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FAQ on GSTR-9C released by ICAI Indirect Tax Committee

    

Goods and Services Tax (GST) evasion

    

Gujrat High Court admits appeal on last date to avail ITC for July 2017 to March 2018

    

Hunt for missing taxpayers under GST?

    

Removal of difficulty order regarding extension of due date for filing of Annual return in FORM GSTR-9, GSTR-9A and GSTR-9C

    

Johnson company found guilty for not passing the benefit of GST reduction from 28% to 18%

    

31st GST Council meeting will be held on December 22, 2018 in New Delhi.

    

CBIC Press Release on effective tax rate on complex, building and flats in Pre-GST and Post-GST Regime.

    

Extension of due date for filing FORM GSTR-9, FORM GSTR-9A and FORM GSTR-9C

    

New Functionality update on GST Portal : Appeal to the AAAR in Form GST ARA-03 against the order of AAR

    

GSTR-9 and GSTR-9C due date is almost near but the utility to file the same is still awaited ?

    

For GSTP Examination on 17.12.2018, candidates enrolled upto 04.12.2018 will be eligible to register, instead of 26.11.2018, as notified earlier

    

GST Council is likely to launch one-time amnesty scheme to facilitate exit for Nil filers and Non-filers

    

New Simplified GST Return Forms are likely to be rolled out from 1st April 2019

    

Updated version of GST Concept and Status and PPT on GST by CBIC (updated as on 01.12.2018)

    

CBIC has released an Updated FAQ on TCS under GST as on 30.11.2018

    

CBIC extended due date for filing GSTR-7 for the months of October 2018 to December 2018

    

Extension of due date for filing GSTR-4 in Srikakulam district of Andhra Pradesh

    

Extension of due date for filing GSTR-1 (having aggregate turnover upto Rs.1.5 Crore) in Srikakulam district of Andhra Pradesh

    

Extension of due date for filing GSTR-1 in some districts of Tamil Nadu and Andhra Pradesh

