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Tax Impact on Goods Sold Prior to GST, but Returned after GST In a business, return of goods sold is common. Under current regime, the return of goods are allowed to be reduced from the total turnover of sales, provided that the goods are returned within specified time limit. The eligibility to avail reduction from tax varies from state to state, but it is generally 6 months from the date of sale. GST, a major reform in indirect taxation is expected to be implemented by 1st July, 2017. ‘Supply’ being the taxable event, it is very important for businesses to understand the tax implications on the goods sold prior to GST, but returned on or after the implementation of GST. Some questions you may have What will happen if taxable goods are returned by the registered taxable person? What will happen if taxable goods are returned by an unregistered person? What will happen if goods returned are exempt under the current regime but are taxable under GST? For ease of understanding, let us categorize this into: Return of taxable goods Return of exempted goods Return of taxable goods Let us understand a scenario where taxable goods are sold prior to GST, but are returned on or after the implementation of GST. The return of goods could be from a registered taxable person or from an unregistered person. Returned by Registered Taxable Person The return of taxable goods by a registered taxable person will be considered as Supply, and GST will be levied. This is because, on the date of purchase of goods, the tax paid by the recipient was allowed as input tax credit and subsequently it was utilized by him, or was allowed to be carried forward as input tax credit to GST.On such return of goods under GST, the person returning the goods should charge GST, and GST paid on sales returns will be allowed as input tax credit to the original seller. Ravindra Automobiles is a registered dealer in spare parts, located in Karnataka. On 15th June, 2017, Ravindra Automobiles sold 30 Nos of spare parts worth Rs. 1, 00, 000, with VAT @ 14.5%, to Rajesh Auto Parts, who is also a registered dealer in Karnataka .On 5th July, 2017, Rajesh Auto Parts returned 15 Nos of the spare parts to Ravindra Automobiles. The return of goods by Rajesh Auto Parts will be considered as supply, and will attract GST. Hence, on making the purchase return, Rajesh Auto Parts will charge a GST of 18 %. Taxable goods are returned by an Unregistered Person On the return of taxable goods by an unregistered person, the seller will be eligible for refund of duty/tax paid under the current regime. The refund claimed by the seller will be subject to the conditions listed below: The date of sale of the goods returned should not be more than 6 months prior to the date of implementation of GST. The return of goods should be within a period of 6 months from the date of implementation of GST. Ravindra Automobiles is a registered dealer in spare parts located in Karnataka. On 25th June, 2017, Ravindra Automobiles sold a spare part worth Rs. 10, 000, with VAT @ 14.5%, to a customer Mr. Kumar.On 2nd July, 2017, Mr. Kumar returned the spare part to Ravindra Automobiles. Ravindra Automobiles will be eligible for a refund of Rs. 1, 450. This is because, the sale period is within 6 months prior to the implementation of GST, and the return of the spare part is within 6 months from the date of implementation of GST. Return of exempted goods Consider a scenario where exempted goods are sold prior to GST, but these goods are taxable and are returned on or after the implementation of GST. Returned by Registered Taxable Person On exempted goods, which are sold under the current law and are returned after implementation of GST, no tax will be levied. This is applicable subject to the following conditions: The date of sale of the goods returned should not be more than 6 months prior to the date of implementation of GST. 2.The return of goods should be within a period of 6 months from the date of implementation of GST. On 15th June, 2017, Ravindra Automobiles sold a goods worth Rs. 1, 00, 000, which is exempt from VAT.On 20th July, 2017, goods were returned to Ravindra Automobiles On 15th June, 2017, Ravindra Automobiles sold goods worth Rs. 1, 00, 000, which is exempt from VAT.On 20th January, 2018, spare part were returned to Ravindra Automobiles. On return of goods, no tax is payable. This is because, the sale period is within 6 months prior to the implementation of GST, and the return of goods is within 6 months from the date of implementation of GST.2. On return of goods, tax is payable. This is because, the return of goods is not within 6 months from the date of implementation of GST. Taxable goods are returned by an Unregistered Person The Goods which are sold as exempt under current regime and are returned by unregistered person in GST regime, no tax is payable on such return. On 25th June, 2017, Ravindra Automobiles sold a goods worth Rs. 10, 000, to a customer Mr. Kumar. This was exempt from VAT.On 2nd July, 2017, Mr. Kumar returned goods to Ravindra Automobiles. No tax is payable on such returns.
