GST The Major Tax Reform in In Indian Economy

By | June 28, 2017

Goods And Service Tax

GST the most talked and search word on website. From last couple of months each person, economist, media, political part, chartered accountant and business man trying to understand GST. I am sure no one has complete idea about what GST is?

As you must be aware that GST enforced in whole of India except the state of J&K from 1st July 2017 and it is not just a tax reform but a change in ideology of doing business. Till now business man/service provider was not completely understood excise, customs, service tax, VAT and many other taxes but now he need to understand the GST for doing his business.

I must tell you that you need to make lot of administrative changes to deal with GST. The first and foremost change would be changing the invoice format which has to drafted keeping in mind the invoicing rules of GST.

In this regard, I have tried to summarized the following important matters related to GST for your understanding and your attention in your future dealing.

Basic details:

a) Registration:Registration needs to be taken if the turnover/income crosses 20 Lacs in financial year on single PAN. Please note that registration has to be taken irrespective of turnover if you have any inter-state sale or purchase. Also if you have any godown/warehouse outside your factory/shop then get all such places registered as your additional place of business. A separate registration of GST has to be taken if you are dealing/selling from multiple state. You can opt for single registration for multiple businesses in one state, or can also apply for separate registration for different business verticals.

b) HSN/SAC Code:There is a requirement to mention HSN/SAC code of items in tax invoice under GST. 2 Digit HSN/SAC code if annual turnover in last year was between Rs 1.5 to 5 crore, 4 Digits if annual turnover in last year was more than Rs 5 crore. No HSN/SAC Code required if turnover was below Rs. 1.5 Crores in last year. You can get the list of HSN/SAC codes here.

c) Invoicing: Now we need to follow GST complied documents i.e. Tax Invoice, Payment Vouchers, Receipt Vouchers, Debit and Credit Note in the revised formats. Find attached formats for your reference. You need to have minimum 18 details on the invoice to have this complied with the rules of GST. Please make sure you mention all the details are required on the invoice.

Altering invoice post approval of buyer is not possible in GST. All modification in invoice details has to be done by way of credit note or debit note.

Visit CBEC Rules for rules on invoicing.

d) Taxes: You will have to start charging CGST and SGST from 1st July 2017 in your invoices in 50:50 proportion. If you are selling goods/services to vendor outside your state then IGST to be charged. Get in touch with your GST consultant for Tax rate on your HSN/SAC Code.

e) Software/ Staff training: Ensure that your accounting software is GST Compliant. Most businessman uses Tally for the same. New release 6.0 of tally is GST complied. If you are using any other accounting software for billing please make sure it is GST complied. It’s time to train your staff for GST accounting and returns.

f) Vendor Master data: You must start collection the GST registration details ofyou’re your vendor and suppliers to get the seamless credit. In turn you also need to provide your GST registration details to all your customer to help them comply with GST procedures.

Periodic Returns/ Compliance:

As like any other law, you need to file returns in GST as well. But the in GST you just need to upload your sales details in GSTR-1. All input that you are expecting to take credit of will be done by vendor/supplier and same will be reflecting in your GST account in GSTR-2. The sustem will allow two days to do the rectification in the returns if it contains any error. The GST portal on it owns calculate the net GST payable based on GSTR-1 & GSTR-2 and that will be called as GSTR-3.

The compliance schedule for filing of returns under GST can be summarized in the form of a table as under:

Sr no. Form Description Due date of filing
1 GSTR-1 Outward supplies i.e Sales 10th of next month
2 GSTR-2 Inward supplies i.e Purchases 15th of next month
3 GSTR-3 Monthly Return i.e. Reconciliation & Liability 20th of next month
4 GSTR-4 Quarterly Return by Composition Dealer 18th of next month succeeding the quarter
5 GSTR-5 Return for Non Residential Taxable Person 20th of next month
6 GSTR-6 Quarterly Return by Input Service Distributor 13th of next month succeeding the quarter
7 GSTR-7 Return by Tax Deductor for deducting tax at source 10th of next month
8 GSTR-8 Return for supplies done thru e-commerce 10th of next month
9 GSTR-9 Annual Return 31st December of next financial year
10 GSTR-10 Final Return by person surrendering the registration Within three months of the date of cancellation or date of cancellation order, whichever is later.

