Saturday, April 29, 2017

Frequently Asked Questions on GST (Goods and Services Tax) - Part II

FAQ on GST (Goods and Services Tax) - Part I
FAQ on GST (Goods and Services Tax) - Part II
FAQ on GST (Goods and Services Tax) - Part III
FAQ on GST (Goods and Services Tax) - Part IV
FAQ on GST (Goods and Services Tax) - Part V
FAQ on GST (Goods and Services Tax) - Part VI

FAQ on GST (Goods and Services Tax) - Part VII

This Question and Answers are prepared by Apex Training Institute Under Central Board of Excise and Customs(CBEC) with some inputs from National Academy of Customs, Excise and Narcotics (NACEN).

Below mentioned Q&A are derived from above document with modifications.

16. What would be the role of GST Council? 

Constituted comprising the Union Finance Minister (Chairman of the Council), the Minister of State(Revenue) and the State Finance/Taxation Ministers to make  recommendations to the Union and the States on 

(i) Taxes, cesses and surcharges levied by the Centre, the States and the local bodies which may be subsumed under GST; 
(ii) Goods and services that may be subjected to or exempted from the GST; 
(iii) Date on which the GST shall be levied on petroleum crude, high-speed diesel, motor spirit (petrol), natural gas and aviation turbine fuel; 
(iv) Model GST laws, principles of levy, apportionment of IGST and the principles that govern the place of supply; 
(v) Threshold limit of turnover below which the goods and services may be exempted from GST 
(vi) The rates including floor rates with bands of GST; 
(vii) Any special rate or rates for a specified period to raise additional resources during any natural calamity or disaster; 
(viii) Special provision with respect to the North-East States, J&K, Himachal Pradesh and Uttarakhand;
(ix) Any other matter relating to GST, as the Council may decide. 

17. How will decisions be taken by GST Council? 

The Constitution (101th Amendment) Act, 2016 provides that every decision of the GST Council shall be taken at a meeting by a majority of not less than 3/4th of the weighted votes of the Members present and voting. The vote of the Central Government shall have a weightage of 1/3rd of the votes cast and the votes of all the State Governments taken together shall have a weightage of2/3rd of the total votes cast in that meeting. One-half of the total number of members of the GST Council shall constitute the quorum at its meetings. 

18. Who is liable to pay GST under the proposed GST regime? 

Tax is payable by the taxable person on the supply of goods and/or services. Liability to pay tax arises when the taxable person crosses the turnover threshold of 20 lakhs INR (10 lakhs for NE & Special Category States) except in certain specified cases where the taxable person is liable to pay GST even though he has not crossed the threshold limit. 

The CGST / SGST is payable on all intra-State supply of goods and/or services and IGST is payable on all inter-State supply of goods and/or services. The CGST/SGST and IGST are payable at the rates specified in the Schedules to the respective Acts. 

19. What are the benefits available to small taxpayers under GST? 

Taxpayers with an aggregate turnover in a financial year up to [20 lakhs and 10 Lakhs for NE and special category states] would be exempt from tax. Further, a person whose aggregate turnover in the preceding financial year is less than 50 Lakhs can opt for a simplified composition scheme where tax will payable at a concessional rate on the turnover in a state. 

[Aggregate turnover shall include the aggregate value of all taxable supplies, exempt supplies and exports of goods and/or services and exclude taxes viz. GST.] Aggregate turnover shall be computed on all India basis. For the NE States and special category states, the exemption threshold shall be [10 lakhs].

All taxpayers eligible for threshold exemption will have the option of paying tax with input tax credit (ITC) benefits. Tax payers making inter-State supplies or paying tax on reverse charge basis shall not be eligible for threshold exemption. 

20. How will the goods and services be classified under GST regime? 

HSN (Harmonised System of Nomenclature) code shall be used for classifying the goods under the GST regime. Tax payers whose turnover is above Rs 1.5 crores but below 5 crores shall use 2-digitcode and the taxpayers whose turnover is 5 crores and above shall use 4-digitcode. Taxpayers whose turnover is below 1.5 crores are not required to mention HSN Code in their invoices. 

Services will be classified as per the Services Accounting Code(SAC) 

21. How will imports be taxed under GST? 

Imports of Goods and Services will be treated as inter-state supplies and IGST will be levied on import of goods and services into the country. The incidence of tax will follow the destination principle and the tax revenue in case of SGST will accrue to the State where the imported goods and services are consumed. Full and complete set off will be available on the GST paid on import on goods and services. 

