 INTRODUCTION TO GST:

The introduction of GST would mark a clear departure from the scheme of distribution of
fiscal powers envisaged in the Constitution. The proposed dual GST envisages taxation
of the same taxable event, i.e., supply of goods and services, simultaneously by both the
Centre and the States. Tax on sale or purchase of goods within a State as per Entry List II
of Seventh Schedule of the Constitution is a State subject, and accordingly, VAT was
been introduced by the concerned States, in place of turnover taxes. The introduction of
VAT ensured that credit of taxes paid on the inputs were available to a tax payer while
discharging his output tax liability. This helped in minimizing cascading of taxes at the
State level and in increasing compliance because of the in-bauilt mechanism of transfer
of input tax credit. VAT led to a simplification of taxes at the State level. Presently, the
Constitution empowers the Central Government to levy excise duty on manufacturing
and service tax on the supply of services. Similarly, it empowers the State Governments
to levy sales tax or value added tax (VAT) on the sale of goods. This exclusive division
of fiscal powers has led to a multiplicity of indirect taxes in the country. Further, central
sales tax (CST) is levied on intra-State sale of goods by the Central Government, but
collected and retained by the exporting States. In addition, many States also levy an entry
tax on the entry of goods in local areas.
This multiplicity of taxes at the State and Central levels has
resulted in a complex indirect tax structure in the country that is ridden with hidden costs
for the trade and industry. Firstly, there is no uniformity of tax rates and structure across
States. Secondly, there is cascading of taxes due to ‘tax on tax’. No credit of excise duty
and service tax paid at the stage of manufacture is available to the traders while paying
the State level sales tax or VAT, and vice-versa. Further, no credit of State taxes paid in
one State can be availed in other States. Hence, the prices of goods and services get
artificially inflated to the extent of this ‘tax on tax’. The introduction of GST would mark
a clear departure from the scheme of distribution of fiscal powers envisaged in the
Constitution. The proposed dual GST envisages taxation of the same taxable event, i.e.,
supply of goods and services, simultaneously by both the Centre and the States.
Therefore, both Centre and States will be empowered to levy GST across the value chain
from the stage of manufacture to consumption. The credit of GST paid on inputs at every
stage of value addition would be available for the discharge of GST liability on the
output, thereby ensuring GST is charged only on the component of value addition at each
stage. This would ensure that there is no ‘tax on tax’ in the country.
GST will simplify and harmonize the indirect tax regime in the
country. It is expected to reduce cost of production and inflation in the economy, thereby
making the Indian trade and industry more competitive, domestically as well as
internationally. It is also expected that introduction of GST will foster a common or
seamless Indian market and contribute significantly to the growth of the economy.
Further, GST will broaden the tax base, and result in better tax compliance due to a
robust IT infrastructure. Due to the seamless transfer of input tax credit from one stage to
another in the chain of value addition, there is an in-built mechanism in the design of
GST that would incentivize tax compliance by traders. bringing GST into practice, there
would be amalgamation of Central and State taxes into a single tax payment. It would
also enhance the position of India in both, domestic as well as international market. At
the consumer level, GST would reduce the overall tax burden, which is currently
estimated at 25-30%.

 HISTORICAL BACKGROUND OF GST:

India has had a number of taxes introduced at various points of time. Under indirect taxes
we have had central excise, central sales tax, value added tax, service tax, luxury tax,
entertainment tax, betting and gambling tax, entry tax in states and many more. Each of
these taxes was administered by State or the Centre or both. They had different threshold
exemption, taxed different activities, their own classification entries, valuation principles,
demand, different procedures, etc. which made it difficult for doing business. There were
also many changes in every year making the multiple laws uncertain and unreliable for
long term investors in India. The Government of India as a part of 40 years old
unfinished agenda of implementing value added tax in India merged 11 indirect taxes of
the Centre and States. This was done in a unique consensus approach (i.e. give and take)
to get all States on boards which lead to the pristine principles of an ideal GST to be
diluted quite substantially. GST was first recommended by Kelkar Task Force
implementation of Fiscal Reforms and Budget Management Act 2004, but the First
discussion paper of Goods and Service Tax in India was presented by the Empowered
Committee of State Finance Ministers dated 10th Nov, 2009. In the Constitution (115th
Amendment) Bill, 2011 was introduced in Parliament to enable the levy of GST.
However, the Bill lapsed with the dissolution of the 15th Lok Sabha. Subsequently in
December 2014, the Constitution (122nd Amendment) Bill, 2014 was introduced in Lok
Sabha. The bill was passed by Lok Sabha in May 2015 and referred to a Select
Committee of Rajya Sabha for Examination. The Goods and Service Tax have been
implemented with effect from 1st July 2017 after Constitutional Amendment in 2016.
France was the first country to implement GST in the year 1954. Within 62 years of its
advent, about 160 countries across the world have adopted GST because this tax has the
capacity to raise revenue in the most transparent and neutral manner.

 DUAL MODEL OF GST:

Dual GST Model signifies that GST is levied by the Central and the States concurrently,
on supply of Goods and/or services. Under GST regime, the powers to tax supply of
goods and services are vested with both i.e. the Centre and the State. The State levies tax
as SGST and Centre as CGST. However, in case of inter-state transactions, Integrated
GST (IGST) which is the sum total of CGST and SGST is levied. The power to levy and
administer IGST is vested with the Central Government, while the IGST revenue would
get distributes between the Centre and the Destination State. In fact the levy of IGST is to
transfer the tax to the State of destination of goods/services where the recipient of same
will be entitled to its ITC, unlike CST (Central Sales Tax) which was the cost under
Earlier Tax Laws. Considering the concurrent taxation power of Central Government and
State Government to tax transaction under GST, the structure is referred to as DUAL
GST.

TAXES WHICH ARE SUBSUMED AND NOT SUBSUMED:

Under the GST Law, certain levies and collection of duty or tax on the goods and/or
services levied either by the Central or by State are subsumed.

The GST subsumes the following taxes:

 CENTRAL TAXES:
a. Central Excise Duty
b. Excise Duties under the Medicinal and Toilet preparations Act
c. Additional Duties of Excise (Goods of Special Importance)
d. Additional Duties of Excise (Textile and Textile Articles)
e. Additional Duties of Customs (Commonly known as CVD)
f. Special Additional Duty of Customs (SAD)
g. Service Tax
h. Central surcharges and cesses on above duties/taxes.

NOTE: On supply of petroleum crude, high speed diesel, motor spirit (petrol),
natural gas and aviation turbine fuel GST shall be levied with effect from such
date as may be notified by the Government on the recommendations of the
GST Council.

 STATE TAXES:
a. State VAT (except tax on alcoholic liquor for human consumption)
b. Central Sales Tax (tough levied under Central Law, it is retained by states
from where the goods started its movement to other State)
c. Luxury Tax
d. Entry Tax (including Octroi & LBT)
e. Entertainment and Amusement Tax (except when levied by the Local
Authorities/Bodies)
f. Taxes on Advertisements
 g. Purchase Tax
h. Taxes on lotteries, betting and gambling
i. Tax on Sale of forest produce
j. State surcharges and cesses on above taxes

The GST Law of the Centre i.e., CGST Law and the States i.e., SGST Law are most same
though enacted separately by each States, to levy and collect tax on intra-State i.e. local
supplies. There are certain exceptional variation in a clause pertaining to the Transitional
Provisions. IGST Law to levy tax on inter-State supplies, UTGST Law to levy tax on
intra-State supplies in Union Territories and GST (compensation to States) Law to levy
cess on certain supplies of goods/services to compensate to the States for loss of revenue
arising on account of implementation of GST for a period of first 5 years period as
provided in law based on recommendations of the GST Council.

 DEFINITIONS UNDER GST:

 GOODS AND SERVICE TAX (GST):

“Goods and Service Tax” is the tax on goods and services with value addition to
each stage having comprehensive and continuous chain of set of benefits from the
producer’s / service provider’s point up to the retailers level where only the final
consumer should bear the tax.

 AGGREGATE TURNOVER u/s. 2(6):

“Aggregate turnover” means the aggregate value of all taxable supplies
(excluding the value of inward supplies on which tax is payable by a person on
reverse charge basis), exempt supplies, exports of goods or services or both and
inter-state supplies of persons having the same Permanent Account Number, to be
computed on all India basis but excludes Central tax, Sales tax, Union Territory
tax, Integrated tax and Cess.

 BUSINESS u/s. 2(17):

“Business” includes-
a. Any trade, commerce, manufacture, profession, vocation, adventure,
wager or any other similar activity, whether or not it is for a pecuniary
benefit;
b. Any activity or transaction in connection with or incidental or ancillary to
sub-clause (a);
 c. Any activity or transaction in the nature of sub-clause (a), whether or not
there is volume, frequency, continuity or regularity of such transaction;
d. Supply or acquisition of goods including capital goods and services in
connection with commencement or closure of business;
e. Provision by a club, association, society, or any such body (for a
subscription or any other consideration) of the facilities or benefits to its
members;
f. Admission, for a consideration, of persons to any premises;
g. Services supplied by a person as the holder of an office which has been
accepted by him in the course furtherance of his trade, profession or
vocation;
h. Services provided by a race club by the way of totalisator or a license to
book maker in such club; and
i. Any activity or transaction undertaken by the Central Government, a State
Government or any local authority in which they are engaged as public
authorities.

 CAPITAL GOODS u/s. 2(19):

“Capital Goods” means goods, the value of which is capitalized in the books of
account of the person claiming the input tax credit and which are used or intended
to be used in the course of furtherance of business.
It appears that the credit availment on capital goods is dependent on the
accounting treatment done by assesse. If the goods are not capital issued, the
credit will be available as input and provision pertaining to input will apply.
However, non-capitalization of goods in books of accounts will also lead to loss
of claim of depreciation by the assessee.

 CASUAL TAXABLE PERSON u/s. 2(20):

“Casual Taxable Person” means a person who occasionally undertakes involving
supply of goods or services or both in the course of furtherance of business,
whether as principal, agent or in any other capacity, in a State or a Union
Territory where he/she has no fixed place of business;
E.g. The person of one State going to any other State for exhibition of goods and
sale therefrom is covered here who can register temporarily and comply with law.

 CONSIDERATION u/s. 2(31):

“Consideration” in relation to the supply of goods or services or both includes-
 a. Any payment made or to be made, whether in money or otherwise, in
respect of, in response to, or for the inducement of, the supply of goods or
services or both, whether by the recipient or by any other person but shall
not include any other subsidy given by the Central Government or a State
Government.
b. The monetary value of any act or forbearance, in respect of, in respect to,
or for the inducement of, the supply of goods or services or both, whether
by the recipient or by any other person but shall not include any subsidy
given by the Central Government or a State Government.

 GOODS u/s. 2(52):

“Goods” means every kind of movable property other than money and securities
but includes actionable claims, growing crops, grass and things attached to to or
forming part of the land which are agreed to be severed before supply or under a
contract of supply.
However, “actionable claims” (other than lottery, betting and gambling) are
neither supply of goods nor supply of services as per Schedule III annexed to Act
read with section 7of the CGST Act,

 SERVICES u/s. 2(102):

“Services” means anything other than goods, money and securities but includes
activities relating to the use of money or its conversion by cash or by any other
mode, from one form currency or denomination, to another form, currency or
denomination for which a a separate consideration is charged;
Definition of services is a residuary one i.e. what are not goods are services. It can
cover a wide range. Thus immovable property is covered here. However, money
and securities are neither goods nor services, thus out of GST net.

 (Job Worker) is exempted.

