GST

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.

Dual GST Model & GST Structure In India

Dual GST Model & GST Structure In India

Leave a Comment / GST / By / February 3, 2024

Dual GST Model & GST Structure In India: Many countries worldwide have a single centralised GST system, i.e. a single tax applicable throughout the country. However, in most federal countries like Brazil and Canada, a dual GST system is widespread, whereby GST is levied by both the federal and State or Provincial governments. India is a federal country; therefore, it has a division of power between the federal and state governments. Dual GST is supported in countries where there is a federal structure of the Government. As in this system, states would be free in their revenue sources, and they don’t have to rely on the Centre to share the revenues they receive. This is essential as it will lessen the conflict between the Centre and State over revenue distribution.

Dual GST Definition

The dual GST means that GST, that is levied concurrently by Center and State Governments. Therefore, every supply transaction of goods or services shall undergo Central GST (CGST) and State GST (SGST) when the transaction is inside the State. However, when the transaction is between states, Integrated GST (CGST + SGST) will be raised by the Central Government. Dual GST is supported in countries where there is a federal structure of the Government.

As in this system, states would be free in their revenue sources, and they don’t have to rely on the Centre to share the revenues they receive. This is essential as it will lessen the conflict between the Centre and State over revenue distribution. The GST regime supersedes the confusing taxes with a single federal tax rate. This is created to unify India’s tax system, make it more comfortable to do business, and decrease prices for customers. Dual GST is normally of two types: Non-Concurrent Dual GST Model and Concurrent Dual GST Model.

Dual GST Model Benefits

The Dual GST is an easy and clear tax with one or two CGST and SGST rates. The dual GST is already confirmed and presents the results in:-

  • decrease in the tax numbers at the Central and State level
  • reduction of the efficient tax rate for many goods
  • replacement of the current cascading impact of taxes
  • the decline of the taxpayer’s transaction costs through interpreted tax compliance

GST Structure In India

GST was preceded with the purpose of reducing the tax burden and inflation rates. GST is an amalgamation of various taxes. It is a comprehensive, uniform, multi-stage, destination-based tax system applied to enhance value addition. However, the current tax regime has made some tax relief; but a notable increase in compliance cost is a fact that is indisputable. The GST tax structure comprises four structures.

  1. Central Goods and Services Tax (CGST): CGST is a tax levied on Intra State supplies of both goods and services by the Central Government and is administered by the CGST Act. SGST will also be levied on the same Intra State supply but will be administered by the State Government. This means that both the Central and the State governments will agree to consolidate their levies with a proper proportion for revenue sharing. However, it is clearly stated in Sec 8 of the GST Act that the taxes be levied on all Intra-State supplies of goods or services, but the tax rate shall not surpass 14 percent.
  2. State Goods and Services Tax (SGST): The SGST is a tax levied on Intra State supplies of both services and goods by the State Government and will be administered by the SGST Act. As described above, CGST will also be levied on the very Intra State supply but will be directed by the Central Government.
  3. Union Territory Goods and Services Tax (UTGST): the UTGST is similar to SGST. The only variation is that the tax revenue goes to the treasury for the particular administration of union territory where the goods or services have permanently been employed. The Union Territory directly comes under the direction of the Central Government and does not have its own elected Government as in the case of States. UGST is also credited at the same rates as CGST.
  4. IGST (Integrated Goods & Service Tax): Under GST, IGST is a tax levied on all Inter-State supplies of services and goods and is governed by the IGST Act. IGST will be applicable on any supply of goods or services in both cases of import into India and export from India.

FAQ’s on Dual GST Model & GST Structure In India

Question 1.
What is State Goods and Service Tax?

Answer:
SGST is one of the components of GST levied and raised by the respective state government on intra-state supplies. Such a tax is administered by the State Goods and Services Tax Act, 2017. The SGST is one of the three categories under the Goods and Service Tax with one tax concept on one nation.

Question 2.
What does GST in India mean?

Answer:
The Goods and Services Tax (GST) in India is regarded as one of the greatest reformations in indirect taxation. It has been decreed effective pan India from 01st July 2017 and is based on the law of destination-based consumption tax.

Question 3.
When is IGST applicable?

Answer:
IGST is applicable in the state of inter-state supply where the place of the supplier and location of supply are in two different states or in two separate union territories.

Suo Moto GST Registration Cancellation

Suo Moto GST Registration Cancellation

Leave a Comment / GST / By / February 3, 2024

Suo Moto GST Registration Cancellation: Suo Moto Cancellation of GST Registration means revocation of registration by GST Officer. Suppose a taxpayer does not comply with the provisions laid down under Goods and Service Tax. In that case, the proper officer is empowered to initiate the cancellation of GST registration of such defaulting taxpayers. This type of cancellation of registration initiated by a conventional officer is called suo moto cancellation of registration. There must be a substantial reason for initiation for continuing Suo moto cancellation as stipulated under Section 29(2) of the CGST/SGST Act. Any contracts before the Suo moto cancellation date will have to be paid by the taxpayer, irrespective of when liabilities are determined. It can be recovered later on, even after the cancellation of GSTIN.

Reasons for Suo Moto Registration Cancellation

The Suo Moto Cancellation of registration is started by the Tax Official for various situations as stated in the GST law provisions. The different types of situations are given below-

  • If the Enrollment Application is not being presented within three months from the selected day, the Tax Official starts the cancellation registration.
  • Any Taxpayer other than composition taxpayer has not listed returns for a consecutive period of six months.
  • Supplying any services or goods without any invoice issue, in breach of the provisions of the rules or act, made thereunder, planning to evade tax.
  • Wrongful utilisation of credit or tax refund by issuing bills/invoices against the fraudulent sale of goods or services, thereby breaching the act and the rules that fall under the act.
  •  The Tax Official starts the cancellation registration if one fails to pay any amount of tax, interest, or penalty to the Central/State Government account beyond a period of three months from the date on which such amount becomes overdue.
  • When a person is no longer responsible for deducting tax at source as per the provisions of GST Law
  • When a person is no longer accountable to collect tax at source as per the provisions of GST Law
  • The person no longer needed to be registered under terms of GST Law.
  • If a GST Practitioner, under the GST Law, is found indicted of misconduct in relation to any proceeding, the Tax Official starts the cancellation registration.
  • Closure/Discontinuation of Business
  • Change in Constitution directing to PAN change
  • Terminated to be liable to pay tax
  • During the business transfer on account of amalgamation, merger/demerger, lease, sale or otherwise disposed of,a etc.
  • Due to the Sole Proprietor Death
  • If the composition person has not provided returns for three consecutive tax periods,
  • If registration has been received using deception, wilful distortion, or suppression of facts. etc.

