Learning GST compliance laws and its Terms and Conditions

GST Structure as Per GST Law

GST has substituted all other taxes like Central Excise Duty, Service Tax, Central Sales Tax, State VAT, Entertainment Tax etc.

• There are two forms under GST. One for those goods which travel at intrastate level i.e. within the state and at the inter-state level i.e. between the states.
• At Intrastate level two types of GST are levied:
  • Central Goods and Service Tax (CGST).
  • State Goods and Service Tax (SGST).
• At Interstate level, Integrated Goods and Service Tax (IGST) is levied.
• Imports shall be considered as an Interstate supply.
• Supplies to Special Economic Zones (SEZ) and exports will be zero rated.

How Set-off Works in GST

• Central Goods and Service Tax (CGST) will be set off against – IGST and CGST on inputs.
• State Goods and Service Tax (SGST) will be set off against – IGST and SGST on inputs.
• Integrated Goods and Service Tax (IGST) will be set off against – IGST, SGST and CGST on inputs.

Benefits of GST

• Removing cascading tax effect.
• Regulating the unorganized sector.
• Higher threshold for registration.
• Taxation has become a simple online procedure.
• Defined treatment for e-commerce.
• Composition scheme for small business.
• Increased efficiency in logistics.

GST Composition Scheme Under GST

A choice is provided to the registered taxpayer under GST composition scheme for informing tax authorities about their intention, while they are registering under this scheme. In case the taxpayer fails to register under this scheme, he will be treated as a normal taxpayer and will be administered accordingly. This option is available to suppliers of goods and restaurants with aggregate turnover up to Rs. 1.5 crore in the preceding financial year (Rs. 75 lakh for special category states), at a rate of 1% of turnover for manufacturers and traders and 5% for restaurants. Service providers with turnover up to Rs. 50 lakh can opt for a similar scheme at 6%.

Breaking Down GSTIN

Before GST, any dealer who was registered under state VAT law was issued a unique TIN by the respective state authorities, and the erstwhile Central Board of Excise and Customs assigned a Service Tax Registration Number to service providers.

Under the GST regime, all taxpayers are brought onto one common platform and registration is assigned through a single portal, gst.gov.in. All the businesses registered under GST are assigned a unique Goods and Services Tax Identification Number (GSTIN); more than 1.5 crore taxpayers are registered under GST today. Each taxpayer is given a state-wise, PAN-based 15-digit Goods and Services Tax Identification Number (GSTIN).

The breakup of the GST Identification Number is as follows

• The first two digits of this number represent the state code, which is as per Indian census 2011.
• The next ten digits are the Permanent Account Number (PAN) of the taxpayer.
• The 13th digit is assigned based on the number of registrations done within the state.
• The 14th digit is Z by default.
• The last digit may be an alphabet or a number, it is basically a check code.

GSTIN and GSTN are both different terms. GSTN is Goods and Services Tax Network. It is the organisation set up to manage the entire IT system of the GST portal, which is the mother database for GST. The government uses this portal to track GST transactions and provide taxpayers with all services – from maintaining all tax details to registration and the filing of returns.

Understanding Reverse Charge

Normally, the supplier is liable to collect and pay tax on the supply. But, in certain notified cases, the receiver is liable to pay tax. In such cases, chargeability gets reversed, which is why it is called reverse charge. The purpose behind this charge is to increase tax compliance and tax revenues. Under the GST regime, the Reverse Charge Mechanism is applicable for both services and goods.

Mixed Supply and Composite Supply Under GST

Under GST, all supplies made together, in a bundle, are covered under one supply whether they are related to one supply or not. The concept used in composite supply as per GST law is similar to the concept of bundled services under the erstwhile service tax law. However, the concept introduced in Mixed Supply was new with GST.

Composite Supply

Composite Supply is a means of supply which comprises of two or more goods/services. This is a kind of supply which is naturally bundled and supplied with each other. The items under this cannot be supplied separately. Any goods or services will be treated as a composite supply if the following two conditions are fulfilled

• Two or more goods supplied together.
• If it is a natural bundle i.e. goods and services which are usually provided in the normal course of business, and cannot be separated from each other.

If the second condition is not fulfilled then it will be treated as a Mixed Supply.

Mixed Supply

When two or more individual supplies goods and services, which are manufactured together by a taxable person for a single price it is termed as “Mixed Supply”. The items which are manufactured can be supplied separately and are not dependent on each other’s supply. If the goods or services are supplied separately, then it will not be termed as mixed supply.

Under GST, a mixed supply comprising two or more supplies is treated as a supply of that article which has the highest tax rate.

Example: A gift box containing chocolates, sweets, dry fruits and aerated drinks sold for a single price is a mixed supply, since each item can also be sold separately.

Continuous Supply

Under the GST regime, goods or services which are provided continuously or on a recurrent basis are termed as Continuous Supply of Goods and Services. On a periodic basis, an invoice is sent to the recipient for the supplies made by the supplier.

Under the erstwhile Central Excise and VAT/CST laws there was no such concept of continuous supply of goods. Under GST, the time of supply for services arises at the earliest of either of the following

• Date of receipt of payment.
• Date of completion of services.
• Date of invoice.