22. How will Exports be treated under GST? 

Exports will be treated as zero rated supplies. No tax will be payable on exports of goods or services, however credit of input tax credit will be available and same will be available as refund to the exporters. The Exporter will have an option to either pay tax on the output and claim refund of IGST or export under Bond with out payment of IGST and claim refund of Input Tax Credit (ITC). 

23. What is the scope of composition scheme under GST? 

Small taxpayers with an aggregate turnover in a preceding financial year up to [50 lakhs] shall be eligible for composition levy. Under the scheme, a taxpayer shall pay tax as a percentage of his turnover in a state during the year without the benefit of Input Tax Credit(ITC). The rate of tax for CGST and SGST/UTGST shall not be less than [1% for manufacturer & 0.5% in other cases; 2.5% for specific services as mentioned in para 6(b) of Schedule II viz Serving of food or any other article for human consumption]. 

A taxpayer opting for composition levy shall not collect any tax from his customers. The government may increase the above said limit of 50 lakhs rupees to up to one crore rupees, on the recommendation of GST Council.  Tax payers making inter-state supplies or making supplies through ecommerce operators who are required to collect tax at source shall not be eligible for composition scheme. 

Composition scheme is optional

24. What is GSTN and its role in GST regime? 

Goods and Service Tax Network (GSTN) is a Special Purpose Vehicle called the GSTN has been setup to cater to the needs of GST. The GSTN shall provide a shared IT infrastructure and services to Central and State Governments, taxpayers and other stakeholders for implementation of GST. 

The functions of the GSTN would, include: 
(i) Facilitating registration; 
(ii) Forwarding the returns to Central and State authorities; 
(iii) Computation and settlement of IGST;
(iv) Matching of tax payment details with banking network; 
(v) Providing various MIS reports to Central and State Governments based on the taxpayer return information; 
(vi) Providing analysis of tax payers profile;
(vii) Running the matching engine for matching, reversal and reclaimof input tax credit. 

The GSTN is developing a common GST portal and applications for registration, payment, return and MIS/ reports. The GSTN would also be integrating the common GST portal with the existing tax administration IT systems and would be building interfaces for tax payers. GSTN is also developing back-end modules like assessment, audit, refund, appeal etc. for 19 States and UTs(Model II States). The CBEC and Model I States (15 States) are themselves developing their GST back-end systems. Integration of GST frontend system with back-end systems will have to be completed and tested well in advance for making the transition smooth. 

25. How are the disputes going to be resolved under GST regime? 

Constitution (101th Amendment) Act, 2016 provides that Goods and Services Tax Council shall establish a mechanism to adjudicate any dispute,
(a) Between Centre and one or more States 
(b) Between Centre and State or States on one side and one or more other Sates on the other side; 
(c) Between two or more States, 

arising out of there commendations of the Councilor implementation there of. 

26. What is the purpose of Compliance rating mechanism?  

As per Section 149 of the CGST/SGST Act, every registered person shall be assigned a compliance rating based on the record of compliance in respect of specified parameters. This rating will be in public domain. A prospective client will be able to see the compliance ratings of suppliers and take a decision as to whether to deal with a particular supplier or not.

27. Whether actionable claims liable to GST? 

As per section 2(52) of the CGST/SGST Act actionable claims are to be considered as goods. Schedule III read with Section 7 of the CGST/SGST Act lists the activities or transactions which shall be treated neither as supply of goods nor supply of services. The Schedule lists actionable claims other than lottery, betting and gambling as one of such transactions. Thus only lottery, betting and gambling shall be treated as supplies under the GST regime.  All the other actionable claims shall not be supplies. 

28. Whether transaction in securities be taxable in GST? 

Securities have been specifically excluded from the definition of goods as well as services. 

29. What is the concept of Information Return? 

Information return is based on the idea of verifying the compliance levels of registered persons through information procured from independent third party sources. 

As per section 150 of the CGST/SGST Act, many authorities who are responsible for,
maintaining records of registration or statement of accounts or 
any periodic return or document containing details of payment of tax and other details of transaction of goods or services or both or 
transactions related to a bank account or 
consumption of electricity or 
transaction of purchase, sale or exchange of goods or property or right or interest in a property 
under any law for the time being in force, are mandated to furnish an information return of the same in respect of such periods, within such time, in such form and manner and to such authority or agency as may be prescribed. 

Failure to do so may result in penalty being imposed as per Section 123.  

30. Different companies have different types of accounting software packages and no specific format are mandated for keeping records. How will department be able to read into these complex software?  

As per Section 153 of the CGST/SGST Act, department may take assistance from an expert at any state of scrutiny, inquiry, investigation or any other proceedings.  


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