Communication SMC GST Registration

As per provision to Sec 29(2), a proper officer can’t void GST registration without presenting taxpayers with the possibility of being heard. In addition, as per Section 169(1), before transferring the cancellation order of GST Registration, the proper officer is expected to issue a report to the taxpayer. The Communication of notice can be performed by forwarding a communication to his/her registered mail address or by availing notice on the common GST portal.

Online Revocation Procedure

A registered person needs to follow the following steps to apply for cancellation online through the GST Portal:

Step 1: Open the GST Portal at “http://www.gst.gov.in”

Step 2:  Enter the user id and the password.

Step 3:  Select services. Under services, click the “registration” button and then select the “application for revocation of cancelled registration” option in the GST Dashboard.

Step 4:  Select the “apply” option for “revocation of cancelled registration”. In the select box, enter the reason for “revocation of GST registration cancellation”.

Step 5: Choose an appropriate file to be added for any supporting documents, and select the verification checkbox and name of the authorised signatory.

Step 6: Lastly, click on the “SUBMIT WITH DSC OR SUBMIT WITH EVC” tab.

FAQ’s on Suo Moto GST Registration Cancellation

Question 1.
What happens when the Show Cause Notice is Dropped?

Answer:
If the Tax Official is content with the acknowledgment collected from the taxpayer on the Show Cause Notice issued, the proceedings can be released. The Primary Authorised Signatory will be inferred about dropping of SCN by SMS & Email. The order issuance for the dropping of SCN will also be inferred to the Primary Authorised Signatory by mail and SMS. Also, the GSTIN Status will shift to “Active” from “Proceeding for Cancellation Initiated”.

Question 2.
State the precondition for SMC of Registration?

Answer:
The precondition for SMC of Registration is that there should be a substantial reason for initiation of advancing for Suo moto cancellation as stipulated under Section 29(2) of the CGST/SGST Act.

Question 3.
What is the duration to file a response for Show Cause Notice concerning Suo Moto Cancellation of Registration?

Answer:
One requires to provide a response within the given time limit of seven working days to file a reply to the SCN using the Services > Registration > Application for Listing Clarifications link. If there is no response given within the designated seven days, the Tax Official can continue with the cancellation of registration.

Important Changes in GST you must know

Important Changes in GST You Must Know

Leave a Comment / GST / By / February 3, 2024

Important Changes in GST You Must Know: There are few changes made in GST from 1st April 2021, that is, things to do before 31st March 2021.

  • E-Way Bill: As per the Finance Act’s Amendment 2021 of u/s 129 of the CGST Act under detention, release, and seizure of goods and conveyance in transit, the new penalty applicable from 1st April 2021 is 200 % of the total tax payable.
  • ITC (Input Tax Credit): As per the Finance Act’s Amendment 2021, Input Tax Credit is available to taxpayers but only if the supplier has uploaded the invoice in GSTR-1 and filled it within the due date. The invoice will reflect in the taxpayer’s GSTR – 2B.

The GST registration might get cancel for any of these cases:

  1. If they found any mismatch found in the taxpayer’s GSTR – 1 and GSTR -2B.
  2. Then a notice will be issued to the taxpayer to satisfy the Official Jurisdiction with their Assessee’s reply; if the taxpayer cannot satisfy the Jurisdiction, the Assessee or the taxpayer failed to reply within the prescribed period, then the Official Jurisdiction will cancel the GST registration.3.

Table of Content

HSN Code

According to Notification No. 78/2020 – Central Tax dated 15th October 2020: A registered person needs to mention the number of digits of their HSN Code. The latter have aggregate turnover in the previous Financial Year.

The HSN Codes are mentioned below:-

Sr. No. Aggregate Turnover Digits of HSN Code
1. Less than or equals five Crore rupees. 4
2. More than five Crore rupees 6
3. If the taxpayer has Export of Goods and Service 8

E-Invoice

According to Notification No. 05/2021 – Central Tax dated 08th March 2021: If any registered person who had an aggregate turnover of rupees 50 Crore or more in any previous Financial Year from 2017-18, for those E-voice will be mandatory.

Composition Schemes Opt-in

If the registered person wants to or opt for the “Composition Scheme,” they can apply before 31st March 2021. The Composition will be provided for Financial Year 2021-22.

Obtain or Renew Letter of undertaking for the Financial Year 2021-22

If the registered person wants to Export or Supply to SEZ units without paying the tax, they can apply before 31st March 2021 for LUT. The Composition will be provided for Financial Year 2021-22.

GST Refund

If the registered person wants a refund for Financial Year 2018-19 (time limit of 2 years), they can claim that refund before 31st March 2021.

GSTR – 9 and GSTR – 9C for Financial Year 2021-22

According to Notification No. 04/2021 – Central Tax dated 28th February 2021: GSTR – 9 is for the taxpayer having an aggregate is more than Rs. 2 Crore, and GSTR – 9C is for the taxpayers who have a total aggregate turnover of more than Rs. 5 Crore.

Their due dates to file their GSTR – 9 and GSTR -9C respectively extend from 28th February 2021 to 31st March 2021.

GST Casual Taxable Person

GST Casual Taxable Person | Casual Taxable Person in Goods and Service Tax

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

GST Casual Taxable Person: A casual taxable person implies an individual who supplies taxable goods or services occasionally in a taxable Territory where they do not have any fixed place of business. The individual can act as a principal or agent or in any other capacity supply goods or services for the progression of the business.

Example

An example of simple registration is participation in an exhibition in a different state. When an individual participates in any display outside the state where their usual registration place is, they must register as a casual taxable person to undertake the sale and purchase of various goods in that different state.

Registration for a Casual Taxable Person

A Casual Taxable person cannot choose to opt for a Composition Scheme.

A CTP needs to obtain a Temporary Registration that is valid for a maximum period of 90 days or three months in the State from where the person seeks to supply as a CTP. A Casual Taxable Person is needed to make the advance deposit for the GST (based on an estimation of the tax liability).