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1 17-12-2018

FAQ No. - dated 17-12-2018 - Other

FAQ on GSTR-9C by ICAI Indirect Tax Committee

FAQ’s on Form GSTR-9C DISCLAIMER The views expressed in this write up are of the author(s). The Institute of Chartered Accountants of India may not necessarily subscribe to the views expressed by the author(s). The information cited in this article has been drawn from various sources. While every effort has been made to keep, the information cited in this article error free, the Institute or any office of the same does not take the responsibility for any typographical or clerical error which may have crept in while compiling the information provided in this article. Indirect Taxes Committee Q 1. Are the accounts maintained by the registered taxable person required to be audited by a Chartered Accountant/Cost Accountant under GST? Ans. It has been stated in the law that every registered person whose aggregate turnover during a financial year exceeds the prescribed limit of Rs. 2 Crore, shall get his accounts audited by a chartered accountant or a cost accountant. In all other cases, no audit is required to be conducted by the Chartered or Cost accountant. Q 2. What is the turnover that should be reckoned to determine the applicability of audit under GST? Ans. Section 35(5) commences with the expression “every registered person whose turnover during a financial year exceeds the prescribed limit” whereas the relevant Rule 80(3) uses the expression “every registered person whose aggregate turnover during a financial year exceeds two crore rupees”. It must be noted that the word turnover has not been defined whereas the expressions aggregate turnover has been defined. One may note that the expression turnover in State or turnover in Union territory is defined. In this backdrop the following understanding is relevant: a) Aggregate turnover is PAN based while turnover in a State / UT is similarly worded except to the extent that turnover in a State / UT is limited to a State; b) It is therefore, reasonable to interpret that the word turnover used in section 35(5) ought to be understood as aggregate turnover (PAN level). c) For the financial year 2017-18, the GST period comprises of 9 months whereas the relevant section 35(5) uses the expression financial year; Therefore, in the absence of clarification from Government and to avoid any cases of default, it is reasonable to reckon the turnover limits prescribed for audit i.e., Rs. 2 crores for the whole of the financial year which would also include the first quarter of the financial year 2017-18. Please also note that where the expression aggregate turnover (PAN level) is considered, please consider the taxable value under section 15 and not the amount as accounted in the books of accounts. For eg. do not ignore taxable value of stock transfers while examining this threshold limit. Q 3. Should the supply of alcohol for human consumption be included in determining the threshold limit of Rs. 2 crores by a person registered under GST? Ans. The definition of aggregate turnover includes exempt turnover. Exempt turnover is defined under CGST Act to mean supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services tax Act and includes nontaxable supply. Non-taxable supply is defined under section 2(78) of CGST Act to mean a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services tax Act. Section 9(1) of CGST/ SGST Act and Section 7(1) and 5(1) of UTGST and IGST Act respectively exclude alcoholic liquor for human consumption from the levy/charge of GST. On a combined reading of the charging sections with the definitions of non-taxable supply and exempt supply, it becomes clear that alcoholic liquor for human consumption forms part of exempt turnover. Since aggregate turnover includes exempt turnover, value of alcoholic liquor for human consumption is to be included while computing threshold limit of Rs. 2 crores Q 4. Will the term 'aggregate turnover’ includes stock transfers/ cross charges effected between branches located in two different states? Ans. Section 2(6) of CGST/ SGST Act defines aggregate turnover to include ‘inter-state supplies of person having same PAN’. Thus, stock transfers/ cross charges of services provided from a branch located in one state to a branch located in another state will be included in the aggregate turnover of the branch supplying the goods/ services. Q 5. Will the term 'aggregate turnover’ includes stock transfers effected within the State having same GSTIN for determining the threshold limits? Ans. The term 'aggregate turnover' shall not include stock transfers effected within the same State having single GSTIN for the purpose of determining the threshold limit. However, where more than one GSTINs has been taken for branches located in the same state, then such branch transfers shall be included for computing threshold limit of Rs.2 crore to identify applicability of this audit requirement. Q 6. Will a Registered Person who is exclusively having exempted supplies of goods or services exceeding Rs. 2 crores be required to file Form GSTR 9C? Ans. The definition of ‘aggregate turnover’ includes even exempted supplies. Therefore, even if a person is registered under GST and only provides exempted supplies, he will have to file Form GSTR 9C. Q 7. Is Form GSTR 9C required to be filed for each registration obtained by a person in respect of each of the states? Ans. Section 35(5) of SGST Act, also requires conduct of audit in addition to Section 35(5) of CGST Act. Thus, audit is required state wise for compliance of Section 35(5) of SGST Act. Therefore, a person having registration in Karnataka and Tamil Nadu is required to be audited under KGST Act, 17 and TNGST Act, 17. GSTR 9C is required to be filed as per Rule 80(3) of KGST Rules, 2017 and TNGST Rules. Thus, a person having registration in more than one state is required to file GSTR 9C registration wise, in each and every state. Q 8. Is a Chartered Accountant required to be registered as a GST practitioner for the purpose of certifying Form GSTR 9C? Ans. Section 48 of the CGST/ SGST Act read with Rule 83(8) of the CGST/ SGST Rules authorizes a GST practitioner to undertake the following activities: a) furnish the details of outward and inward supplies; b) furnish monthly, quarterly, annual or final return; c) make deposit for credit into the electronic cash ledger; d) file a claim for refund; and e) file an application for amendment or cancellation of registration: The GST Act/ Rules do not vest a GST practitioner with the power to audit under section 35(5). The power to audit is granted only to a Chartered Accountant or Cost Accountant. Therefore, a Chartered Accountant is not required to be registered as a GST practitioner for the purpose of certifying Form GSTR 9C. Q 9. What are the documents to be enclosed along with GSTR 9C? Ans. As per section 35(5), a copy of audited accounts and such other documents in such form and manner ‘as may be prescribed’ ought to be submitted along with reconciliation statement (i.e. GSTR 9C). Prescription ought to be provided in the Rules as the Act employs the term ‘as may be prescribed’. No documents other than audited annual accounts have been prescribed in Rule 80(3). Part B of GSTR 9C requires the GST Auditor to enclose a copy of audit report of the entity, where the audit of the entity has been carried out by another person under a statute other than GST Act. In the said case, documents declared by the said statute which forms a part of the audited financial statements must also be annexed to the audit report. Q 10. Should Form GSTR 9 and Form GSTR 9C be filed separately? Ans. Section 44(2) of the CGST/ SGST Act 2017 provides a Registered Person to file annual return in Form GSTR 9 along with a copy of the reconciliation statement in Form GSTR 9C. Thus, Form GSTR 9C has to be filed along with Form GSTR 9 in cases where aggregate turnover exceeds Rs. 2 crores. Q 11. What is the time limit to file Form GSTR 9C? Ans. Section 44(2) requires reconciliation statement in Form GSTR 9C along with annual return in Form GSTR 9. As per section 44(1), the due date to file annual return is on or before the thirty-first day of December following the end of such financial year for which annual return is being prepared. Thus, it can be inferred that due date for filing reconciliation statement in Form GSTR 9C is also on or before thirty-first day of December following the end of such financial year for which reconciliation statement is being prepared. Q 12. What are the consequences of the failure in submitting the annual return and not getting the accounts audited? Ans. The following are the consequences of the failure in submitting the annual return and not getting the accounts audited: a) Section 44(2) of the CGST Act and State /Union Territory GST Act provides that every Registered Person shall file electronically an annual return in Form GSTR 9 along with a reconciliation statement in Form GSTR 9-C, reconciling the value of supplies declared in the return furnished for the financial year with the audited annual financial statement. b) Section 47(2) of the CGST Act provides for levy of a late fee of Rs. 100/- per day (each under CGST Act and under SGST Act) for delay in furnishing annual return in GSTR 9, subject to a maximum amount of quarter percent (0.25%) of the turnover in the State or Union Territory. Similar provisions for levy of late fee exist under the State / Union Territory GST Act. c) On a combined reading of Section 47(2) and Section 44 (2) of the CGST Act and State / Union Territory GST Act a late fee of Rs.200/- per day (Rs. 100 under CGST law + Rs. 100/- under State / Union Territory GST law) can be levied which would be capped to a maximum amount of half percent (0.25% under the CGST Law + 0.25% under the SGST / UTGST Law) of turnover in the State or Union Territory. d) In a situation where a registered person gets GSTR 9C duly certified but fails to furnish both GSTR 9 and GSTR 9C on the common portal, the provisions of late fee cited in clause “a to c” supra would equally apply. e) In a situation where a registered person files only GSTR 9, but fails to file GSTR 9C, the filing of GSTR 9 is not considered to have been defaulted, whereby the late fee cited in clause "a to c" supra would not apply. However, there may be consequences of default in complying with the provisions of Section 44(2). Q 13. Can the late fee be waived off in genuine cases? Ans. The Government may, by notification, waive in part or full, any late fee referred to in section 47 for such class of taxpayers and under such mitigating circumstances as may be specified therein on the recommendations of the Council. However, no notification has been issued by the Central Government/ State Government as on date. Q 14. Is there any provision of filing the Revised Form GSTR 9C? Ans. There is no provision enabling a dealer to file revised Form GSTR 9C. As such, some experts opine that, the Certificate once issued / filed cannot be revised as no such revision is permitted to audited reports by a Chartered Accountant. However, there is another view that since there are no specific bar/ restrictions under the GST law to file a revised audit report/ certificate, a revised audit report / certificate can be issued / filed. Care must be exercised to ensure that the relevant Form GSTR 9C is not taken lightly and filed with inaccurate particulars. Caution is advised in taking such a position unless Government issues any clarification in this regard. While one can appreciate that mistakes apparent which can creep in and therefore warrant a revision, it must be ensured that there is no mala fide intention at the time of filing this reconciliation statement. If felt necessary, the reasons for the need for revision and impact can be communicated on record which can be used as an evidence of bona fide and professional action. Q 15. Will audit under Section 35(5) be applicable to Non-Filers or unregistered Persons liable to take registration? Ans. The audit under Section 35(5) of the CGST Act to be conducted by CA or CWA is applicable only to a Registered Person. A non-filer is still a Registered Person under Section 25 of the CGST Act. Hence, he may be required to get the audit conducted under Section 35(5) of the said Act. Practically such a person would not have filed his returns at all and therefore Form 9 & 9C would not be possible. Therefore, there may be no audit for him. However, unregistered Person who is liable to take registration under Section 25 of the CGST Act is a taxable person. But the said unregistered Person is not a Registered Person as defined under Section 2(94) of the CGST Act 2017. Hence in terms of Section 35(5) of the Act it is not required to get the audit done. Q 16. What are the records to be reconciled in Form GSTR-9C? Ans. The records to be reconciled in GSTR-9C are: i) Books of accounts of registered person – if the registered person has multiple registrations, information needs to be derived from the Audited financials of the entity. ii) Annual Return of Registered Person in Form GSTR 9. Q 17. What are the contents of Form GSTR 9C? Ans. Form