 RESEARCH METHODOLOGY:

The Goods and Services Tax which is being implemented from 1st July, 2017 is
proposed to be a unified tax for the entire nation. The intended objective of GST
 2017 is to replace a lot of other indirect and direct taxes like the VAT, service tax,
luxury tax etc. GST is aimed at being comprehensive with most of the goods and
services included in the GST bill but alcohol and petrol exempted. GST rate is
proposed to be 27% which is far higher than the global standard of 16.4% for
similar taxes. Our finance minister, Mr. Arun Jaitley on several occasions has
mentioned that the rate is way too high, whereas some of the states want the rate to
be still higher. The primary objectives of GST 2017 bill.

OBJECTIVES OF GST:

1. Ensuring that the cascading effect of tax on tax will be eliminated.

2. Improving the competitiveness of the original goods and services, thereby
improving the GDP rate too.
3. Ensuring the availability of input credit across the value chain.
4. Reducing the complications in tax administration and compliance.
5. Making a unified law involving all the tax bases, laws and administration
procedures across the country.
6. Decreasing the unhealthy competition among the states due to taxes and
revenues.
7. Reducing the tax slab rates to avoid further clarification issues.

With all of these being very significant objectives of GST, it is still facing a lot of
implementation issues. Some of them are:

1. Complete lack of adaptation mechanisms and trained staff.

2. In some cases, the double registration might annoy people. Also, these
registrations result in increase compliances and cost.
3. Unclear estimate of the exact impact of GST.
4. No clear mechanism to control tax evasion.

FEATURES OF GST:
(a) Dual Goods and Service Tax: CGST and SGST

(b) Inter-State Transactions and the IGST Mechanism: The Center would levy
and collect the Integrated Goods and Services Tax (IGST) on all inter-State
supply of goods and services. The IGST mechanism has been designed to
ensure seamless flow of input tax credit from one State to another. The inter-
State seller would pay IGST on the sale of his goods to the Central
Government after adjusting credit of IGST, CGST and SGST on his
purchases (in that order). The exporting State will transfer to the Centre the
credit of SGST used in payment of IGST. The importing dealer will claim
credit of IGST while discharging his output tax liability (both CGST and
SGST) in his own State. The Centre will transfer to the importing State the
credit of IGST used in payment of SGST.
(c) Destination-Based Consumption Tax: GST will be a destination-based tax.
This implies that all SGST collected will ordinarily accrue to the State where
the consumer of the goods or services sold resides.

(d) Computation of GST on the basis of invoice credit method: The liability
under the GST will be invoice credit method i.e. cenvat credit will be
allowed on the basis of invoice issued by the suppliers.

(e) Payment of GST: The CGST and SGST are to be paid to the accounts of the
central and states respectively.

(f) Goods and Services Tax Network (GSTN): A not-for-profit, Non-

Government Company called Goods and Services Tax Network (GSTN),
jointly set up by the Central and State Governments will provide shared IT
infrastructure and services to the Central and State Governments, tax payers
and other stakeholders.

(g) INPUT TAX CREDIT (ITC) SET OFF : ITC for CGST & SGST will be
taken for taxes allowed against central and state respectively.

(h) GST on Imports : Centre will levy IGST on inter-State supply of goods and
services. Import of goods will be subject to basic customs duty and IGST.

(i) Maintenance of Records: A taxpayer or exporter would have to maintain

separate details in books of account for availment, utilization or refund of
Input Tax Credit of CGST, SGST and IGST.

(j) Administration of GST: Administration of GST will be the responsibility of

the GST Council , which will be the apex policy making body of the GST.
Members of GST Council comprised of the Central and State ministers in
charge of the finance portfolio.

(k) Goods and Service Tax Council: The GST Council will be a joint forum of
the Centre and the States. The Council will make recommendations to the
Union and the States on important issues like tax rates, exemption list,
threshold limits, etc. One-half of the total number of Members of the Council
will constitute the quorum of GST council.

(l) Credit Adjustment of INPUT TAX CREDIT: The credit would be permitted
to be utilized in the following manner:
 ITC of CGST allowed for payment of CGST and IGST in that
order.
 ITC of SGST allowed for payment of SGST and IGST in that
order.
  ITC of IGST allowed for payment of IGST, CGST and SGST in
that order.

(m) Exemptions under GST: The list of exempted goods and services would be
kept to a minimum and would be harmonized for the Centre and States as far
as possible.
GST would apply to all goods and services except Alcohol for human
consumption, Electricity and Real Estate.

Region of research:
The geographical area of the research is Mumbai, Maharashtra. Mumbai is
the financial capital of India and hence most of the financial sector companies have
their headquarters in Mumbai. Thus Mumbai would be a good representative for the
purposes of drawing conclusions.

Research Design:
The research would be descriptive, empirical as well as analytical. The
design would be based on the objectives of the study and the hypothesis of the study.
Data in relation to provisions for taxing of financial services would be collected
from the existing law. The data collected through the interviews and questionnaires
will be subject to further statistical methods of analysis.

Sampling:
All assessees, accountants and tax professionals related to the financial
sector are the population. The different assessees, accountants and tax professionals
selected - around 40 in number will form the sample. This sample of 40 individuals
who will be interviewed and questionnaires will be sent to and who are located in
Mumbai are selected based on purposive sampling. A larger sample size may not be
practical since the questions to be answered are technical and hence need to be
answered by technical people in the financial services sector. Such people who are
available to provide the response are few and hence the sample size is restricted to
40 also based on convenient sampling.

Tools for Data collection:

The study involves collection of both primary and secondary data. Primary
data is being collected by using the interview schedule and structured questionnaire.
The questionnaire before actual use is put through pilot testing. The difficulties
identified in pilot testing are removed before finalizing the final questionnaire. This
questionnaire will be distributed to the selected sample. Secondary data is collected
through existing legislations, proposed legislations on GST floated in public domain,
published/unpublished reports on the GST impact in India and globally, various
websites on GST and financial services,

Data Analysis:
Data collected through interviews will be analysed qualitatively.
Quantitative data will be subjected to Z test.

Methods of reporting:
The data collected will be reported using tables, text, bar diagrams, graphs
and pie diagrams for successful understanding.

Utility of the Research:

A good tax system would ensure that the country’s resources are utilized in
an most advantageous manner and the country is competitive in the global trade. In
this regard, GST in India would ensure that with seamless ITC the costs will come
down for both the business people and the consumers. It would lead to an increase in
the GDP of the country and proficient use of all factors of production. Further,
financial services sector supplies average 50% of the total demand in an economy
and contributes to almost 20% of the indirect taxes in an economy. Hence the study
of the existing system with the pros and cons, the impact of GST on the said
financial sector, the difficulties in administrative compliance in the sector and
examination of views of accountants in this relation is pertinent.

 TIME OF SUPPLY:
Point of taxation means the point in time when goods have been deemed to be
supplied or services have been deemed to be provided. The point of taxation
enables us to determine the rate of tax, value, and due dates for payment of taxes.
Under GST the point of taxation, i.e., the liability to pay CGST / SGST will arise
at the time of supply as determined for goods and services. There are separate
provisions for time of supply for goods and time of supply for services.

HOW TO DETERMINE TIME OF SUPPLY:

The time of supply of goods shall be the earlier of the following dates –

(a) The date of issuing of invoice (or the last day by which invoice should have
been issued)
OR
(b) The date of receipt of payment-whichever is earlier
If the supplier receives an amount up to Rs. 1000 in excess of the invoice amount, the
time of supply for the extra amount shall be the date of issue of invoice (at the option of
the supplier).
For (a) and (b)- The supply shall be assumed to have been made to the extent it is covered
by the invoice or the payment (as the case may be).
For (b)- the date of receipt of payment shall be earlier of-
1. The date on which he entered the payment in his books
OR
2. The date on which the payment is credited to his bank account
Example:
(a) Date of invoice 15th May 2018
(b) Date of receipt of payment 10th July 2018
(c) Date when supplier recorded receipt in books 11th July 2018
Time of supply will be 15th May 2018

TIME OF SUPPLY UNDER REVERSE CHARGE:

Reverse charge means the liability to pay tax is by the recipient of goods/services instead
of the supplier. In case of reverse charge, the time of supply shall be the earliest of the
following dates—
(a) the date of receipt of goods OR
(b) the date of payment OR
(c) the date immediately after THIRTY days from the date of issue of invoice by the
supplier (60 days for services)
If it is not possible to determine the time of supply under (a), (b) or (c), the time of supply
shall be the date of entry in the books of account of the recipient.
For clause (b)- the date of payment shall be earlier of-
(a) The date on which the recipient entered the payment in his books
OR
(b) The date on which the payment is debited from his bank account
Example:
(a) Date of receipt of goods 15th May 2018
(b) Date of payment 15th July 2018
(c) Date of invoice 1st June 2018
(d) Date of entry in books of receiver 18th May 2018
Time of supply of goods 15th May 2018
If for some reason time of supply could not be determined supply under (a), (b) or (c)
then it would be 18th May 2018 i.e., date of entry.
TIME OF SUPPLY FOR VOUCHERS:
In case of supply of vouchers the time of supply is-
(a) The date of issue of voucher, if the supply can be identified at that point OR
(b) The date of redemption of voucher, in all other cases.

WHEN TIME OF SUPPLY CANNOT BE DETERMINED:

If it is not possible to determine the time of supply by the above provisions, then it will
be-
(a) The date on which a periodical return has to be filed
OR
(b) The date on which the CGST/SGST is paid, in any other case.
In GST regime, the tax collection event will be earliest of the dates as given above. The
various events like issuing invoice/making payment in case of supply of goods /services
or completion of event-in case of supply of service triggering the tax levy, confirms that
the Government wants to ensure tax is collected at the earliest point of time.
This will be altogether a new concept for the current VAT and Central Excise taxpayers.
There are multiple parameters in determining ‘time’ of supply. Thus, businesses will face
a challenge in maintaining and reconciling between revenue as per financials and as per
GST.

REVERSE CHARGE MECHANISM:

As per Sec 9(4) of CGST Act, if a registered person purchases goods/services

from an unregistered dealer (URD) then the registered taxpayer is liable to pay GST
on reverse charge basis. All the provisions of the Act will apply to such recipient as if he
were the person liable for paying the tax in relation to the supply of goods or services.
Reverse Charge Mechanism in simple words is referred as Buying from Unregistered
Dealers.

This provision will apply if the below conditions are met:

 There should be a supply of goods or services

 The supply should be in respect of taxable goods/services
 Supply must be by an unregistered person.
 Supply must be to a registered person
 Supply must be an intra-state supply as compulsory registration is required for
inter-state sales
Purchases upto Rs. 5,000 per day from unregistered suppliers will not attract GST. In
other words, there is a reverse charge on buying from unregistered dealers if you are
dealing with unregistered suppliers and making payments above Rs. 5,000.
Example:
ABC Ltd. is a registered company which has spent Rs. 7,500 on purchases from a URD.
Should it pay GST via RCM (Reverse Charge Mechanism) on Rs. 1,500?
Once the limit of Rs. 5,000 in a day is crossed, the GST is payable on the entire amount
of Rs. 7,500 on RCM.
LIST OF PROFIT AND LOSS ITEMS WHICH ATTRACTS GST UNDER
RCM:

 Rent
 Commission payments
 Printing and stationery
 Repairs and Maintenance
 Office Maintenance
 Vehicle maintenance
 Computer maintenance
 Legal Fees
 Consultancy Fees
 Professional Fees
 Audit Fees
 Freight and transportation expenses (GTA)
 Gift expenses
 Business promotion expenses
 Advertisement

Exempted Goods and RCM:

The Central or State Government are empowered to grant exemption to the Goods or
Services from tax either absolute or conditional, which should be in the public interest on
recommendation from the council by way of issue of notification. Under the previous
Indirect Taxation regime, taxpayers were enjoying large tax exemptions which are now
limited under GST. The Central or State Government are empowered to grant exemption
to the Goods or Services from tax either absolute or conditional, which should be in the
public interest on recommendation from the council by way of issue of notification.

The types of exemptions under GST. Those are as follows:

 Absolute exemption: Exemption without any conditions.

