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Get the latest on GST Under the current indirect tax structure, the taxable event differs for each type of tax. The taxable events under the current indirect tax structure are captured below: Type of Tax Taxable Event Central Excise Removal of excisable goods VAT On sale of goods Service Tax Provision of taxable services The taxable event under GST is the Supply of Goods and/Services. All taxes such as Central Excise, Service Tax and VAT/CST will be subsumed under GST, and the concept of manufacture of goods, sale of goods, and provision of services would no longer be relevant. Thus, for every business, it is crucial to understand the relevance of supply which sets the scope of transactions liable for the levy of GST. Relevance of Supply under GST The term ‘supply’ includes all forms of supply of goods or services, supplied or to be supplied, for a consideration, in the course of or for furtherance of business. However, there are specific types of supplies mentioned in the law which need to be considered as supply even without a consideration. Let us understand by categorizing the different types of supply as; • Supplies made for a consideration in the course of or for furtherance of business • Supplies without consideration • Supplies made for a consideration whether or not in the course of or for furtherance of business Supplies made for a consideration in the course of or for furtherance of business The following are considered as supply with consideration: Any sale of goods or services which broadly result in the transfer of title in case of goods, and transfer of right to use in case of services. Any transfers between branches form a part of supply and are taxable. However, GST paid on branch transfers are fully available as Input Tax Credit. When the consideration is paid through goods instead of money. For example: a seller has supplied goods and the buyer, supplies goods to the extent of payment. Or when one product is exchanged with another product.
Scenarios where you cannot Avail Input Tax Credit we will discuss the scenarios where you cannot avail Input Tax Credit. 1. Registration not applied for within 30 days from the date on which you become liable to register If you have not applied for registration within 30 days from the date on which you become liable to register, you will lose the eligible ITC on inputs and inputs contained in semi-finished or finished goods in stock, on the day before the date on which you become liable to pay tax. 2. After the time limit for availing Input Tax Credit is crossed ITC must be availed within the earliest of the following dates- • 1 year of date of the invoice OR • The date of filing of the return for September of the next financial year OR • The date of filing of the annual return (due date is 31st December of the next financial year) Let us understand this with an illustration. Example: Rajesh Apparel Pvt Ltd is a dealer in men’s apparel. It purchases apparel for Rs.1, 00, 000 from the manufacturer on 15th July, 2017. GST paid on the purchase is Rs.18, 000 (18%). They have filed their annual return for the year ‘17-’18 on 31st July 2018, and the return for September 2018 is filed on 20th October 2018. Here, the three dates to be checked are- 1 year from date of invoice 14th July 2018 Date of filing of return for September of the next financial year 20th October 2018 Date of filing of annual return 31st July 2018 As 1 year from the date of invoice, i.e. 14th July 2018 is the earliest among the three dates above, ITC on the invoice must be availed before 14th July 2018. 3. On goods and/or services used as inputs by a composition tax payer A composition tax payer cannot avail ITC on goods and/or services used as inputs. Example: Laxmi Kirana Stores is registered as a composition tax payer under GST. It purchases grocery items from the manufacturer for Rs.20, 000 and GST is charged @ 12% amounting to Rs.2, 400. As Laxmi Kirana Stores is registered as a composition tax payer, it cannot avail ITC of Rs.2, 400 on the purchase. This GST paid will become part of their material cost. 4. On goods and/or services used for personal consumption Example: Rajesh Apparel Pvt Ltd purchased apparel for Rs.50, 000 from the manufacturer. GST paid on the purchase is Rs.9, 000. Out of the apparel purchased, apparel worth Rs.2, 000 is taken by the owner for his personal use. The remaining apparel are sold to customers. Here, the ITC to be availed on the purchase is Rs.8, 640 (48, 000 *18%). 5. On goods and/or services used for making exempt supplies ITC cannot be availed on goods and/or services used for making exempt supplies and supplies where the receiver pays tax on reverse charge basis. Example: You manufacture an exempt good. You purchase the following inputs (used to manufacture the exempt good) on 4th September 2017- Inward supplies- 4.9.2017 Inputs Value (Rs.) GST paid on inputs @ 18% (Rs.) Raw material A 3, 00, 000 54, 000 Raw material B 30, 000 5, 400 Total 3, 30, 000 59, 400 Here, you cannot avail the ITC of Rs.59, 400 as these inputs have been used for manufacturing an exempt good. 6. On services received for which payment has not been made within 3 months from the date of invoice If the recipient of a service has not made payment for the receipt of the service along with the tax payable within 3 months from the date of invoice, the ITC availed will be added to the recipient’s liability, along with interest due. Example: You have taken auditing and consultancy services from a Chartered Accountant. The value of the service is Rs.50, 000 and the GST charged is Rs.9, 000 (@18%). If you do not make the payment of Rs.59, 000 within 3 months of the invoice date, the ITC of Rs.9, 000 availed by you will be added to your liability, along with the interest due. 7. On goods lost, stolen, destroyed, written off or disposed as gift or free samples Example: You are an electronic goods dealer. On 1st Nov, 2017, you purchase 20 computers @ Rs. 25, 000 each from the manufacturer. GST charged is Rs.90, 000 (@18%). On 2nd Nov, 2017, 1 of the computers gets destroyed completely and cannot be used any more. You cannot avail the ITC on that computer, i.e., Rs. 4, 500. 