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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.
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
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.
March 2, 2017 • No Comments Why is Technology the Epicentre of GST Implementation Share 262 Tweet Share 12 +1 2 SHARES 276 Technology-assisted compliance is not an entirely new concept in India. Way back in the 1990s, taxation departments used technology for tax administration. However, this was mainly as a backend mechanism. A major shift in behaviour occurred when online filing of returns was introduced. This was largely a result of different computer systems being integrated, thus enabling taxpayers to directly interact with the tax department. Under the current taxation system, data or information broadly flows in one direction to the Government, which we can describe as a B to G or Business to Government data flow. With the use of technology, the time and cost has reduced significantly while accuracy of compliance has been greatly enhanced. Technology for GST compliance – what is different this time? With technology already a driving force for compliance today, what then is the need to revisit issues that concern the right technology for GST implementation and compliance? Why will technology play a pivotal role in GST implementation and administration from both a government and business perspective? With GST, the two major goals that the government intends to achieve are: • Reduce tax evasion • Simplify compliance for taxpayers In the prevailing tax systems, there are several cases where the government has not been able to detect evasion and loss of tax revenues. As a result, it has become a challenge for the department concerned to track the input claims against the liability of the seller. There have also been numerous cases of duplication of claims on input tax, fraudulent claims, input tax claims that do not correspond with tax liability declared by the seller, or seller who has not furnished his tax liability. In order to overcome this, GST has introduced invoice matching of buyer and seller. It has been estimated that the taxpayer base under GST is around 8 million. With billions of invoices to be matched on a monthly basis, there is a critical need for a real time invoice matching capability, supported by robust IT infrastructure. There is no way invoice matching at this scale can be achieved manually. What is GSTN’s role in simplifying compliance for taxpayers? The GSTN is currently working on rolling out state-of-the art IT infrastructure that will introduce changes that are significantly different from the current system. Equipped with an open API (Application Program Interface), the GSTN server will seamlessly connect with third party applications used by taxpayers, thus providing an all-user interface, and convenience via desktops, mobiles, and tablets. This will assist taxpayers to automate their invoice matching from within their software rather than by logging onto the portal. This will save time, and drive simplicity of compliance procedures. GST will drive a lot of discipline in filing returns at regular intervals, and automation will help businesses achieve this with less pain. Use of technology will also enable efficient tax administration for registration, returns filing, data exchange, and effective investigation, monitoring, auditing and performance analysis with little or no human intervention. It will also provide several user-friendly features such as offline capabilities, alerting capabilities, mobile/tablet interface, and additional mechanisms to avoid duplicity of data. As this tax system is being implemented for the first time in India, businesses will encounter several challenges during the initial stages of implementation. However, once systems are streamlined, the two important objectives envisaged – curbing tax evasion, and increasing tax revenue and ease of compliance for taxpayers will be achieved. The success of this transformation will help our nation create history in the world of GST compliance. So what should businesses do now? The GST regime which begins on July 1, 2017, will ride on the strength of technology with seamless interface with the GSTN server. Businesses must automate their manual systems, and install software that is robust enough to interact with the GSTN system, and assist in immediate, accurate, and reliable compliance. Invoice matching is a very critical requirement of GST. Because of the clear timelines dictated by GST, compliance will no longer be a month-end or quarter-end activity. Therefore, invoice matching and other compliance related activities cannot be achieved using a manual or a low-tech system. Speed and accuracy are both critical. Businesses will have to start interacting frequently with the GSTN system. This will require a GSTN-enabled business application or accounting software so that the task ahead become seamless and efficient.
7th Feb, 2017Revenue Department prepares draft recommendations for GST rates : Report The Revenue Department has prepared draft recommendations for GST rates on services. According to the draft, GST on telecom, banking, financial services, aviation is proposed to be pegged at 18%, sources told ET Now. DTH, restaurant dining are also placed in the 18% bracket, they said. "Education, healthcare are the only major sectors which will see lower service tax rate of 12%. Construction of affordable housing will also remain in the 12% bracket, " the sources further added. Meanwhile, talking about the roadmap for implementation of the Goods and Services Tax (GST), Hasmukh Adhia expressed optimism that the government is on track to make the indirect tax reform a reality soon. "We are well on track for GST, nobody needs to worry about its implementation, " he said. "On February 18, we have the next meeting of the GST Council. We hope to finalise the law in that meeting, " he said, adding that the broad rates of GST have already been indicated and further calamity will emerge as the government moves forward on implementation. Source - Financial express
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