For instance, Say Ms. A estimates her taxable services at Rs. 200000. She must make an advance deposit of Rs.36000 (18% of Rs.200000) to obtain a temporary registration.

Documents needed for the GST Registration of Casual Taxable Person

  1. Business Name, Copy of PAN card of the applicant.
  2. Mobile Number and Email address for communicating and sending OTP.
  3. The applicant’s existing registration, if any. (Ex: GSTIN, Incorporation document or the registration with any other authority such as MCA)
  4. Copy of Incorporation document evidencing the applicant’s existence (E.g.: Copy of the Partnership deed, certificate of company incorporation, etc.)
  5. Details of partners/directors/promoters etc., of the applicant and copy of the address proofs and ID proofs such as the PAN, Aadhar card, Photo, Email ID, Mobile Number.
  6. Bank Details: documents like Cancelled Cheque of firm/Copy of the passbook or bank statement with the applicant’s name are needed.
  7. Details of Principal Place of Business address and documents evidencing the ownership of the premises like Property Tax Receipt or Electricity Bill or legal ownership document of the place where business is to be carried on.
  8. If any other place of business, the same documents as above are needed.
  9. Nature of business that the applicant carries out. Also, specify the top 5 products or services provided by the applicant.
  10. Authorisation letter provided on the applicant’s Letter Head to authorise one or more persons for signing all documents related to GST. An authorisation letter to be signed by persons other than the authorised signatories. An authorisation letter is not needed in the case of the proprietorship.
  11. State-specific registration in case it is applicable.
  12. Payment of tax or challan on the estimated supplies that have been made during the period of Casual registration.

How Can a Casual Taxable Person Apply for Registration

  • Apply for the registration by declaring of PAN, mobile number and email
  • Validate and verify the PAN, mobile number and email via OTP
  • After Successful Verification, a Temporary Reference Number is going to be Generated using which advance tax is to be made. As an Acknowledgement for a deposit, Form GST Reg 02 is going to be given electronically.
  • Using the generated reference number, the applicant can fill up and submit the PART B of Form GST REG – 01 electronically.
  • The Registration Certificate must be issued electronically after the tax deposit has appeared in the electronic cash ledger.
  • After receiving the receipt of the Registration Certificate, CTP can make the taxable supplies.
  • Validity of certificate- A specified period in the application or 90 days (3 months) from the effective registration date, whichever is earlier.

Returns That Need to be Furnished by the Casual Taxable Person

The casual taxable person (CTP) is needed to furnish the following returns

  1. GSTR-1 is a Details about the outward supplies of goods or services of a specific month. This return must be filed before the 10TH day of the month following Or Quarter end based on Turnover.
  2. GSTR-2 is a Details for the inward supplies of any particular month. This return must be filed before the 15th day of the month following.
  3. GSTR-3 is a Details about both the purchases and sales of a specific month. This return must be filed prior to the 20th day of the following month.
  4. GSTR-3B is a summary of both the purchases and sales of a particular month. This return must be filed prior to the 20th day of the month following.

Note: Currently, only GSTR-1 and GSTR-3B must be filed by a registered person under GST.

A casual tax person must not file an annual return as directed by a usually registered taxpayer.

How to Track GST Registration Application Status

How to Track GST Registration Application Status

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

How to Track GST Registration Application Status: If you apply for GST registration, it usually takes about seven working days for the provisional GSTIN to be allotted and ten days to obtain the final GSTIN with the GST registration certificate. From submitting the GST registration application, the status can be checked on the GST portal.

This article will discuss how you can track the status of the GST registration application and clear your doubts in the FAQ section.

How to Track GST Application Status without Logging In

On submitting the registration application, you are given an Application Reference Number (ARN). You can track the GST registration status of your application by tracking this ARN. To check the status of the GST Application without logging into the GST Portal, follow the below steps:

  • Step 1: Open the URL https://www.gst.gov.in/. The Goods and Services Tax website is displayed.
  • Step 2: Click on Services then Registration, followed by the Track Application Status command.
  • Step 3:  In the ARN field, enter the ARN received on your email address when submitting the registration application.
  • Step 4: Identify and type the characters displayed in the image below the ARN field and enter the captcha text.
  • Step 5: Click on the Search button.
  • Step 6: Finally, the application status is displayed.

How to Track GST Application Status after Logging In

On submission of the application, you are given a unique Application Reference Number (ARN). By tracking the ARN, you can track the status of your application. To check the status of your GST Application after logging into the GST Portal, follow the below steps –

Step 1: Open the URL https://www.gst.gov.in/. The Goods and Services Tax website is displayed.

Step 2: Open and log in to the GST Portal with valid credentials.

Step 3: Click the Services then Registration, followed by the Track Application Status command.

Case I: For ARN

  1. Enter the ARN received on your email address when submitting the registration application in the ARN field.
  2. Click on the Search button.
  3. The application status is then displayed.

Case II: Submission Period

  1. Select the Submission Period of the application using the calendar given on the website.
  2. Click on the Search button.
  3. The application status is then displayed.

How to Track GST Application Status using TRN Login

After logging into the GST Portal using Temporary Reference Number (TRN), follow the below steps to track the status of the GST Application after logging into GST Portal –

  • Step 1: Open the URL https://www.gst.gov.in/. The Goods and Services Tax website is displayed.
  • Step 2: Click the Register Now link.
  • Step 3: Select the Temporary Reference Number (TRN) option.
  • Step 4: In the Temporary Reference Number (TRN) field, enter the TRN received.
  • Step 5: Click the Proceed button.
  • Step 6: In the Mobile / Email OTP field, enter the OTP received on your mobile number or email address. Remember, the OTP is valid only for the next 10 minutes.
  • Step 7: Click the PROCEED button.
  • Step 8: The My Saved Application page is then displayed. You can now then check the status of your GST Application under the Status column.

Note:

  1. The same OTP is sent to the mobile number and email address.
  2. If the OTP is invalid, try again by clicking the Click here option to resend the OTP link. The OTP on the registered mobile number or email ID will now be sent again. Enter the newly received OTP again.

