Frequently Asked Questions

Q 1. What is Goods and Service Tax (GST)?

Ans. It is a destination based tax on consumption of goods and services. It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as setoff. In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer.

Q 2. What type of GST is proposed to be implemented?

Ans. It would be a dual GST with the Centre and States simultaneously levying it on a common tax base. The GST to be levied by the Centre on intra-State supply of goods and / or services would be called the Central GST (CGST) and that to be levied by the States would be called the State GST (SGST). Similarly Integrated GST (IGST) will be levied and administered by Centre on every inter-state supply of goods and services.

Q 3. Why is Dual GST required?

Ans. India is a federal country where both the Centre and the States have been assigned the powers to levy and collect taxes through appropriate legislation. Both the levels of Government have distinct responsibilities to perform according to the division of powers prescribed in the Constitution for which they need to raise resources. A dual GST will, therefore, be in keeping with the Constitutional requirement of fiscal federalism.

Q 4. What exactly is the concept of destination based tax on consumption?

Ans. The tax would accrue to the taxing authority which has jurisdiction over the place of consumption which is also termed as place of supply.

Q 5. Which of the existing taxes are proposed to be subsumed under GST?

Ans. The GST would replace the following taxes:

  1. taxes currently levied and collected by the Centre: a. Central Excise duty b. Duties of Excise (Medicinal and Toilet Preparations) c. Additional Duties of Excise (Goods of Special importance) d. Additional Duties of Excise (Textiles and Textile Products) e. Additional Duties of Customs (commonly known as CVD) f. Special Additional Duty of Customs (SAD) g. Service Tax h. Central Surcharges and Cesses so far as they relate to supply of goods and services
  2. State taxes that would be subsumed under the GST are: a. State VAT b. Central Sales Tax c. Luxury Tax d. Entry Tax (all forms) e. Entertainment and Amusement Tax (except when levied by the local bodies) f. Taxes on advertisements g. Purchase Tax h. Taxes on lotteries, betting and gambling i. State Surcharges and Cesses so far as they relate to supply of goods and services The GST Council shall make recommendations to the Union and States on the taxes, cesses and surcharges levied by the Centre, the States and the local bodies which may be subsumed in the GST.

Q 6. What principles were adopted for subsuming the above taxes under GST?

Ans. The various Central, State and Local levies were examined to identify their possibility of being subsumed under GST. While identifying, the following principles were kept in mind:

  1. Taxes or levies to be subsumed should be primarily in the nature of indirect taxes, either on the supply of goods or on the supply of services.
  2. Taxes or levies to be subsumed should be part of the transaction chain which commences with import/ manufacture/ production of goods or provision of services at one end and the consumption of goods and services at the other.
  • The subsumation should result in free flow of tax credit in intra and inter-State levels. The taxes, levies and fees that are not specifically related to supply of goods & services should not be subsumed under GST.
  • Revenue fairness for both the Union and the States individually would need to be attempted.

Q 7. Which are the commodities proposed to be kept outside the purview of GST?

Ans. Alcohol for human consumption, Petroleum Products viz. petroleum crude, motor spirit (petrol), high speed diesel, natural gas and aviation turbine fuel& Electricity.

Q 8. What will be the status in respect of taxation of above commodities after introduction of GST?

Ans. The existing taxation system (VAT & Central Excise) will continue in respect of the above commodities.

Q 9. What will be status of Tobacco and Tobacco products under the GST regime?

Ans. Tobacco and tobacco products would be subject to GST and a GST Compensation Cess. In addition, the Centre would have the power to levy Central Excise duty on these products.

Q 10. How a particular transaction of goods and services would be taxed simultaneously under Central GST (CGST) and State GST (SGST)?

Ans. The Central GST and the State GST would be levied simultaneously on every transaction of supply of goods and services except the exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits. Further, both would be levied on the same price or value unlike State VAT which is levied on the value of the goods inclusive of CENVAT. While the location of the supplier and the recipient within the country is immaterial for the purpose of CGST, SGST would be chargeable only when the supplier and the recipient are both located within the State. Illustration I: Suppose hypothetically that the rate of CGST is 10% and that of SGST is 10%. When a wholesale dealer of steel in Uttar Pradesh supplies steel bars and rods to a construction company which is also located within the same State for, say Rs. 100, the dealer would charge CGST of Rs. 10 and SGST of Rs. 10 in addition to the basic price of the goods. He would be required to deposit the CGST component into a Central Government account while the SGST portion into the account of the concerned State Government. Of course, he need not actually pay Rs. 20 (Rs.10 + Rs. 10) in cash as he would be entitled to set-off this liability against the CGST or SGST paid on his purchases (say, inputs). But for paying CGST he would be allowed to use only the credit of CGST paid on his purchases while for SGST he can utilize the credit of SGST alone. In other words, CGST credit cannot, in general, be used for payment of SGST. Nor can SGST credit be used for payment of CGST. Illustration II: Suppose, again hypothetically, that the rate of CGST is 10% and that of SGST is 10%. When an advertising company located in Mumbai supplies advertising services to a company manufacturing soap also located within the State of Maharashtra for, let us say Rs. 100, the ad company would charge CGST of Rs. 10 as well as SGST of Rs. 10 to the basic value of the service. He would be required to deposit the CGST component into a Central Government account while the SGST portion into the account of the concerned State Government. Of course, he need not again actually pay Rs. 20 (Rs. 10+Rs. 10) in cash as it would be entitled to set-off this liability against the CGST or SGST paid on his purchase (say, of inputs such as stationery, office equipment, services of an artist etc). But for paying CGST he would be allowed to use only the credit of CGST paid on its purchase while for SGST he can utilize the credit of SGST alone. In other words, CGST credit cannot, in general, be used for payment of SGST. Nor can SGST credit be used for payment of CGST.