What is Union Territory GST (UTGST)? In our previous blogs, we have discussed about the taxes that will be levied on supply under GST. On intrastate supplies, the taxes levied are Central GST (CGST) and State GST (SGST). On interstate supplies, the tax levied is IGST. Another component of GST is now being talked about – UTGST. UTGST stands for Union Territory Goods and Services Tax. Let us understand UTGST, the circumstances in which it is levied, and the manner of its levy. Union Territory GST (UTGST) A union territory is directly under the governance of the Central Government. This differentiates them from the states, which have their own elected governments. Currently, there are 7 union territories in India: Chandigarh Lakshadweep Daman and Diu Dadra and Nagar Haveli Andaman and Nicobar Islands Delhi Puducherry Among these, Delhi and Puducherry have their own legislature, with elected members and a Chief Minister. Hence, they function as semi-states. Under GST, the SGST Act applies to all the states in India. The definition of ‘States’ in the Indian Constitution includes union territories with their own legislature. Hence, the SGST Act also applies to the union territories of Delhi and Puducherry. This means that on supplies within the union territories of Delhi and Puducherry, the taxes levied will be CGST +SGST, and on supplies from Delhi/Puducherry to another state/union territory, the tax levied will be IGST. As the SGST Act cannot be applied on a union territory without its own legislature, the GST Council has introduced the UTGST Act, to levy a tax, called UTGST, in the union territories of Chandigarh, Lakshadweep, Daman and Diu, Dadra and Nagar Haveli and Andaman and Nicobar Islands. UTGST will be levied in place of SGST in these union territories. UTGST is applicable in the union territories of Chandigarh, Lakshadweep, Daman and Diu, Dadra and Nagar Haveli and Andaman and Nicobar Islands. CLICK TO TWEET Levy of Tax Supply within the Union Territory On supplies within a union territory, CGST + UTGST will be levied. For example: Furniture Centre in Chandigarh supplies 50 sofa sets for Rs. 10, 00, 000 to Veena Furnitures in Chandigarh. This is a supply within the union territory of Chandigarh. Assuming a GST rate of 12% on sofa sets, the tax calculation in this case will be as follows: Particulars Amount (Rs.) Sofa sets 10, 00, 000 CGST @ 6% 60, 000 UTGST @ 6% 60, 000 Total 11, 20, 000 Hence, the only difference here, is that on supplies within union territories, UTGST will be levied in place of SGST. On supplies within a union territory, CGST and UTGST will be levied. CLICK TO TWEET Supply outside the Union Territory On supplies from a union territory to another state or union territory, IGST will be levied. For example: Furniture Centre in Chandigarh supplies 50 sofa sets for Rs. 10, 00, 000 to Ramesh Furniture Town in Delhi. This is a supply outside the union territory of Chandigarh. Assuming a GST rate of 12% on sofa sets, the tax calculation in this case will be as follows: Particulars Amount (Rs.) Sofa sets 10, 00, 000 IGST @ 12% 1, 20, 000 Total 11, 20, 000 Hence, similar to the levy of tax on supplies outside a state, IGST will be applicable on supplies outside a union territory. IGST will be applicable on supplies outside a union territory. CLICK TO TWEET Order of utilization UTGST credit can be utilised to set-off the tax payable in a manner similar to utilization of SGST credit, i.e.: Input Tax Credit Set-off against liability UTGST UTGST and IGST (in this order) Also, UTGST credit cannot be utilized to set-off CGST liability. Example: At the end of August ’17, Furniture Centre in Chandigarh has input tax credit and tax liability as shown below: Input tax credit (Rs.) Tax liability (Rs.) CGST 1, 00, 000 CGST 80, 000 UTGST 1, 00, 000 UTGST 80, 000 IGST 2, 00, 000 IGST 2, 50, 000 Here, Furniture Centre can utilise the UTGST credit of Rs. 1, 00, 000 as follows: Particulars Amount (Rs.) UTGST credit 1, 00, 000 (-) Set-off against UTGST liability (-) 80, 000 Balance 20, 000 (-) Set-off against IGST liability (-) 20, 000 Balance Nil UTGST will be levied in place of SGST in union territories without their own legislatures. The UTGST bill, along with CGST and IGST bills, which will be administered by the Central Government, has been passed
GST Council plans to take up three contentious laws for discussion; targets 1 July roll-out Aiming towards a smooth roll out of Goods and Services Tax (GST) from 1 July, the GST Council will look into the three GST laws in its next meeting, scheduled for 18 February. The session by the Secretaries Panel at CNBC-TV 18 Mint’s ‘Budget 2017: The Verdict’ programme in New Delhi on Thursday evening discussed in detail the GST and its power to arrest, disinvestment plans, mergers and acquisitions, proposals for a new financial year, and other factors. West Bengal finance minister Amit Mitra, who also heads the empowerment panel on GST. AFP file image “Industry is looking forward to the laws and rules. Once they are finalised by the GST council, it will pave the way towards the implementation of GST from 1 July. The agenda of the next meeting is to look into all the three laws. In the subsequent meetings, we’ll take up the rules. As far as rates are concerned, it’s going to be a simplistic