As you are all aware that by now the GST rates have been finalized and out which are 5% (For Basic necessities), 12% & 18% (Both are standard rates) and 28% (For Luxury Items, of course as per the definition and understanding of Govt.). Last time we discussed the Basics of GST, Registration Requirements of GST and the part-1 of Scope of Supply under GST. Before you start reading this, I would insist you to have a look at the previous article first, if possible.
To read the first part of the article: Click here
MEANING & SCOPE OF SUPPLY - PART II
1. The taxable event under GST shall be the supply of goods and / or services made for consideration in the course or furtherance of business. The taxable events under the existing indirect tax laws such as manufacture, sale, or provision of services shall stand subsumed in the taxable event known as ‘supply’.
2. In order to constitute a ‘supply’, the following elements are required to be satisfied, i.e.-
- Supply of goods and / or services;
- Supply is for a consideration;
- Supply is made in the course or furtherance of business;
- Supply is made in the taxable territory;
- Supply is a taxable supply; and
- Supply is made by a taxable person.
3. Now the question is what if a dealer of air-conditioners transfers an air conditioner from his stock in trade, for personal use at his residence. Will the transaction constitute a supply?
Yes. As per Schedule-I (1) business assets put to private or non-business use without consideration will be treated as supply.
4. So what if a club or association of persons or society provides goods or services to its members, will be considered as supply?
Yes. Provision of facilities by a club, association, society or any such body to its members shall be treated as supply. This is included in the definition of ‘business’ in section 2(17) of MGL.
5. Where the location of the supplier and the place of supply are in same state it will be intra-state and where it is in different states it will be inter-state supplies.
Few Examples bifurcating the Supply of Goods and Supply of Services:
6. Works contract and catering services shall be treated as supply of service as specified in Schedule-II of MGL.
7. Supply of goods on hire purchase shall be treated as supply of goods as there is transfer of title, albeit at a future date.
8. Transfer of right to use goods shall be treated as supply of service because there is no transfer of title in such supplies. Such transactions are specifically treated as supply of service in Schedule-II of MGL
TIME OF SUPPLY (ALSO KNOWN AS POINT OF TAXATION)
The time of supply fixes the point when the liability to charge GST arises. It also indicates when a supply is deemed to have been made. The MODEL GST LAW provides separate time of supply for goods and services.
TIME OF SUPPLY OF GOODS
1. The time of supply of goods shall be the earliest of the following namely,
- The date on which the goods are removed by the supplier, where the supply of goods require removal; or
- The date on which the goods are made available where the supply does not require removal; or
- The date on which the supplier issues invoices with respect to the supply where the above two situations do not apply; or
- The date on which the recipient shows the receipt of the goods in his books of accounts.
2. Time of Supply of Continuous Supply of Goods
The time of supply of continuous supply of goods is;
a) Where successive statements of accounts or successive payments are involved, the date of expiry of the period to which such successive statements of accounts or successive payments relate.
b) Where there are no successive statements of account or successive payments involved, the date of issue of the invoice or the date of receipt of payment whichever is earlier.
3. Time of Supply in case of goods sent on approval basis
In case of supply on approval basis, the time of supply shall be the time at which it is known whether supply will take place or six months from the date of supply, whichever is earlier.
Unlike goods, in the case of services, the time of supply is determined by the fact whether the invoice or supply of services has been issued within the prescribed period or beyond such prescribed period.
Note: Govt. is yet to prescribe any specific time period (It is expected to be between 15 to 30 days)
1. When invoice is NOT issued within prescribed period
The time of supply of service in such cases shall be the earliest of the following:
- date completion of the provision of service; or
- the date of receipt of payment.
2. When invoice is Issued within prescribed period
The time of supply of service in such cases shall be the earliest of the following:
- Date of issue of invoice; or
- The date of receipt of payment.
Note: In case the invoice is issued or payment is made only for part and not full, the supply will be considered for that part only and NOT FOR FULL.
3. Time of Supply of service in case of tax payable under Reverse Charge:
The time of supply will be the earliest of the following dates:
- Date of receipt of services;
- Date on which payment is made;
- Date of receipt of invoice;
- Date of debit in the books of accounts by supplier.
4. Time of Supply of service in case of continuous supply of Service:
Ans. The time of supply shall be the due date of payment, if ascertainable from the contract.
If not ascertainable, it will be earliest of date of receipt of payment or the date of issue of invoice or completion of event where payment is linked to completion of event.
5. Let’s say there was increase in tax rate from 18% to 20% w.e.f. 1.6.2017. What is the tax rate applicable when services provided and invoice issued before change in rate in April 2017, but payment received after change in rate in June 2017?
Ans. The old rate of 18% shall be applicable as services are provided prior to 1.6.2017.