8. On motor vehicles and other conveyance ITC is not allowed on motor vehicles and other conveyance unless they are: • Further supplied OR • Used for transporting passengers or goods OR • Used for imparting training on driving, flying, or navigating such vehicles or conveyances Example: Super Cars Pvt Ltd, a car manufacturer, purchased a Tempo Traveler for the transport of employees within the factory premises. Super Cars Pvt Ltd cannot avail ITC on the Tempo Traveler as it has not been used for the above activities. Let us look at another scenario. Mukesh Travels, a tour operator, purchased a Tempo Traveler for the purpose of transporting tourists during their package tours. Here, Mukesh Travels can avail ITC on the Tempo Traveler, as it is used for transporting passengers – a business activity for Mukesh Travels. 9. On food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery ITC cannot be availed on food and beverages, outdoor catering, beauty treatment, health services and cosmetic and plastic surgery, except where they have been used for making outward supply of the same category of goods or services. Example 1: Super Cars Pvt Ltd take the services of a caterer, Rakesh Caterers, for Diwali Celebration event for its employees. Super Cars Pvt Ltd cannot avail ITC on the catering service, as their business activity is not catering service. Example 2: Rakesh Caterers take the services of a Shamiana provider while providing the catering service to Super Cars Pvt Ltd. Here, Rakesh Caterers can avail ITC on the Shamiana services, as they have been used for making outward supplies of the same category of services. 10. On membership of clubs and health & fitness centres, rent-a-cab services and life & health insurance taken for employees, except notified services which are obligatory to be provided to employees Example: Mukesh Travels, a tour operator, takes an annual membership of a fitness centre, Pratham Fitness Centre, for the use of its employees. Here, Mukesh Travels cannot avail ITC on the GST paid on membership charges. 11. On travel benefits to employees on vacation, such as leave or home travel concession Example: Super Cars Pvt Ltd reimburses its senior employees on travel expenses as part of LTA (Leave Travel Allowance). Super Cars Pvt Ltd cannot avail ITC on the GST component of the travel fare reimbursed. 12. On tax component of cost of capital goods, if depreciation has been claimed on the tax component ITC cannot be availed on the tax component of cost of capital goods, if depreciation has been claimed on the tax component in Income Tax return. Example: Super Cars Pvt Ltd purchases machinery for Rs.50, 00, 000 to be used for the manufacture of cars. The GST paid on the machinery is Rs.9, 00, 000. Super Cars Pvt Ltd claims depreciation of Rs.59, 00, 000 on the machinery under Income Tax, which is including the GST component. In this case, Super Cars Pvt Ltd cannot avail the ITC of Rs.9, 00, 000 on the machinery. Treatment of Input Tax Credit already availed in exceptional scenarios When a regular dealer who has availed ITC switches to the composition scheme When a regular dealer who has availed ITC switches to the composition scheme, the person must pay back the ITC availed on inputs in stock, inputs in semi-finished state, finished goods in stock and capital goods (reduced by the prescribed percentage points) on the day before the date of switching to the composition scheme. Example: You are registered as a regular dealer. You switch to the composition scheme on 1st September 2017 as your turnover does not exceed Rs.50 Lakhs. On 31st August 2017, you have the following inputs in stock on which ITC has already been availed- Closing stock- 31.8.2017 Inputs Value (Rs.) GST paid on inputs @ 18% (Rs.) Raw material A 1, 50, 000 27, 000 Raw material B 20, 000 3, 600 Total 1, 70, 000 30, 600 On switching to the composition scheme, you have to pay back the ITC of Rs.30, 600 availed on the inputs in stock. When taxable goods and/or services become exempt When taxable goods and/or services supplied by a person are notified as exempt, the person must pay back the ITC availed on inputs in stock, inputs in semi-finished or finished goods in stock and capital goods (reduced by the prescribed percentage points) on the day before the date of exemption. Example: You manufacture a taxable good, which is notified to be exempt from GST with effect from 15th September 2017. On 14th September 2017, you have the following inputs in stock on which GST has already been availed- Closing stock- 14.9.2017 Inputs Value (Rs.) GST paid on inputs @ 18% (Rs.) Raw materials 1, 00, 000 18, 000 Inputs in semi-finished goods 50, 000 9, 000 Total 1, 50, 000 27, 000 The ITC availed on the inputs in stock, ie. Rs.27, 000 will have to be paid back. Note: GST rates are not finalised yet and the rates mentioned in the examples are for illustration purpose only.