GSTR 9C consists of 2 parts. Part-A is Reconciliation statement and Part B is Certificate to be issued by GST Auditor. Q 18. What is the turnover intended to be declared in Sl. No. 5A of Form GSTR-9C? Ans. Sl. No. 5A is intended to report the turnover as per the audited Annual Financial Statement for a GSTIN. There may be cases where multiple GSTINs (State-wise) registrations exist for the same PAN. This is common for persons / entities with presence over multiple States or in respect of multiple registration in a single State/UT. The Government vide it is instructions has indicated that such persons / entities would have to internally derive their GSTIN wise turnover and provide the same to the Auditor to verify and declare in this Sl. No. Turnover to be declared under this Sl. No. must purely flow from the ‘audited financial statements’ even if such turnover consists of adjustments/ revenue recognition on account of a requirement of an Accounting Standard (E.g.: AS 7 in case of ‘Construction Contracts’). It cannot and must not include “Deemed supplies under Schedule I” as Sl. No. 5D separately covers such adjustments Q 19. What detailed are to be provided in Sl. No.5B (Unbilled revenue at the beginning of Financial Year)? Ans. Clause 5B requires addition of unbilled revenue at the beginning of Financial Year. Unbilled revenue which was recorded in the books of accounts on the basis of accrual system of accounting in the earlier financial year for which the invoice is issued under GST law is required to be declared here. In other words, when GST is payable during the financial year on such revenue (which was recognized as income in the earlier year), the value of such revenue is to be declared here. Q 20. What are the adjustments to be included / excluded from Sl. No.5C of Form GSTR-9C? Ans. Advances received can be for various purposes. Therefore, the Advances on which GST is liable should only be considered for the adjustment. The illustrations of advances to be included / excluded are as follows: Include for Adjustment Sl. No. Particular’s Reason 1. Advance received in respect of services for which the supply has not been made as on 31st March 2018 Revenue not recognized in books, but offered to tax for GST 2. Advance received for Goods before 15th Nov 2017 and the supply of goods not complete as on 31st March 2018 Revenue not recognized in books, but offered to tax for GST Do NOT include for Adjustment Sl. No. Particular’s Reason 1. Advance received for EXEMTED services as on 31st March 2018 GST is not applicable 2. Advance received for Goods after 15th Nov 2017 GST is not applicable 3. Financial Advances received which are not adjustable against any services NOT a GST Transaction Q 21. Provide illustration of transactions to be reported in Sl. No.5D of Form GSTR-9C (Deemed Supply under Schedule I)? Ans. The illustrations of transactions to be reported in Sl. No.5D of Form GSTR-9C are as follows  Transfer of machinery from Agra Branch to Bengaluru Branch without consideration for indefinite usage in production activity is a supply although there is no consideration involved.  An Architect located in New Jersey, USA may provide architect services to say, his brother who is a Builder in India and is a taxable person.  Foreign branch supplying manpower to Head Office located at Hyderabad.  Cloud servers and data storage facilities are commonly shared by the group of entities. Each region is allocated its share of cost. In such instances, it is possible that due to difference in financial year closure in various other branches, the relevant cost of the Indian entity may not be recorded. The Auditor needs to ensure that by year end, these costs are also reckoned - GST is paid and the relevant input tax credit is claimed. Q 22. What is the methodology to extract turnover from April 2017 to June 2017? Ans. Adjustments are to be made based on the point of taxation under excise law, State level VAT law and service tax law to arrive at taxable values as per the erstwhile laws. The said value must be entered under this head. It may be noted that tax is liable to be paid on removal in case of excise/ on sale under VAT law/ on provision of service or issue of invoice as the case may be under service tax law provisions and not on accrual basis or cash basis (which is the basis of accounting and hence basis of annual turnover as per financial statements). Thus, the criteria for reducing turnover for the period April 2017 to June 2017 from the total turnover would be based on taxability under the erstwhile laws as per point of taxation under the said laws but not when the revenue was recognised as per relevant accounting standards. Amounts forming part of turnover relating to works contracts, where consideration was received during the period April 2017 to June 2017, but either supplies were effected or services were rendered after June 2017, needs to be deducted under this Sl. No. This is because the said consideration was liable to tax on receipt basis as per service tax law. However, the same value needs to be added back in Sl. No. 5(O), since the aforesaid supplies would be liable to tax under GST law also as per Section 142(11)(c). At this juncture, it is important to note that the relevant service tax and value added tax paid on such advances for which supplies are effected during the GST regime would be available as CGST / SGST credit as per section 142(11)(c) of the CGST Act. Q 23. What is the effect of Credit notes issued in relation to exempt supplies, zerorated supplies and non-GST outward supplies? Ans. Supply of exempt, zero-rated and non-GST outward supply of goods and / or services are not liable to GST. In such a scenario, the credit notes issued for claiming reduction in the taxable value shall be recorded in the audited annual financial statements. Such credit notes should be declared against Pt. II Sl. No. 5J of Form GSTR 9C. Q 24. What are the implications upon issuance of financial credit notes? Ans. Financial credit notes would not adjust the amount of GST involved in the original tax invoice issued at the time of supply of goods and / or services. Accordingly, the transaction value of supply of goods and / or services shall stand reduced although tax paid thereon remains the same. This may result in higher amount of GST being paid considering the adjusted value of original supply. Since, the value of financial credit notes is to be reduced from the financial statements and not the GST Annual returns, it is required to be adjusted in 5J of Form GSTR 9C. Q 25. Provide an illustration of reconciliation of turnover arising in GSTR-9C due to the valuation provisions. Ans. A suitable illustration can be taken in the case of construction contracts wherein the contractor is given a contract by a developer for construction of building and he is responsible for the procurement of all the materials required for such construction. However, the developer issues cement free of cost to such contractor in the given case. Treatment in Books Contractor – No Entry Developer - Procurement of Cement will be treated as an inward supply of cement and the issuance of the Cement to Contractor will form part of the cost of goods supplied. Treatment for GST Contractor – Add the value of cement so received for the computation of GST Developer – Consider the supply of cement as an outward supply. The contractor’s invoice (including cement) is an inward supply for construction. Q 26. Should the taxable person disclose details of Notice pay recovery from employees in GSTR-9C? If yes, where should it be reported? Ans. If the taxable person has considered the notice pay recovered from employees as a taxable supply but has not disclosed the same as an income in the Profit and Loss account, it would be reported under Sl.No.5O of GSTR-9C for the purpose of reconciliation. Data for such recoveries can be ascertained from credits in the Salary / Wages ledger maintained in the books of accounts. Q 27. Is there any transaction which appears under the expense head, but has an impact on the outward taxable supplies for the purpose of GST? Ans. Yes, one of the cases can be incentives / Rebate received from supplier which is considered as a supply under GST. Incentives / rebate received from the supplier can amount to a taxable supply under the GST. Where the taxable person has reduced the incentive / rebate received from the cost of purchase in the books of accounts, the said amount will be added under Sl. No. 5O so as to reconcile with value declared in Form GSTR 9. Q 28. Is there any reconciliation required in GSTR-9C in case of sale of capital goods? Ans. In respect of sale of capital goods, only the profit / loss arising on the sale of such capital goods is disclosed in the Profit and Loss account. However, the GST on supply of capital goods is leviable on the transaction value or input tax credit is reversed as per the formula prescribed in Section 18(6) of the CGST Act. In order to reconcile the difference, the profit / loss arising on sale of such capital goods has to be adjusted along with the transaction value on which GST has been paid under Sl.No.5O to reconcile with the amount disclosed in Form GSTR 9. Data for such transactions can be ascertained from the deletions disclosed in the Fixed Asset schedule. Q 29. What is the effect of return of pre-GST inward supplies by a taxable person? Ans. As per the transition provisions [Section 142(1)], taxable person is required to consider return of pre-GST inward supplies as an outward supply and raise a tax invoice for the same. However, for the purpose of accounts, the same would be considered as a purchase return and reduced from the total purchase value instead of being disclosed as a revenue in the books of accounts. In such a situation, the aggregate value of the returns which has been considered as an outward supply under GST has to be adjusted in Sl. No. 5O for the purpose of reconciliation. Q 30. What is the effect of Inputs and Capital Goods which is sent to a job worker but is not returned within the prescribed period? Ans. As per Section 143(3) and 143(4) of the CGST Act, where inputs or capital goods are sent to job worker and such goods are not received within the prescribed period of one year or three years respectively, it will be deemed as a supply on the date when such goods were sent to the job worker. However, such supply may not be treated as an income in the audited annual Financial Statements. In such a situation, the value on which GST is liable to be paid on the goods sent to the job worker is liable to be added under Sl No 5O. Data for such transactions can be ascertained from the inventory records and Form ITC-04. Q 31. What is the effect of non-receipt of consideration in convertible foreign exchange within the prescribed time-limit for export of services and its effect on GSTR-9C? Ans. In terms of Rule 96A, it is specified that a taxable person would be liable to pay applicable tax along with interest within fifteen days from the following date: - In case of services – after the expiry of one year or such further period as may be allowed by the Commissioner from the date of issue of export invoice, if the payment is not received by the exporter in convertible foreign exchange. If the tax is remitted in terms of Rule 96A of CGST / SGST Rules, the relevant zerorated supplies should not be declared against Sl.No.7C since the tax on such supplies have been remitted. Being an inter-State supply that has failed the condition of repatriation of forex (only in case of services), output tax will become payable on transactions earlier considered as export of services. Q 32. Provide a few illustrations of unreconciled differences to be reported in Sl No.8 of Form GSTR-9C. Ans. Following illustrations can be considered for having the reconciliation differences to be reported in Sl No.8 of Form GSTR-9C: a) Zero-rated supply made by the Registered person during the previous year. However, conditions relevant for the supply has not been complied by the Registered person, can be construed to be a regular supply. b) Transaction reported in a Delivery challan during the financial year for supply on sale or approval basis beyond a period of six months shall be deemed to be a supply under GST. However, that may not be a sale for revenue recognition in the books of accounts for such transaction. Assuming GST returns carry the supply details and no revenue recognition has been done in the books of accounts, this shall call for the reconciliation. c) Exemption conditions not fulfilled by the Registered person while exercising the option to supply either a Nil rated of Exemption, shall be reported as Regular Supply. Q 33. How to validate the details of Gross turnover as per books of accounts? Ans. Ideally the ledger accounts for outward tax liability in the books of accounts should be maintained GST rate wise. It minimizes the chances of errors in classification due to over-sight in the books of accounts and ensures that the data generated from books of accounts is correct and consistent. The rate of tax should also be mapped with HSN to ensure that errors of HSN classification is also minimized. Generally, in various