GST Payment of Tax–
In the GST regime, for any intra-state supply, taxes to be paid are the Central GST (CGST, going into the account of the Central Government) and the State GST (SGST, going into the account of the concerned State Government). For any inter-state supply, tax to be paid is Integrated GST(IGST) which will have components of both CGST and SGST.
In addition, certain categories of registered persons will be required to pay to the government account Tax Deducted at Source (TDS) and Tax Collected at Source (TCS). In addition, wherever applicable, Interest, Penalty, Fees and any other payment will also be required to be made.
1. PERSON LIABLE FOR PAYMENT OF TAX: In general the supplier of goods or service is liable to pay GST. However in specified cases like imports and other notified supplies, the liability may be cast on the recipient under the reverse charge mechanism.
Further, in some cases, the liability to pay is on the third person (say in the case of e-commerce operator responsible for TCS or Government Department responsible for TDS).
2. Payment can be done by the following methods:
(i) Using Input Credit of the Ledger of the taxpayer 67 maintained on the Common Portal ONLY Tax can be paid. Interest, Penalty and Fees cannot be paid by debit in the credit ledger.
Tax payers shall be allowed to take credit of taxes paid on inputs (input tax credit) and utilize the same for payment of output tax. However, no input tax credit on account of CGST shall be utilized towards payment of SGST and vice versa. The credit of IGST would be permitted to be utilized for payment of IGST, CGST and SGST in that order.
(ii) In cash by debit in the Cash Ledger of the taxpayer maintained on the Common Portal. Money can be deposited in the Cash Ledger by different modes, namely, E-Payment (Internet Banking, Credit Card, Debit Card); Real Time Gross Settlement (RTGS)/National Electronic Fund Transfer (NEFT); Over the Counter Payment in branches of Banks Authorized to accept deposit of GST.
3. Due date of Payment:
Payment of taxes by the normal taxpayer is to be done on monthly basis by the 20th of the succeeding month.
Composition tax payers will need to pay tax on68 quarterly basis.
Timing of payment will be from 0000 Hrs (Midnight 12) to 2000 Hrs (Evening 8). So you cannot make payment during evening 8 to Midnight 12.
4. Which date is considered as date of deposit of the tax dues- Date of presentation of cheque or Date of payment or Date of credit of amount in the account of government account?
It is the date of credit to the Government account.
5. E-Ledger - Electronic Ledgers or E-Ledgers are statements of cash and input tax credit in respect of each registered taxpayer. In addition, each taxpayer shall also have an electronic tax liability register. Once a taxpayer is registered on Common Portal (GSTN), 2 e-ledgers(Cash & Input Tax Credit) and an electronic tax liability register will be automatically opened and displayed on his dashboard at all times.
Cash Ledger: The cash ledger will reflect all deposits made in cash, and TDS/TCS made on account of the taxpayer. The information will be reflected on real time basis. This ledger can be used for making any payment on account of GST.
ITC Ledger: Input Tax Credit as self-assessed in monthly returns will be reflected in the ITC Ledger. The credit in this ledger can be used to make payment of TAX ONLY and not other amounts such as interest, penalty, fees etc.
Tax liability register: Tax Liability Register will reflect the total tax liability of a taxpayer (after netting) for the particular month.
6. Sequence of Payment of GST:
- First self-assessed tax and interest for the previous period,
- Thereafter self-assessed tax and interest for the current period
- Thereafter any other amounts payable including any confirmed demands under section51.
This sequence has to be mandatorily followed.
7. TDS: TDS stands for Tax Deducted at Source (TDS). As per section 37, this provision is meant for Government and Government undertakings and other notified entities making contractual payments in excess of Rs.10 Lakhs to suppliers. While making such payment, the concerned Government/authority shall deduct 1% of the total payable amount and remit it into the appropriate GST account.
Any amount shown as TDS will be reflected in the electronic cash ledger of the concerned supplier. He can utilize this amount towards discharging his liability towards tax, interest fees and any other amount.
8. TDS Deductor: TDS Deductor will account for such TDS in the following ways:
i. Such deductors needs to get compulsorily registered under section 19 read with Schedule III of MGL.
ii. They need to remit such TDS collected by the 10th day of the month succeeding the month in which TDS was collected and reported in GSTR 7.
iii. The amount deposited as TDS will be reflected in the electronic cash ledger of the Supplier.
iv. They need to issue certificate of such TDS to the deductee within 5 days of deducting TDS failing which fees of Rs. 100 per day subject to maximum of Rs. 5000/- will be payable by such deductor.
9. TCS: This provision is applicable only for E-Commerce Operator under section 43C of MGL. Every E-Commerce Operator needs to withhold a percentage (to be notified later on the recommendation of the GST Council) of the amount which is due from him to the supplier at the time of making actual payment to the supplier. Such withheld amount is to be deposited by such E-Commerce Operator to the appropriate GST account by the 10th of the next month. The amount deposited as TCS will be reflected in the electronic cash ledger of the supplier.