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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.
Supply of Goods or Services between Related and Distinct Persons Feb 15 2017 In our earlier blog GST Impact on Supply without Consideration and Importation of Services, we discussed about supply without consideration and the import of service. This blog discusses, in detail, supplies without consideration between: • Related person • Distinct person Related person The definition of “Related Person” is similar to the current Customs Valuation Rules. The supply is considered as between related persons only if the supply of goods or services is made between: 1.Officers or directors of one another’s businesses: In a supply, the supplier and the recipient are actually officers or directors of the other business. As illustrated above, Mr. Ganesh is a Director in Ganesh Trading Ltd, and an officer in Rakesh Trading Ltd. Mr. Rakesh, is a Director in Rakesh Trading Ltd. Also, Rakesh is an officer in Ganesh Trading Ltd. Therefore, any supply between them, will be treated as supply between related persons. 2. Legally recognized partners in business: The supplier and the recipient are partners in the same business or associated business. As illustrated above, Mr. Ganesh and Mr. Rakesh are partners in Ganesh Trading Ltd. Any supply between Mr. Ganesh and Mr. Rakesh will be treated as supply between related persons. 3. Employer and employee: Any supply of goods and services between employer and employee. Mr. Rakesh is an employee of Ganesh Trading Ltd. Any supply from Ganesh Trading Ltd to Mr. Rakesh is considered as supply between related persons. 4. The supplier or recipient directly or indirectly owns, controls or holds twenty-five per cent or more of the outstanding voting stock or shares. For example, the recipient hold 25% of equity in the supplier’s business. 5. One of them directly or indirectly controls the other: If in any supply, the supplier or the recipient directly or indirectly controls the other, then it is considered as supply between related persons. Direct Control As illustrated above, Ganesh Trading Ltd holds equity in Rakesh Trading Ltd. The supply between Ganesh Trading and Rakesh Trading are related since Ganesh Trading Ltd directly controls Rakesh Trading Ltd.’s business. Indirect Control As illustrated above, Ganesh Trading Ltd holds equity in Rakesh Trading Ltd . Rakesh Trading Ltd. holds equity in Max Trading Ltd. Any supply between Ganesh Trading Ltd and Max Trading Ltd. are related. This is because Ganesh Trading Ltd. indirectly controls Max Trading’s Ltd business by way of ‘Rakesh Trading’s’ business interest in Max Trading Ltd. 6. Both of them are directly or indirectly controlled by a third person: If in any supply, the supplier and the recipient are directly or indirectly controlled by a third person. In the illustration above, Ganesh Trading Ltd holds equity in Rakesh Trading ltd and Max Trading. The supply between Rakesh Trading Ltd and Max Trading ltd are related since both of them are directly controlled by Ganesh Trading Ltd. 7. Together they directly or indirectly control a third person: If in any supply, the supplier and the recipient, together, directly or indirectly control a third person. As illustrated above, Rakesh Trading Ltd holds 80% equity in Max Trading Ltd and 30% in Ganesh Trading Ltd. Max Trading Ltd’ hold 70 %equity in Ganesh Trading Ltd . Now, together, Rakesh Trading Ltd has control over Ganesh Trading Ltd and the supply between them will be considered as supply between related persons. 8. They are members of the same family: A supply made between the members of the same family is considered as supply between related persons. Distinct Person A Distinct Person can be defined as a taxable person who has obtained or is required to obtain more than one registration in the same state or a different state. Or an establishment of a person who has obtained or is required to obtain a registration, and also has the establishment in another state. Each of his/her registration and establishment will be treated as a Distinct Person, and any supply between them will be taxable. Therefore, any stock transfer or branch transfers are taxable in the following two cases: 1.Intrastate stock transfer: Only when an entity has more than one registration in one state. For Example Super Cars Ltd is a car manufacturing unit located in Karnataka. They also own a service unit in Karnataka. Super Cars Ltd have obtained separate registrations for both the manufacturing and service units. The manufacturing unit and the service unit of Super Cars Ltd will be treated as distinct persons, and any supply between them will be taxable, even without consideration. 2. Inter State Stock transfer: Transfer between two entities located in different states is taxable. For Example Super Cars Ltd is a car manufacturing unit located in Karnataka. They also own a service unit in Delhi. The manufacturing unit and the service unit of Super Cars Ltd located in Delhi will be treated as distinct persons, and any supply between them will be taxable, even without consideration.