formula. The council has said that there would be four slabs: 5 percent, 12 percent, 18 percent and 28 percent, ” said revenue secretary Hasmukh Adhia. After the announcement of the Budget on 1 February, West Bengal finance minister Amit Mitra, who also heads the empowerment panel on GST, sent 16 demands to the Finance Ministry to look into, including the arrest clause, which was described as “draconian” by the West Bengal government. “The power to arrest tax defaulters is already there under excise and service tax laws, and also under VAT in some states. After an extensive debate, a majority in the GST Council decided that no arrests should be made in cases of tax evasion up to Rs 2 crore. However, evaders between Rs 2 and Rs 5 crore could face bailable arrest. Above tax evasion of above Rs 5 crore, it may invite non-bailable arrest, ” he said. Is there a new financial year on cards? Economic affairs secretary Shaktikant Das said, “The report to change the financial year is under consideration by the government. We are examining it, and once the decision is taken, it will be communicated.” On IDBI Bank’s disinvestment plan The government announced in the Budget that it hopes to raise Rs 72, 500 crore in FY18 by divesting stakes in public sector firms. Compared to the revised estimate of Rs 45, 500 crore for FY17, this is an increase of around 60 percent. While discussing the disinvestment plan of the state-run IDBI Bank, Das said, “The divestment of IDBI Bank is not off the table. The work is in progress. Its share value in the market doesn’t reflect the real estate it holds in Mumbai. The real estate valuation needs to be done carefully and a transparent decision needs to be taken in this case.” “We’ve not derailed from the path of financial prudence. Today, our economy needs investment in certain sectors. As per the NK Singh panel, our fiscal deficit target is 3 percent and we’ll improve it in 2017-18, ” Das added. Priorities in 2017: “To ensure people pay tax and society becomes more tax compliant”: Ashok Lavasa, finance secretary. “Budget 2017 is very strong on reforms, and our focus is on implementation”: Shaktikant Das, economic affairs secretary. “Roll out of GST from 1 July 2017 will be the Year of GST”: Hasmukh Adhia, revenue secretary. “Look for a stable and buoyant market”: Neeraj
NEW DELHI: The GST council approved the draft compensation bill for states. The government will table the bill in the next session of Parliament. “The Draft Compensation Bill has been approved in the GST Council meeting. The government will present the Bill to Parliament in next session, ” Finance Minister Arun Jaitley said after the GST council meeting today. “Next GST meeting will be held on March 4-5 in Delhi and the government is expecting to clear IGST and SGST bills in this meeting. It will also discuss slabs for commodities in next meeting, ” Jaitley said. “The GST council will then require one major meeting after March 4-5 to approve GST bill specifics, ” Jaitley added.
1st Feb, 2017GST will hit tax collections, but boost GDP in medium run : Over the medium run, the implementation of GST and enactment of other structural reforms should help the economy realise its real potential GDP growth of 8-10%+ , chief economic advisor (CEA) Arvind Subramanian has said in the Economic Survey. However GST, which will be implemented from July 2017 if the finance ministry sticks to the new deadline, is likely to affect revenue collections adversely, particularly that of the Centre as the states' revenues are guaranteed. The survey pointed out that the transition to the GST is so complicated from an administrative and technology perspective that "revenue collection will take some time to reach full potential". Combined with the Centre's commitment to compensating the states for any shortfall in their own GST collections relative to a baseline of 14% increase, the outlook must be cautious with respect to revenue collections, the survey said. Source - TOI Business
GST roll out next fiscal: Is the govt looking at changing the financial year? Aiming towards a smooth roll out of Goods and Services Tax (GST) from 1 July, the GST Council in its next meeting on 18 February will look into the three laws in GST. The session by Secretaries Panel at ‘Budget 2017 The Verdict’ of CNBC-TV 18-Mint at Hyatt Regency in New Delhi on Thursday evening discussed GST and its power to arrest disinvestment plan, merger & acquisition, proposal for a new financial year among others in detail. “Industry is looking forward to the laws and rules. Once they are finalised by the GST Council – it’ll pave way towards implementation of GST from 1 July. The agenda of the next meeting is to look into all the three laws. In the subsequent meetings we’ll take up the rules. As far the rates are concerned, it is going to be a simplistic formula. The council has said that there would be four slabs of rates—5%, 12%, 18% and 28%, ” said Revenue Secretary, Hasmukh Adhia. After the announcement of Budget 2017 on 1 February, West Bengal’s finance minister, who also heads the empowerment panel on GST, sent 16 demands to finance ministry to look into, including the arrest clause. The arrest clause has been described as ‘draconian’ by the West Bengal government. “Power to arrest the tax defaulters