120 Days of GST

Its around 4 months have passed, we have entered in the GST regime. Like any other major change, GST is also facing teething problems, which are expected to be sorted out in coming few months.

This blog will try to comment on performance of GST in first 120 days.

Biggest achievement of GST is quantum of the tax collection. GST collected so far is in line with the estimates provided by the govt at the time of rollout. As per latest data released by finance ministry, GST collection was above Rs. 95,000/- Crores in July 17 and was above Rs. 91,000/- Crore in August 17. Collection in September 17 was at Rs. 92,150/- Crores. Figures of October are awaited. However, point to be noted is this is only the collection of GST. This is not the actual revenue for govt. Because, from this collection, govt has yet to pay the refunds to eligible assessees. Collection net of GST can be termed as actual revenue for the govt. Nevertheless, gross collection as well is impressing.

Some financial experts and socialists were arguing that there will be huge protest from small businessmen against GST. Fortunately, it is not so. GST is well accepted by entire strata of society and people are adapting to it.

However, there is major cause of concern as well. Thing to worry about is the fact that even July months GST returns are not yet filed completely. (People have collected GST and paid it to govt, but return filing process is pending). Due date for filing GST Returns for July 17 have been extended again and again and as of date, it is 30/11/2017. Govt. has claimed that it has established fully automated system with almost nil human intervention which will ensure transperancy and accuracy. However, even after 120 days post implementation, no one knows how that system works exactly. Reason being, not even the first months returns have been filed yet! Govt and tax payers are blaiming this on each other. As per govt, people are not yet used to it, and as per tax payers, system is too complicated to get accustomed with it.

For certain sectors, GST rates are too high, and govt. has revised it last couple of months. Though govt is paying attention to the troubles of various industries, it wont be possible for the govt. to satisfy all of them! Thus, some sort of resistence will always remain.

Lets see, what happens next!

Till then, stay tuned and keep reading!!

GST – How it Works – Part 2 (Scope and Taxable event)

In last blog we have seen three main type of GST Levies – CGST, SGST and IGST. We have also seen which levy will be applicable in which case.

Before going into the intrecacies of GST, it is important to know exact scope of GST. Scope of any tax is decided on the basis on taxable event. We have seen the meaning of the term ‘taxable event’ in last blog. We have also seen that in GST taxable event is ‘Supply of Goods and Services‘. Let us try to discuss this in detail.

By mere reading of this term, it is very simple to understand that in all cases where any goods and services are supplied, GST will be payable. What is worth noting is that GST law uses the term ‘Supply’ and not ‘Sale’. When I use the term ‘Sale’, here also goods are supplied by seller to buyer. But intention of sale is very clear, i.e. seller will give goods to buyer and will receive money from buyer for the same. However, like GST law says, when we use the term ‘Supply’, its scope become much much wider. As per GST law, Supply includes any of the following terms:

1) Normal Sale Transactions / Providing of Services

2) Gifts / Donations  / Free Samples (All these activities are done without an intention for receipt of money or revenue generation. But still, there is ‘Supply’ of goods from donor to donee. Even if goods are donated or services are provided to charitable trusts, GST is payable.)

3) Exchange of goods (Here too, there is no movement of money. But still, there is ‘Supply’ of goods from one person to another. This may also include Barter exchange. Thus, all the cases where supply is done in kind, GST becomes applicable.)

4) Renting / Leasing out the Property (This includes Supply of immovable property. All the leave and license agreements, lease agreements etc. will be covered here)

5) Transaction between Principal and Agent

6) Import of services in India

7) Permanat transfer / disposal of Business Assets where input tax credit is already claimed

8) Transfer of right to use the goods without transferring title to the goods (eg. rent a cab, renting of machinery, providing free accomodation, free transportation etc)

9) Construction activity (Though there was huge resistance, this activity was covered in Vat. Same is covered in GST as well. In all first sale transactions i.e. from builder to first buyer, GST is payable. However, if entire sale consideration is paid after completion certificate is received, GST is not applicable.)

10) Any perks or services provided by Employer to Employee exceeding Rs. 50,000/- per year. This comes in the ambit of Supply of services and hence, GST will be payable.

Above points cover only broad and widely used ideas of the term ‘Supply’. There are many other clauses incorporated in the act which make meaning of ‘supply’ in GST virtually unlimited. 

Along with supply, levy of GST is equally dependent on ‘Place of Supply’. Will try to cover this in next blog. Till then, Stay Tuned and Happy Reading 😊.

GST aayo re…

Long awaited and most discussed GST is finally implemented from today!