Status Description as Shown During Online Tracking of GST Registration Application Status

  1. Draft: When the Application Form is saved in the GST Portal but not yet submitted.
  2. Active: On the generation of the TRN, the Status of TRN becomes Active or Status of GSTIN on approval of the application.
  3. Inactive: Status of the Provisional GSTIN in case of Casual Dealer or Non-Resident Taxable Person on the rejection of the application or post expiry of the validity period, which is 90 days.
  4. Expired: Status of TRN on the expiry of 15 days and application form has not been submitted at the GST Portal.
  5. ARN Generated: The status of TRN on the GST portal after submitting the application form.
  6. Provisional: The status of GSTIN, when create challan is initiated (in case of a casual taxable person) till the registration form is approved further.
  7. Pending for Validation: Time from submitting the application form until ARN is generated at the GST Portal.
  8. Pending for Processing: The application form has been successfully filed at the GST Portal.
  9. Pending for Clarification: A tax office has issued a notice seeking clarification.
  10. Pending for Order: The applicant resubmitted the application form with the response/clarifications answering the notice.
  11. Validation Error: If the validation fails after submitting the application form until the ARN is generated.
  12. Approved: When the tax official approves the Registration Application.
  13. Rejected: When the tax official rejects the Registration Application.

FAQ’s on GST Registration

Question 1.
Who is required to file a GST Registration?

Answer:
GST registration is mandatory in most states for businesses having a total annual turnover of more than Rs.20 lakhs per annum.

Besides the aggregate turnover criteria, businesses involved in import or export, interstate supply, e-commerce and other such conditions must obtain GST registration mandatorily irrespective of annual aggregate turnover.

Question 2.
What is the GST Registration validity?

Answer:
GST registration for regular taxpayers is valid until it is surrendered or cancelled and does not have an expiry date.

Only the GST registration for non-resident taxable persons and casual taxable persons are valid until the date as mentioned on the GST registration certificate.

Question 3.
After how many days does the TRN expire after its generation, or does it expire after the last login?

Answer:
The TRN gets expired 15 days after it is generated and is not dependent on when the applicant has logged in for the last time.

GST Composition Scheme

GST Composition Scheme | Composition Scheme Under GST Comprehensive Guide

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

GST Composition Scheme: In accordance with the GST law, a taxpayer generally pays tax under standard rates, i.e., 5%, 12%, 18%, 28%, and avails cenvat capital goods, credit on inputs, and input services. After the cenvat paid in cash to the government has been claimed, then the balance tax becomes payable. Using this process, all the procedural agreements have to be adhered to.

Under the composition scheme, there is a provision under GST to register to decrease the burden of legal formalities and compliance. This composition scheme is almost comparable to the composition schemes prevailing in the previous vat regime in almost all states. It makes procedural compliance very easy as it provides the taxpayer to pay tax at a flat rate without claiming input credit.

Under Composition Scheme – Individuals Who Are Eligible To Register

  1. Only somebody who deals in goods can opt for such a scheme. Manufacturers can also opt for a scheme of composition, although manufacturers of pan masala, tobacco, and ice cream are not qualified for this scheme. For service providers, there is a separate composition scheme. However, restaurants can opt for the composition scheme under this section if they do not serve alcohol.
  2. Individuals are only eligible under this scheme whose Aggregate Turnover in the preceding financial year doesn’t exceed Rs. 1.5 crore. For individuals in the state of Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, Arunachal Pradesh, and Assam, this limit will be Rs. 75 lakhs.
  3. Aggregate turnover, or in other terms, means the aggregate value of all non-taxable and taxable supplies, export of goods and/or services of an individual, and exempt supplies having the same PAN. GST is not incorporated in the aggregate turnover. So if any individual inducts two firms and the coupled turnover is more than the above-mentioned limit, then the individual can not take the composition scheme.
  4. If an individual’s turnover surpasses the above-mentioned limits in a financial year, then from such day, the individual ceases to be in the composition scheme and requires to pay tax under the normal scheme from the before-mentioned day.
  5. If any individual wishes to opt for the composition scheme, then all of their firms should opt for the composition scheme. It is not permitted that some of the individual firms are in a composition scheme, and some are not. If one of the firms of an individual becomes ineligible for the composition scheme, then all other firms of that individual also become ineligible.
  6. An individual should not make inter-state sales of goods. Such an individual is only permitted to make intra-state sales, i.e., in the same union or state territory in which the firm is registered.
  7. An individual should not make sales through an e-commerce portal like Flipkart or Amazon.
  8. A casual taxable individual and a non-resident taxable individual can not register under the composition scheme.

GST Payment And Return

Individuals in the composition scheme are needed to file quarterly returns and, on a quarterly basis, also need to pay GST. All other normal dealers are obligated to file monthly returns and also tender a monthly payment.

The due date is 18 days from the end of the quarter for return filing and further for GST payment. In Form GSTR-4, such quarterly return is required to be filed, and the details will be made available in Form GSTR-4A of input supplies.

A yearly return is also to be filed on or before 31st December after the end of the financial year, as mentioned in Form GSTR-9A.

The process to file GST return by composition dealer.

Under Composition Scheme – Rates of GST

Particulars – CGST + SGST = Total

  1. Manufacturers – 0.5% + 0.5% = 1%
  2. Restaurants not serving alcohol – 2.5% + 2.5% = 5%
  3. All other traders – 0.5% + 0.5% = 1%

Procedure to Apply For Composition Scheme

Procedure To Opt

Any individual has to opt for such an option given in Part B of Form GST REG-01, registering directly under GST, and desires to opt for a composition scheme.

Any individual who aspires to opt composition scheme after the registration and before the commencement of the financial year has to be file Form GST CMP-02 for which the individual desires to opt. And also, as per Form GST ITC-03, the individual also has to file within sixty days from the commencement of the appropriate financial year. Such intimations should not be registered only once in all financial years but also at the time of opting.

The goods held in stock by that individual at the start of the financial year should not be procured from an unregistered person, and then if such purchases were made, tax is to be paid on such stock.

The Effective Date For The Composition Levy

The intimation is filed in Form GST CMP-02, as the effective date for the composition levy will be the beginning of the financial year. In the matter of an individual opts for a composition scheme at the course of registration, only the operative date will be the date of registration. Such an individual should also take due care that if their registration is not accepted under the composition scheme, then at full rate for the sales already made, they may be liable to pay tax.

Opting Out From The Composition Scheme

Any individual who doesn’t satisfy any requirement for eligibility under this scheme has to publish tax invoices and pay tax at standard rates from the day such condition ceases to be accomplished. As per Form GST CMP-04, the individual is also obligated to file an intimation for withdrawal from the scheme within seven days of such date.