is already there in excise and service tax, and also under VAT law in some states. After an extensive debate, majority in the GST Council decided that no arrest would be made in the case of tax evasion up to Rs 2 crore. However, evader between Rs 2-5 crore will face arrest but get a bail. But above, Rs 5 crore, it’s non-bailable, ” he said. Is there a new financial year on cards? Economic Affairs secretary, Shaktikant Das said, “The report to change the financial year is under consideration by the government. We’re examining it, and once the decision is taken, it will be communicated.” On IDBI Bank’s disinvestment plan The government announced in the Union Budget on 1 February that it hopes to raise Rs 72, 500 crore in FY18 by divesting stakes in public sector firms. Compared to the revised estimate of Rs 45, 500 crore for FY17, this is an increase of around 60 percent. While discussing the disinvestment plan of the state-run IDBI Bank, Das said, “The divestment of IDBI Bank is not off the table. The work is in progress. The share value of it in market doesn’t reflect real estate it holds in Mumbai. The real estate valuation needs to be done carefully and transparent decision needs to be taken in this case.” “We’ve not derailed from the path of financial prudence. Today, our economy needs investment in certain sectors. As per the NK Singh panel, our fiscal deficit target is 3% and we’ll improve it in 2017-18, ” added Das. Priorities in 2017 Ashok Lavasa, Finance Secretary: To ensure that people pay tax and it should be a more a tax compliant society. Shaktikant Das: Budget 2017 is very strong on reforms and our focus is on implementation. Hasmukh Adhia: Roll out of GST from 1 July. Year 2017 will be the Year of GST.
7th Feb, 2017GST migration Seva Kendra opened A facilitation centre that would provide assistance in uploading the required documents for registration under the upcoming Goods and Services Tax (GST) regime opened in Hyderabad on Thursday. Chief Commissioner, Customs and Central Excise, Hyderabad zone, Sandeep M. Bhatnagar inaugurated the GST migration Seva Kendra at Kendriya Shulk Bhavan, Basheerbagh. The Central Board of Excise and Customs, he said, was establishing such Seva Kendras across the country to facilitate migration of the assessees to the GST. The Seva Kendra would remain open from 9:30 a.m. to 5:30 p.m. on all working days. It is connected to both the GSTN as well the Central Board of Excise and Customs portals. The facility is manned by experienced and well-trained officers, a release said. Mr. Bhatnagar said similar facilities would be opened in all buildings housing the Central Excise and Service Tax Commissionerates in Telangana. Source - The Hindu
20th Feb, 2017GST council OKs draft law on relief to states Prospects of a rollout of the Goods and Services Tax (GST) by July 1 brightened with the GST Council approving on Saturday a draft law that seeks to compensate states fully in case of revenue loss as a result of the tax reform. The council is now expected to approve three other laws when it meets on March 4-5, paving the way for the legislations to be brought to Parliament by around March 9. The decision on categorisation of goods in tax slabs is not part of the law and will be worked out by the council after the enabling laws are passed. Briefing reporters after a meeting of the council, finance minister Arun Jaitley said he expected the panel to approve the C-GST, I-GST and S-GST laws at its next meeting in Delhi. "It's essential that enabling laws for GST are passed in the second half of the budget session to ensure rollout from July 1, " Jaitley said. The approval to the draft compensation law is read as a positive development as it was a contentious issue, improving the prospects of the ambitious indirect tax reform meeting its latest July 1 deadline. Parliament has been subject to disruptions and the heated poll rhetoric in the midst of assembly elections can be a worry. Source - Times of India
20th Feb, 2017Telangana government wants consumers to pass on GST benefits The Telangana state government has been pitching for a clause in the GST Act to ensure that the benefit of lower taxes is passed on to consumers. Apart from this, the state government will ask the Centre to set up a National GST Appel-late Tribunal to resolve tax-related disputes between all the stakeholders without any delay. The transition of traders from VAT to GST is going on at a brisk pace in the state. The linking of local traders with national GST networks is expected to be completed by April to enable GST rollout from July 1, as planned by the Centre. Senior officials of the commercial taxes department have submitted a report to finance minister Etela Rajender on the issues to be taken up in the GST Council. The report noted that the benefit of taxes that come down due to GST should be passed on to the consumers. It also suggested that there should be a mechanism like Appellate Tribunal to examine whether input tax credits availed by any registered taxable person, or the reduction in the price on account of any reduction in the tax rate have actually resulted in a commensurate reduction in the price of goods and/or services supplied by him. Source - Deccan Chronicle
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