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Levy & Exemption from Tax

Supply of goods and/or services is the taxable event under GST. CGST & SGST will be levied on intra-state supplies while IGST will be levied on inter-state supplies. The charging section is section 7 (1) of CGST/SGST Act and Section 4(1) of the IGST Act.

Note: The Meaning and definition of Supply has been explained in detail from Page No. 5

Reverse Charge Applies to Both Supply of Goods and Services.

Note: Currently, the reverse Charge is applicable only on few specified services for Service tax applicability (e.g. Goods Transport Service). The reverse Charge concept on Goods is very new and will be introduced with effect with GST.

The recipients who are registered under composition schemes would be liable to pay tax under reverse charge.

Composition scheme would become applicable for all the business verticals/registrations which are separately held by the person with same PAN.

Threshold for Composition Scheme is Rs. 50 Lakhs

The methodology to compute aggregate turnover is given in Section 2(6). Accordingly, ‘aggregate turnover’ means ‘Value of all supplies (taxable and non-taxable supplies + Exempt supplies + Exports) and it excludes Taxes levied under CGST Act, SGST Act and IGST Act, Value of inward supplies + Value of supplies taxable under reverse charge of a person having the same PAN.

Min. Rate of Composition Scheme is 1%

If Goods are destroyed due to and only due to NATURAL CAUSE, tax payer may be exempt from paying the tax.

Registration

Any supplier who carries on any business at any place in India and whose aggregate turnover exceeds threshold limit as prescribed in a year is liable to get himself registered within 30 days. However, certain categories of persons mentioned in Schedule III of MGL are liable to be registered irrespective of this threshold as mentioned in point number 3 below. An Agriculturist is not considered as a taxable person, and shall not be liable to take registration. (Section 9(1))

As per section 2 (6) of the MGL, aggregate turnover includes the aggregate value of:

  • All taxable and non-taxable supplies,
  • Exempt supplies, and
  • Exports of goods and/or service of a person having the same PAN.

As per paragraph 5 in Schedule III of MGL, the following categories of persons shall be required to be registered compulsorily irrespective of the threshold limit:

  • Persons making any inter-State taxable supply;
  • Casual taxable persons; (Explained in Point Number 10 in details)
  • Persons who are required to pay tax under reverse charge;
  • Non-resident taxable persons;
  • Persons who are required to deduct tax under section 37;
  • Persons who supply goods and/or services on behalf of other registered taxable persons whether as an agent or otherwise;
  • Input service distributor;
  • Persons who supply goods and/or services, other than branded services, through electronic commerce operator;
  • Every electronic commerce operator;
  • An aggregator who supplies services under his brand name or his trade name; and
  • Such other person or class of persons as may be notified by the Central Government or a State Government on the recommendations of the Council.

Every person who is liable to take a Registration will have to get registered separately for each of the States where he has a business operation and is liable to pay GST in terms of Sub-section (1) of Section 19 of Model GST Law.

In terms of Sub-Section (2) of Section 19, a person having multiple business verticals in a State may obtain a separate registration for each business vertical, subject to such conditions as may be prescribed.

Every person shall have a Permanent Account Number issued under the Income Tax Act, 1961 (43 of 1961) in order to be eligible for grant of registration under Section 19 of the Model GST Law.

However as per section 19 (4A) of MGL, PAN is not mandatory for a non-resident taxable person who may be granted registration on the basis of any other document as may be prescribed.

In terms of sub-section 7 of MGL, the proper officer can reject an application for registration after due verification.

However, it is also provided in sub-section 8 of Section 19, the proper officer shall not reject the application for registration or the Unique Identity Number without giving a notice to show cause and without giving the person a reasonable opportunity of being heard.

The taxable supplier supplying to UN bodies is expected to mention the UIN on the invoices and treat such supplies as supplies to another registered person (B2B) and the invoices of the same will be uploaded by the supplier.

A unique identification number (ID) would be given by the respective state tax authorities through GST portal to Government authorities / PSUs not making outwards supplies of GST goods (and thus not liable to obtain GST registration) but are making inter-state purchases.