The person has to file Form GST CMP-04 before the date of such withdrawal, who wants to withdraw from such a scheme voluntarily.

Every individual who has filed GST CMP-04 or under GST CMP-07 has been allotted an order for withdrawal of scheme has to furnish GST ITC-01 containing details of the inputs contained in semi-finished or finished goods and stock of inputs which are held in stock by that individual on the specific date on which the option is denied or withdrawn, within 30 days, as mentioned in FORM GST CMP-07, from the date of order passed or from the date from which the option is withdrawn, as the situation may be.

An intimation sent to any union or state territory or withdrawal of option by the officer shall be deemed to be a withdrawal or intimation regarding all other places of business registered on the same PAN.

Withdrawal Of Scheme for An Individual By Proper Officer

Under section 10, it that the GST officer has reasons to believe that the registered individual was ineligible to pay tax or has contravened the provisions of the Act or these rules, the individual may issue a notice to such person in FORM GST CMP-05 to confirm such notice caused within fifteen days of the receipt and under composition scheme state as to why the option to pay tax should not be dismissed.

The accused individual has to reply to the notice in Form GST CMP-06. In accordance to FORM GST CMP-07, the proper officer has to issue an order within thirty days of receipt of such reply, either denying the option to pay tax under section 10 or accepting the response from the date of the event concerning such infringement or the date of the option, as the situation may be.

Under Composition Scheme – Restrictions On Registered Individuals

  • Such an individual can not make inter-state sales.
  • Such an individual can not make sales of exempted goods.
  • Such individuals shall not be entitled to an input tax credit. Total tax payable = Turnover multiplied by Rate of Composition.
  • Such an individual also breaks the chain of input credit, so it also cannot pass the input tax credit. In other terms, the dealer also can not take the input tax credit if another dealer purchases goods/services from a composition dealer. So composition scheme is not fitting for B2B and wholesalers businesses.
  • Such an individual in the issued invoice can not charge composition tax separately.
  • Such an individual can not make sales through an e-commerce portal like Amazon or Flipkart.
  • Such an individual under reverse charge is liable to pay tax on purchases of goods or services from un-registered individuals and on import of services. Such tax is be estimated using the normal GST rates, and SGST and CGST will apply even if the purchase is from an external state.
  • Such an individual should state the words “taxable composition individual, on supplies not eligible to collect tax” at the top of the issued bill of supply by that individual.
  • Such individuals shall mention the words “composition taxable person” on every signboard or notice displayed at a prominent place at their principal place of business and the place of business or every additional place.
  • Using our GSTIN validator and search, one can find the registration status and registration date of any registered individual with GSTIN.

Under Composition Scheme – Benefits Of Registration

Less Compliance

Composite dealer has to make quarterly payment and file quarterly returns while normal dealers have to make monthly payments and file monthly returns. A substantial level of record-keeping work also decreases.

Less Expense To The Customer

If the individual has a high margin, then the cost to the final customer also decreases if that person opts for a composition scheme.

Example – Composite Dealer or Normal Dealer Purchase Price 50-50 GST @ 18% on purchase 9-9 Cost 50 59 Margin 50-50 Sale Price (Without GST) 100-109 GST @ 18%-18 Composition Fees 1.10 (109*1%/.99) Cost to customer 118-110.10 Composition Fees is estimated at 1%. Composition fees can not be separately imposed by the dealer from the customer. In the above example, both dealers appreciate a margin of Rs. 50, but in the matter of sales made by the composite dealer, the final cost is 9.33% less to the customer.

In Composition Scheme – Drawbacks Of Registration

  • Such a person cannot make sales through an E-commerce operator: As explained above, the individual registered in this scheme cannot make sales through an e-commerce operator like Amazon, Flipkart, etc. So, for those making online sales or planning in the near future, the composition scheme will not be available.
  • It does not fit for wholesalers.: Such individuals cannot pass the input tax credit, and any other dealer would not like to purchase from such an individual. If any dealer desires to purchase goods from such an individual, then it would increase costs due to the amount charged to double taxation.
  • Cannot secure sales outside the state: Such an individual cannot make sales outside the state or union territory in which they are registered. This reduces the scope of the business.
  • Heavy penalty: Suppose the individual is not qualified to register under the composition scheme but proceeds to continue to do so, then at standard rates. In that case, the officer may ask to deposit tax and penalty equal to the tax. If the individual makes a mistake in following the eligibility criteria, then that individual may be liable for a very hefty penalty.

In Case Of A Wrongful Claim – Penalty Charged

Suppose the officer finds that the individual is not eligible to pay tax under this scheme and continues paying tax under this scheme. In that case, the individual is liable to pay the penalty equivalent to the tax payable and also tax at the standard GST rate. A proper officer must issue a notice in Form GST CMP-05 to such defaulting individual to show cause within fifteen days of receiving such information as to why under the composition scheme, the option to pay tax should not be denied. According to Form GST CMP-06, the person has to reply, and under Form GST CMP-07 within 30 days of such reply, a proper officer has to be issued.

GST Forms

Form No. — Description

  • GST CMP-01 – Presentation to pay tax under section 10 (composition levy) (Only for individuals registered under the existing law migrating on the appointed day)
  • GST CMP-02 – Presentation to pay tax under section 10 (composition levy) (For individuals registered under the Act)
  • GST CMP-03 – Presentation of details of stock on the date of opting for composition levy (Only for individuals registered under the existing law migrating on the appointed day)
  • GST CMP-04 – Application/Presentation for withdrawal from composition Levy
  • GST CMP-05 – Under section 10, notice for denial of option to pay tax.
  • GST CMP-06 – Reply to the show cause notice.
  • GST CMP-07 – Order for rejection/acceptance of reply to show cause notice
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.

Reverse Charge UnderGST

Reverse Charge under GST | Explained with Examples

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

Reverse Charge Under GST: Usually, GST should be collected by the person who is selling goods and services. Although in some cases, GST should be managed by the buyer of goods or services, not by the seller. This is called RCM in short or Reverse Charge Mechanism.

In some cases of trade through E-commerce administrators such as Uber, Ola, etc., the tax is not accumulated and deposited by the seller but by the e-commerce operator. Such cases are not named reverse charges.