Q 11. How will imports be taxed under GST?

Ans. Imports of Goods and Services will be treated as inter-state supplies and IGST will be levied on import of goods and services into the country. Integrated Goods and Services Tax on goods imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 (51 of 1975) at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962 (52 of 1962), on a value as determined under the CGST Act. Further, The Central Government can notify categories of services the tax on which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of IGST Act shall apply to such electronic commerce operator as if he is the person liable for paying the tax in relation to the supply of such services, even if the electronic commerce operator has no physical presence in India. This will mainly relate to online information and database access or retrieval services like content downloading, e-books .etc. The incidence of tax will follow the destination principle and the tax revenue in case of SGST will accrue to the State where the imported goods and services are consumed. Full and complete set-off will be available on the GST paid on import on goods and services.

Q 12. How will Exports be treated under GST?

Ans. Exports will be treated as zero rated supplies. No tax will be payable on exports of goods or services, however credit of input tax credit will be available and same will be available as refund to the exporters.

Q 13. What is the scope of composition scheme under GST?

Ans. Small taxpayers with an aggregate turnover in a financial year up to [Rs. 50 lakhs] shall be eligible for composition levy. Under the scheme, a taxpayer shall pay tax as a percentage of his turnover during the year without the benefit of ITC. The floor rate of tax for CGST and SGST shall not be less than [2.5% in case of manufacturers and 1% in case of others]. A tax payer opting for composition levy shall not collect any tax from his customers. Tax payers making inter- state supplies or paying tax on reverse charge basis shall not be eligible for composition scheme.

Registration

Q 1. What is advantage of taking registration in GST?

Ans. Registration under Goods and Service Tax (GST) regime will confer following advantages to the business: Legally recognized as supplier of goods or services. • Proper accounting of taxes paid on the input goods or services which can be utilized for payment of GST due on supply of goods or services or both by the business. • Legally authorized to collect tax from his purchasers and pass on the credit of the taxes paid on the goods or services supplied to purchasers or recipients.

Q 2. Can a person without GST registration claim ITC and collect tax?

Ans. No. A person without GST registration can neither collect GST from his customers nor claim any input tax credit of GST paid by him.

Q 3. What will be the effective date of registration?

Ans. Where the application for registration has been submitted within thirty days from the date on which the person becomes liable to registration, the effective date of registration shall be date of his liability for registration. Where an application for registration has been submitted by the applicant after thirty days from the date of his becoming liable to registration, the effective date of registration shall be the date of grant of registration. In case of suomoto registration, i.e. taking registration voluntarily while being within the threshold exemption limit for paying tax, the effective date of registration shall be the date of order of registration.

Q 4. Who are the persons liable to take a Registration under the Model GST Law?

Ans. Any supplier who carries on any business at any place in India and whose aggregate turnover exceeds threshold limit as prescribed in a year is liable to get himself registered. However, certain categories of persons mentioned in para 6 of Schedule V of MGL are liable to be registered irrespective of this threshold. An agriculturist shall not be considered as a taxable person and shall not be liable to take registration. (As per Para 2 of Schedule V)

Q 5. What is aggregate turnover?

Ans. As per section 2 (6) of the MGL, aggregate turnover includes the aggregate value of: (i) all taxable and non-taxable supplies, including inter-state supplies (ii) exempt supplies, and (iii) exports of goods and/or service of a person having the same PAN. The above shall be computed on all India basis and excludes taxes charged under the CGST Act, SGST Act and the IGST Act. 35 Aggregate turnover does not include value of supplies on which tax is levied on reverse charge basis, and value of inward supplies.

Q 6. Which are the cases in which registration is compulsory?

Ans. As per paragraph 6 in Schedule V of MGL, the following categories of persons shall be required to be registered compulsorily irrespective of the threshold limit:

  1. persons making any inter-State taxable supply;
  2. casual taxable persons;
  3. persons who are required to pay tax under reverse charge;
  4. e-commerce operators making specified categories of services, for which they are liable to tax under section 8(4)
  5. non-resident taxable persons;
  6. persons who are required to deduct tax under section 46;
  7. persons who supply goods and/or services on behalf of other registered taxable persons whether as an agent or otherwise;
  8. input service distributor;
  9. persons who supply goods and/or services, other than branded services, through electronic commerce operator;
  10. every electronic commerce operator;
  11. every person supplying online information and data base access or retrieval services from place outside India to a person in India
  12. Such other person or class of persons as may be notified by the Central Government or a State Government on the recommendations of the Council.

Q 7. What is the time limit for taking a Registration under Model GST Law?

Ans. Any person should take a Registration, within thirty days 36 from the date on which he becomes liable to registration, in such manner and subject to such conditions as may be prescribed.

Q 8. If a person is operating in different states, with the same PAN number, whether he can operate with a single Registration?

Ans. No. Every person who is liable to take a Registration will have to get registered separately for each of the States where he has a business operation and is liable to pay GST in terms of Sub-section (1) of Section 23 of Model GST Law.