In all probability, India will roll out its biggest financial reform since independence – the Goods and Services Tax or GST from July 01, 2017. Though delayed by three months (the original date for its roll out was fixed for April 01, 2017), the new taxation regime promises to create a single seamless national market by consolidating a range of disparate central and local taxes into one levy. The 9th meeting of the GST Council was held in New Delhi wherein the center broadly consented to the states’ demand on dual control of assessing, administrative and auditing powers. Meanwhile, a panel of bureaucrats from the center and the states firmed up the list that would specify the tax slabs for each goods and services. Given that this exercise would spill over to March, July 1 comes across as a tenable date for GST’s introduction. As the deadline for the new tax regime is approaching fast, SAP customers are understandably anxious about this change. While there has been a deluge of information related to GST on the Internet (published by SAP and others), it has only created a more confusing scenario for customers. Amidst all the confusion, we demystify the situation and bring in clarity for all. Here is a point-by-point look at what SAP customers need to mandatorily do, and the changes that need to be carried out in their SAP implementations to align with GST. Compulsory Requirements The mandatory prerequisites for migrating to GST include: The necessary minimum patch level for SAP Application must be SAP ERP 6.0 (600) SP26 or higher (for instance, if you’re on SAP 4.7, you must first upgrade to SAP ERP 6.0 before moving to GST). For more details, refer SAP Note number 1175384. You need to be having Tax Procedure TAXINN (which is condition-based). In case you’re live on SAP with tax procedure TAXINJ (which is formula-based), you must first migrate to tax procedure TAXINN. Refer SAP Note/KBA numbers 2252781, 2014164, 2153807, 827268. The last two Notes talk about SAP’s standard programs for migration of open Purchase Orders and open contracts. Incidentally, both the requirements are akin to mini-projects with each taking a minimum of 3-6 man-months depending on the scale and complexity involved. Areas Impacted in SAP Below are the changes that need to be carried out in SAP. You may also refer to SAP Note No 240580. Organization setup: Create Business Place and assign to Plants. Tax Registration: Maintain GST Registration Number (also called GSTIN as explained earlier) at the business place level configuration. Master Data maintenance – Maintain GST registration number for each registered customer and vendor. Also affected will be Material Master and Services Master. Please refer to SAP Notes Numbers 2405502 and 2385575 which explain the changes to master data. GST Tax Accounts: Define for CGST, SGST and IGST separately – Business place based G/L account determination for both MM and SD. Define new Condition Types under tax procedure TAXINN. For instance, JICG, JISG, and JIIG for central, state and integrated GST respectively. Maintain SD Access Sequence and MM Access Sequence Maintain document number range for outgoing GST invoices Business Processes affected that, therefore, need to be tested thoroughly after the configuration include: Sales Order Billing document Purchase Order Goods receipt Vendor Invoice Outgoing GST invoice Incoming GST invoice Stock transfer Subcontracting Need to have GL accounts for Separate accumulation of credit and payable for CGST SGST IGST Separate accumulation at Registration level Utilization of Input tax credit would be as below: Input CGST to be utilized against output CGST and IGST Input SGST to be utilized against output SGST and IGST Input IGST to be utilized against output IGST, CGST and SGST in the order of IGST, CGST and SGST Reporting: Tax Register CGST IGST SGST The most important parameters to be reported to GSTN include — GSTR-1 (Outward supplies made by the taxpayer); GSTR-2 (Inward Supplies/Purchases received); GSTR-8 (Annual return); Custom-developed objects (RICEF). It is recommended that every form/layout, report, interface, which involves fields related to taxes is tested. Some changes may need to be carried out through ABAP/4. Commercials Involved As for CXOs, they would be interested in knowing how much budget needs to be allocated for GST implementation in SAP. Since the efforts vary greatly from organization to organization (depending on the scale and complexity involved), a fixed number can’t be put here. However, the common requirement across all organizations of all sizes is the need for human resources with the following skills. SAP FI SAP MM SAP SD SAP ABAP/4 SAP Basis Project Lead The number (how many from each skill) and duration (man-weeks) would vary from case-to-case.
GST Network extends deadline till April 30 2017, for existing firms to register MUMBAI: with only 54 lakh businesses, out of the estimated 80 lakh, enrolling with the GST Network (GSTN), the infrastructure provider has decided to extend the deadline to register with it till April 30 from March 31. There are about 65 lakh registered value-added tax (VAT) assessees, 26 lakh service tax assessees and another five lakh central excise assessees, who are expected to register under the unified GSTN, which provides IT infrastructure and services for implementation of GST. It’s a private limited company with the central and state governments holding 49 per cent stake, while the remaining 51 per cent is with non-government financial institutions. “The voluntary enrollment process started six months ago and 73 per cent of the businesses have registered. We will be extending time till April 30, for the others to enroll, ” Prakash Kumar, CEO, Goods and Services Tax Network told Express. He added that starting April, the central and respective state government tax departments will kick-start training campaigns to familiarise assesses on filing returns, which starts from August. However, small and medium enterprises, the backbone of the country’s industrial activity, await clarity on key aspects such as input tax credit. According to GST laws, input credit against taxes paid by the purchaser can be availed only if the seller deposits the said tax with the government treasury. In the event of non-compliance, the purchaser will be denied input credit. “There’s a need to de-link payment with the availability of input credit, which GST is capable of providing as it brings transparency and protection against tax evasion, ” said Tejas Goenka, executive director, Tally Solutions. Meanwhile, small and medium businesses also want relaxation of audit considering the shortage of chartered accountants. “There are only 2.3 lakh CAs in the country, of which 40 per cent are not practicing and those who are serving cannot cope up with the increased demand. We requested the government to exempt MSMEs up to Rs 5 crore revenue for audit and also allow cost accountants, tax consultants and income tax assessors to audit financials for ease of use, ” said Avinash K Dalal, national president and founder, All India MSME Association. Source: http://www.newindianexpress.com/business/2017/mar/30/gst-network-extends-deadline-till-april-30-for-firms-to-register-1587528.html
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.
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