accounting softwares and ERPs, facility to generate report of GST rate wise outward tax liability along with taxable value or transaction value is available. The same can be relied upon as document. The total of said report should be matched with the total turnover declared in the books of accounts. Further, the amount of tax should also be matched with total credits in the GST Liability register in the books of accounts. In cases where no report of rate wise GST liability along with taxable value can be generated or where the liability ledger is not maintained rate wise, the GST Auditor should use substantive audit tools to check if the details of various invoices issued by the Registered Persons have been consistently and accurately booked in the books of accounts. After applying substantive test, the Auditor may become satisfied that proper recording of transactions has taken place and reports duly prepared by the Registered Person for rate wise amount of tax Liability and taxable amount is made available to him. In such a case, the Auditor can rely on the same with a separate disclosure that rate wise tax liability has not been maintained in the books of accounts. In cases where no rate wise tax liability and taxable value is maintained in the books of accounts and registered Person is engaged in making outward supplies of goods or services or both of different rates, then the Auditor may consider making a disclosure. Due to the lack of availability of rate wise tax liability from the books of accounts, the Auditor should state that he is not in a position to punch the details in the given table. Q 34. How to validate details of Deemed Supplies and adjust the valuation amount? Ans. In case of deemed supplies under Schedule-I, there can be a situation that tax amount in relation to the said deemed supplies is becoming part of the tax Liability Register but may not be a part of overall turnover of the Registered Person in the books of accounts. In such cases, the rate wise taxable value of the said transactions should be calculated either on the basis of Invoice issued under Section 31 of the CGST Act 2017 and respective SGST Acts 2017 or can be calculated by reverse method. (i.e. calculating the value of taxable supply from the rate of tax). Same shall be applicable in case where the adjustments of Section 15 or valuation Rules is made for tax purpose. Q 35. Registered Person has classified EPC Contract of Solar Power Plants as Supply of Goods classifiable under Chapter 85 and has reflected it under 5% GST rate. However, throughout country in various advance rulings, the EPC of Solar Power Plant has been treated as a Supply of Works Contract Service leviable to GST at the rate of 18%. Auditor is also of the view that it is a works contract service. What should an Auditor do? Ans. In case Registered Person agrees with the contention of Auditor: The EPC of Solar Power Plant should be shown as Works Contract Service under 18% rate. It shall lead to non-reconciliation and disclosure within the Auditor recommendation which will lead to payment of additional tax. In case Registered Person does not agree with the contention of Auditor: The rate classification should be 5% under table 9 as understood by management and Auditor should consider a suitable disclosure by way of a qualification in the main certificate under the opinion paragraph that according to him the rate of GST should be 18% and classification should be works contract service with reasoning thereof. Q 36. Due to the nature of business of a Registered Person, types of supply, complexities of transactions and size of operations, the Auditor is unable to identify or comment upon each and every classification of outward and inward supplies. How should Auditor approach to punch data in Table 9? Ans. The Auditor in such a case, may put in his comments in the main Certificate under opinion paragraph (4 or 5, as the case maybe). He can state that the classification aspect has been considered as noticed during audit and is subject to the information and declaration or management representation as provided by the Registered Person. It should be clearly specified that all aspects of classification have not been considered. Q 37. Provide some illustrations where non-reconciliation is reported in Table 6 in Form GSTR 9C but shall not require any additional tax payment. Ans. Few illustrations where non-reconciliation is reported in Table 6 in Form GSTR 9C but shall not require any additional tax payment are as under:  Where the difference is on account of exempt/non taxable/no supply turnover  Where the entry passed in the books of accounts is incorrect and the GST returns have been filed correctly  Where the amount of tax paid as per the GST returns is higher than the taxes paid as per the books of accounts In the given cases, no reporting is required to be done in Table 11. Q 38. What is the source of information for filling Sl No. 12B of Form GSTR-9C (ITC booked in earlier Financial Years claimed in current Financial Year)? Ans. The details for filling Sl No. 12B of Form GSTR-9C shall be drawn from the claims of TRAN I which were booked in earlier periods. This will contain closing balance of Cenvat Credit and VAT credit which is carried forward as per Section 140(1) of the CGST and SGST Acts. Other TRAN-1 credits which are not booked during the earlier period should not be reflected in Sl No. 12B of Form GSTR 9C. From FY 2018-19 and onwards, this column would be the same amount as reported in column 12C of Form 9C of previous financial year. Q 39. Is there a separate reporting to be made in GSTR 9C of ITC accounted in books in the current financial year (i.e. July 2017-18) and not claimed in return in Form GSTR 3B in 2017-18 but claimed in the next financial year 2018-19 (April 2018 to September 2018)? Ans. Separate disclosure should be made in Part IV Sl. No. 12 C of Form GSTR 9C in respect of all such supplies. This credit can also relate to goods which are in transit as at the close of financial year and which are received in the next year. Thereby, it is to be availed as a bona fide credit in the next financial year. Q 40. What can be the reasons for difference in ITC in Form GSTR 9C being reported in Part IV Sl. No. 12 D ‘ITC availed as per audited financial statements or books of accounts’ and ITC reported in Part IV Sl. No. 12 E ‘ITC claimed in Annual Return (GSTR 9)’? Ans. The reasons for difference in ITC in Form GSTR 9C being reported in Part IV Sl. No. 12 D & 12E could be as follows: a) Duplicate ITC incorrectly availed in returns b) Differences in the ITC treatment of certain inward supplies as per books of accounts and GSTR-3B (for e.g. claimed as credit in books and taken as an ineligible credit in GSTR-3B) c) ITC claimed in GSTR-3B but recorded as expenses in the books of accounts. Q 41. Where should the ineligible ITC identified by an auditor which are claimed as eligible by the dealer in GSTR 3B and in Form GSTR 9 be reported in Form GSTR 9C? Ans. Total amount of ITC availed by the dealer will have to be reported in column 3 Part IV of Sl.14 of Form GSTR 9C and eligible ITC as determined by the auditor will have to be reported in column 4 Part IV of Sl.14 of Form GSTR 9C. Thus, the difference between column 3 Part IV of Sl.14 9C and column 4 Part IV of Sl.14 of Form GSTR 9C will be ineligible ITC identified by the auditor. Suitable disclosures should be made in the certificate by the auditor. Q 42. Where the liability on account of disallowance of ITC by auditor arises, should the same be remitted? Ans. Part V of GSTR 9C provides for auditor’s recommendation on additional liability wherein liability arising on account of non-reconciliation of ITC has to be remitted in cash. Whether cash will include payment through ITC as well is yet to be clarified by the Government or can only be known once the form becomes live on the GST portal. Q 43. Is the determination of additional liability determined by the Auditor binding on the Registered person? Ans. At the outset, it can be inferred from the heading to Part V of GSTR 9C that the Auditor only has a recommendatory power while furnishing his report. Any recommendations given by the Auditor may or may not be acceptable to the Registered Person. If it is acceptable, the payment of tax is to be made by the registered person. However, if it is not acceptable then the question arises as to how the Auditor resolves the issue. At this juncture, the Auditor needs to exercise his professional diligence, skill, legal knowledge and care in determination of any additional tax liability which in his opinion, may be payable by the Registered Person. The Registered Person has an option to accept, reject or partially accept the recommended additional tax liability. In line with such recommendations though not explicitly stated anywhere in the relevant Form or GST laws – (i) the Registered Person can choose to make the payment of the additional tax liability in full or in part; (ii) the Registered Person can even choose to reject the complete recommendations of the Auditor and not make the payment at all. Before an Auditor ventures into recommending any additional tax liability due care, caution and diligence must be exercised. For instance, in respect of commodity classification based on HSN if an Auditor believes that there are two possibilities then he may choose to place reliance on an expert opinion obtained by the Registered Person. In such a situation a proper disclosure may suffice. However, when looked at from the perspective of the Government, the recommendation shall form the foundation for an effective show cause notice and enquiry into the affairs of the Registered Person. . Q 44. In which of the situations will Part I and Part II of the Certification part be applicable? Ans. Part I certification is to be certified by a Chartered Accountant / firm of Chartered Accountant wherein the audit of books of accounts, financial statements and reconciliation statement in Form GSTR 9C are certified by the same Chartered Accountant / firm of Chartered Accountant. Part II certification is to be certified by a Chartered Accountant / firm of Chartered Accountant or a Cost Accountant/ firm of Cost Accountants if the audit of books of accounts, financial statements and reconciliation statement in Form GSTR 9C are certified by some other Chartered Accountant / firm of Chartered Accountant. Q 45. Can the Internal Auditor of the dealer certify Form GSTR 9C? Ans. An internal Auditor cannot certify Form GSTR 9C as per the instructions issued by ICAI. Q 46. Does the submission of the Form GSTR 9C lead to the understanding that the Commissioner or any officer authorized by him will not undertake an audit under Section 65 of the CGST Act? Ans. No, provisions relating to departmental audit under section 65 and provisions relating to audit under section 35(5) are two independent provisions. Audit under section 35(5) is required when aggregate turnover is greater than Rs.2 crores whereas there is no such condition for audit under section 65. Further audit under section 65 is by the department whereas audit under section 35(5) is by a Chartered Accountant/ Cost Accountant. Thus, submission of Form GSTR 9C will not in any manner curtail the right of the department to conduct an audit. Q 47. Can Form GSTR-9C be certified by a different Chartered Accountant for another distinct person of the same entity? Ans. There is no restriction under the CGST Act or under the ICAI regulation in relation to certification of Form GSTR-9C by different Chartered Accountant for another distinct person of the same entity. Q 48. Who is responsible to submit Form GSTR-9C? Ans. It will be the responsibility of the registered person to submit Form GSTR-9C. Auditor’s responsibility will be to provide the certified copies of Form GSTR-9C to the registered person or upload the same on the website. However, the submission of the same must be made by the registered person. Q 49. In case of Multi Location entities, what should be the specific area of examination? Ans. Audit of Multi Location entities would require examination (among others) of the following: i) Cost incurred commonly at or by the Head Office – E.g. Marketing and Brand Building Costs; ii) Head Office providing support to Branches – E.g. Centralized Accounting Services; HR Services etc., iii) Branches without billings to third parties; iv) Branches with billings to third parties; v) Identification of Branches which have not been registered; vi) E-Way bill to track supplies which have been marked as stock transfers; vii) Credit of ‘State A’ availed in ‘State B’ especially in cases of where the place of supply is State B (E.g. Accommodation Services of employee of ‘State A’ availed as credit in ‘State B’); viii) Basis of bifurcation of credits into ISD; ix) Valuation of Supply especially when credits are not available in the hands of the receiving Branches. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Acknowledgements We thank CA. Yeshwanth G N for drafting this write up and CA A. Jatin Christopher for reviewing the same. For any queries, you may connect with the authors at idtc@icai.in . - Indirect Taxes Committee