 Ex: Transmission or distribution of electricity by an electricity transmission or
distribution utility, Services by Reserve Bank of India.
 Conditional Exemption: Exemption subject to certain conditions.
  Ex: Services by a hotel, inn, guest house, club or campsite, by whatever name
called, for residential or lodging purposes, having declared tariff of a unit of
accommodation less than ` 1000/- per day”.
 Conditional or partial exemption:
 Intra-State supplies of services and/or services received from an unregistered
person by a registered person is exempted from payment of tax under reverse
charge provided the aggregate value of such supplies received by a registered
person from all or any of the suppliers does not exceed ` 5000/- in a day.

If the supply involves exempted goods/services RCM will not be applicable.

Examples:

1. A registered person hires auto rickshaw for commuting from one place to
another.

This section will not apply as the transportation of passenger by auto rickshaw is
exempted from GST.
2. A registered person stays in a budget hotel whose tariff is Rs. 800 per day. Is
GST applicable on RCM?
Since the room tariff is less than ₹1,000 it is exempted from GST. The question of RCM
does not arise.

NOTE:

There are certain complexities & confusion in paying GST under RCM.
For items excluding GST, you will just calculate the GST amount and pay under RCM.
Many URDs follow cost+ profit method.
For example, a printer sends a bill of Rs. 6,000 for printing 600 brochures. The printer
sends a simple bill of Rs. 6,000 only without any GST. Then the registered person will
calculate GST @12% on Rs. 6,000 and pay Rs.720 to the government.
The complications arise when you are paying items at MRP (which include GST). Say,
you (registered business) are buying biscuits of Rs. 500 (MRP which includes GST) from
a small roadside shop (URD). Your total purchases from URD in the day exceeds the Rs.
5000 limit and RCM applies.
How to pay tax via RCM in such cases?
BACK-CALCULATION:
You can back calculate from Rs. 500 (say 400 taxable value) and pay Rs. 400 to URD
and GST 100 to government and claim ITC. But the URD will not accept less payment.
Also, as per GST act, you cannot collect GST under RCM from the service
provider/supplier.
Pay GST on Rs. 500
If you pay GST on Rs. 500, it will be double taxation.

CURRENT RCM APPLICABILITY(2018-19):

PARTICULARS APPLICABILITY TAX RATE

RENT EXEMPT NIL
LABOUR (JOB EXEMPT NIL
WORKER)
LABOUR (OTHER THAN TAXABLE 18%
JOB WORKER)
TRANSPORT TAXABLE 5%

IMPORTANT POINTS:
 Newly when GST was introduced RCM was applicable on all the expenses and
purchases from Un-Registered Dealer (URD) i.e. RCM (with some exceptions)
was applicable from 1st July 2017 to 13th October 2017.
 From 13th October 2017 RCM on all expenses and purchases were Exempted.
 Before 22nd August 2017 RCM on Labour was 18% and from 22nd August 2017 up
to 12th October RCM on Labour was reduced to 5% and from 13th October RCM
on Labour is exempted.

INPUT TAX CREDIT (ITC):

Input Tax Credit means reducing the taxes paid on inputs from taxes to be paid on
output. When any supply of services or goods is supplied to a taxable person, the GST
charged is known as Input Tax.
The concept is not entirely new as it already existed under the pre-GST indirect taxes
regime (service tax, VAT and excise duty). Now its scope has been widened under GST.
Earlier, it was not possible to claim input tax credit for Central Sales Tax, Entry Tax,
Luxury Tax and other taxes. In addition, manufacturers and service providers could not
claim the Central Excise duty.
During the pre-GST era, cross-credit of VAT against service tax/excise or vice versa was
not allowed. But under GST, since these taxes will be subsumed into one tax, there will
not be the restriction of setting off this input tax credit.
The conditions to claim Input Tax Credit under GST is a very critical activity for every
business to settle the tax liability.
Input Tax Credit can’t be applied to all type of inputs, each state or a country can have
different rules and regulations. Input Tax Credit is also viable to a dealer who has
purchased good to resale.
Tax Credit is the backbone of GST and for registered persons is a major matter of
concern. This is majorly in line with the pre-GST regime. These rules are quite stringent
and particular in their approach.
Say for instance that you are a manufacturer. The tax to be paid on the final product is
INR 450. The purchase tax paid is INR 300. The input credit you claim is INR 300, and
the final taxes you will pay is INR 150.

WHAT IS THE TIME LIMIT TO AVAIL GST ITC?

ITC can be availed by a registered taxable person in a specific manner and within a
specified time frame. The table below shows the different situations wherein the inputs
can be claimed for semi-finished goods or stock or finished goods.

SCENARIO ITC claims day for semi-

furnished
goods/stock/finished goods
(held on immediate
preceding day)
If a person has applied for registration or is Day from when he is liable
liable to register or is granted registration to pay taxes

When a person takes voluntary registration Registration Day

When a taxable registered person stops paying taxes Day from when he is liable to
in composition levy scheme pay tax normally u/s 7.

Input tax credit for the above-mentioned situations can be claimed only if it does not
exceed one year from the tax invoice date of issue related to supply.
For any other cases, ITC must be claimed earlier of the following-
a) Furnishing of annual return or
b) Due date of filing the monthly return (GSTR-3) for the next financial year’s September
month.
Example- For the invoice dated 10/11/2017, ITC must be availed earlier of the following
dates –
The due date for September 2018 return – 20th October 2018
Annual return filed (assumed) – 10th November 2018
Thus till 20th October 2018, ITC must be availed.

HOW TO CALCULATE INPUT TAX CREDIT?

Let’s consider an example on how to calculate Input Tax Credit:

Suppose you have a business. The service or product you sell attracts a tax of 18%. You
use input services or goods during your business. The tax due from you (of 18%) can be
adjusted to the taxes paid already by you on the purchase of such inputs. The
manufacturers add taxes only for the value addition done and not on the total product
value.
Let’s consider an example of a steel utensils manufacturer who manufactures utensils like
spoons, plates, etc. Assume that the manufacturer had bought an INR 500 worth of raw
steel to make a pressure cooker and INR 100 worth other raw materials. Let’s assume that
the GST for steel is 18%. Also, assume that the GST he paid is 28% of other raw
materials.
Hence, the manufacturer has paid Rs. 28 on other raw materials and Rs. 90 on raw steel
which he used as inputs.
So, the total input tax paid was INR 118 by the manufacturer.
Now, after considering the cost of manufacturing steel pressure cooker using the raw
materials and including a decent profit, he decided to sell the pressure cooker to a
distributor at INR 800 + GST.
Assume that the steel utensil attracts a GST of 18%.
Now the tax on it will be INR 144. So the manufacturer will invoice the pressure cooker
for INR 944.
Hence, the manufacturer is collecting INR 144 as GST on sale from the distributor. The
manufacturer had paid INR 118 towards GST during the purchase of his input raw
materials. Hence, out of INR 144 of GST, the manufacturer can now claim a credit of
INR 118 which he already paid towards GST for inputs and deposit the difference of INR
26 with the government.
This tax credit is available at all succeeding stages, retailers and distributors charge GST
and can claim the Input Tax Credit.

HOW TO CLAIM INPUT TAX CREDIT (ITC)?

The following conditions have to be met to be entitled to Input Tax Credit under the GST
scheme:
1. One must be a registered taxable person.
2. One can claim Input Tax Credit only if the goods and services received is used for
business purposes.
3. Input Tax Credit can be claimed on exports/zero-rated supplies and are taxable.
4. For a registered taxable person, if the constitution changes due to merger, sale or
transfer of business, then the Input Tax Credit which is unused shall be transferred to
the merged, sold or transferred business.
5. One can credit the Input Tax Credit in his Electronic Credit Ledger in a provisional
manner on the common portal as prescribed in model GST law.
6. Supporting documents – debit note, tax invoice, supplementary invoice, are needed to
claim the Input Tax Credit.
7. If there is an actual receipt of goods and services, an Input Tax Credit can be claimed.
8. The Input Tax should be paid through Electronic Credit/Cash ledger.
9. All GST returns such as GST-1, 2,3, 6, and 7 needs to be filed

HOW INPUT TAX CREDIT WORKS UNDER GST?

Suppose Mr. A is a seller. He sells goods to Mr. B. The buyer Mr. B is now eligible to
claim the purchase credit using his purchase invoices.
This is how it works:
1. A uploads all his tax invoices details as issued in GSTR-1.
2. The details uploaded by Mr. A is automatically populated or reflected in GSTR-2A.
This same data will get reflected when Mr. B files the GSTR-2 returns which are
nothing but the details of his purchase.
3. The details of thesale are then accepted and acknowledged for by Mr. B, and
subsequently, the purchase tax is credited to Mr. B’s ‘Electronic Credit ‘ He can use
this to adjust it later for future output tax liability and receive a refund.
HOW TO UTILIZE THE INPUT TAX CREDIT?
In GST we have three types of taxes CGST, IGST, and SGST/UTGST.
For the inter-state supply of goods/ services, IGST is charged.
and for the intra-state supply of goods/services CGST and SGST/UTGST are charged.
While making payment for the above taxes, input tax credit will be allowed in the
following manner-

1ST TO BE
CREDIT UTILIZED FOR BALANCE IF
PAYMENT ANY

CGST CGST IGST

CGST and
IGST IGST then SGST OR
UTGST

SGST/UTGST SGST/UTGST IGST

WHAT IS THE MANNER OF AVAILING ITC ON CAPITAL

GOODS?

Unlike earlier Laws,100% of the credit is allowed in the 1st year of purchases.
If the depreciation is charged on the GST portion(i.e. credit) of capital goods, ITC will
not be allowed.

Example:

Cost GST Total cost Deprecation charged on ITC available

500 50 550 550 nil
500 25 525 500 25

Under what situations one CAN NOT claim Input Tax Credit (ITC)?
ITEMS
Credit on Motor vehicles and other
conveyances purchased or
Expenses related to the normal use of motor
vehicles for office purposes cannot be
claimed as an input tax credit.
EXCEPTIONS
Taxable person is in the business of sale
and purchase of new or second-hand
motor vehicle i.e Dealer of the motor
vehicle or
Providing the service of transportation of
passengers(Ola, Uber)/ goods(GTA) or
The motor vehicle is used by the driving
school.

Supply of food and beverages, outdoor An inward supply of aforesaid goods or

catering, beauty treatment, health service services or both is used by a registered
and cosmetic and plastic surgery
Rent-a-cab, Life and health insurance
person for making an
outward taxable supply of the same
category of goods or services or both or as
an element of
a taxable composite or mixed supply then
the input tax credit will be available.
Example- When the outdoor catering
service is subcontracted then the main
contractor can avail
input on tax charged by sub-contractor
because the service received is used for
making the outward supply of the same
category.
The Government notifies the services
which are obligatory for an employer to
provide to its employees
under any law for the time being in force
or The receiver of service provides the
same line or category of service example-
Government made a law for the companies
to provide cab facility for there female
employees.

Travel benefit to employees as leave or

home travel concession
Example – Tour arranged for the employee
Works contract service for construction Works contractor uses the service of
of immovable property another contractor, then the former can
claim the ITC.
Construction of immovable property which
includes reconstruction, renovation,
additions or repairs. Goods/services used
for construction on his own account or even
when it is used for the furtherance of
business.
Example- Mr.A constructing his own office,
ITC on goods or services used for the
construction of the office cannot be claimed
by Mr.A

ITC will not be available for the In case if Non-resident taxable person
goods/services received by the non-resident imports goods or service, then ITC will be
taxable person. allowed.