Q 9. Whether a person having multiple business verticals in a state can obtain for different registrations?

Ans. Yes. In terms of Sub-Section (2) of Section 23, a person having multiple business verticals in a State may obtain a separate registration for each business vertical, subject to such conditions as may be prescribed.

Q 10. Is there a provision for a person to get himself voluntarily registered though he may not be liable to pay GST?

Ans. Yes. In terms of Sub-section (3) of Section 23, a person, though not liable to be registered under Schedule III, may get himself registered voluntarily, and all provisions of this Act, as are applicable to a registered taxable person, shall apply to such person.

Q 11. Is possession of a Permanent Account Number (PAN) mandatory for obtaining a Registration?

Ans. Yes. Every person shall have a Permanent Account Number issued under the Income Tax Act, 1961 (43 of 1961) in order to be eligible for grant of registration under Section 23 of the Model GST Law. However as per section 19 (4A) of MGL, PAN is not mandatory for a non-resident taxable person who may be granted registration on the basis of any other document as may be prescribed.

Q 12. Whether the Department through the proper officer, can suo-moto proceed with registration of a Person under this Act?

Ans. Yes. In terms of sub-section (5) of Section 23, where a person who is liable to be registered under this Act fails to obtain registration, the proper officer may, without prejudice to any action that is, or may be taken under the MGL, or under any other law for the time being in force, proceed to register such person in the manner as may be prescribed.

Q 13. Whether the proper Officer can reject an Application for Registration?

Ans. Yes. In terms of sub-section 8 of section 23 of MGL, the proper officer can reject an application for registration after due verification.

Q 14. Whether the Registration granted to any person is permanent?

Ans. Yes, the registration Certificate once granted is permanent unless surrendered, cancelled, suspended or revoked.

Q 15. Is it necessary for the UN bodies to get registration under MGL?

Ans. All UN bodies Consulate or Embassy of foreign countries and any other class of persons so notified would be required to obtain a unique identification number (UIN) from the GST portal. The structure of the said ID would be uniform across the States in conformity with GSTIN structure and the same will be common for the Centre and the States. This UIN will be needed for claiming refund of taxes paid by them and for any other purpose as may be prescribed in the GST Rules.

Q 16. What is the responsibility of the taxable person supplying to UN bodies?

Ans. The taxable supplier supplying to these organizations is expected to mention the UIN on the invoices and treat such supplies as supplies to another registered person (B2B) and the invoices of the same will be uploaded by the supplier.

Q 17. Is it necessary for the Govt. organization to get registration?

Ans. A unique identification number (ID) would be given by the respective state tax authorities through GST portal to Government authorities / PSUs not making outwards supplies of GST goods (and thus not liable to obtain GST registration) but are making inter-state purchases.

Q 18. Who is a Casual Taxable Person?

Ans. Casual Taxable Person has been defined in Section 2 (20) of MGL. It means a person who occasionally undertakes transactions in a taxable territory where he has no fixed place of business.

Q 19. Who is a Non-resident Taxable Person?

Ans. A taxable person residing outside India and coming to India to occasionally undertake transaction in the country but has no fixed place of business in India is a non-resident taxable person in terms of Section 2 (68) of the MGL.

Q 20. What is the validity period of the Registration certificate issued to a Casual Taxable Person and non- Resident Taxable person?

Ans. The certificate of registration issued to a “casual taxable person” or a “non-resident taxable person” shall be valid for a period of ninety days from the effective date of registration. However, the proper officer, at the request of the said taxable person, may extend the validity of the aforesaid period of ninety days by a further period not exceeding ninety days.

Q 21. Is there any Advance tax to be paid by a Casual Taxable Person and Non-resident Taxable Person at the time of obtaining registration under this Special Category?

Ans. Yes. While a normal taxable person does not have to make any deposit of money to obtain registration, a casual taxable person or a non-resident taxable person shall, at the time of submission of application for registration under sub-section (1) of section 23, make an advance deposit of tax in an amount equivalent to the estimated tax liability of such person for the period for which the registration is sought. If registration is to be extended beyond the initial period of ninety days, an advance additional amount of tax equivalent to the estimated tax liability is to be deposited for the period for which the extension beyond ninety days is being sought.

Q 22. Whether Amendments to the Registration Certificate is permissible?

Ans. Yes. In terms of Section 25, the proper officer may, on the basis of such information furnished either by the registrant or as ascertained by him, approve or reject amendments in the registration particulars in the manner and within such period as may be prescribed. It is to be noted that permission of the proper officer for making amendments will be required for only certain core fields of information, whereas for the other fields, the registrant can himself carry out the amendments.

Q 23. Whether Cancellation of Registration Certificate is permissible?

Ans. Yes. Any Registration granted under this Act may be cancelled by the Proper Officer, in circumstances mentioned in Section 26 of the MGL. The proper officer may, either on his own motion or on an application filed, in the prescribed manner, by the registered taxable person or by his legal heirs, in case of death of such person, cancel the registration, in such manner and within such period as may be prescribed.

Q 24. Whether cancellation of Registration under CGST Act means cancellation under SGST Act also?

Ans. Yes. The cancellation of registration under one Act (say CGST Act) shall be deemed to be a cancellation of registration under the other Act (i.e. SGST Act). (Section26(6))

Q 25. Can the proper Officer Cancel the Registration on his own?