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2 11-12-2018

Order No. 1/2018 dated 11-12-2018 - Central Tax

Removal of difficulty order regarding extension of due date for filing of Annual return (in FORMs GSTR-9, GSTR-9A and GSTR-9C) for FY 2017-18 till 31st March, 2019

[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (ii)] Government of India Ministry of Finance (Department of Revenue) Order No. 1/2018-Central Tax New Delhi, the 11th December, 2018 S.O.(E).––WHEREAS, sub-section (1) of section 44 of the Central Goods and Services Tax Act, 2017 (12 of 2017) (hereafter in this Order referred to as the said Act) provides that every registered person, other than an Input Service Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident taxable person, shall furnish an annual return for every financial year electronically in such form and manner as may be prescribed on or before the thirty-first day of December following the end of such financial year; AND WHEREAS, for the purpose of furnishing of the annual return electronically for every financial year as referred to in sub-section (1) of section 44 of the said Act, the electronic system to be developed is at the advanced stage and is likely to be made operational by the 31st January, 2019 as a result whereof, the said annual return for the period from the 1 st July, 2017 to the 31st March, 2018 could not be furnished by the registered persons, as referred to in the said sub-section (1) and because of that, certain difficulties have arisen in giving effect to the provisions of the said section; NOW, THEREFORE, in exercise of the powers conferred by section 172 of the Central Goods and Services Tax Act, 2017, the Central Government, on recommendations of the Council, hereby makes the following Order, to remove the difficulties, namely:–– 1. Short title.––This Order may be called the Central Goods and Services Tax (Removal of Difficulties) Order, 2018. 2. In section 44 of the Central Goods and Services Tax Act, 2017, after sub-section (2), the following Explanation shall be inserted, namely:–– “Explanation.- For the purposes of this section, it is hereby declared that the annual return for the period from the 1st July, 2017 to the 31st March, 2018 shall be furnished on or before the 31st March, 2019.”. [F. No. 20/06/17/2018-GST] (Dr. Sreeparvathy S.L.) Under Secretary to the Government of India

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3 08-12-2018

Press Release No. 74 dated 08-12-2018 - Central Tax

Press Release on effective tax rate on complex, building and flats in Pre-GST and Post-GST Regime.