Goods/services received for personal

consumption

Goods stolen /destroyed/ written

off/distributed as a gift or free samples

Dealer under composition scheme- Neither

the dealer nor the receiver of goods from
the dealer can claim ITC

Membership in a club, Health, and Fitness

centre
Example- Company paying the gym fees
for its employees

WHAT ARE THE DOCUMENTS AND FORMS REQUIRED TO

CLAIM INPUT TAX CREDIT?
Each applicant will require the following documents to claim Input Tax Credit under
GST:
1. Supplier issued invoice for supplying the services and goods or both according to GST
law.

2. A debit note issued by the supplier to the recipient in case of tax payable or taxable
value as specified in the invoice is less than the tax payable or taxable value on such
supplies.
3. Bill of entry.

4. A credit note or invoice which is to be issued by the ISD (Input Service Distributor)
according to the GST invoice rules.

5. An invoice issued like the bill of supply under certain situations instead of the tax
invoice. If the amount is lesser than INR 200 or in conditions where the reverse
charges are applicable according to the GST law.

6. A supplier issued a bill of supply for goods and services or both as per the GST
invoice rules.

The above documents prepared as per the GST invoice rules should be furnished while
filing the GSTR-2 form. Failure to present these forms can lead to either rejection or
resubmission of the request.
For taxes paid on goods and services or both due to any fraud or due to order for the
demand raised, suppression of facts or wilful misstatement, Input Tax Credit cannot be
claimed.
Since input credit will be available to the seller at each stage, the input tax credit is
expected to bring down the overall taxes charged on the product at present. So, if input
credit mechanism works efficiently, final consumers may see the cost reduction.

IMPORTANT POINTS REGARDING ITC:

1. For advance payment, the supplier is required to pay tax on such advance receipt but
in case of the recipient, he can avail the ITC only when tax invoice is issued and
goods/services are received.

2. ITC cannot be availed on the basis of a photocopy of the valid document.

3. SGST paid in one state cannot be utilized as credit for payment of SGST of another
state.

4. For payment of interest and penalty Input tax credit cannot be utilized in other words
it should be paid using electronic cash ledger.

5. For claiming ITC goods/ services must be actually received. Hence the goods or
services received by the agent or the job worker will be assumed to be received by the
recipient.

6. On receipt of invoice by the recipient, invoice amount must be paid within 180 days
from the date of invoice. If the recipient fails to pay so, the amount taken as credit will
be reversed and output tax will be payable on such amount. Yet on the later date, if the
recipient pays the invoice amount, he can again claim the credit.
7. On filing the form GSTR-2 (inward supplies details) by the recipient, the credit
claimed in the return will be credited to electronic credit ledger on the provisional
basis. The recipient can file Form GSTR-3 and pay self-assessed tax by taking credit
of input available in electronic credit ledger. After filling of form GSTR-3 by both
supplier and recipient system carries out the matching process. If the supplier has paid
the tax on the goods/services, ITC will be allowed to the recipient. In case during the
matching process, any mismatch is found due to-
a) duplication of claim or
b) If the input claimed by the recipient is in excess of output declared by the supplier,
then, the excess amount will be added to the output tax liability of the recipient and
the tax amount will be required to be paid along with the interest.

8. In case if goods (inputs and Capital goods both) has been received in installment or lot
against a single invoice then input can be availed on the receipt of last installment or
lot.

9. GST paid under reverse charge can also be utilized as ITC.

10. If goods or services purchased/received are used for both business and non-business
purpose, then only part of ITC relating to goods/service used for business purpose will
be allowed as a credit. Even in case of taxable and exempted goods/services, only the
part relating to taxable goods/service will be allowed as a credit.

GST REGISTRATION:

In the GST Regime, businesses whose turnover exceeds Rs. 20 lakhs (Rs 10 lakhs for NE
and hill states) is required to register as a normal taxable person. This process of
registration is called GST registration.
For certain businesses, registration under GST is mandatory. If the organization carries
on business without registering under GST, it will be an offence under GST and heavy
penalties will apply.
GST registration usually takes between 2-6 working days.

WHO SHOULD REGISTER FOR GST?

 Individuals registered under the Pre-GST law (i.e., Excise, VAT, Service Tax
etc.)
 Businesses with turnover above the threshold limit of Rs. 20 Lakhs (Rs. 10 Lakhs
for North-Eastern States, J&K, Himachal Pradesh and Uttarakhand).
 Casual taxable person / Non-Resident taxable person.
 Agents of a supplier & Input service distributor.
 Those paying tax under the reverse charge mechanism.
 Person who supplies via e-commerce aggregator.
 Every e-commerce aggregator.
  Person supplying online information and database access or retrieval services
from a place outside India to a person in India, other than a registered taxable
person.

WHAT IS GST REGISTRATION PROCESS?

Every dealer whose Annual turnover exceeds Rs 20 lakh (for special states, the amount is
Rs 10 lakh) has to register for GST.
Here is a step-by-step guide on how to complete registration process online on the GST
Portal–

Step 1 – Go to GST portal. Click on Register Now under Taxpayers (Normal)

Step 2 – Enter the following details in Part A –

 Select New Registration

 In the drop-down under I am a – select Taxpayer
 Select State and District from the drop down
 Enter the Name of Business and PAN of the business
 Key in the Email Address and Mobile Number. The registered email id and
mobile number will receive the OTPs.
 Click on Proceed

Step 3 – Enter the OTP received on the email and mobile. Click on Continue. If you
have not received the OTP click on Resend OTP.

Step 4 – You will receive the Temporary Reference Number (TRN) now. This will also
be sent to your email and mobile. Note down the TRN.

Step 5 – Once again go to GST portal. Click on Register Now.

Step 6 – Select Temporary Reference Number (TRN). Enter the TRN and the captcha
code and click on Proceed.

Step 7 – You will receive an OTP on the registered mobile and email. Enter the
OTP and click on Proceed.
Step 8 -You will see that the status of the application is shown as drafts.

Step 9 – Part B has 10 sections. Fill in all the details and submit appropriate documents.

Here is the list of documents you need to keep handy while applying for GST
registration-

 Photographs
 Constitution of the taxpayer
 Proof for the place of business
 Bank account details
 Authorization form

Step 10 – Once all the details are filled in go to the Verification page. Tick on the
declaration and submit the application using any of the following ways –

 Companies must submit application using DSC

 Using e-Sign – OTP will be sent to Aadhaar registered number
 Using EVC – OTP will be sent to the registered mobile

Step 11 – A success message is displayed and Application Reference Number(ARN) is

sent to registered email and mobile.

DOCUMENTS REQUIRED FOR GST REGISTRATION:

1.Documents required for Private Limited Company (Pvt Ltd)/Public Company

(limited company)/One person company (OPC):

– Company documents

 PAN card of the company

 Registration Certificate of the company
 Memorandum of Association (MOA) /Articles of Association (AOA)
 Copy of Bank Statement
 Declaration to comply with the provisions
 Copy of Board resolution

– Director related documents

 PAN and ID proof of directors

– Registered Office documents

  Copy of electricity bill/landline bill, water Bill
 No objection certificate of the owner
 Rent agreement (in case premises are rented)

2. Documents required for Limited Liability Partnerships (LLP):

– LLP documents

 PAN card of the LLP

 Registration Certificate of the LLP
 LLP Partnership agreement
 Copy of Bank Statement of the LLP
 Declaration to comply with the provisions
 Copy of Board resolution

– Designated Partner related documents

 PAN and ID proof of designated partners

– Registered Office documents

 Copy of electricity bill/landline bill, water Bill

 No objection certificate of the owner
 Rent agreement (in case premises are rented)

3. Documents required for Normal Partnerships

– Partnership documents

 PAN card of the Partnership

 Partnership Deed
 Copy of Bank Statement
 Declaration to comply with the provisions

– Partner related documents

 PAN and ID proof of designated partners

– Registered Office documents

 Copy of electricity bill/landline bill, water Bill

 No objection certificate of the owner
 Rent agreement (in case premises are rented)

4. Documents required for Sole proprietorship/Individual

– Individual documents
  PAN card and ID proof of the individual.
 Copy of Cancelled cheque or bank statement.
 Declaration to comply with the provisions.

– Registered Office documents

 Copy of electricity bill/landline bill, water Bill

 No objection certificate of the owner
 Rent agreement (in case premises are rented)

CONCEQUENCES OF GST NON-COMPLIANCE (OFFENCES AND

PENALTIES):

The 21 offenses listed below are subject to a penalty of 10,000 rupees or the amount of
tax involved, whichever is greater [Sec 122(1)]:

1. Supplying goods and/or services without issuing an invoice or issuing an incorrect or

false invoice.
2. Issuing an invoice without supplying goods and/or services
3. Collecting tax but failing to remit it to the government within three months of the due
date
4. Collecting tax in contravention of law but failing to remit it to the government within
three months of the due date
5. Failing to deduct tax or deposit the tax with the government.
6. Failing to collect tax or collecting too little tax from the supplier at the time of
payment, or failing to pay the tax to the government — applies to eCommerce operators*
7. Taking full or partial input tax credit without actual receipt of goods and/or services
8. Obtaining a refund of tax by fraud
9. Distributing an input tax credit other than in the manner prescribed
10. Falsifying or substituting financial records, producing fake accounts and/or
documents, or furnishing a false return
11. Failing to obtain registration (if registration is required)
12. Furnishing false information during registration
13. Obstructing an officer from the discharge of duties
14. Transporting taxable goods without documents
15. Suppressing turnover leading to evasion of tax
16. Failing to maintain books of accounts and documents
17. Failing to furnish information to CGST/SGST officers or furnishing false information
18. Supplying and/or storing goods which one has reason to believe are liable for
confiscation
19. Issuing an invoice or document by using the identification number of another person
20. Tampering with material evidence
21. Tampering with any goods that have been detained, seized, or attached

* In addition to any action that may be taken under Sec. 122, failure of an electronic
commerce operator to furnish all required information could lead to penalties of up to
25,000 rupees.

The Central Goods and Services Tax Act allows for a reduction in penalties when a
person fails to pay or underpays the tax owed erroneously, rather than deliberately by
fraud, wilful misstatement, or the suppression of facts. In such cases, penalties could be
reduced to 10 percent of the tax owed, subject to a minimum of 10,000 rupees. A similar
abatement of penalties could be available when input tax credits are wrongly availed or
utilized, or when the tax is erroneously refunded on the supply of goods or services. [Sec
122(2a)]

Additionally, if there is an element of fraud or wilful misstatement or suppression of

facts, then the penalty will be the tax owed, subject to a minimum of 10,000 rupees. [Sec
122(2b)]

A penalty is also prescribed for offenses where the person is not directly involved in any
evasion but may be a party to evasion or fails to attend summons or produce
necessary documents. In such cases, the penalty would be up to 25,000 rupees. [Sec
122(3)]

Certain people are required to furnish information return and if they fail to do so, a
penalty of 100 rupees per day applies, subject to a maximum of 5,000 rupees. [Sec 123]

If a person fails to furnish statistics or willfully furnishes false statistics, the following
penalties apply:

 First-time offense – 10,000 rupees

 Continuing offense – 10,000 rupees plus 100 rupees per day (from the second
day), subject to maximum of 25,000 rupees [Sec 124]
A penalty of up to 25,000 rupees applies to any offense of the GST law that lacks a
specifically prescribed penalty [Sec 125].

Compared to earlier tax laws (i.e., Excise Duty, Service Tax, VAT), the GST tax regime
contains a substantial increase in the maximum penalty levied. This indicates the
seriousness of the government's intent to ensure GST compliance. However, the
government also reserves the right to either fully or partially waive penalties.
The CGST law also sets guidelines for the judicious levy of penalties. Some of the
principles of natural justice are codified in the law itself So that no unjust penalties are
imposed for trivial offenses. These general principles are enlisted below -

(a) A substantial penalty shall not be levied in instances where the tax involved is less
than 5,000 rupees (minor breach) and documentation errors are easily rectifiable.

(b) There are safety nets so that the degree and severity of a breach can be determined
before a penalty is imposed.