Ans. Yes, in certain circumstances specified under section 26(2) of MGL, the proper officer can cancel the registration on his own. Such circumstances include not filing return for a continuous period of six months (for a normal taxable person) or three months (for a compounding taxpayer), and not commencing business within six months from the date of registration. However, before cancelling the registration, the proper officer has to follow the principles of natural justice. (Section 21 (4))

Q 26. What happens when the registration is obtained by means of willful misstatement, fraud or suppression of facts?

Ans. In such cases, the registration may be cancelled with retrospective effect by the proper officer. Section 26(4).

Q 27. Is there an option to take centralized registration for services under MGL?

Ans. No.

Q 28. If the taxpayer has different business verticals in one state, will he have to obtain separate registration for each such vertical in the state?

Ans. No. However the taxpayer has the option to register such separate business verticals independently in terms of Section 23(2) of MGL.

Q 29. Who is an ISD?

Ans. ISD stands for Input Service Distributor and has been defined under Section 2 (54) of MGL. It is basically an office meant to receive tax invoices towards receipt of input services and further distribute the credit to supplier units proportionately.

Q 30. Will ISD be required to be separately registered other than the existing taxpayer registration?

Ans. Yes. The ISD registration is for one office of the taxpayer which will be different from the normal registration.

Q 31. Can a taxpayer have multiple ISDs?

Ans. Yes. Different offices of a taxpayer can apply for ISD registration.

Q 32. What could be the liabilities (in so far as registration is concerned) on transfer of a business?

Ans. The transferee or the successor shall be liable to be registered with effect from such transfer or succession and he will have to obtain a fresh registration with effect from such date. (Schedule V of MGL).

Q 33. Whether all assessees/dealers who are already registered under existing central excise/service tax/ vat laws will have to obtain fresh registration?

Ans. No. GSTN shall migrate all such assessees/dealers to the GSTN network and shall issue GSTIN number and password. They will be asked to submit all requisite documents and information required for registration in a prescribed period of time. Failure to do so will result in cancellation of GSTIN number. The service tax assessees having centralized registration will have to apply afresh in the respective states wherever they have their businesses.

Q 34. Whether the job worker will have to be compulsorily registered?

Ans. No. Section 55 of MGL does not prescribe any such condition.

Q 35. Whether the goods will be permitted to be supplied from the place of business of a job worker?

Ans. Yes. But only in cases where the job worker is registered or the principal declares the place of business of the job worker as his additional place of business.

Q 36 At the time of registration will the assessee have to declare all his places of business?

Ans. Yes. The principal place of business and place of business have been separately defined under section 2(74) & 2(77) of MGL respectively. The taxpayer will have to declare the principal place of business as well as the details of additional places of business in the registration form.

Q 37. Is there any system to facilitate smaller dealers or dealers having no IT infrastructure?

Ans. In order to cater to the needs of taxpayers who are not IT savvy, following facilities shall be made available:- Tax Return Preparer (TRP): A taxable person may prepare his registration application /returns himself or can approach the TRP for assistance. TRP will prepare the said registration document / return in prescribed format on the basis of the information furnished to him by the taxable person. The legal responsibility of the correctness of information contained in the forms prepared by the TRP will rest with the taxable person only and the TRP shall not be liable for any errors or incorrect information. (* As per the decision of the 6th GST Council Meeting the words “TRP” is proposed to be replaced with GST Practitioner”.) Facilitation Centre (FC): shall be responsible for the digitization and / or uploading of the forms and documents including summary sheet duly signed by the Authorized Signatory and given to it by the taxable person. After uploading the data on common portal using the ID and Password of FC, a print-out of acknowledgement will be taken and signed by the FC and handed over to the taxable person for his records. The FC will scan and upload the summary sheet duly signed by the Authorized Signatory.

Q 38. Is there any facility for digital signature in the GSTN registration?

Ans. Taxpayers would have the option to sign the submitted application using valid digital signatures (if the applicant is required to obtain DSC under any other prevalent law then he will have to submit his registration application using the same). For those who do not have a digital signature, alternative mechanisms will be provided in the GST Rules on Registration.

Q 39. What will be the time limit for the decision on the online application?

Ans. If the information and the uploaded documents are found in order, the State and the Central authorities shall approve the application and communicate the approval to the common portal within three common working days. The portal will then automatically generate the Registration Certificate. In case no deficiency is communicated to the applicant by both the tax authorities within three common working days, the registration shall be deemed to have been granted [section 23(12) of MGL] and the portal will automatically generate the Registration Certificate.

Q 40. What will be the time of response by the applicant if any query is raised in the online application?

Ans. If during the process of verification, one of the tax authorities raises some query or notices some error, the same shall be communicated to the applicant and to the other tax authority through the GST Common Portal within 3 common working days. The applicant will reply to the query / rectify the error / answer the query within a period informed by the concerned tax authorities (Normally this period would be seven days). On receipt of additional document or clarification, the relevant tax authority will respond within seven common working days.

Q 41. What is the process of refusal of registration?

Ans. In case registration is refused, the applicant will be informed about the reasons for such refusal through a speaking order. The applicant shall have the right to appeal against the decision of the Authority. As per sub-section (11) of section 23 of MGL, any rejection of application for registration by one authority (i.e. under the CGST Act / SGST Act) shall be deemed to be a rejection of application for registration by the other tax authority (i.e. under the SGST Act / CGST Act).