Press Release, dated 8 th December, 2018 Effective tax rate on complex, building, flat etc. It is brought to the notice of buyers of constructed property that there is no GST on sale of complex/ building and ready to move-in flats where sale takes place after issue of completion certificate by the competent authority. GST is applicable on sale of under construction property or ready to move-in flats where completion certificate has not been issued at the time of sale. 2. Effective rate of tax and credit available to the builders for payment of tax are summarized in the table for pre-GST and GST regime. Period Output Tax Rate Input Tax Credit details Effective Rate of Tax PreGST Service Tax: 4.5% VAT: 1% to 5% (composition scheme) Central Excise on most of the construction materials: 12.5% VAT: 12.5 to 14.5% Entry Tax: Yes No input tax credit (ITC) of VAT and Central Excise duty paid on inputs was available to the builder for payment of output tax, hence it got embedded in the value of properties. Considering that goods constitute approximately 45% of the value, embedded ITC was approximately 10- 12%. Effective preGST tax incidence: 15- 18% GST Affordable housing segment: 8%, Other segment: 12% after 1/3rd abatement of value of land Major construction materials, capital goods and input services used for construction of flats, houses, etc. attract GST of 18% or more. ITC available and weighted average of ITC incidence is approximately 8 to10%. Effective GST incidence, for affordable segment and for other segment has not increased as compared to pre- GST regime. 3. Housing projects in the affordable segment such as Jawaharlal Nehru National Urban Renewal Mission, Rajiv Awas Yojana, Pradhan Mantri Awas Yojana or any other housing scheme of State Government etc., attract GST of 8%. For such projects, after offsetting input tax credit, the builder or developer in most cases will not be required to pay GST in cash as the builder would have enough ITC in his books of account to pay the output GST. 4. For projects other than affordable segment, it is expected that the cost of the complex/ buildings/ flats would not have gone up due to implementation of GST. Builders are also required to pass on the benefits of lower tax burden to the buyers of property by way of reduced prices/ installments, where effective tax rate has been down. *****

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4 07-12-2018

Press Release No. 73 dated 07-12-2018 - Central Tax

Press Release for extension of due date for filing of Annual return FORMS GSTR-9, GSTR-9A and GSTR-9C to 31st March, 2019

Press Release 7 th December, 2018 Extension of due date for filing FORM GSTR-9, FORM GSTR-9A and FORM GSTR-9C FORM GSTR-9 and FORM GSTR-9A have been notified vide notification No. 39/2018-Central Tax, dated 04.09.2018 while FORM GSTR-9C has been notified vide notification no. 49/2018-Central Tax, dated 13.09.2018 as part of the CGST Rules. 2. The competent authority has decided to extend the due date for filing FORM GSTR-9, FORM GSTR-9A and FORM GSTR-9C till 31st March, 2019. The requisite FORMs shall be made available on the GST common portal shortly. Relevant order is being issued. *******

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5 05-12-2018

Press Release No. 72 dated 05-12-2018 - Central Tax

For GSTP Examination on 17.12.2018, candidates enrolled up-to 4.12.2018 (11.59.59 PM) will be eligible to register, instead of 26.11.2018, notified earlier.

PRESS RELEASE 4 th December, 2018 EXAMINATION FOR CONFIRMATION OF ENROLLMENT OF GST PRACTITIONERS Reference is invited to Press Releases dated 1.11.2018 and 29.11.2018 regarding exam to be conducted on 17.12.2018 for GST Practitioners (GSTPs) covered under clause (b) of sub-rule (1) of Rule 83 of CGST Rules 2017, i.e. those enrolled as a sales tax practitioners or tax return preparer under the existing law for a period not less than five years, and enrolled under sub-rule (2) of Rule 83 of the said Rules. For the said examination, candidates enrolled up-to 4.12.2018 (11.59.59 PM) will be eligible to register, instead of 26.11.2018, notified earlier. The registration window will also remain open till 7.12.18 (11.59.59PM), instead of 5.12.18 (11.59.59PM) notified earlier. 2. Further, if there are any candidates who get enrolled from 5.12.18 to 16.12.18 in the relevant category, they will also be allowed to register and appear in examination on provisional basis. Such candidates will have to make a request to NACIN for provisional registration at email gstp.nacin@gmail.com. Such candidates will be required to appear at the test centres as allotted by NACIN. The registration fee paid by such candidates shall be non refundable, irrespective of their eligibility. ****

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6 05-12-2018

Other No. - dated 05-12-2018 - Central Tax

Updated version of GST Concept and Status and PPT on GST by CBIC (updated as on 01.12.2018)