(c) No penalty will be imposed without issuing a show cause notice or giving the assessee
a personal hearing.

(d) Voluntary disclosure by a person to a tax authority (not merely in his own books and
records) about the circumstances of the breach may be considered as a mitigating
factor for levy of penalty.

These guidelines are for cases involving substantive penalties; cases involving fixed sum
or percentage of penalty are excluded.

Moreover, GST law has not yet specified the penalty for breaching the anti-profiteering
measure. Finance Minister Arun Jaitley has said that there would be no witch hunt, but no
further clarity has been provided.

CONFISCATION OF GOODS OR CONVEYANCE:

Certain offenses will lead to both a penalty and the confiscation of goods and/or
conveyances. The penalty will be 10,000 rupees or an amount equal to the tax evaded.
These offenses are:

 Failing to account for the goods on which a person is liable to pay tax
  Supplying or receiving goods in breach of any provisions or rules, with the intent
to evade payment of tax
 Supplying any goods liable to tax without registering
 Using a conveyance to deliver taxable goods in breach of any provisions or rules
The Confederation of All India Traders (CAIT) states that high penalties will
ensure that taxes collected by the merchant will not be used for working capital or
the financial benefit of companies. This should lead to more stable tax collection
and administration.

The prosecution provisions are harsher as compared to mere pecuniary penalties.

They are intended to be a deterrent not only to the assessee but also to all other
assessees.

PERIOD OF IMPRISONMENT:

The period of imprisonment of a prosecuted person will depend on the amount of tax
evaded:

Type of Offence Amount of tax evaded/ ITC wrongly Period of maximum

availed/utilized/refund wrongly taken imprisonment &
fine
Certain offenses specified in Exceeding Rs 500 lakhs 5 yrs* and fine (Non-
the Act bailable)
Certain offenses specified in Exceeding Rs 200 lakhs up to Rs 500 lakhs 3 yrs* and fine
the Act
Any other offense Exceeding Rs 100 lakhs up to Rs 200 lakhs 1 yr* and fine

Commits/ assists in the 6 months and/or fine

commission of certain
specified offenses
Repetition of offense 5 yrs* and fine
(i.e. second & every
subsequent offense)
*Without any specific or special reason as recorded in the order by the court, the term of
imprisonment should not be less than 6 months. The CGST Act also proposes the levy of
late fees to facilitate better GST compliance:

Offense Late Fee

A person fails to furnish details of
outward or inward supplies, monthly Rs 100 per day while the failure continues,
return or final return by the due date subject to a maximum of Rs 5,000 rupees.
[Sec 47].
Rs 100 per day while the failure continues,
A person fails to furnish the annual subject to a maximum of quarter percent of the
return by the due date [Sec 47] person’s turnover in the state where he/she is
registered
Deductor fails to furnish TDS
certificate to Deductee within 5 days of Rs 100 per day, subject to max of Rs 5,000
credit to govt. [Sec 51]
Various trade organizations argue that the government should tackle noncompliance with
soft hands initially, rather than with imprisonment, since non-compliance could be
erroneous rather than intentional. Navneet Agarwal, State General Secretary of Akhil
Bharatiya Udyog Vyapar Mandal, Madhya Pradesh has expressed that, “the government
should set a three-year period for transition from the current system to GST, and
shouldn’t impose a penalty or punishment on those who commit mistakes in this period.
This duration should be treated as a learning period”.

GST RETURN FILING AND PROCEDURE:

 GSTR1 (MONTHLY AND QUARTERLY)-

Now a days, Every body is in big tension about GST Return whether it is GSTR 1/ GSTR
2/ GSTR3/ GSTR 4/ GSTR 3B. The government has notified new GST Return formats in
this area . The GST Return Formats have been updated to ease the process and simplify
compliance for taxpayers under GST.

GSTR 1 prescribed to be filed by every taxpayer except Composition Scheme

taxpayers, Non-Resident Foreign taxpayers, TDS deductors, E commerce Operators
and Input Service Distributors as there are separate returns for them. GSTR 1 is filed
monthly or quarterly depending on the previous financial year turnover. If the turnover
 exceeds 1.5 crore then the assessee has to file GSTR 1 - MONTHLY or otherwise he has
to file GSTR 1- QUARTERLY.

DUE DATE:

1. Monthly: 11th (every month)

2. Quarterly: 31st of next month after completion of a quarter i.e. for the period of
October 2018to December 2018 returned to be filed on 31st January 2019.

STEP BY STEP PROCEDURE TO FILE GSTR-1:

A taxpayer is requested to login at GST Portal by using his user ID & Password. After
complete login, user can see his dashboard. Click on “Service Menu” and then click on
Returns and you will reach at GST Return Page. The steps are as under :

 Taxpayer will be allotted a state-wise PAN-based 15-digit (GSTIN). The identification

of taxpayer will be auto-filled at the time of return filing in future.
 Name of the taxpayer, will be auto-filled at the time of logging into the common GST
Portal. Trade Name, if any, should be separately provided.
 Tentative Annual Income/ Turn Over information is required to be filled only in the
first year of GST. Other year onwards it will be auto-filled on basis of the previous
year.
 In the Column of Taxable Outward Supplies to a Registered Person (B2B) –
Taxable supplies are required to be filled. Supply here includes any supply under
reverse charge mechanism or made through e-commerce operator attracting TCS. In
the case of inter-state, only IGST would be filed. Similarly, in the case of intra-state
supplies, CGST and SGST can be filed.
 In this respective column Taxable Outward Supplies to a Consumer (B2C) – This
column consists of such required information in which the taxpayer is requested to fill
in details of inter-state supplies made to an unregistered end consumer where the
invoice value is more than 2.5 lakh.
 Now move to the another column i.e. Zero Rated Supplies and Deemed Exports –
This consists will include all kinds of Zero Rated Supplies like exports (including
deemed exports) and sale to SEZ. Noticeably, such supplies will only attract IGST.
 In this Column i.e. Taxable Outward Supplies to a Consumer – Under this Column,
the taxpayer is required to provide details of all the supplies made to an end consumer
which were not covered in point 5. This means all intra-state supplies and inter-state
supplies with invoice value less than Rs. 2.5 Lakhs.
 This respective column consists of Nil Rated, Exempt, and Non-GST Outward
Supplies – This column consists of all kind of Nil Rated/ Exempt and Non-GST
Supplies irrespective of inter-state or intra-state supplies.
 Next Respective Column Consists of the original debit notes, credit notes and refund
vouchers issued during current and their corresponding amendments.
 Now we move to next column and This column includes intra-state, inter-state and e-
commerce supplies corresponding to them.
 Next column/ Bar is Tax Liability of Amount Received in Advance – This column/
bar is consisted of Any kind of advance amount received against a supply to be made
or invoice to be issued in future must be reported in this section.
 Next Column is HSN-wise summary – All outward supplies must be reported in this
column categorized on the basis of concerned HSN codes.
 Now move to documents required option/ Column and This includes all invoices,
revised invoices, debit/ credit notes, receipt/ payment/ refund vouchers.

 GSTR 2 (MONTHLY):

Every registered taxable person is required to give details of Inward Supply, i.e.,
purchases for a tax period in GSTR-2. GSTR-2 contains details of all the purchases
transactions of a registered dealer for a month. It will also include purchases on which
reverse charge applies.
The GSTR-2 filed by a registered dealer is used by the government to check with the
sellers’ GSTR-1 for buyer-seller reconciliation.
Buyer-seller reconciliation or invoice matching or is a process of matching taxable sales
by the seller with the taxable purchases of the buyer.
It is vital because ITC on purchases will only be available if the details of purchases filed
in GSTR-2 return of buyer matches with the details of sales filed in GSTR-1 of the seller.
For example, Ajay buys 100 pens worth Rs. 500 from Vijay Stationery. Vijay Stationery
must show Rs. 500 sales in his GSTR-1. Ajay must show the same Rs. 500 purchase in
GSTR-2 to claim ITC. Unless the amounts match, Ajay will not be able to claim ITC.
Note: Most of the headings under GSTR-2 are auto-populated from counter-party
GST return so it will involve minimal time.

WHAT HAPPENS IF GSTR 2 IS NOT FILED?

If GSTR-2 return is not filed then the next return GSTR-3 cannot be filed. Hence, late
filing of GST return will have a cascading effect leading to heavy fines and penalty.

WHAT HAPPENS IF GSTR 2 IS NOT FILED LATE?

If you delay in filing, you will be liable to pay interest and a late fee.
Interest is 18% per annum. It has to be calculated by the taxpayer on the amount of
outstanding tax to be paid. The time period will be from the next day of filing (16th of the
month) to the date of payment.
The late fee is Rs. 100 per day per Act. So it is 100 under CGST & 100 under SGST.
Total will be Rs. 200/day. The maximum is Rs. 5,000.There is no late fee on IGST.
WHO SHOULD FILE GSTR 2?
Every registered person is required to file GSTR-2 irrespective of whether there are any
transactions during the month or not.
However, these registered persons do not have to file GSTR 2 –

 Input Service Distributors

 Composition Dealers
 Non-resident taxable person
 Persons liable to collect TCS
 Persons liable to deduct TDS
 Suppliers of online information and database access or retrieval services
(OIDAR), who have to pay tax themselves (as per Section 14 of the IGST Act)

HOW TO REVISE GSTR 2?

GSTR 2 once filed cannot be revised. Any mistake made in the return can be revised in
the next month’s return. It means that if a mistake is made in September GSTR 2,
rectification for the same can be made in October’s GSTR 2.

STEP BY STEP PROCEDURE TO FILE GSTR-2:

 Make sure all your purchase invoices are in the software - by using Excel Import
or importing through other software.
 While uploading purchase bills, you can select bills on which reverse charge will
apply.
 There are one or more unregistered purchase invoices under reverse charge
without any tax (no or 0 tax) in your data. As per GST rules you should add
appropriate tax amount against such invoices before filing.”
 identify invoices which do not have any GSTIN and can be subject to RCM
 Track invoices and remember their treatment. If an invoice from same GSTIN is
already marked as under reverse charge, system will alert the user that a similar
invoice from same GSTIN had already marked under reverse charge and hence
the new invoice may also be under reverse charge.
 Download your seller’s return from GST Portal through our software. The
software will automatically highlight any mismatches between you purchases and
your vendor’s sales.
 Finally, validate data and upload to the government GST portal.

DETAILS TO BE PROVIDED IN GSTR 2:

There are 13 headings in GSTR-2 format prescribed by the government.

We have explained each heading along with the details required to be reported under
GSTR-2.
1.GSTIN – Each taxpayer will be allotted a state-wise PAN-based 15-digit Goods and
Services Taxpayer Identification Number (GSTIN). A format of proposed GSTIN has
been shown in the image below. GSTIN of the taxpayer will be auto-populated at the
time of return filing.

2.Name of the Taxpayer – Name of the taxpayer including legal and trade name (will
be auto-populated)

Month, Year – Mention the relevant month and year for which GSTR-2 is being filed.

3.Inward Supplies from Registered Taxable Person

Most of the purchases from a registered person will be auto-populated here from GSTR-1
filed by the seller. It will have all details of type, rate and amount of GST, whether ITC is
eligible, amount of ITC.
However, it will not contain purchases under reverse charge
Certain transactions may not be auto-populated because-

 Seller did not file GSTR-1

 Seller filed GSTR-1 but he missed the transaction

In either case, the buyer can manually add these transactions. The seller will get a
notification to accept this addition/modification in his GSTR-1A return.
If the supply is received in more than one lots, the invoice must be reported in the return
of the month in which the last lot is received and recorded in books of accounts.