Q 42. Will there be any communication related to the application disposal?

Ans. The applicant shall be informed of the fact of grant or rejection of his registration application through an e-mail and SMS by the GST common portal. Jurisdictional details would be intimated to the applicant at this stage.

Q 43. Can the registration certificate be downloaded from the GSTN portal?

Ans. In case registration is granted, applicant can download the Registration Certificate from the GST common portal.

Input Tax Credit

Q 1. What is input tax?

Ans. “Input tax” has been defined in section 2 (56) of the MGL and section 2 (15) of the IGST Act. Input tax in relation to a taxable person, means the {IGST and CGST} in respect of CGST Act and {IGST and SGST} in respect of SGST Act, charged on any supply of goods and/or services to him which are used, or are intended to be used, in the course or furtherance of his business and includes the tax payable under sub-section (3) of section 8. Under the IGST Act, input tax is defined as IGST, CGST or SGST charged on any supply of goods and / or services.

Q 2. What is the implication of different definition of “input tax” in three acts viz CGST, SGST and IGST Acts?

Ans. It implies that input tax consists of IGST & CGST in CGST Act and IGST & SGST in SGST Act. In the IGST Act, input tax consists of all three taxes namely, IGST, CGST and SGST. It further implies that credit of all three can be used for discharging IGST liability, whereas only credit of IGST & CGST can be taken in CGST Act and that of IGST & SGST can be taken under SGST Act. Further the credit of CGST & SGST cannot be cross-utilized.

Q 3. Can GST paid on reverse charge be considered as input tax?

Ans. Yes. The definition of input tax includes the tax payable under sub-section (3) of section 8 (Reverse Charge). The credit can be availed if such goods and/or services are used, or are intended to be used, in the course or furtherance of his business.

Q 4. Does input tax includes tax (CGST/ IGST/SGST) paid on input goods, input services and/ or capital goods?

Ans. Yes, in terms of section 2(52), 2(53) & 2(19) of the MGL respectively. It may be noted that credit of tax paid on capital goods also is permitted to be availed in one installment, except for pipelines and telecommunication towers (proviso to 16(1))

Q 5. What is the ITC entitlement of a person who has applied for registration under the Act within thirty days from the date on which he becomes liable to registration and has been granted such registration? (Section 18(1))

Ans. He shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date from which he becomes liable to pay tax under the provisions of this Act. It may be noted that the credit on pre-registration stock would not be admissible if the registration has not been obtained within a period of 30 days from the date on which he becomes liable to registration.

Q 6. A person becomes liable to pay tax on 1st August, 2017 and has obtained registration on 15th August, 2017. Such person is eligible for input tax credit on inputs held in stock as on

Ans. 31st July, 2017.

Q 7. What is the eligibility of input tax credit on inputs in stock for a person who obtains voluntary registration?

Ans. As per section 18(2) of MGL, the person who obtains voluntary registration is entitled to take the input tax credit of input tax on inputs in stock, inputs in semi- finished goods and finished goods in stock, held on the day immediately preceding the date of registration.

Q 8. Where goods and/or services received by a taxable person are used for effecting both taxable and non-taxable supplies, whether the input tax credit is available to the registered taxable person?

Ans. As per section 17(2) of MGL, the input tax credit of goods and / or service attributable to only taxable supplies can be taken by registered taxable person. The amount of eligible credit would be calculated in a manner to be prescribed in terms of section 17(2) of the MGL read with GST ITC Rules (yet to be issued). It is important to note that credit on capital goods also would now be permitted on proportionate basis.

Q 9. Where goods and/or services received by a taxable person are used for the purpose of business and non-business supplies, whether the input tax credit is available to the registered taxable person?

Ans. As per section 17(1) of the MGL, the input tax credit of goods and / or service attributable to only supplies effected for business purpose can be taken by registered taxable person. The amount of eligible credit would be calculated in a manner to be prescribed in terms of section 17(1) of the MGL read with GST ITC Rules (yet to be issued). It is important to note that credit on capital goods also would now be permitted on proportionate basis.

Q 10. What would be input tax eligibility in cases where there is a change in the constitution of a registered taxable person?

Ans. As per section 18(6) of the MGL, the transferor shall be allowed to transfer the input tax credit that remains unutilized in its books of accounts to the transferee provided that there is a specific provision for transfer of liabilities.

Q 11. What would be input tax eligibility in case where the goods and/or services supplied by a registered taxable person become absolutely exempt?

Ans. As per section 18(7) of the MGL, the registered taxable person who supplies goods and / or services which become absolutely exempt, has to pay an amount equivalent to the input tax credit in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date of such exemption. It has also been provided that after payment of the amount on such goods, the balance, if any available in electronic credit ledger would lapse. The amount, required to be paid, is to be calculated as per rules that will be framed in this regard.

Q 12. What would be input tax eligibility in cases where taxable person paying tax under section 7 opts to pay tax under Compounding Scheme under Section 8?

Ans. As per section 18(7) of the MGL, the registered taxable person, who was paying tax under section 8opts to pay tax under Compounding Scheme under Section 9, has to pay an amount equivalent to the input tax credit in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date of such switch over. It has also been provided that after payment of the amount on such goods, the balance, if any available in electronic credit ledger would lapse. The amount, required to be paid, is to be calculated as per rules that will be framed in this regard.

