to the customer

Changes Between Pro Forma Invoice Under GST and GST Proforma Invoice

The significant differences in GST pro forma invoices as compared to pre-GST invoices in pro forma are explained below:

  1. The GST pro forma invoice contains the GST registration number, whereas the VAT/CST/Sales Tax pro forma invoice has the VAT/CST/Sales Tax registration number.
  2. Additionally, the GST pro forma invoice includes information on HSN codes for commodities and SAC codes for services.
  3. GST is divided into three categories: SGST, CGST, and IGST, depending on whether the supply is intrastate or interstate.

FAQs on Pro Forma Invoice Format under GST

Question 1.
Should I pay a proforma invoice?

Answer:
No, you don’t have to pay the Proforma invoice. Only when the order is confirmed, the seller will issue the final invoice and the customer should pay the amount represented on the final invoice bill.

Question 2.
Does the proforma invoice have the number?

Answer:
No, the proforma invoice doesn’t need to have a number on it.

Question 3.
Is it possible for a customer to negotiate over the amount specified in the pro forma invoice?

Answer:
A pro forma invoice is, in fact, negotiable. A customer might negotiate about price, shipping expenses, and delivery time, among other things. Even if both customer and seller have signed it, it can be changed.