With each passing day, we are moving one step closer to the GST regime. The GST Bill has been approved by President and the GST Council is in the process for forming the rules. As business begin their preparation towards the new taxation system, obtaining GST registration is the first step.
Liability for Registration in GST
Liability to Register
Liability for Payment of Tax
North East India
Rs 9 Lakhs
Rs 10 Lakhs
Rest of India
Rs 19 Lakhs
Rs 20 Lakhs
This ensures that on the day a dealer crosses Rs 20 Lakhs turnover, he is already registered, need to start charging GST, and is eligible to claim input tax credit. All existing dealers registered with any of the current laws (VAT/Excise/Service Tax) will also need to register under GST by default.
Important Note: The turnover considered here is the aggregate pan-India turnover (including value of non-taxable, exempt and export supplies) of a business entity, and not state-wise.
Let us take an example to illustrate the liability of business to register under GST.
Super Cars Ltd. is a car manufacturing unit in Karnataka. They own ‘Super Cars Service Ltd’, a service unit located in Karnataka and Delhi. Additional details are furnished in the table below:
Super Cars Ltd.
Super Cars Service Ltd.
Super Cars Service Ltd.
As per the example,
All 3 units are registered under the same PAN AEHCS3476M
To arrive at the aggregate turnover, the turnover of all the 3 units (Super Cars Ltd. and Super Cars Service Ltd. located in Karnataka and Delhi) will be considered.
Therefore, the aggregate turnover will be Rs 155 Lakhs (Super Cars Ltd. Rs 125 Lakhs + Super Cars Service Ltd. of Karnataka Rs 20 Lakhs + Super Cars Services Ltd. of Delhi Rs 10 Lakhs) and are required to register under GST.
For Whom is Registration Mandatory?
The following categories of suppliers need to mandatorily register irrespective of turnover:
Taxable person carrying on interstate supply
Casual and non-resident taxable persons
Businesses liable to pay tax under reverse charge
Agents supplying on behalf of taxable person
Input service distributor
Sellers on e-commerce platforms
Aggregator supplying services under his brand name
Persons responsible to deduct TDS
Registration Forms for Dealers Registered under Existing Central and State Tax
All dealers registered with central or state tax authorities will be auto-migrated and allotted with a provisional certificate of registration in Form GST REG-21.
Within 6 months, dealers are required to submit Form GST REG-20 in the GST Portal along with information and documents as prescribed.
If the information provided is complete and satisfactory, final registration certificate will be issued in Form GST REG-06.
If the details submitted are not satisfactory, a show cause notice will be issued in Form GST REG-23, and there will be a hearing before cancelling the provisional registration. If the show cause hearing is not successful, or if the details are not provided within the stipulated period, the provisional registration allotted in Form GST REG-21 will be cancelled by issuing an order in Form GST REG-22.
During transition, if a taxable person is not required to register under GST, but was previously registered (Central and State law), he has an option to cancel the provisional registration issued by submitting the Form GST REG-24.
New Stat.900 Version is available free for existing Tally User
Major Enhancement are :
As per the notification, effective 17 Sep 2016, the following VAT classifications are provided to support the revised VAT rate from 5.5% to 6% :
Composition Tax – Restaurant Etc @ 6%
Composition Tax – Retail @ 6%
CST @ 6%
CST – Works Contract @ 6%
Input VAT @ 6%
Input VAT – Works Contract @ 6%
Input VAT – Works Contract @ 6% (Construction)
Interstate Purchases @ 6%
Output VAT @ 6%
Output VAT @ 6% on Works Contract (Construction)
Output VAT – Works Contract @ 6%
Purchases – Capital Goods @ 6%
Sales – Restaurant Etc @ 6% (Composition)
Sales Retail @ 6% (Composition)
As per the notification, effective 17 Sep 2016, the following VAT classifications are provided to support the revised VAT rate from 12.5% to 13.5% :
Composition Tax – Motor Vehicle @ 13.5%
CST @ 13.5%
CST – Works Contract @ 13.5%
Input VAT @ 13.5%
Input VAT – Works Contract @ 13.5%
Interstate Purchases @ 13.5%
Output VAT @ 13.5%
Output VAT – Works Contract @ 13.5%
Output VAT – Works Contract @ 13.5% (on Going)
Purchases – Capital Goods @ 13.5%
Sales Motor Vehicle @ 13.5% (Composition)
Note: Currently, the values from transactions recorded using the above classifications are captured in the VAT Computation report. In the future releases, the relevant VAT forms will be enhanced to capture these values.