1 | 49 GOODS AND SERVICE TAX (GST) CONCEPT & STATUS CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS (CBIC) DEPARTMENT OF REVENUE MINISTRY OF FINANCE GOVERNMENT OF INDIA AS ON 1st DECEMBER, 2018 2 | 49 The uniform system of taxation, which, with a few exceptions of no great consequence, takes place in all the different parts of the United Kingdom of Great Britain, leaves the interior commerce of the country, the inland and coasting trade, almost entirely free. The inland trade is almost perfectly free, and the greater part of goods may be carried from one end of the kingdom to the other, without requiring any permit or let-pass, without being subject to question, visit, or examination from the revenue officers. ……This freedom of interior commerce, the effect of uniformity of the system of taxation, is perhaps one of the principal causes of the prosperity of Great Britain; every great country being necessarily the best and most extensive market for the greater part of the productions of its own industry. If the same freedom, in consequence of the same uniformity, could be extended to Ireland and the plantations, both the grandeur of the state and the prosperity of every part of the empire, would probably be still greater than at present” – Adam Smith in ‘Wealth of Nations’ 1. INTRODUCTION: Whether it was uniformity of taxation and consequent free interior trade or possession of ‘the jewel in the crown’ at the root of prosperity of Britain is debatable, nonetheless the words of father of modern economics on the benefits of uniformity of system of taxation cannot be taken too lightly. Before implementation of Goods and Service Tax (GST), Indian taxation system was a farrago of central, state and local area levies. By subsuming more than a score of taxes under GST, road to a harmonized system of indirect tax has been paved making India an economic union. 3 | 49 2. CONSTITUTIONAL SCHEME OF INDIRECT TAXATION IN INDIA BEFORE GST : 2.1 Article 265 of the Constitution of India provides that no tax shall be levied or collected except by authority of law. As per Article 246 of the Constitution, Parliament has exclusive powers to make laws in respect of matters given in Union List (List I of the Seventh Schedule) and State Government has the exclusive jurisdiction to legislate on the matters containing in State List (List II of the Seventh Schedule). In respect of the matters contained in Concurrent List (List III of the Seventh Schedule), both the Central Government and State Governments have concurrent powers to legislate. 2.2 Before advent of GST, the most important sources of indirect tax revenue for the Union were customs duty (entry 83 of Union List), central excise duty (entry 84 of Union List), and service tax (entry 97 of Union List). Although entry 92C was inserted in the Union List of the Seventh Schedule of the Constitution by the Constitution (Eighty-eighth Amendment) Act, 2003 for levy of taxes on services, it was not notified. So tax on services were continued to be levied under the residual entry, i.e. entry 97, of the Union List till GST came into force. The Union also levied tax called Central Sales Tax (CST) on inter-State sale and purchase of goods and on inter-State consignments of goods by virtue of entry 92A and 92B respectively. CST however is assigned to the State of origin, as per Central Sales Tax Act, 1956 made under Article 269 of the Constitution. 2.3 On the State side, the most important sources of tax revenue were tax on sale and purchase (entry 54 of the State List), excise duty on alcoholic liquors, opium and narcotics (entry 51 of the State List), Taxes on luxuries, entertainments, amusements, betting and gambling (entry 62 of the State List), octroi or entry tax (entry 52 of the State List) and electricity tax ((entry 53 of the 4 | 49 State List). CST was also an important source of revenue though the same was levied by the Union. 3. HISTORICAL EVOLUTION OF INDIRECT TAXATION IN POSTINDEPENDENCE INDIA TILL GST: 3.1 In post-Independence period, central excise duty was levied on a few commodities which were in the nature of raw materials and intermediate inputs, and consumer goods were outside the net by and large. The first set of reform was suggested by the Taxation Enquiry Commission (1953-54) under the chairmanship of Dr. John Matthai. The Commission recommended that sales tax should be used specifically by the States as a source of revenue with Union governments' intervention allowed generally only in case of inter-State sales. It also recommended levy of a tax on inter-State sales subject to a ceiling of 1%, which the States would administer and also retain the revenue. 3.2 The power to levy tax on sale and purchase of goods in the course of interState trade and commerce was assigned to the Union by the Constitution (Sixth Amendment) Act, 1956. By mid-1970s, central excise duty was extended to most manufactured goods. Central excise duty was levied on unit, called specific duty, and on value, called ad valorem duty. The number of rates was too many with no offsetting of taxes paid on inputs leading to significant cascading and classification disputes. 3.3 The Indirect Taxation Enquiry Committee constituted in 1976 under Shri L K Jha recommended, inter alia, converting specific rates into ad valorem rates, rate consolidation and input tax credit mechanism of value added tax at manufacturing level (MANVAT). In 1986, the recommendation of the Jha Committee on moving on to value added tax in manufacturing was partially implemented. This was called modified value added tax (MODVAT). In principle, 5 | 49 duty was payable on value addition but in the beginning it was limited to select inputs and manufactured goods only with one-to-one correlation between input and manufactured goods for eligibility to take input tax credit. The comprehensive coverage of MODVAT was achieved by 1996-97. 3.4 The next wave of reform in indirect tax sphere came with the New Economic Policy of 1991. The Tax Reforms Committee under the chairmanship of Prof. Raja J Chelliah was appointed in 1991. This Committee recommended broadening of the tax base by taxing services and pruning exemptions, consolidation and lowering of rates, extension of MODVAT on all inputs including capital goods. It suggested that reform of tax structure must have to be accompanied by a reform of tax administration, if complete benefits were to be derived from the tax reforms. Many of the recommendations of the Chelliah Committee were implemented. In 1999-2000, tax rates were merged in three rates, with additional rates on a few luxury goods. In 2000-01, three rates were merged into one rate called Central Value Added Tax (CENVAT). A few commodities were subjected to special excise duty. 3.5 Taxation of services by the Union was introduced in 1994 bringing in its ambit only three services, namely general insurance, telecommunication and stock broking. Gradually, more and more services were brought into the fold. Over the next decade, more and more services were brought under the tax net. In 1994, tax rate on three services was 5% which gradually increased and in 2017 it was 15% (including cess). Before 2012, services were taxed under a ‘positive list’ approach. This approach was prone to ‘tax avoidance’. In 2012 budget, negative list approach was adopted where 17 services were out of taxation net and all other services were subject to tax. In 2004, the input tax credit scheme for CENVAT and Service Tax was merged to permit cross utilization of credits across these 6 | 49 taxes. 3.6 Before state level VAT was introduced by States in the first half of the first decade of this century, sales tax was levied in States since independence. Sales tax was plagued by some serious flaws. It was levied by States in an uncoordinated manner the consequences of which were different rates of sales tax on different commodities in different States. Rates of sales tax were more than ten in some States and these varied for the same commodity in different States. Inter-state sales were subjected to levy of Central Sales Tax. As this tax was appropriated by the exporting State credit was not allowed by the dealer in the importing State. This resulted into exportation of tax from richer to poorer states and also cascading of taxes. Interestingly, States had power of taxation over services from the very beginning. States levied tax on advertisements, luxuries, entertainments, amusements, betting and gambling. 3.7 A report, titled "Reform of Domestic Trade Taxes in India", on reforming indirect taxes, especially State sales tax, by National Institute of Public Finance and Policy under the leadership of Dr. Amaresh Bagchi, was prepared in 1994. This Report prepared the ground for implementation of VAT in States. Some of the key recommendations were; replacing sales tax by VAT by moving over to a multistage system of taxation; allowing input tax credits for all inputs, including on machinery and equipment; harmonization and rationalization of tax rates across States with two or three rates within specified bands; pruning of exemptions and concessions except for a basic threshold limit and items like unprocessed food; zero rating of exports, inter-State sales and consignment transfers to registered dealers; taxing inter-State sales to non-registered persons as local sales; modernization of tax administration, computerization of operations and simplification of forms and procedures. 7 | 49 3.8 The first preliminary discussion on transition from sales tax regime to VAT regime took place in a meeting of Chief Ministers convened by the Union Finance Minister in 1995. A standing Committee of State Finance Ministers was constituted, as a result of meeting of the Union Finance Ministers and Chief Ministers in November, 1999, to deliberate on the design of VAT which was later made the Empowered Committee of State Finance Ministers (EC). Haryana was the first State to implement VAT, in 2003. In 2005, VAT was implemented in most of the states. Uttar Pradesh was the last State to implement VAT, from 1st January, 2008. 4. INTERNATIONAL PERSPECTIVES ON GST / VAT: 4.1 VAT and GST are used inter-changeably as the latter denotes comprehensiveness of VAT by coverage of goods and services. France was the first country to implement VAT, in 1954. Presently, more than 160 countries have implemented GST / VAT in some form or the other. The most popular form of VAT is where taxes paid on inputs are allowed to be adjusted in the liability at the output. The VAT or GST regime in practice varies from one country to another in terms of its technical aspects like ‘definition of supply’, ‘extent of coverage of goods and services’, ‘treatment of exemptions and zero rating’ etc. However, at a broader level, it has one common principle, it is a destination based consumption tax. From economic point of view, VAT is considered to be a superior system over sales tax of taxing consumption because the former is neutral in allocation of resources as it taxes value addition. Besides, there are certain distinct advantages of VAT. It is less cascading making the taxation system transparent and antiinflationary. From revenue point of view, VAT leads to greater compliance because of creation of transaction trails. 