Casual Taxable Person has been defined in Section 2 (21) of MGL. It means a person who occasionally undertakes transactions in a taxable territory where he has no fixed place of business.

A taxable person residing outside India and coming to India to occasionally undertake transaction in the country but has no fixed place of business in India is a non-resident taxable person in terms of Section 2 (69) of the MGL.

The certificate of registration issued to a “casual taxable person” or a “non-resident taxable person” shall be valid for a period of ninety days from the effective date of registration. However, the proper officer, at the request of the said taxable person, may extend the validity of the aforesaid period of ninety days by a further period not exceeding ninety days.

While a normal taxable person does not have to make any deposit of money to obtain registration, a casual taxable person or a non-resident taxable person shall, at the time of submission of application for registration under sub-section (1) of section 19, make an advance deposit of tax in an amount equivalent to the estimated tax liability of such person for the period for which the registration is sought. If registration is to be extended beyond the initial period of ninety days, an advance additional amount of tax equivalent to the estimated tax liability is to be deposited for the period for which the extension beyond ninety days is being sought.

Yes, in certain circumstances specified under section 21(2) of MGL, the proper officer can cancel the registration on his own. Such circumstances include not filing  return for a continuous period of six months (for a normal taxable person) or three months (for a compounding taxpayer), and not commencing business within six months from the date of registration. However, before cancelling the registration, the proper officer has to follow the principles of natural justice. (Section 21 (4))

No option of Centralized Registration for service.

For Separate line of business, tax payer may opt for independent registration for each line of business.

On transfer of business, the transferee or the successor shall be liable to be registered with effect from such transfer or succession and he will have to obtain a fresh registration with effect from such date.

GSTN shall migrate all existing assessees/dealers to the GSTN network and shall issue GSTIN number and password. They will be asked to submit all requisite documents and information required for registration in a prescribed period of time. Failure to do so will result in cancellation of GSTIN number.

The service tax assessees having centralized registration will have to apply afresh in the respective states wherever they have their businesses.

If the information and the uploaded documents are found in order, the State and the Central authorities shall approve the application and communicate the approval to the common portal within three common working days. The portal will then automatically generate the Registration Certificate. In case no deficiency is communicated to the applicant by both the tax authorities within three common working days, the registration shall be deemed to have been granted [section 19(9) of MGL] and the portal will automatically generate the Registration Certificate.

Meaning and Scope of Supply - Part I

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’.

The term ‘supply’ is wide in its import and includes all forms of supply of goods and / or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. It also includes import of service. The model GST law also provides for including certain transactions made without consideration within the scope of supply.

A ‘taxable supply’ means a supply of goods and / or services which is chargeable to good and services tax under the GST Act.

In order to constitute a ‘supply’, the following elements are required to be satisfied, i.e.-

(i) supply of goods and / or services;
(ii) supply is for a consideration;
(iii) supply is made in the course or furtherance of business;
(iv) supply is made in the taxable territory;
(v) supply is a taxable supply; and
(vi) Supply is made by a taxable person.

Importation of goods is dealt separately under the Customs Act, 1962, wherein IGST shall be levied as additional duty of customs in addition to basic customs duty.

Inter-state self-supplies such as stock transfers will be taxable as a taxable person has to take state wise registration in terms of Schedule 1(5). Such transactions have been made taxable even if there is no consideration. However, intra-state self-supplies are not taxable.

Titles as well as possession both have to be transferred for a transaction to be considered as a supply of goods. In case title is not transferred, the transaction would be treated as supply of service in terms of Schedule II (1). In some cases, possession may be transferred immediately but titled may be transferred at a future date like in case of sale on approval basis or hire purchase arrangement. Such transactions will also be termed as supply of goods.

An individual buys a car for personal use and after a year sells it to a car dealer. Will the transaction be a supply in terms of MGL? Give reasons for the Answer.

No, because supply is not made by the individual in the course or furtherance of business. Further, no input tax credit was admissible on such car at the time of its acquisition as it was meant for non-business use.

This Concludes Part I. Will come up with Part II soon.

The author can also be reached at camayur2@gmail.com

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