Q 13. A dealer paying tax on compounding basis crosses the compounding threshold and becomes a regular taxable person. Can he avail ITC and if so from what date?

Ans. As per section 18(3) of the MGL, he can avail ITC in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date from which he becomes liable to pay tax under section 8.

Q 14. Mr. B, a registered taxable person was paying tax under composition rate up to 30th July, 2017. However, w.e.f 31st July, 2017. Mr. B becomes liable to pay tax under regular scheme. Is he eligible for ITC?

Ans. Mr. B is eligible for input tax credit on inputs held in stock and inputs contained in semi-finished or finished goods held in stock as on 30th July, 2017.

Q 15. Mr. A applies for voluntary registration on 5th June, 2017 and obtained registration on 22nd June, 2017. Mr. A is eligible for input tax credit on inputs in stock as on …………..

Ans. Mr. A is eligible for input tax credit on inputs held in stock and inputs contained in semi-finished or finished goods held in stock as on 21st June, 2017.

Q 16. When shall a taxable person be not entitled to take input tax credit under sub-section (1), (2), (3) or sub-section (4) of Section 18 in respect of any supply of goods and / or services to him?

Ans. As per section 18(5) of the MGL, he cannot avail ITC after the expiry of one year from the date of issue of tax invoice relating to such supply.

Q 17. Whether the principal is eligible to avail input tax credit of inputs sent to job worker for job work?

Ans. Yes, the principal is eligible to avail the input tax credit on inputs sent to job worker for job work in terms of Section 20(1) of the MGL.

Q 18. What is the time period within which the inputs sent for job work has to be received back by the principal?

Ans. One year.

Q 19. Whether principal has to reverse the input tax credit on inputs which have not been received back from the job worker within one year?

Ans. Yes, the principal has to reverse the credit along with interest on inputs which have not been received back from job worker within one year.

Q 20. Which of the following is included for computation of taxable supplies for the purpose of availing credit: (a) Zero-rated supplies; (b) Exempt supplies; (c) Both?

Ans. Zero rated supplies.

Q 21. What is the time period within which the capital goods sent for job work has to be received back by the principal?

Ans. Three years.

Q 22. What is the liability of the principal if the capital goods sent to job worker have not been received within 3 years from the date of being sent?

Ans. Principal has to pay an amount equal to credit taken on such capital goods along with interest.

Q 23. A Taxable person is in the business of information technology. He buys a motor vehicle for use of his Executive Directors. Can he avail the ITC in respect of GST paid on purchase of such motor vehicle?

Ans. No. As per section 17(4)(a) of the MGL, ITC on motor vehicles can be availed only if the taxable person is in the business of transport of passengers or goods or is providing the services of imparting training on motor vehicles.

Q 24. Where the registered taxable person has claimed depreciation on the tax component of the cost of capital goods under the provisions of the Income Tax Act, 1961, will ITC be allowed in such cases?

Ans. As per section 16(3) of the MGL, the input tax credit shall not be allowed on the said tax component.

Q 25. What are the conditions necessary for obtaining ITC?

Ans. As per Section 16(2) of the MGL, following four conditions are stipulated: (a) The registered taxable person should be in possession of tax-paying document issued by a supplier; (b) The taxable person must have received the goods and / or services; (c) The tax charged on such supply has been actually paid to the government either in cash or through utilization of input tax credit; and (d) The taxable person should have furnished the return under section 34.

Q 26. Where the goods against an invoice are received in lots or installments, how will a registered taxable person be entitled to ITC?

Ans. As per proviso to section 16(2) of the MGL, the registered taxable person shall be entitled to the credit upon receipt of the last lot or installment.

Q 27. Who will get the ITC where goods have been delivered to a person other than taxable person (‘bill to’- ‘ship to’ scenarios)?

Ans. As per explanation clause to section 16(2) of the MGL, for this purpose of receiving the goods, it would be deemed that the taxable person has received the goods when the goods have been delivered to a third party on the direction of such taxable person. So ITC will be available to the person on whose order the goods are delivered to third person.

Q 28. What is the time limit for taking ITC?

Ans. As per Section 16 (4) of the MGL, ITC cannot be taken beyond the month of September of the following FY to which invoice pertains or date of filing of annual return, whichever is earlier. The underlying reasoning for this restriction is that no change in return is permitted after September of next FY. If annual return is filed before the month of September then no change can be made after filing of annual return.

Q 29. Is there any negative list on which ITC is not permitted?

Ans. Section 17(4) of the MGL provides for the negative list with respect to the admissibility of ITC. It has been provided that the ITC on following items cannot be availed:

(a) motor vehicles, except when they are supplied in the usual course of business or are used for providing the following taxable services— (i) transportation of passengers, or (ii) transportation of goods, or (iii)imparting training on motor driving skills;

(b) goods and / or services provided in relation to food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness center, life insurance, health insurance and travel benefits extended to employees on vacation such as leave or home travel concession, when such goods and/ or services are used primarily for personal use or consumption of any employee;

(c) Goods and/or services acquired by the principal in the execution of works contract when such contract results in construction of immovable property, other than plant and machinery; except where it is an input service for further supply of works contract service.