RCM is Applicable in which Cases?

The notification number and summary are listed below for these two cases where RCM can be applied:

  • 8/2017 of Central Tax (Rate): This notification spares RCM under section 9(4) up to Rs. 5000 per day.
  • 38/2017 of Central Tax (Rate): This notification eliminates the limit of Rs. 5,000 up to Mar 31st, 2018. Therefore, no RCM under section 9(4) is applicable.
  • 10/2018 of Central Tax (Rate): This notification increased the date of exemption to Jun 30th, 2018.
  • 12/2018 of Central Tax (Rate): This notification increases the date of exemption to Sep 30th, 2018.
  • 22/2018 of Central Tax (Rate): This notification increases the date to an exemption to Sep 30th, 2019.

Note: Supply of specified goods or services notified by the government [section 9(3)]. In the case of a registered person purchasing goods or services from an unregistered person. RCM is also applicable to composition dealers, as mentioned under section 9(4).

This section is postponed till Sept 30th, 2019, via notifications as under

Buying any Goods or Services from Unregistered Persons

When a registered person buys any goods or services from an unregistered person, such a registered person must pay GST on a reverse charge basis. An unregistered dealer cannot make interstate sales; therefore, such sales are mostly intra-state sales.

Even though the government has given a lease of Rs. 5,000 per day. Therefore, if a total procurement of less than Rs. 5,000 is made in a day from an unregistered person, and then there is no need to pay tax on RCM. This limit is a total of Rs. 5,000 from every supplier and not per supplier according to notification No. 8/2017 of Central Tax (Rate).

Note: The registered person has to furnish a self-invoice.

Purchase of Specified Product or Services from a Person

For some products/services, reverse charge is expressly provided. In such cases, the receiver pays a reverse amount even if the seller is a registered person subjected to the conditions specified for such product or service.

The person needed to pay tax under RCM under this heading has to register irrespective of the threshold limit. The seller of services or goods on which covered under this point must mention in the tax invoice that GST is payable on reverse charge.

Example: A trader registered in GST takes GTA or Goods Transport Agency for services. 10,000. This service is recorded under the reverse charge list; therefore, trader has to pay tax at 18% on Rs. 10,000 on Reverse Charges. However, such GST is also allowed as an input tax credit in the same month, and therefore the net liability of tax will not increase.

GST Rate

The tax rate to be used is applicable on such goods or services. GST Compensation Cess on reverse charge is also relevant.

  • If the goods or services bought are exempted or nil rated, no tax is payable under RCM.
  • Composition dealers are required to pay reverse charges at standard rates of 5%, 12%, 18%, 28%, and not at composition rates of 1% or 5%.

GST Input Tax Credit Paid in Reverse Charge Mechanism

Any amount paid as the reverse charge is permitted as input tax credit subject to the condition where credit is allowed in normal situations to such business.

Example: Composition dealers are not permitted to take the input tax credit in normal circumstances. Therefore, they are not allowed to take the input tax credit on GST amount paid on reverse charge.

Besides, the amount of GST under Reverse charge is paid in cash only and cannot be reimbursed from ITC. The net result is that the minimum amount of GST payable in a tax period is the reverse charge in that period.

Advance paid for reverse charge supplies are also applicable to GST. The person making an advance payment must pay tax on a reverse charge basis.

Accounting Entries meant for Reverse Charge Mechanism

At time of purchasing such goods/ services

  1. Purchase A/c Dr
  2. Input SGST A/c Dr
  3. Input CGST Ac Dr
  4. To Creditor A/c
  5. To Output SGST RCM A/c
  6. To Output CGST RCM A/c

In case of the purchase of an asset, the specified account will be debited. The Output SGST RCM A/c is applied in place of standard Output SGST A/c to differentiate taxes as taxes under RCM cannot be adjusted against input taxes and paid in cash.

During Payment of GST

  1. Output SGST RCM A/c
  2. Output CGST RCM A/c
  3. To Cash/Bank A/c

Invoice Under RCM

A registered person is responsible for paying tax under RCM (both for supplies on which the tax must be paid under RCM and supplies received from unregistered persons). The registered person must issue an invoice regarding goods or services. Such a registered person regarding the before-mentioned supplies also has to issue a payment voucher when making his payment to the supplier.

There is no specific format for such self-invoicing. The exact form which the person is using for invoicing should be used. Only the heading should be changed.

Registration Requirements

If a seller only supplies goods and services on which GST is levied on a reverse charge basis, in that case, such a person is not needed to take registration even if the turnover exceeds the specified limits.

Example: Suppose a farmer sells cashew nuts to a trader. The trader is liable to pay GST on an RCM basis. But, if a farmer is not engaged in trading other taxable goods, he cannot take registration under GST. as per Notification No. 5/2017 of Central Tax.

Time Of Supply

When RCM Tax is to be Paid

For the Reverse Charge tax under GST, it is essential to ascertain the time of supply since GST would be needed to be deposited to the Govt within 20 days from the end of the month.

In case of Goods Supply

In the case of Reverse Charge, the time of supply would be the earliest of the following.

  • The date of receiving goods
  • The date of payment
  • The date directly after 30 days of issue of invoice by the supplier.

If it is not likely to determine the time of supply for the points above, the time of supply shall be the entry date in the books of accounts of the recipient.

In the case of Service Supply

In the subject of the Reverse Charge Mechanism, the time of supply would be the earliest for the following:

  • For the date of payment
  • For the date directly after 60 days from the date of issuing of the invoice by the supplier.

If it is not likely to determine the time of supply for the points above, the time of supply shall be the entry date in the books of accounts of the recipient.

Date of Payment

For the calculation of Date of Supply, the Date of Payment should be earlier of the following:

  • The date of payment debit from their bank account
  • The date of entry of payment in the recipient’s book.