One of the fundamental features of GST is seamless flow of input credit across the chain (from the manufacture of goods till it is consumed) and across the country. In this section, let’s discuss about various conditions laid down by law to avail input credit on supply of goods or services.
All of the following conditions need to be satisfied to avail Input credit:
• The dealer should be in possession of Tax Invoice / Debit or Credit Note / Supplementary Invoice issued by a supplier registered under GST Act.
• The said goods/services have been received.
• Returns (GSTR-3) have been filed.
• The tax charged has been paid to the government by the supplier.
What do these conditions imply?
Once GSTR-1 (Outward supply details) is filed by the supplier, recipient has a visibility of the purchase through the auto populated GSTR-2 (Inward supplies details). After necessary modification, additions (if any) and acceptance, the Input credit will be credited to the recipient’s electronic credit ledger on a provisional basis.
Input credit will be available only when the Monthly returns (GSTR-3) are filed by the supplier along with payment tax.
Let us understand this with an example
Super Cars Ltd, a manufacturer of cars purchased 30 tons of steel from Ratna Steels. Ratna Steels supplied steel and issued tax invoice on 5th April with GST of 2, 40,000.
With this example, let us examine the process to understand the flow of availing input credit.
GSTR-1: Furnish all outward supply details on or before 10th of Subsequent month.
GSTR-2: This is auto-populated by System on 11th of subsequent month. This includes all inward supplies details
GSTR-3: Monthly Return auto populated by system on 20th of subsequent month
GST (Goods & Service Tax), a single unified tax system aims at uniting India’s complex taxation structure to a ‘One Nation- One Tax’ regime. It is the biggest tax reform since India’s independence.
What does this mean? What will be its impact?
GST proposes to remove the geographical barriers for trading, and transform the entire nation to ‘One Common Market Place’.
Let us understand the fundamentals of GST, it is a dual concept tax system. Under this system, tax is administered, collected, and shared by both the Centre and the State governments, based on the nature of transaction (within the state or interstate).
The tax components of GST
While we now know the tax components of GST, it is equally important for you to know the taxes existing in the current regime, and how they are subsumed under GST.
In the current regime of indirect tax system, the chain of input credit, at a certain point, is broken. Let’s say Central Sales Tax (CST) applicable on interstate trade is non-creditable, leading to a break in the input credit chain. Similarly, a manufacturer charging excise duty on sale to a dealer causes the chain to break. This leads to taxes forming a part of the product cost.
In the year 2005, VAT was introduced with the similar objective to overcome cascading affect. If VAT was designed to eliminate it, how is it different in GST?
Yes, VAT eliminated the cascading tax effect on the state indirect tax, while the cascading effect of other indirect taxes still remained. GST allows for seamless flow of tax credit, and eliminates the cascading effect of all indirect taxes in the supply chain from manufacturers to retailers, and across state borders.
Let us examine this with an example of car as a product with overall rate of tax being considered @22% under existing and GST regime – to illustrate elimination of tax on tax
Savings of 5,280 catching your eyes! Isn’t it? Let’s us examine this.
If you observe closely, in the example, the taxes paid by dealer (CGST + SGST) to manufacturer is not added to cost. This is because GST allows the dealer to set off the tax liability of CGST+SGST. This is one of the fundamental features of GST, which allows seamless credit from manufacturer to dealer, and eliminates the cascading effect.