(d) goods acquired by a principal, the property in which is not transferred (whether as goods or in some other form) to any other person, which are used in the construction of immovable property, other than plant and machinery;

(e) goods and/or services on which tax has been paid under section 9; and

(f) goods and/or services used for private or personal consumption, to the extent they are so consumed.

(g) lost, stolen, written-off goods ,gifts and free samples

(h) of tax assessed on account of fraud and willful suppression(68),vehicle checking tax, penalties and security deposits(section 89 and 90)

Q 30. Section 37 of the MGL provides that the ITC would be confirmed only if the inward details filed by the recipient are matched with the outward details furnished by the supplier in his valid return. What happens if there is a mismatch?

Ans. In case of mismatch between the inward and outward details, the supplier would be required to rectify the mismatch within a period of two months and if the mismatch continues, the ITC would have to be reversed by the recipient.

Q 31. What will be the tax impact when capital goods on which ITC has been taken are supplied by taxable person?

Ans. As per section 18(10) of the MGL, in case of supply of capital goods on which input tax credit has been taken, the registered taxable person shall pay an amount equal to the input tax credit taken on the said capital goods reduced by the percentage points as may be specified in this behalf or the tax on the transaction value of such capital goods, whichever is higher.

Q 32. What is the recovery mechanism for wrongly availed credit?

Ans. As per section 19 of the MGL, the wrongly availed credit would be recovered from the registered taxable person in terms of provisions of the Act.

Refunds

Q 1. What is refund?

Ans. Refund has been discussed in section 48 of the MGL. “Refund” includes refund of tax on goods and/or services exported out of India or on inputs or input services used in the goods and/or services which are exported out of India, or refund of tax on the supply of goods regarded as deemed exports, or refund of unutilized input tax credit as provided under section48(3).

Q 2. Can unutilized Input tax credit be allowed as refund?

Ans. Yes, but only in following cases as given in sub-section (3) of section 48:- (i) Exports of goods on which export duty is not payable; (j) Exports of services; (k) Where credit has accumulated on account of rate of tax on inputs being higher than the rate of taxes on Outputs.

Q 3. Can unutilized ITC be given refund, in case goods exported outside India are subjected to export duty?

Ans. No (Second proviso to Section 48(3 ) of MGL).

Q 4. Can ITC of goods lying in stock at the end of the financial year (after introduction of GST) be refunded?

Ans. No. It is proposed to be carried forward.

Q 5. Suppose a taxable person has paid IGST/ CGST/SGST mistakenly as an Interstate/intrastate supply, but the nature of which is subsequently clarified. Can the CGST/ SGST be adjusted against wrongly paid IGST or vice versa?

Ans. No. He can claim refund of the tax wrongly paid. (IGST Sec.19 and Sec.70 GST).

Q 6. Whether purchases made by Embassies or UN be taxed or exempted?

Ans. It will be taxed, which later on can be claimed as refund by them. [The United Nations Organization and Consulates or Embassies are required to take a Unique Identity Number and purchases made by them will be reflected against their number in the return of outward supplies of the supplier and refunds of taxes can be granted. A separate process will be notified in the Rules. GST Sec. 48(2) and 49].

Q 7. What is the time limit for taking refund?

Ans. The person concerned is required to file the application before expiry of two years from the relevant date, as given in the explanation to section 48 of MGL.

Q 8. Whether principle of unjust enrichment will be applicable in refund?

Ans. Yes, except in cases of (i) exports and refund of unutilized ITC as referred to in sub-section (3) of section 48 (also refer to question no. 2 above). (ii) Taxes paid for which supply was not provided and for which invoice was not issued, (iii)taxes wrongfully collected and deposited with state/ central government in pursuance of section 70, (iv)tax and interest paid the incidence of which has not been passed to any other person. (v) taxes borne by persons notified by central and state governments(refer section 48(8))

Q 9. In case the tax has been passed on to the consumer, whether refund will be sanctioned?

Ans. Yes, however, the amount so determined shall be credited to the Consumer Welfare Fund.

Q 10. Is there any time limit for sanctioning of refund?

Ans. Yes, it is 60 days in all cases, excepting in a case where the refund to the extent of 80% of the total amount claimed is refundable to certain categories of exporters referred to in sub-section (6) of section 48. If refund is not sanctioned within the period of two months, interest will have to be paid by the department.

Q 11. Can refund be withheld by the department?

Ans. Yes, refund can be withheld in the following circumstances:

  • If the registered dealer has not submitted return(s), till he files the return(s);
  • If the registered taxable person is required to pay any tax, interest or penalty which has not been stayed by the appellate authority/Tribunal/ court, till he pays such tax interest or penalty; [The proper officer can also deduct unpaid taxes if any of the dealer from the refundable amount].
  • Commissioner/Board can withhold refund, if, the Or der of Refund is under appeal and he is of the opinion that grant of such refund will adversely affect revenue – (Sec.48(11) of MGL).

Q 12. Where the refund is withheld under 38(9), as discussed in 11(c) above, will the taxable person be given interest?

Ans. If as a result of appeal or further proceeding the taxable person becomes entitled to refund then he shall be also entitled to interest.

Q 13 . Is there any minimum threshold for refund?

Ans. No refund shall be granted if the amount is less that Rs.1000/-. (Sec.48 (14) of MGL)

Q 14. How will the refunds arising out of earlier law be paid?

Ans. The refund arising out of earlier law will be paid as per the earlier law and will be paid in cash (under CGST) or as per the provisions of the earlier law (under SGST) and will not be available as ITC (Section 179 of MGL).