4. Inward supplies on which tax is to be paid on reverse charge

Certain goods and services attract reverse charge, i.e., the buyer is liable to pay GST. A
registered dealer purchasing more than Rs. 5,000 per day from an unregistered dealer is
liable to pay reverse charge.
All purchases on which reverse charge applies, will be reported in this part.
4A. Under this head, all purchases on which reverse charge specifically applies by law
must be mentioned. For example, purchasing cashew nuts from an agriculturist.
4B. This head will list the purchases from unregistered dealer which exceed Rs. 5,000 per
day from an unregistered dealer
4C. Under this head, reverse charge GST paid on import of service will be reported.
 5. Inputs/Capital goods received from Overseas or from SEZ units on a Bill of
Entry

Any kind of import of inputs (items used to manufacture finished goods) or capital goods
received against a Bill of Entry must be reported under this head. Goods received from
SEZ are also reported here.

 5A. Imports: Any kind of import of inputs (items used to manufacture finished
goods) or capital goods received against a Bill of Entry will be reported here.
Details of bills of entry, along with 6-digit port codes and 7-digit bill numbers
must be mentioned.

 5B. Received from SEZ: Inputs or capital goods received from sellers in a SEZ
will be reported here.
 6. Amendments to details of inward supplies furnished in returns for earlier tax
periods in Tables 3, 4 and 5 [including debit notes/credit notes issued and
their subsequent amendments]

A taxpayer cannot revise any GST return once it is filed. Revision is possible only in the
next month’s return under this heading. The taxpayer can amend any detail of purchases
of goods/services in earlier months. This information can be filled manually.
Subsequently, the seller will also get a notification regarding this modification. The seller
needs to accept this change in his GSTR-1A return.
6A. This head will contain all revisions of input goods/services (except imports)
6B. Any change in amount/tax calculated on imported goods and goods from SEZ can be
made under this heading. Here, the taxpayer must mention the changes made in the bill of
Entry / Import Report.
6C. The taxpayer must report all debit and credit notes issued with respect to purchases.
Any debit/credit note issued under reverse charge mechanism will get auto-populated
here from counter-party GSTR-1 and other applicable returns (eg. GSTR-5 filed by NR).
6D. Any changes in debit /credit note of previous months will be reported under this
heading.
 7. Supplies received from composition taxable person and other exempt/Nil
rated/Non-GST supplies received

This head will include purchases from composition dealer and other exempt/nil/non-GST
supplies.
Non-GST supplies include items like petrol, diesel which are not covered under GST.
Also, both inter-state and intra-state supplies need to be reported here.
 8. ISD credit received

Details of the input tax credit received from a registered Input Service Distributor (ISD)
(usually a head office which has transferred its ITC to all its branches). This data will be
auto-populated from GSTR-6 filed by ISD.

9. TDS and TCS Credit received

TDS Credit Received – This section will only be applicable in case you engage in
specified contracts with specified persons (usually government bodies). The receiver
(government) will deduct a certain percentage of transaction value as Tax Deduction at
Source. All information will get auto-populated here from GSTR-7 filed by the deductor.
TCS Credit Received – This heading is applicable for only online sellers registered with
e-commerce operator. E-commerce operator is required to collect tax at source at the time
of making payment to such sellers. This information will again be auto-populated
from GSTR-8 of e-commerce operator.
Please read our Impact Analysis on E-commerce marketplace sellers for more
information.
 10. Consolidated Statement of Advances paid/Advance adjusted on account of
receipt of supply

Any advance payment made during the month will appear here. If you paid advance tax
on goods or services received during an earlier tax period, but only received the invoices
this month, declare the details here.
Advance receipts issued under reverse charge are also covered here.
Normally the seller issues an advance receipt when he receives any advance payment. In
case of purchases attracting reverse charge, the buyer must issue the advance receipt if he
pays in advance.
Part I –

 This part will cover the advance amount paid for reverse charge supplies in the
current month.
 It will also include the advances paid in earlier months against which invoices
have been received in current month.
 The purchases will be broken up into inter-state and intra-state.

Part II will contain changes to above part I in relation to an earlier month.

 11. Input Tax Credit Reversal / Reclaim

ITC can be availed only on goods and services for business purposes. If they are used for
non-business (personal) purposes, or for making exempt supplies ITC cannot be claimed.
In this heading, the taxpayer must to fill in details of ITC that cannot be claimed during
the month due to various ITC rules.
11A. This head will cover all input tax reversal for the current month. It will also include
ITC reversal on account of exempt and personal supplies.
a. Amount in terms of rule 37(2)– ITC will be reversed for invoices which were not
paid within 180 days of issue.
b. Amount in terms of rule 39(1)(j)(ii)– This is for ISDs. If a credit note was issued by
the seller to the HO then the ITC subsequently reduced will be reversed.
c. Amount in terms of rule 42(1)(m)– This is for businesses which use inputs for both
business and non-business (personal) purpose. ITC used in the portion of input
goods/services used for personal purpose must be reversed proportionately.
d. Amount in terms of rule 43(1)(h)– This is similar to above except that it concerns
capital goods.
e. Amount in terms of rule 42 (2)(a)– This is calculated after the annual return is
furnished. If total ITC on inputs of exempted/non-business purpose is more than the ITC
actually reversed during the year then the difference amount will be added to output
liability. Interest will be applicable.
f. Amount in terms of rule 42(2)(b)– This is is the opposite of the above. If total ITC on
inputs of exempted/non-business purpose is less than the ITC actually reversed during the
year then the difference amount can be reclaimed as ITC.
11B. The taxpayer can manually amend any details of ITC under 11A of earlier months.
He will select the appropriate information from a drop down.

12. Addition and reduction of amount of output tax for mismatch and other
reasons

This section will capture any additional tax liability that can arise due to the corrections
made to the GSTR-3 of the previous month.
a) ITC claimed on mismatched/duplication of invoices/debit notes: In case mismatch
of invoices, there may be double claiming of ITC. The excess ITC claimed from
duplicate purchase invoices will be reversed and added to the tax liability.
b) Tax liability on mismatched credit notes: Incorrect credit notes issued by the
taxpayer will also result in incorrect ITC. Extra ITC claimed due to mismatch will now
be added to your tax liability.
c) Reclaim on account of rectification of mismatched invoices/debit notes: This is the
opposite of point (a). In this case, the mismatch has led to claiming lower ITC. You are
entitled to more ITC and so the additional amount will be reduced from the output tax
liability.
d) Reclaim on account of rectification of mismatched credit note (Reduce): This is
opposite to (b), i.e., lower ITC has been claimed and will work in the same way as (c).
e) Negative tax liability from previous tax periods:This is due to excess tax paid
during the previous months and will be reduced from output tax liability of this month.
f) Tax paid on advance in earlier tax periods and adjusted with tax on supplies
made in current tax period (Reduce): This refers to tax paid along with advance
payments in earlier months for supplies received during this month.

13.HSN summary of inward supplies

This section requires a registered dealer to provide HSN wise summary of goods
purchased. It will be entered by the taxpayer.
Finally, sign off with a declaration that all information has been supplied and is
correct.

 GSTR 3B (MONTHLY):

GSTR-3B is a monthly self-declaration that has to be filed a registered dealer

from July 2017 till March 2018. Points to Note:

 You must file a separate GSTR-3B for each GSTIN you have
 Tax liability of GSTR-3B must be paid by the last date of filing GSTR-3B for that
month
 GSTR-3B cannot be revised

GSTN has made the following key changes in the process of filing GSTR 3 B as below:

1) Tax payment – Earlier, a taxpayer was required to Submit the return to ascertain the
tax liability amount. Post submission, no changes were allowed. Now, the tax liability to
be paid in cash/ credit will be shown before submitting the return.
2) Challan generation – Tax payment challan can now be auto-generated after offsetting
the input tax credit available in credit ledger. Taxpayer, however, has an option to edit the
credit amount to be utilized and not to consider the system generated credit utilization.
Earlier, the assessee had to manually fill in the credit utilization amount and generate the
challan.
3) Download facility of draft return – A new feature of downloading draft return at any
stage has been provided to verify the saved details offline.
4) Auto-fill of tax amount – Taxpayer now need to fill either CGST or SGST/UTGST
amount, other tax will get auto-filled.

Details of changes done in GSTR 3B filing process:

 FAQs and User Manual are provided along with pop-ups, to guide taxpayers while
filling Form GSTR 3B.
 Fill either CGST or SGST/UGST amount, other tax will get auto-filled.
 Form GSTR 3B can be previewed or downloaded, for cross verifying saved details in
any table(s), by Clicking PREVIEW DRAFT GSTR-3B button. The draft Summary
page of your GSTR-3B can be downloaded for review.
 Once taxpayer proceeds to payment, the details of balances as available in cash and
credit ledgers can be seen (refer Table 6.1 – Payments Table) at one place.
 Tax liabilities as declared in the return along with the credits gets updated in the
ledgers and displayed in the “Tax payable” column of the payment section and can be
seen while hovering on the said headings of credit in the payment section.
 System auto-populates “Tax to be paid through ITC” fields with optimum utilization
amounts based on provisions of the law relating to credit utilization. It is suggestive
and the taxpayer may edit the ITC utilization. In case ITC utilization is changed, the
cash to be paid also gets changed accordingly.
 If available cash balance in Electronic cash ledger is insufficient to offset the
liabilities, additional cash required for paying liability is displayed in the last column
of the Table (Additional cash required). The taxpayer may create challan for that
amount directly by clicking on the CREATE CHALLAN button. Once online
payment is made, the system will navigate back to Payments Table.
 Click the MAKE PAYMENT/POST CREDIT TO LEDGER button to pay off the
liabilities or to claim credit in case of no liabilities.
 Click “Proceed to file” and File GSTR-3B with EVC or File GSTR-3B with DSC.
(“Submit” button has been removed).

WHO NEED TO FILE GST-3B?

Every person registered under GST needs to file GSTR-3B return. In case you have
multiple GSTNs, separate GSTR-3B needs to be filed for every GSTN.
Even if there are no transactions during the month, registered businesses still need to
file NIL GSTR-3B.
Following registrants do not have to file GSTR-3B:

 Input Service Distributors

 Businesses registered under GST Composition Scheme
 Suppliers of online information and database access or retrieval services (OIDAR),
who have to pay tax themselves.
 Non-resident taxable person
WHY IS IT IMPORTANT TO FILE GSTR 3B?
Since GSTR 3B is temporary in nature, some businesses might think that it’s not that
important. However, you should know following things:
 Not filing GSTR-3B may invite the penalty of 18% per year
 GSTR 3B is required for preparation of filing further GST returns.
 Same data can be used to file GSTR 1 .

IMPORTANT POINTS ABOUT GSTR-3B

Before we take a deeper dive and understand this form, let’s first take a look at few
important points that you should know:
1. GSTR 3B needs to be separately filed for each GST registration number.

2. It needs to be filed online only in the common portal i.e. www.gst.gov.in, there is no
any offline utility provided which can be filled and uploaded into the system. In the
post-login mode, one can access it by going to Services > Returns > Returns
Dashboard. After selecting the financial year and tax period, GSTR 3B, (if
applicable), in the given period.

3. It is needed to be filed even if it is a nil return.

4. Once filed, the form shall be final and there is no provision for revision of the return
once filed. Any revision has to be done through while filing of GSTR -1, GSTR -2,
GSTR -3.

5. Upon generation of GSTR 3, if actual liabilities are different from those declared in
GSTR 3B, the system will update the delta (difference) between GSTR 3B and GSTR
3 automatically. In case of an upward revision of liabilities, one will be liable to pay
differential tax along with interest on the (differential) amount.

6. Refund cannot be claimed under GST-3B since invoice-wise details in form GSTR 1
must have to be submitted for the matching of invoices and for processing of the
refund claim.

7. All migrated taxpayers need to furnish all the information required under REG- 26 so
as to file GSTR-3B. Therefore, if the details of enrolment for registration are not fully
or properly submitted, then such person may not be able to file the GSTR-3B return.