Understanding Mixed and Composite Supply in GST. If you look at the market today, you will notice very often, two or more goods, or a combination of goods and services, are supplied together. This could be due to either of the following reasons: A sales strategy – to attract more customers The nature or type of goods or services, which requires them to be bundled or supplied together Under Service Tax, this mechanism is called Bundled Service – which is the rendering of a service or services with another element of service of services. Under the revised model draft GST law, supplies which are bundled with two or more supplies of goods or services or combination of goods and services are classified, with distinct characteristics, as: Mixed Supply Composite Supply Mixed supply The supply of two or more individual supplies of goods or services, or any combination of goods and services, by a taxable person, for a single price, is called Mixed Supply. In Mixed Supply, the combination of goods and/or services are not bundled due to natural necessities, and they can be supplied individually in the ordinary course of business. Determining mixed supply Let us understand this with an example. Consider a kit which contains a tie, a watch, a wallet, and a pen, as a combo, for Rs. 4, 500 GST Mixed Supply As per the example, Tie, watch, wallet, and pen are bundled as a kit The supply of a tie does not naturally necessitate the supply of other elements (watch, wallet, pen) and vice versa. The kit is supplied for a single price. Hence, the supply of this kit is a mixed supply. Tax liability on mixed supply To calculate the tax liability on mixed supply, the tax rate applicable on the goods or services attracting the highest rate of tax, in the combination of goods and services, will be considered. Let us consider the example of the kit again. Product Rate of Tax* Tie 12% Watch 18% Wallet 12% Pen 5% *Indicative rates In this case, the watch attracts the highest rate of tax in the mixed supply i.e., 18%. Hence, the mixed supply will be taxed at 18%. Composite supply Composite Supply of goods and services is made by a taxable person to a recipient, and: It comprises two or more supplies of goods or services, or A combination of goods and services, which are naturally bundled and supplied, in the ordinary course of business. This means that the goods and services are bundled owing to natural necessities. The elements in a composite supply of goods and services are dependent elements on the ‘principal supply’ of goods or services. What is principal supply? The pre-dominant element in the supply of goods or services, forming part of composite supply, is principal supply, and any other dependent supply, forming part of composite supplies, are secondary to principal supply. Determination of Composite Supply Let us understand this with an example, A 5-star hotel in Mumbai provides a 4 days/3 nights package, with breakfast.GST Composite supply This is a composite supply as the package of accommodation facilities and breakfast is natural combination in the ordinary course of business for a hotel. In this case, the hotel accommodation is the principal supply, and breakfast is ancillary to the hotel accommodation. 2. A 5-star hotel in Mumbai provides a 4 day/3 nights package with the breakfast and one day Mumbai Darshan. The inclusion of Mumbai Darshan in this package is not a natural requisite to accommodation in the hotel. Hence, this does not amount to composite supply. This is a mixed supply. 3. Sale of laptop with bag -this is a composite supply because laptop bag is natural requisite to carry the laptop. But if the customers opts for a multipurpose bag like backpack bag, it is not a composite supply since it is not naturally bundled. Tax liability of composite supply For purpose of calculating tax liability, the rate of tax applicable on the principal supply of such goods and services will be effected on the composite supply. Let us consider the same example, A 5-star hotel in Mumbai provides a 4 days/3 nights package with the breakfast. Let us assume, the hotel accommodation attracts 18% tax and the restaurant service attracts 12% tax. As per the example, hotel accommodation is the principal supply, and the entire supply will be taxed at 18%. It is important for businesses to look at the types of supplies made by them and re-assess them in order to achieve the objectives of bundling the goods and services, in context with the concepts of mixed supply and composite supply.