​So please share the monthly details of your sales transactions with your customer and ask your vendor/supplier to share details by 8th of next month for smooth compliance and to avoid penalties. GST needs to be paid on 20th of next month to avoid 18% interest along with the penalties. Along with Netbanking & Debit card, payment thru credit card has also been added as mode of payment.

 Other technical details:

a)Reverse Charge MechanismIt is advisable to buy taxable goods from registered Dealer only otherwise you will have to pay GST on Reverse Charge basis. If you purchase the goods or services from unregistered person where the value of goods or services exceeds Rs. 5,000/- per day would attract the GST to pay in reverse charge mechanism. Liability has to be discharges by you under reverse charge mechanism. You need to prepare the self invoice in Payment voucher and make sure the correct HSN/SAC code and tax rate has been used while discharging your reverse charge mechanism liability. For eg if you are enter into 3 different vendors of Rs. 2,000/- in one day then you have crossed limit of Rs. 5,000/- and all the transactions are liable for RCM. The input credit of the GST liability paid under reverse charge mechanism may be allowed in the next month based on the input credit rules.

b) GST on advances: Where there is advance receipt from customer for providing or supply of goods or services then GST would be applicable on the advance receipt as well,you ​will have to give the Receipt voucher as GST is applicable on Invoice issues or Advance received whichever is earlier.

c) Composition Scheme: It is available only to Traders/ Hotels and Manufacturers if turnover is less than 75 Lacs. But you won’t be able to take any credit of purchases and expenses. Get in touch with your GST consultant for further details. Composition Scheme is not available if you have any inter-state sales. Also the option has to be chose at the start of the year.

d) Transitional Rules: 

The GST law provides for carry-forward of accumulated tax credit as well as for claiming credit of various taxes paid on stock in hand (which cannot be claimed at present), subject to fulfillment of the prescribed conditions. Please note that following things to be done/reported to take benefits of transition. This will help us to reduce the future liabilities: Transitional return has to be filled by 30th September but for taking the credit in the first return same should be provided by 15th of August.

For Traders/Manufactures:

  1. Physical verification needs to be done of stock as on 30thJune 2017 and stock to be bifurcated in two criteria which are Stock purchased before 30th June 2016 and stock purchased between 01st July 2016 to 30th June 2017. Follow FIFO basis for working and maintain the separate bill file/ proof of purchases for all the between last 1 year for future reference.
  2. Working for Capital goods purchased between 01stJuly 2016 to 30th June 2017 and remained unutilised has to be prepared.
  3. Working for Service Contract entered before 01stJuly 2017 and part/full service not yet supplied.
  4. VAT return till 30thJune 2017 has to be filled with due care so that all the available credit is carried forward.
  5. Stock purchased between 01stJuly 2016 to 30th June 2017 has to be sold before 31st December 2017, and then only we can claim the input tax credit. It will be better if you can flag those stock for administration.
  6. A separate record has to be maintained till 31st December 2017 for sales of goods which were lying in stock in hand as on 30th June 2017.
  7. Make strict follow-up to collect all the C forms/ H forms/ I forms

For Service Sector:

  1. Working for Service Contract entered before 01stJuly 2017 and part/full service not yet supplied.
  2. Working for Capital goods purchased between 01stJuly 2016 to 30th June 2017 and remained unutilised has to be prepared.
  3. Service Tax return till 30thJune 2017 has to be filled with due care so that all the available credit is carried forward.
  4. Services purchased between 01stJuly 2016 to 30th June 2017 has to be utilised before 31st December 2017, and then only we can claim the input tax credit.

Please consult to  your CA, tax practitioner or consultant for more details.

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