Q 15. Whether refund can be paid before verification of documents?

Ans. For export refunds to notified category of dealers, 80% refund can be granted before verification subject to such conditions and restrictions as may be prescribed – section 48(6).

Q 16. In case of refund under exports, whether BRC is necessary for granting refund?

Ans. Since the exporter has a time period of one year from the date of export for remitting of export proceeds, BRC may not be available at the time of refund application. But if export proceeds are received in advance BRC may be available. Thus, refund should be subject to submission of BRC details within a period of maximum one year or as extended by RBI. e-BRC module of DGFT will be integrated with GST module. However for export of services BRC would be required before sanction of refund.

Q 17. Will the principle of unjust enrichment apply to exports or deemed exports?

Ans. The principle of unjust enrichment is not applicable in case of actual exports of goods or services as the recipient is located outside the taxable territory. However, in case of deemed exports (eg:SEZ) it will be applicable.

Q 18. How will the person prove that the principle of unjust enrichment do not apply in his case?

Ans. The person concerned may furnish together with the application such invoices, document(s) or evidence(s) to establish that the amount of tax and interest, if any, paid on such tax or any other amount paid in relation to which such refund is claimed was not passed on by him to any other person – section 48(3)(b). Further, to provide relief to taxpayers the above sub-section also provides that where the refund amount, as claimed, is less than Rs 5 lakh a self-declaration will only be required.

Q 19. Today under VAT/CST merchant exporters can purchase goods without payment of tax on furnishing of a declaration form. Will this system be there in GST?

Ans. No, there will be no such provision in GST. They will have to purchase goods upon payment of tax and claim refund of the accumulated ITC as discussed in section 38(2).

Q 20. Presently under Central law, exporters are allowed to obtain duty paid inputs, avail ITC on it and export goods upon payment of duty (after utilizing the ITC) and thereafter claim refund of the duty paid on exports. Will this system continue in GST?

Ans. Under the GST regime exports will be zero rated which means that the export goods would not suffer any actual tax liability although inputs for such exports would be tax paid. Under GST, refund will be allowable on the accumulated inputs as well as on exported finished goods.

Job Work

Q 1. What is job-work?

Ans. Section 2(61) of the MGL provides that “job-work” means undertaking any treatment or process by a person on goods belonging to another registered taxable person and the expression “job-worker” shall be construed accordingly. This definition is much wider than the one given in Notification No. 214/86 CE dated 23rd March, 1986 as amended, wherein job-work has been defined in such a manner so as to ensure that the activity of job-work must amount to manufacture. Thus the definition of job- work itself reflects the change in basic scheme of taxation relating to job-work in the proposed GST regime.

Q 2. Whether goods sent by a taxable person to a job-worker will be treated as supply and liable to GST? Why?

Ans. The goods can be sent for job-work without payment of tax. If the goods are not returned after job work within one year (3 years in case of capital goods) it will be treated as a supply from the date of sending out of such inputs.

Q 3. Can a registered taxable person send goods without payment of tax to his job-worker?

Ans. Yes. Section 55 of the MGL provides that the registered taxable person (principal) can send the taxable goods to a job-worker for job-work without payment of tax. He can further send the goods from one job-worker to another job-worker and so on subject to certain condition. It may be noted that provisions of Section 55 are not applicable if non-taxable or exempted goods are proposed to be sent for job-work.

Q 4. Is a job-worker required to take registration?

Ans. Yes, as a Job-worker would be a supplier of services, he would be required to obtain registration if his aggregate turnover exceeds the prescribed threshold.

Q 5. Whether the goods of principal directly supplied from the job-worker’s premises will be included in the aggregate turnover of the job- worker?

Ans. No. It will be included in the aggregate turnover of the principal.

Q 6. Can the principal supply the goods directly from the premises of the job-worker without bringing it back to his own premises?

Ans. Yes but with a rider that the principal should have declared the premises of such job-worker as his additional place of business or where the job-worker is a registered person or where the goods have been notified.

Q 7. Under what circumstances can the principal directly supply goods from the premises of job-worker?

Ans. The goods can be supplied directly from the place of business of job-worker without declaring it as additional place of business in two circumstances namely where the job-worker is a registered taxable person or where the principal is engaged in supply of such goods as may be notified in this behalf.

Q 8. What are the provisions concerning taking of ITC in respect of inputs/capital goods sent to a job-worker?

Ans. In the MGL, aspects relating to taking input tax credit in respect of inputs/capital goods sent for job-work have been specifically dealt in Section 20, which provides that the credit of taxes paid on inputs or capital goods can be taken in the following manner: Principal shall be entitled to take credit of inputs sent to a job-worker if the said inputs, after completion of job-work are received back in one year from the date of being sent out. In case the inputs are sent directly to the job-worker, the date shall be counted from the date of receipt of inputs by job-worker. Further an amount equivalent to the input tax credit availed on such inputs has to be paid along with interest, in case the inputs are not received back within the specified time. The credit can be reclaimed when the inputs are actually received back.

Q 9. Are the provisions of job-work applicable to all category of goods?

Ans. No. The provisions relating to job-work are applicable only when registered taxable person intends to send taxable goods. In other words, these provisions are not applicable to exempted or non-taxable goods or when the sender is a person other than registered taxable person.

 



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