No tax in India is discussed so extensively like GST. From last 17 years we are discussing that we need to have something like GST. As our PM Modiji correctly commented in his address in the launching ceremony, “There are 500 type of taxes that play there role. Today we are getting rid of them. From Ganganagar to Itanagar and from Leh to Lakshdweep its One Nation One Tax.”

Benefits of GST are already discussed in the last blog. Europian union (EU) is already having free movement of goods and services among the member nations which facilitates ‘ease of doing business.’ Unfortunately, in India, though we are a Single nation, till now each state had different tax rules and different tax structure. Now with GST since we are having one tax, undoubtedly, our Country will develop into single unified market.

There were different taxes levied by different govt. which had different set of rules. This not only resulted in multiple compliances but also created cascading effect of taxes. (Please refer earlier blog to know more about cascading effect of taxes). It was also resulting in artificial scarcity and inflation in certain cases. GST tries to eliminate most of the problems given above. Govt also claims it will increase the national income, investment, exports and will generate employment.

Our Hon PM also made one more statememt at launching program. He said that GST is Good and Simple Tax. GST is Good (not only good, the ideology is so good, it can even be termed as best). But whether its Simple, only time can tell.

Along with the benefits, there are many allegations that the way in which GST is implemented and the compliances expected to be met under GST, will be troublesome for small businessmen. 

On this background, have you ever wondered why our all tax laws are so Complex? The reason is we Indians are most notorious in evading the taxes. Look at some of the cases pending at ITAT or CESTAT, you will be amazed to see the innovative ways people find out to evade the taxes. Ultimately, aim of any tax law is to collect the tax. If people are evading the taxes by finding new ways, govt is ought to make new provisions which will curb the malpractices. This circle goes on and our tax laws become highly complex. If all of us decide to pay the taxes very honestly and tranparently, our tax laws will become as simple as nursery poems! Personally, as far as complexity of tax laws is concerned, I feel, first blame should be on the taxpayers and letter on the Govt.

Will try to focus more on various aspects of GST in next blogs. But one thing is sure, like surgical strike and demonetisation, implementing GST is bold step to make India stronger and better. Personally, I welcome it with all the positivity!!!

Welcome GST Welcome!!!

Goods and Service Tax (GST) – How it works

Last blog was about need of GST and how it will mitigate the cascading effect of tax. In this blog, let us try to understand what exactly GST means and how it will actually function.

GST is destination based tax levied on consumption of Goods and Services. First thing is very clear that GST is charged on consumption (i.e. on use of goods and Services). 

Secondly, GST will be charged at every stage right from manufacture of goods up to the final consumption by the end user. In every stage, GST paid at earlier stage will be available as set off. Due to this, only value addition will be charged at every stage. 

For eg. if Mr. A purchase Goods worth Rs. 1000/- and pays GST of Rs. 100/-. After processing he sells the goods for Rs. 1500/- and collects GST of Rs. 150/-. Though he has collected Rs. 150/-, will he deposit entire Rs. 150/- to govt.? NO. He will deposit only Rs. 50/-. (Rs. 150/- GST collected from customer minus Rs. Rs. 100/- GST already paid to the supplier). This means, Mr. A will take the credit of GST already paid by him and will deposit only the residual amount.

Now look at this from other perspective. Mr. A has purchased goods of Rs. 1000/- and have sold the same for Rs. 1500/-. What is the value addition done by Mr. A? Rs. 500/-. And how much GST he is actually depositing to Govt.? Rs. 50/-. Thus, to put in other words, GST will actually charge only the amount of value addition done at every stage. This is essentially required to avoide cascading effect of tax (Pl refer earlier blog for more details on cascading effect of tax). 

GST is expected to subsume following type of Indirect taxes currently prevailing in India:

1) Excise Duty which is currently charged on Manufacture

2) Custom Duty which is currently charged on Import of goods. (At present, we have three custom duties. Basic Custom Duty, Countervailing Custom Duty (CVD) and Special additional Customs Duty (SAD). Out of this three duties, CVD and SAD will be merged in GST. However, Basic Custom Duty will remain after GST also.

3) Service Tax currently charged on supply of services

4) VAT / CST currently charged on sale of goods.

5) Entertainment tax

6) Luxury tax

7) Entry Tax (eg. Octroi or LBT) charged by local authorities.

At present, all the above taxes are levied by different Govt. authorities. GST will be single tax and hence, there has to be some mechanism to share the revenue collected from GST to different authorities. For this, in India, we are planning to apply Dual GST system. This will have total four types – CGST (Central GST), SGST (State GST), UTGST (Union territory GST) and IGST (Integrated GST). Will try to focus on this in next blog.

Till then, stay tuned and happy reading 😊.