8. Composition Dealers are not required to file GSTR-3B. They will be required to file
quarterly return only.
9. If there is any tax payable then payment of such tax is mandatory for the filing of form
GSTR-3B. In other words, GSTR-3B return cannot be filed without full payment of
the tax due.
System based reconciliation of information furnished in FORM
GSTR-1 and FORM GSTR-2 with FORM GSTR-3B:

In case the registered person intends to amend any details furnished in FORM GSTR 3B,
it may be done in the FORM GSTR-1 or FORM GSTR-2, as the case may be. For
example, while preparing and furnishing the details in FORM GSTR-1, if the outward
supplies have been under-reported or excess reported in FORM GSTR-3B, the same
maybe correctly reported in the FORM GSTR-1.
Similarly, if the details of inward supplies or the eligible ITC have been reported less or
more than what they should have been, the same may be reported correctly in the FORM
GSTR-2. This will get reflected in the revised output tax liability or eligible ITC, as the
case may be, of the registered person.
The details furnished in FORM GSTR-1 and FORM GSTR-2 will be auto-populated and
reflected in the Part-A of FORM GSTR-3 for that particular month and the tax paid
while filing FORM GSTR-3B will get auto-populated in Part-B of FORM GSTR-3.
If the details filed in FORM GSTR-1 and FORM GSTR-2 matches, the tax liability
payable in FORM GSTR-3 will be zero and in case it does not match the following action
will be taken-

MISMATCH ACTION

If the ITC claimed in FORM GSTR-2 is The excess ITC claimed in FORM
less than the ITC claimed and utilized by GSTR-3B will be added to the output tax
the registered person in FORM GSTR- liability and must be paid along with the
3B. interest while filing FORM GSTR-3.

If the ITC claimed in FORM GSTR-3B is The additional amount of ITC will be
more than the ITC claimed and utilized credited to the electronic credit ledger of
by the registered person in FORM the registered person when he submits the
GSTR-2. return in FORM GSTR-3.
Where the total GST liability of the
registered person as per the details
furnished in
FORM GSTR-1 and FORM GSTR-2 are
less than the GST liability as per the
details furnished in the FORM GSTR-3B.
The same is not offset by a corresponding
reduction in the input tax credit to which
he is entitled, the excess shall be carried
forward to the next month’s return to be
offset against the output liability of the
next month by the taxpayer when he
signs and submits the return in FORM
GSTR-3.

Since the payment was not made on or

before the due date of filing form GSTR-
3B, the registered person shall be liable
In case if the registered person fails to for payment of interest on delayed
file GSTR-3B, and later on files GSTR-1, payment of tax. The interest shall be
2 and 3. calculated from the due date of filling
GSTR-3B till the date of filling GSTR-3.

GSTR 3B (SPECIMEN):
STEP BY STEP PROCEDURE TO FILE GSTR-3B:
1. After login to GSTN portal, select Return Dashboard
2. Select Financial Year 2017-18 and Month July. Click Search and Select GSTR-3B
3. Declare your liabilities and ITC claims in Section 3.1 and 4 respectively by clicking
on the tiles and furnishing the required information. Transitional ITC cannot be
claimed in GSTR 3B. It can be claimed only through TRANS 1 and TRANS 2.
4. Enter details of interest, if payable, in Section 5.1. Late fee will be computed by the
system
5. Click on Save GSTR-3B After you save the data, Submit button will get enabled.
Please note that after submit, no modification is possible. Hence ensure that details are
filled correctly before clicking on Submit button.
6. On clicking Submit GSTR-3B button, System will post (debit) the self-assessed
liabilities including system generated late fee in Liability Register and credit the
claimed ITC into ITC ledger.
7. After this the Payment of Tax tile will be enabled, please click it and declare your
payment details to pay the taxes and offset the liability.
8. Click CHECK BALANCE button to view the balance available for credit
under Integrated Tax, Central Tax, State Tax and Cess. (This includes transitional
credit also, if TRAN-1 and 2 are submitted). This will enable you to check the balance
before making the payment for the respective minor heads. The balance is also
displayed when the mouse is hovered on the applicable data entry field in payment
section.
9. Please fill out the section that specifies how you wants to set-off your liabilities using
a combination of Cash and ITC.
 System checks if you have sufficient Cash/ITC balance.
 It also checks if the Reverse charge liabilities are set-off only through CASH.
 System also checks if all liabilities are set-off. Part payment is not allowed in
GSTR-3B. Hence, ensure sufficient balance in Cash and ITC Ledger to Offset
liability
 In case of ITC utilizations, the system checks the prioritization rules viz. IGST
Credit has to be first utilized for paying IGST liability and remaining for CGST
liability and thereafter SGST liability; SGST credit has to be first used for paying
SGST liability and then IGST liability; CGST Credit has to be first used for CGST
liability and the remaining for IGST Liability; SGST credit cannot be used for
paying CGST liability and CGST credit cannot be used for paying SGST liability
 Transition ITC, if available in ITC ledger, can be used for payment of liabilities of
GSTR 3B
10. Click the OFFSET LIABILITY button to pay off the liabilities
11. Click on declaration statement
12. Select Authorized Signatory filing the Form
13. Click on File GSTR-3B button with DSC or EVC
14. Message for successful filing will appear and Acknowledgement will get generated

PAYMENTS AND REFUNDS OF TAX UNDER GST:

Current GST return filing requires that every month, once GSTR-1 is filed to report
Sales, one must file GSTR-3B to report the ITC and make necessary GST Payment. Also
if a refund is required to be claimed the same can be done by filing relevant refund
related forms.
 A. PAYMENTS-

 WHAT ARE PAYMENTS TO BE MADE UNDER GST??

Under GST the tax to be paid is mainly divided into 3 –

 IGST – To be paid when interstate supply is made (paid to center)

 CGST – To be paid when making supply within the state (paid to center)
 SGST – To be paid when making supply within the state (paid to state)

CIRCUMSTANCES CGST SGST IGST

Goods sold from Delhi to Bombay NO NO YES

Goods sold within Bombay YES YES NO

Goods sold from Bombay to Pune YES YES NO

Apart from the above payments a dealer is required to make these payments –

 Tax Deducted at Source (TDS) – TDS is a mechanism by which tax is deducted

by the dealer before making the payment to the supplier

For example –
A government agency gives a road laying contract to a builder. The contract value is Rs
10 lakh.
When the government agency makes payment to the builder TDS @ 1% (which amounts
to Rs 10,000) will be deducted and balance amount will be paid.

 Tax Collected at Source (TCS) – TCS is mainly for e-commerce aggregators. It

means that any dealer selling through e-commerce will receive payment after
deduction of TCS @ 2%.

This provision is currently relaxed and will not be applicable to notified by the
government.

 Reverse Charge – The liability of payment of tax shifts from the supplier of goods
and services to the receiver. To know more about reverse charge check out our
article ‘Know all about Reverse Charge under GST‘
  Interest, Penalty, Fees and other payments

 HOW TO CALCULATE THE GST PAYMENT TO BE MADE?

Usually, the Input Tax Credit should be reduced from Outward Tax Liability to calculate
the total GST payment to be made.
TDS/TCS will be reduced from the total GST to arrive at the net payable figure. Interest
& late fees (if any) will be added to arrive at the final amount.
Also, ITC cannot be claimed on interest and late fees. Both Interest and late fees are
required to be paid in cash.
The way the calculation is to be done is different for different types of dealers –
Regular Dealer
A regular dealer is liable to pay GST on the outward supplies made and can also claim
Input Tax Credit (ITC) on the purchases made by him.
The GST payable by a regular dealer is the difference between the outward tax liability
and the ITC.
Composition Dealer
The GST payment for a composition dealer is comparatively simpler. A dealer who has
opted for composition scheme has to pay a fixed percentage of GST on the total outward
supplies made.
GST is to be paid based on the type of business of a composition dealer.

 WHO SHOULD MAKE THE PAYMENT?

These dealers are required to make GST payment –

1. A Registered dealer is required to make GST payment if GST liability exists.

2. Registered dealer required to pay tax under Reverse Charge Mechanism(RCM).
3. E-commerce operator is required to collect and pay TCS
4. Dealers required deducting TDS

 WHEN SHOULD GST PAYMENT BE MADE?

GST payment is to be made when the GSTR 3 is filed i.e by 20th of the next month.

 WHAT ARE THE ELECTRONIC LEDGERS?

These ledgers are maintained on the electronically on GST Portal.
  HOW TO MAKE GST PAYMENT?

GST payment can be made in 2 ways –

 Payment through Credit Ledger –

The credit of ITC can be taken by dealers for GST payment. The credit can be
taken only for payment of Tax. Interest, penalty and late fees cannot be paid by
utilizing ITC.

 Payment through Cash Ledger –

GST payment can be made online or offline. The challan has to be generated
on GST Portal for both online and offline GST payment.Where tax liability is
more than Rs 10,000, it is mandatory to pay taxes Online.

 WHAT IS THE PENALTY FOR NON-PAYMENT OR

DELAYED PAYMENT?
If GST is short paid, unpaid or paid late interest at a rate of 18% is required to be paid by
the dealer.
Also, a penalty to be paid. The penalty is higher of Rs. 10,000 or 10% of the tax short
paid or unpaid.
 B. REFUNDS:

 WHAT IS GST REFUND?

 Usually when the GST paid is more than the GST liability a situation of claiming
GST refund arises. Under GST the process of claiming a refund is standardized to
avoid confusion. The process is online and time limits have also been set for the
same.

 WHEN CAN THE REFUND BE CLAIMED?

A GST refund claim can arise on account of:

(a) Export of goods or services.

(b) Supplies to SEZs units and developers.
(c) Deemed exports.
(d) Refund of taxes on purchase made by UN or embassies etc.
(e) Refund arising on account of judgment, decree, order or direction of the
Appellate Authority, Appellate Tribunal or any court.
(f) Refund of accumulated Input Tax Credit on account of inverted duty structure
other than Nil rated or fully exempt supplies.
(g) Finalization of provisional assessment.
(h) Refund of pre-deposit.
(i) Excess payment due to mistake.
(j) Refunds to International tourists of GST paid on goods in India and carried
abroad at the time of their departure from India.
(k) Refund on account of issuance of refund vouchers for taxes paid on advances
against which, goods or services have not been supplied.
(l) Refund of CGST & SGST paid by treating the supply as intra-State supply which
is subsequently held as inter-State supply and vice versa.

 HOW TO CALCULATE GST REFUND?

Let’s take a simple case of excess tax payment made.

Mr. B’s GST liability for the month of September is Rs 50000. But due to mistake, Mr. B
made a GST payment of Rs 5 lakh.
Now Mr. B has made an excess GST payment of Rs 4.5 lakh which can be claimed as a
refund by him. The time limit for claiming the refund is 2 years from the date of payment
  WHAT IS THE TIME LIMIT FOR CLAIMING THE REFUND?
 The time limit for claiming a refund is 2 years from relevant date.
 The relevant date is different in every case.
 Here are the relevant dates for some cases –

Reason for claiming GST Refund Relevant Date

Excess payment of GST Date of payment

Export or deemed export of goods or Date of dispatch/loading/passing the frontier

services

ITC accumulates as output is tax exempt Last date of financial year to which the credit
or nil-rated belongs

Finalization of provisional assessment Date on which tax is adjusted

 Also if refund is paid with delay an interest of 24% p.a. is payable by the
government.

 GST REFUND CLAIM ON EXPORTS:

 One of the major categories under which, claim for GST refund arises is
export. Exports (whether of goods or services) as well as supplies to SEZs have
been categorized under GST as Zero-Rated Supplies. Because the supply is zero-
rated, the supplier can claim refund of input tax credit paid.