GST on Reverse Charge – A List of Services

Note: Service tax percentage owed by the provider is nil in this case

Service tax percentage owned by anyone apart from the service provider is 100%

The Supplier and Receiver of Services for every Section are listed below:

  • Services provided by anyone located in a non-taxable area and received by anyone located in a taxable area except non- assessee recipient (OIDAR)
  • Supplier can be anyone who is located in a non-taxable area
  • Receiver can be any person located in the taxable territory other than non-assessee online recipient (Business Recipient)
  • Services provided by a GTA or goods transport agency in respect of transportation of goods by road
  • Supplier is Goods Transport Agency (GTA)

Receiver may be:

  1. Any factory which is registered or governed by the Factories Act of 1948.
  2. Any society registered which is under the Societies Registration Act of 1860 or below any other laws in force in any part of India.
  3. Any cooperative society is established by or under any law.
  4. Any individual registered under CGST or SGST or UTGST Act.
  5. Any corporate established by any law or under any law.
  6. Any partnership firm, which is registered or not following any law, including an association of several people.

Casual chargeable person

  • Services are provided by an individual advocate or firm of advocates through legal services, directly or indirectly.
  • Supplier can be an individual advocate or firm of advocates
  • Receiver can be any business entity.

Services provided by an arbitral tribunal

  • Supplier is an arbitral tribunal
  • A receiver is any business entity.

Sponsorship services

  • Supplier can be any person.
  • Receiver can be any corporate or partnership firm.

Services provided by Government or local authority apart from renting of immovable property or services are specified below-

  1. Services by the Department of Posts through speed post, life insurance, express parcel post, and agency services provided to an individual other than the Government.
  2. services concerning an aircraft or a vessel, inside or outside the precincts of a port or an airport;

transport of goods or passengers

  • Supplier can be Government or local authority
  • Receiver can be any business entity.

Services provided to the said company or the body corporate by a director of a company or a body corporate

  • Supplier should be a director of a company or a body corporate
  • Receiver should be a company or a body corporate.

Services provided to any person carrying on insurance business by an insurance agent

  • Supplier should be insurance agents
  • Receiver can be any person having an insurance business.

Services provided by any recovery agent to a financial banking company or a non-banking financial company

  • Supplier should be a recovery agent
  • Receiver may be financial banking company or a non-banking financial company.

Services by the transportation of goods by a vessel from a location outside India up to the customs station of clearance in India.

  • Supplier can be a person located in a non-taxable area to a person located in a non-taxable area.
  • The receiver can be an importer as defined under clause (26) of section 2 for the Customs Act, 1962.

Services for Transfer or allowing the use of copyright as covered under clause (a) of subsection (1) of section 13 of the Copyright Act, 1957 relating to original literary, dramatic, musical, or artistic works.

  • Supplier is an author or music composer, photographer, artist, etc
  • Receiver is a publisher, Music company, or Producer.

Services for Radio taxi or Passenger Transport Services provided through electronic commerce operators.

  • Supplier may be a taxi driver or rent a cab worker.
  • Receiver maybe anyone.

GST on Reverse Charge | A List of Goods

Tariff item, title or
Section		 Account of Goods Supply Goods supplier Receiver of Supplies
0801 Cashew nuts that are not shelled or peeled An agriculturist Any registered person
1404 90 10 Bidi wrapper
leaves (tendu)		 An agriculturist Any registered person
2401 Tobacco leaves An agriculturist Any registered person
5004 to 5006 Silk yarn Any person
who
manufactures
silk yarn from
raw silk or silk
worm cocoons
for supply of
silk yarn		 Any registered person
none Lottery supply State Government, Union Territory local authority Lottery distributor/selling agent.
Purposes of this entry, lottery distributor or selling agents are the same in clause (c) of Rule 2 of the Lotteries Rules, 2010, made under the provisions of sub section 1 of section 11 of the Lotteries (Regulations) Act, 1998 (17 of 1998).

 

 

GST on Hotels

GST on Hotels – A Complete Guide for GST on Hotels

Leave a Comment / GST / By / January 27, 2024

GST on Hotels: The Indian tourism industry plays a vital role in strengthening Foreign relations in India, and most of India’s revenue comes from the tourism industry itself. At present, the Indian tourism industry is expected to grow at even a higher pace. Indian tourism industry consists of two major components, i.e. hotels and restaurants. Mainly hotels act as the backbone of the tourism industry, and without hotels, tourism in India would not have survived at all.

Before the advent of GST, Hotels were supposed to comply with various other taxes such as Value Added Tax (VAT), Service Tax, etc. The compliance with all these taxes made it difficult for the hotels to do business. But later in 2017, with the implementation of GST, it became more accessible for the Hotels as all the taxes were subsumed under one single tax. Compliance with the GST was much easier than compliance with all the other taxes.

Here in this article, we will discuss the various aspects of GST on Hotels.

GST on Hotels

The Goods and Service Tax Act states that any service provided by a hotel is taxable under GST. The GST act provides for the different tax rates for various tariffs on rooms in a hotel.

The implementation of GST has benefitted the hotel industry in many ways. GST provides the benefits of standardised and uniform tax rates for hotels that are easy to comply with. It also allows better utilisation of input tax credit and eventually decreases the rates for the end-user, which in turn attracts more and more customers.

As discussed earlier, the GST rates are applicable on the price charged by the hotels from the customers on a per night basis. Most of the time, people think that GST rates depend on the star ratings of the hotels, which are not valid.

Till 2018 the GST was applicable on the declared tariff of the hotels, but later in July 2018, the rules were changed, and the GST was charged on the total value of supply. Given below is a table that depicts the GST rates charged by hotels on tariff per night:

Tariff Per Night GST Rates

  • When the price less than ₹1,000 – No GST applicable
  • When the price charged is ₹1,000 – ₹7,499 – 12% GST applicable
  • When the price charged is ₹7,500 or more – 18% GST applicable

Place of Supply For GST on Hotels

Under GST, the place of supply of the goods or services plays a vital role. Similarly, the place of supply for the services provided by a hotel plays a crucial role in the calculation of GST.

For GST on Hotel services, the place of supply is always the state or the union territory in which the hotel or lodge is situated. The place of supply won’t be changed even if the person availing of the hotel service belongs to another state and has a registered GSTIN in another state. The hotels for such cases charge both SGST and CGST.

The registered person can only take an input tax credit if the hotel is registered in the same state as the person.

For example: When a person registered in Jaipur goes to a hotel in Jodhpur and pays SGST and CGST on the bill, they can take input credit of the same. But when the same person travels to any other state, say Delhi and pays SGST and CGST on the hotel bills. In such cases, they cannot take an input tax credit for the same as the person is registered in Jaipur and the hotel is registered in Delhi.