If you look at the market today, you will notice very often, two or more goods, or a combination of goods and services, are supplied together. This could be due to either of the following reasons: A sales strategy – to attract more customers The nature or type of goods or services, which requires them to be bundled or supplied together Under Service Tax, this mechanism is called Bundled Service – which is the rendering of a service or services with another element of service of services. Under the revised model draft GST law, supplies which are bundled with two or more supplies of goods or services or combination of goods and services are classified, with distinct characteristics, as: Mixed Supply Composite Supply Mixed supply The supply of two or more individual supplies of goods or services, or any combination of goods and services, by a taxable person, for a single price, is called Mixed Supply. In Mixed Supply, the combination of goods and/or services are not bundled due to natural necessities, and they can be supplied individually in the ordinary course of business. Determining mixed supply Let us understand this with an example. Consider a kit which contains a tie, a watch, a wallet, and a pen, as a combo, for Rs. 4, 500 GST Mixed Supply As per the example, Tie, watch, wallet, and pen are bundled as a kit The supply of a tie does not naturally necessitate the supply of other elements (watch, wallet, pen) and vice versa. The kit is supplied for a single price. Hence, the supply of this kit is a mixed supply. Tax liability on mixed supply To calculate the tax liability on mixed supply, the tax rate applicable on the goods or services attracting the highest rate of tax, in the combination of goods and services, will be considered. Let us consider the example of the kit again. Product Rate of Tax* Tie 12% Watch 18% Wallet 12% Pen 5% *Indicative rates In this case, the watch attracts the highest rate of tax in the mixed supply i.e., 18%. Hence, the mixed supply will be taxed at 18%. Composite supply Composite Supply of goods and services is made by a taxable person to a recipient, and: It comprises two or more supplies of goods or services, or A combination of goods and services, which are naturally bundled and supplied, in the ordinary course of business. This means that the goods and services are bundled owing to natural necessities. The elements in a composite supply of goods and services are dependent elements on the ‘principal supply’ of goods or services. What is principal supply? The pre-dominant element in the supply of goods or services, forming part of composite supply, is principal supply, and any other dependent supply, forming part of composite supplies, are secondary to principal supply. Determination of Composite Supply Let us understand this with an example, A 5-star hotel in Mumbai provides a 4 days/3 nights package, with breakfast.GST Composite supply This is a composite supply as the package of accommodation facilities and breakfast is natural combination in the ordinary course of business for a hotel. In this case, the hotel accommodation is the principal supply, and breakfast is ancillary to the hotel accommodation. 2. A 5-star hotel in Mumbai provides a 4 day/3 nights package with the breakfast and one day Mumbai Darshan. The inclusion of Mumbai Darshan in this package is not a natural requisite to accommodation in the hotel. Hence, this does not amount to composite supply. This is a mixed supply. 3. Sale of laptop with bag -this is a composite supply because laptop bag is natural requisite to carry the laptop. But if the customers opts for a multipurpose bag like backpack bag, it is not a composite supply since it is not naturally bundled. Tax liability of composite supply For purpose of calculating tax liability, the rate of tax applicable on the principal supply of such goods and services will be effected on the composite supply. Let us consider the same example, A 5-star hotel in Mumbai provides a 4 days/3 nights package with the breakfast. Let us assume, the hotel accommodation attracts 18% tax and the restaurant service attracts 12% tax. As per the example, hotel accommodation is the principal supply, and the entire supply will be taxed at 18%. It is important for businesses to look at the types of supplies made by them and re-assess them in order to achieve the objectives of bundling the goods and services, in context with the concepts of mixed supply and composite supply.