 Currently, exporters can claim refund on zero-rated supplies under two options.
Either the exporter can export under Bond/ LUT and claim refund of accumulated
Input Tax Credit or he may export on payment of integrated tax and claim refund.
However, both the methods and delays in processing GST refunds have adversely
impacted the working capital cycle of many businesses. Hence, the Government
has announced the creation of a e-wallet facility for exporters to quicken and
streamline the GST refund process.
  CHARTERED ACCOUNT CERTIFICATE FOR GST
RETURN:
 If a GST refund claim is less than Rs. 2 Lakhs, then a self-declaration of the
applicant must be submitted to the effect that the incidence of tax has not been
passed to any other person along with other documents listed below.
 For GST refund claims exceeding Rs. 2 Lakhs, a certificate from a Chartered
Accountant/ Cost Accountant must be submitted along with the documents
below.

 DOCUMENTS REQUIRED FOR GST REFUND:

The following documents must be submitted for GST refund claim:

a. GST Refund for Exports

If a refund claim is made on account of exports or supply to SEZ, the relevant invoice
pertaining to the transaction must be submitted. Along with the invoice, a statement
containing the number and date of shipping bills or bills of export and the number and the
date of the relevant export invoices, in a case where the refund is on account of export of
goods must also be provided.

In case of GST refund on account of export of services, along with the tax invoices, the
relevant bank realization certificates evidencing receipt of payment in foreign currency is
also required to be submitted.

b. GST Refund for Supply to SEZ

If a GST refund claim is made by the supplier to an SEZ unit, an endorsement from the
Proper Officer evidencing receipt of such goods/ services in the SEZ should be submitted
along with the tax invoice. Further, a declaration is also required from the SEZ unit to the
effect that they have not availed input tax credit of the tax paid by the supplier. If the
claim is for

c. GST Refund for Accumulated Input Tax Credit

If the GST refund claim is for accumulated input tax credit, only a statement containing
invoice details as prescribed in the GST refund rules must be submitted.
Its important to note that no refund of unutilised input tax credit will be allowed
on CGST and IGST paid, in case of supply of services for construction of a complex,
building, civil structure or a part thereof, including a complex or building intended for
sale to a buyer, wholly or partly.

Also, no refund of unutilised input tax credit will be allowed for CGST and IGST, where
the credit has accumulated on account of GST rate of tax on inputs being higher than the
rate of tax on output supplies.

d. GST Refund on Account of Order

In case of claim of GST refund on account of any order or judgment of appellate
authority or court, the reference number of the order giving rise to refund should be given
along with the relevant tax invoices.

 E- WAY BILL UNDER GST:

E-Way Bill is the short form of Electronic Way Bill. It is a unique document/bill,
which is electronically generated for the specific consignment/movement of
goods from one place to another, either inter-state or intra-state and of value more
than INR 50,000, required under the current GST regime.

As per the update on 23rd Mar 2018, Generation of the e-Way Bill has been made
compulsory from 1st April 2018. Inter-state implementation of e-way bill is
notified to be implemented from 1st April 2018.

The implementation of Eway Bill to kick-off from 15th April 2018 in a phased
manner. States to be divided into 4 lots to execute this phased rollout.
When e-Way Bill is generated, a unique e-Way Bill Number (EBN) is made
available to the supplier, recipient and the transporter.
The e-Way Bill replaces the Way Bill, which was a physical document and
existed during the VAT regime for the movement of goods.

 WHO SHOULD GENERATE AN E-WAY BILL?

GST Registered Person:

(a) When a registered person causes the movement of goods/ consignment, either
in the capacity of a consignee (i.e., buyer) or consignor (i.e., seller) in his/her
vehicle or hired vehicle or railways or by air or by ship, then either the registered
person or the recipient should generate the e-Way Bill in Form GST EWB 01
electronically on the common portal by furnishing information in Part B.
 (b) When a registered person causes the movement of goods and hands these over
to the transporter for transportation by road, but the e-Way Bill has not been
generated, then it is the transporter who needs to generate the bill. The registered
person will first furnish the information relating to the transporter in Part B of
Form GST EWB. After which, the transporter will generate the e-Way Bill by the
information furnished by the registered person through Part A of Form GST EQB
01.

Unregistered Person:
(a) When an unregistered person causes the movement of goods, through his/her
conveyance or hired conveyance or using the services of a transporter, then the e-
Way Bill needs to be generated either by the unregistered person or by the
transporter, by completing Form GST EWB-01.

(b) When an unregistered person supplies the goods to a registered person AND
the registered person is known to the unregistered person at the time of the start of
the movement of goods, then it will be considered that the registered person is
moving the consignment. In this case, the registered person or transporter shall
complete the formalities of the e-Way Bill.

 WHEN SHOULD E-WAY BILL BE ISSUED?

(a) Ideally, e-Way Bill should be generated before the commencement of movement
of goods above the value of INR 50,000 (either individual invoice or consolidated
invoice of multiple consignments). The movement of goods will be either about a
supply/ reasons other than supply (like return)/ inward supply from an
unregistered person.
(b) For purposes of an e-Way Bill, supply is considered either a payment in the
course of business/ a payment which may not be in the course of business/ no
consideration of payment (in the case of barter/ exchange).
(c) Latest update as on 23rd Mar 2018:
The transporters need not generate the Eway bill (as Form EWB-01 or EWB-02)
where all the consignments in the conveyance.

(d) Individually (single Document**) is less than or equal to Rs 50,000 BUT

In Aggregate (all documents** put together) exceeds Rs 50,000.

(e) (**Document means Tax Invoice/Delivery challan/Bill of supply)

  GST E-WAY BILL FORMAT:

Below is the image of the e-Way Bill to be electronically generated after completing
the Form GST EWB-01.

The bill comprises of 2 parts – Part A and Part B.

Part A of the form is to collect the details of the consignment, usually about the invoice.
 GSTIN of Recipient: The recipient of the goods needs to provide GST Identification Number.

 Place of Delivery: The Pin Code of the place where goods are to be delivered needs to be
filled in.

 Invoice or Challan Number: The Invoice or Challan number of the supplied goods, needs to be
filled in.

 Value of Goods: The total consignment value of the goods.

 HSN Code: The HSN (Harmonized System of Nomenclature) code of the transported goods is
required. If the turnover is up to INR 5 crores, then the first two digits need to be mentioned.
For a turnover more than INR 5 crores, four digits of HSN code are required.

 Reason for Transportation: One needs to select the most appropriate option from the list of
reasons which is pre-defined.
 Transport Document Number: One needs to enter the Goods Receipt Number/ Railway
Receipt Number/ Airway Bill Number/ Bill of Loading Number.

In Part B of this form, one needs to fill in the vehicle number of the transported goods.
The transporter will complete this information in the common portal.

HOW TO GENERATE E-WAY BILLS?

e-Way Bills are generated either via online e-way bill system or SMS. The bill needs to
be generated before the start of the movement of goods about supply/ reasons other than
supply/ inward supply from an unregistered person. [Supply being defined sale of goods
and payment made/ branch transfer/ barter or exchange].
The table below is aimed to provide a bird’s eye-view of ‘Who, When and How’ will
generate the e-Way Bill and which part of the form needs to be completed:

Who When Which Part Form

A person Registered Before movement Complete Part A GST EWB-01

under GST of goods

If Registered person is Before movement Complete Part B GST EWB-01

consignor or consignee of goods
(mode of transport may
be owned or hired) OR
is recipient of goods

Registered person is Before movement Complete Part B The registered person to

consignor or consignee of goods furnish information about
and goods are handed the transporter GST EWB-
over to transporter of 01
goods

Transporter of goods Before movement e-Way Bill will be created

of goods based on the information
completed by the registered
person in Part A of GST
EWB-01
An unregistered person Recipient is 1) If it is an intrastate/intra-
under GST and recipient is considered to be union territory transport of 10
registered same as the Supplier km or less from a business
place of the consignor to
business place of the
transporter with the intention
of further transportation, the
supplier or the transporter is
not required to furnish the
details of conveyance in Part B
of FORM GST EWB-01.

2) If air/ship /railways make

the supply, then consignor
or recipient needs to
complete Part A of FORM
GST EWB-01.

Responsibilities of the Transporter:

Under GST regime, when goods are moved from one place to another, the transporter
needs to ensure to carry an e-Way Bill. When a registered person causes the movement of
goods and hands these over to the transporter for transportation by road, but the e-Way
Bill has not been generated, then it is the transporter who needs to create the bill.
When an unregistered person causes the movement of goods, through his/her conveyance
or hired vehicle or services of a transporter, then the e-Way Bill needs to be generated
and can be done by the transporter.
In cases where there are multiple consignments, being sent through one conveyance, the
transporter has the responsibility to ensure that the serial number of each individually
generated e-way bill per each consignment is entered on the common platform and a
consolidated e-Way Bill via the Form GST EWB 02 is created.

GST AUDIT AND ASSESSMENT:

Goods and Service Tax (GST) is structured for efficient tax collection, reduction in
corruption, easy inter-state movement of goods and a lot more.
The GST Law provides for self-assessment to facilitate easy compliance and payment of
taxes. It also explains the notices, the demand and recovery provisions when the taxes are
unpaid, short paid and/or returns are not filed.

AUDITS:
Audit under GST is the examination of records maintained by a registered dealer. The
aim is to verify the correctness of information declared, taxes paid and to assess the
compliance with GST.

a. Audit by Registered Dealer

Every registered dealer whose turnover during a financial year exceeds the Rs 2 crore has
to get his accounts audited by a CA or a CMA.
b. Audit by GST Tax Authorities
- General Audit: The commissioner or on his orders an officer may conduct an audit of
any registered dealer.
- Special Audit: The department may conduct a special audit due to the complexity of
the case and considering the interest of revenue. The CA or a CMA will be appointed to
conduct the audit.
ASSESSMENTS:
Assessment under GST means the determination of tax liability under GST. Assessment
under GST has been divided into 5 types:

a. Self Assessment
Under GST, every registered taxable person shall assess the taxes payable by them on
their own, and furnish a return for each tax period. This is called self-assessment.

b. Provisional Assessment
A registered dealer can request the officer for provisional assessment if he is unable to
determine the value of goods or rate of tax. The proper officer can allow the assessee to
pay tax on a provisional basis at a rate or a value specified by him.

c. Scrutiny Assessment
A GST officer can scrutinize the return to verify its correctness. The officer will ask for
explanations on any discrepancies noticed in the returns.

d. Summary Assessment
Summary Assessment is done when the assessing officer comes across sufficient grounds
to believe any delay in showing a tax liability can harm the interest of the revenue. To
protect the interest of the revenue, he can pass the summary assessment with the prior
permission of the additional/joint commissioner.

e. Best Judgement Assessment

1. Assessment of non-filers of returns
If a registered taxable person does not file his return even after getting a notice, the
proper officer will assess the tax liability to the best of his judgment using the available
relevant material.
2. Assessment of unregistered persons
This assessment is done when a taxable person fails to obtain registration even though he
is liable to do so.
The officer will assess the tax liability of such persons to the best of his judgement. The
taxable person will receive a show cause notice and an opportunity of being heard.

DEMAND AND RECOVERY:

Demand and recovery provisions are applicable when a registered dealer has paid tax
incorrectly or not paid tax at all. It is also applicable when an incorrect refund or ITC is
claimed by the dealer.
The proper officer will issue a show cause notice along with a demand for payment of tax
and penalty in case of fraud.
Demands can arise in the following cases:
1. Unpaid or short paid tax or wrong refund
2. Tax collected but not deposited with the Central or a State Government
3. CGST/SGST paid when IGST was payable and vice versa.
If demand is not paid, the GST authority starts recovery proceedings

ADVANCE RULING:
Advance Ruling under GST means seeking clarifications from GST authority on certain
tax matters before starting the proposed activity. This helps to reduce costly litigation.
An advance ruling is a written decision given by the tax authority to an applicant on
queries related to the supply of goods/services.