Registration for GST

As per the GST laws, a person or a business is supposed to get registered under the GST act to charge GST from its customers. Similarly, a hotelier is required to get a registration to charge GST.

A hotel is bound to get registered under GST if the yearly turnover of the Hotel is equal to ₹10 lacs or ₹20 lacs or more. But, if the hotel’s turnover is less than the specified limit, and it may or may not get registered under GST.

When a hotel is registered on any e-commerce portal such as Make my trip or OYO or Go Ibibo, and the hotel’s turnover is less than that of the specified limit, it may not get registered under GST.

GST on Bookings From Online Portal

At present, it has become very common for hotels to get bookings from online e-commerce portals. In such cases, if the hotelier has a turnover less than the specified limit and is not registered under GST, then it is the e-commerce operator who is liable to charge GST on the transactions made.

If the hotelier is registered under GST, then it charges GST from the clients by itself. In such a case, the e-commerce operator is supposed to deduct TCS at 1% on the transactions made.

Deemed Export Under GST

Deemed Export Under GST | Meaning, Requirements, Differences, Procedure and Supplies

Leave a Comment / GST / By / January 27, 2024

Deemed Export Under GST: The term ‘deemed export’ comes under the indirect tax system. It is not a new concept of the term, and it revolves around foreign trade policies and schemes. However, under GST, deemed export is present in the IGST Act.

Meaning of Deemed Exports under GST

People can export goods outside India, and it is called jargon. Such products that are shipped are assumed to be zero-rated goods under the GST rule. The Central Government has notified that specific categories of goods can come under the subsection on deemed goods or deemed exports. The meaning of it is that the goods that come under deemed exports will be considered a part of export goods even if they are not exported.

Requirements to Qualify Goods as Deemed Exports

The conditions that will determine if certain goods or supplies of products will come under Deemed Exports of the GST are as follows.

  1. If the products or supplies are only material products and not services
  2. If people do not export the products outside India
  3. If there are some goods that people need to export outside India, they have to notify the Central Government according to the Deemed exports under Section 147 of the CGST Act of the Central Goods and Services Tax law of 2017.
  4. If the goods are manufactured or are produced in India, then they will come under Deemed export.
  5. If the products are made under bond/ LUT, then they do not qualify as Deemed Exports. However, the rest of the product through other mediums can come under the term.
  6. The payment for the goods can be in Indian Rupees or other convertible foreign exchange currency.
  7. The people who buy it have to pay tax at the time of buying it. If there is a refund of tax for the items, then they can claim it afterward.

Supplies Notified as Deemed Exports under the GST

The CGST notification no. of 48/2017 of Central Tax dated 18th October 2017 has informed that the following supply of products deemed exports:

  1. Registered people can do the supply of products against Advance Authorisation or AA. It means that the supplier must be registered under the GST, and the recipient must be the holder of an Advance Authorisation holder.
  2. Registered people can do the supply of the capital goods against the export promotion of capital goods authorisation or EPCG.
  3. The supply of goods by registered people to Export Oriented Unit or EOU or Electronic Hardware Technology Park Unit or EHTP or Software Technology Park Unit or STP and biotechnology park unit or BTP
  4. The supply of gold to a client by a bank or the public sector undertaking against AA
  5. Note: People should know that the Deemed export also has a definition under the Foreign Trade Policy of 2015 to 2020 or FTP. Though the definition of deemed export under FTP is different from the GST law definition, it is best not to consider it while applying for a GST provision. This is because the motive or purpose of the two legislations is varied.

Difference Between Deemed Exports and Other Exports

Suppose a dealer is located in Rajasthan and sells goods to another Dealer who is an EU. If the second dealer sells the goods to a customer in Germany, then the dealer from Rajasthan sold to the next dealer comes under deemed exports. Therefore, the supply to the second dealer to the customer is under exports.

Taxability of Deemed Exports under the GST

Under deemed exports, the supplies are not zero-rated by default like exports. Here, all deemed exports and supplies are subject to GST at the point of collection. The products cannot be manufactured under any Bond or LUT without payment of tax. People have to pay tax on such a supply and then be claimed as a refund.

People can claim the condition that is subject to certain conditions according to their role. The supplier of goods or recipient of gods can get a refund for the tax. People should know that the recipient is not eligible to claim the input tax credit or ITC if a refund of tax paid is claimed by the suppliers.

What are the Additional Conditions for Deemed Exports to EOU/ STP/ HTP?

The EOU/ STP/ HTP/ BTP units must provide the recipient prior intimation by filing Form A to the supplier and the jurisdiction GST officer of supplier and recipients. Form A should bear a running serial number containing the details of goods that the dealer wants to procure. The Development Commissioner has to preapprove the goods before procuring them.

Next, the supplier has to supply the goods according to the cover of a tax invoice. Furthermore, the tax invoice recipient should have an endorsed copy of the same and send it to the supplier and the jurisdictional GST administrator of the recipient and supplier. Finally, the recipient must record such goods they received to the EOU/ STP/ BTP/ EHTP unit through Form B.

Procedure to Refund GST Paid on Deemed Exports

There are certain documents required to claim a fund for filing. For example, if the supplier claims a refund of the tax they paid on deemed exports, the instructions are as follows.

  1. A statement containing the invoice wise details of the deemed export suppliers of the supplier
  2. Acknowledgment of the jurisdictional tax officer of the AA or EPCG holder that says that they have received the OR in case of EOU/ STP/ EHTP/ BTP of the deemed export supplies or the copy of tax invoice the recipient signed
  3. Undertaking by the recipient claiming that they have not claimed any ITC
  4. Undertaking by the recipient that they shall not claim a refund in such supplies

Refund Form

If the supplier of the recipient wants to obtain a refund for the tax they paid on deemed exports, then they have to apply Form FST RFD 01 along with the supporting documents. Then, they can claim it online and process the refund if it is applicable. They can file a refund within a range of two years from the date when the return related to such supplies has finished electronically.

The information is also present in CGST notification no. 49/ 2017 on 18th October 2017. One can also set out the list of the evidence about the supplier of the export items. They have to fill out the declaration in statement 5B and Annexure one of the RFD 01 refund application.

People can utilize the ITC on inputs that belong to the manufacturer of deemed exports entirely. They have to submit a CA certificate within six months of the supply. People have to provide the details of the invoices, credit notes, debit notes of the outward supplies if their supplier has claimed the refund.