For the implementation of GST from July, 2017 , Draft law of GST compensation has been approved by the GST council in 10th meeting. Now, three crucial draft laws — Central GST (CGST), Integrated GST (IGST) and State GST (SGST) expected to be approved in the next meeting held on 4 and 5 march. GST will impact on each and every industry & business in India. In Education and Training Industry, India holds an important place in the global education industry. The country has more than 1.4 million schools with over 227 million students enrolled and more than 36, 000 higher education institutes. India has one of the largest higher education systems in the world. However, there is still a lot of potential for further development in the education system. India has become the second largest market for e-learning after the US. In the Education and Training Industry will also be impacted by GST and impact is elaborate in the following aspects:- Tax Payment Registration Input Tax Credit Returns Refund Tax Payment: In the existing indirect tax structureeducation and training industry enjoy various tax exemptions and tax benefits. Education services provided by an educational institution (i.e. institution providing services of pre-school education and education up to higher secondary school not coaching instituteOR education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in forceOR education as a part of an approved vocational education courseto its students, faculty and staff. In addition of above, Following Services provided to an educational institution(i.e. institution providing services of pre-school education and education up to higher secondary school not coaching institute OR institution providing services of education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force OR institution providing services of education as a part of an approved vocational education course)— (i)Transportation of students, faculty and staff; (ii) Catering, including any mid-day meals scheme sponsored by the Government; (iii) Security or cleaning or house-keeping services performed in such institution; (iv) Services relating to admission to, or conduct of examination by such institution. » Following Services provided by the Indian Institutes of Management to their students as per the guidelines of the Central Government:- 2 years full time residential Post Graduate Programme in Management for the Post Graduate Diploma in Management, to which admissions are made on the basis of Common Admission Test (CAT), conducted by Indian Institute of Management Fellow programme in Management 5 year integrated programme in Management. » Services of National Skill Development Programme implemented by the National Skill Development Corporation (NSDC)OR A vocational skill development course under the National Skill Certification and Monetary Reward Scheme ORAny other Scheme implemented by the National Skill Development Corporation by the following:- National Skill Development Corporation set up by the Government of India Sector Skill Council(SSC) approved by the NSDC Assessment agency approved by the SSC or NSDC A training partner approved by the SSC or NSDC. » Services of skill or vocational training courses certified by National Council For Vocational Training provided by training providers i.e. Project implementation agencies under Deen Dayal Upadhyaya Grameen Kaushalya Yojana under the Ministry of Rural Development. » Services of training or coaching in recreational activities relating to arts, culture or sports. Any education and training service except aforesaid education and training services are liable of Service Tax @15%. In the GST Law, It is expected that any education and training service except exempted in existing tax system will of GST @18% then the price will up by 3%. But the input Tax credit will be allowed on the input goods which was not available in existing tax system resulting some relaxation to the education and training service provider. And it is expected that exempted services in the existing tax system will continue to remain exempt as exempt supply in GST law. 2. Registration: In the existing tax system, Centralized registration facility is available for the taxpayer who provides education and training services from more than one premise. Such premises may be located in the same state or in different states. In the GST Law, State wise registration is mandatory i.e. If any institution supply services from more than one premises located in different states then registration in every state from where services supplied is mandatory. For Example: – ABC smart classes having 20 offices in India and each office is located in different state and provide services and head office is situated in New Delhi. In present tax system, Centralized registration facility may be availed by the ABC smart classes however in the GST law, Registration in all 20 states is mandatory for ABC smart classes. Migration of Existing Taxpayers into GST has been started from 08th Nov 2016. In the migration, taxpayers can log in to GST Portal i.e. www.gst.gov.in to fill the required fields and submit scanned documents. Input Tax Credit: In the existing tax structure, education and training services are provided by the various institution and they procure various goods and services for providing education and training services. Service provider avail the credit of service tax paid on input services however can not avail the credit of input tax on procured goods for providing services. In the GST law, institution which will provide education and training services can avail the credit of CGST+SGST or IGST (as the case may be) paid on input goods and services procured for providing education and training services in the following manner: Cross utilization of CGST and SGST will not be permitted i.e. for the payment of SGST, input of CGST is not available and vice-a-versa. For the payment of CGST, first input of CGST to be used then input IGST to be used. For the payment of SGST, first input of SGST to be used then input IGST to be used. For the payment of IGST, first input of IGST to be used then input CGST and then input of SGST to be used. Returns: In the existing tax structure, Education and Training service provider are required to file the following returns:- Half Yearly Service Tax return. Annual Service Tax return. In the GST law, institution which will provide education and training services are required to file the following returns:- Return Particulars Due Date Applicable For Form GSTR-1 Outward Supplies 10thdayof next month Normal tax payer GSTR-2 Inward Supplies 15thdayof next month Normal Taxpayer GSTR-3 Monthly return 20thdayof next month Normal Taxpayer GSTR-8 Annual return 31st Dec of the next FY Normal Taxpayer GSTR-4 Quarterly Return 18th day of next month qtr. Compounding Taxpayer GSTR-5 Return by Non Resident Taxpayer Ø If registration period is less than month -within 7 days after the date of expiry of registration. Ø If registration period is more than one month then to be furnished on monthly basis -20thday of next month. Non Resident Taxpayer In addition of above returns, GSTR- 6 and GSTR- 7 are required to be filled by Input Service Distributer and Tax deductor respectively. Refunds Same as refund in existing tax structure, Refund under GST by Educational and Training institution may be availed in the following situations:- In case of excess payment In case of export of services In case of Finalization of Provisional Assessment. In case of pre deposit in case of Appeal. Further, Refund application shall be filled within 2 years from the relevant date.
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