8 | 49 4.2 When compared globally, VAT structures are either overly centralized where tax is levied and administered by the Central government (Germany, Switzerland, Austria), or dual GST structure wherein both Centre and States administer tax independently (Canada) or with some co-ordination between the national and sub-national entities (Brazil, Russia). While a centralized structure reduces fiscal autonomy for the States, a decentralized structure enhances compliance burden for the taxpayers. Canada is a federal country with unique model of taxation in which certain provinces have joined federal GST and others have not. Provinces which administer their taxes separately are called ‘nonparticipating provinces’, whereas provinces which have teamed up with the Federal Government for tax administration are called ‘participating provinces’. 4.3 The rate of GST varies across countries. While Malaysia has a lower rate of 6% (Malaysia though scrapped GST in 2018 due to popular uproar against it), Hungary has one of the highest rate of 27%. Australia levies GST at the rate of 10% whereas Canada has multiple rate slabs. The average rate of VAT across the EU is around 19.5%. 5. NEED FOR GST IN INDIA: 5.1 The introduction of CENVAT removed to a great extent cascading burden by expanding the coverage of credit for all inputs, including capital goods. CENVAT scheme later also allowed credit of services and the basket of inputs, capital goods and input services could be used for payment of both central excise duty and service tax. Similarly, the introduction of VAT in the States has removed the cascading effect by giving set-off for tax paid on inputs as well as tax paid on previous purchases and has again been an improvement over the previous sales tax regime. 9 | 49 5.2 But both the CENVAT and the State VAT have certain incompleteness. The incompleteness in CENVAT is that it has yet not been extended to include chain of value addition in the distributive trade below the stage of production. Similarly, in the State-level VAT, CENVAT load on the goods has not yet been removed and the cascading effect of that part of tax burden has remained unrelieved. Moreover, there are several taxes in the States, such as, Luxury Tax, Entertainment Tax, etc. which have still not been subsumed in the VAT. Further, there has also not been any integration of VAT on goods with tax on services at the State level with removal of cascading effect of service tax. 5.3 CST was another source of distortion in terms of its cascading nature. It was also against one of the basic principles of consumption taxes that tax should accrue to the jurisdiction where consumption takes place. Despite remarkable harmonization in VAT regimes under the auspices of the EC, the national market was fragmented with too many obstacles in free movement of goods necessitated by procedural requirement under VAT and CST. 5.4 In the constitutional scheme, taxation powers on goods was with Central Government but it was limited upto the stage of manufacture and production while States have powers to tax sale and purchase of goods. Centre had powers to tax services and States also had powers to tax certain services specified in clause (29A) of Article 366 of the Constitution. This sort of division of taxing powers created a grey zone which led to legal disputes. Determination of what constitutes a goods or service is difficult because in modern complex system of production, a product is normally a mixture of goods and services. 5.5 As can be seen from the previous paragraphs, India moved towards value added taxation both at Central and State level, and this process was complete by 10 | 49 2005. Integration of Central VAT and State VAT therefore is nothing but an inevitable consequence of the reform process. The Constitution of India envisages a federal nature of power bestowed upon both Union and States in the Constitution itself. As a natural corollary of this, any unification of the taxation system required a dual GST, levied and collected both by the Union and the States. 6. GST : A HISTORICAL PERSPECTIVE: 6.1 The Kelkar Task Force on Fiscal Responsibility and Budget Management (FRBM) recommended in 2005 introduction of a comprehensive tax on all goods and service replacing Central level VAT and State level VATs. It recommended replacing all indirect taxes except the customs duty with value added tax on all goods and services with complete set off in all stages of making of a product. 6.2 An announcement was made by the then Union Finance Minister in Budget (2007-08) to the effect that GST would be introduced with effect from April 1, 2010 and that the EC, on his request, would work with the Central Government to prepare a road map for introduction of GST in India. After this announcement, the EC decided to set up a Joint Working Group in May 10, 2007, with the then Adviser to the Union Finance Minister and Member-Secretary of the Empowered Committee as its Co-conveners and four Joint Secretaries of the Department of Revenue of Union Finance Ministry and all Finance Secretaries of the States as its members. This Joint Working Group got itself divided into three Sub-Groups and had several rounds of internal discussions as well as interaction with experts and representatives of Chambers of Commerce & Industry. On the basis of these discussions and interaction, the Sub-Groups submitted their reports which were then integrated and consolidated into the report of Joint Working Group (November 19, 2007). 11 | 49 6.3 This report was discussed in detail in the meeting of the EC on November 28, 2007, and the States were also requested to communicate their observations on the report in writing. On the basis of these discussions in the EC and the written observations, certain modifications were considered necessary and were discussed with the Co-conveners and the representatives of the Department of Revenue of Union Finance Ministry. With the modifications duly made, a final version of the views of EC on the model and road map for the GST was prepared (April 30, 2008). These views of EC were then sent to the Government of India, and the comments of Government of India were received on December 12, 2008. These comments were duly considered by the EC (December 16, 2008), and it was decided that a Committee of Principal Secretaries/Secretaries of Finance/Taxation and Commissioners of Trade Taxes of the States would be set up to consider these comments, and submit their views. These views were submitted and were accepted in principle by the EC (January 21, 2009). Based on discussions within the EC and between the EC and the Central Government, the EC released its First Discussion Paper (FDP) on GST in November, 2009. This spelled out the features of the proposed GST and has formed the basis for discussion between the Centre and the States. 7. CHALLENGES IN DESIGNING GST: 7.1 In the discussion that preceded amendment in the Constitution for GST, there were a number of thorny issues that required resolution and agreement between Central Government and State Governments. Implementing a tax reform as vast as GST in a diverse country like India required the reconciliation of interests of various States with that of the Centre. Some of the challenging issues, addressed in the run up to GST, were the following: 12 | 49 7.2 Origin-based versus Destination-based taxation: GST is a destination based consumption tax. Under destination based taxation, tax accrues to the destination place where consumption of the goods or services takes place. The existing VAT regime was based on origin principle where Central Sales Tax was assigned to the State of origin where production or sale happened and not to the State where consumption happened. Many manufacturing States expressed concerns over the loss of revenue on account of shift from origin based taxation to destination based taxation. 7.2.1 An argument put forward on behalf of producing states in support of origin based taxation is that they need to collect at least some tax from inter-State sales in order to recover the cost of infrastructure and public services provided by the State Governments to the industries producing the goods which are consumed in other states. This line of reasoning is based on the assumption that in the absence of a tax on inter-State sales, the location of export industries within their jurisdiction would not contribute to the tax revenues of the exporting state. This view was missing the fact that any value addition in a jurisdiction necessarily means extra income in the hands of the residents of that jurisdiction. Spending of this income on consumer goods expands the sales tax base of the producing states and thereby contributes to their revenues. In fact, to the extent that consumer expenditures are dependent on the level of income of the residents of a State, it is the producing States that stand to gain the most in additional sales tax revenues (even under the destination basis of consumption taxes) from increased export output. 7.3 Rate Structure and Compensation: There was uncertainty about gains in revenue after implementation of GST. Though attempts were made to estimate a revenue neutral rate, nonetheless it remains an estimate only. It was difficult to estimate accurately as to how much the States will gain from tax on services and 13 | 49 how much they will lose on account of removal of cascading effect and phasing out of CST. In view of this, States asked for compensation during the first five years of implementation of GST. 7.3.1 A Committee headed by the Chief Economic Adviser Dr. Arvind Subramanian on possible tax rates under GST suggested RNR (Revenue Neutral Rate). The term RNR refers to that single rate, which preserves revenue at desired (current) levels. This would differ from the standard rate, which is the rate that would apply to a majority of goods and services. In practice, there will be a structure of rates, but for the sake of analytical clarity and precision it is appropriate to think of the RNR as a single rate. It is a given single rate that gets converted into a whole rate structure, depending on policy choices about exemptions, what commodities to charge at a lower rate and what to charge at a very high rate. 7.3.2 The Committee recommended RNR of 15-15.5% (to be levied by the Centre and States combined). The lower rates (to be applied to certain goods consumed by the poor) should be 12%. Further, the sin or demerit rates (to be applied on luxury cars, aerated beverages, pan masala, and tobacco) should be 40%. 7.4 Dispute Settlement: A harmonized system of taxation necessarily required that all stakeholders stick to the decisions taken by the supreme body, which was later constituted as the Goods and Services Tax Council (the Council). However, the possibility of departure from the recommendations of such body cannot be completely ruled out. Any departure would definitely affect other stakeholders and in such circumstances there must be a statutory body to which affected parties may approach for dispute resolution. The nature of such dispute resolution body was a bone of contention. Under the Constitution (One Hundred Fifteenth Amendment) 14 | 49 Bill, 2011, a Goods and Services Tax Dispute Settlement Authority was to be constituted for this purpose. This body was judicial in nature. The proposed constitution of this Authority was challenged because it’s powers would override the supremacy of the Parliament and the State Legislatures. The Constitution (One Hundred Twenty Second Amendment) Bill, 2014 departed from the previous GST amendment bill and proposed that the Goods and Services Tax Council may decide about the modalities to resolve disputes arising out of its recommendations. 7.5 Alcohol and Petroleum products: Alcoholic liquor for human consumption and petroleum products are major contributor to revenue of States. As States were uncertain about impact of GST on their finances and moreover loss of autonomy in collection of tax revenue, States unanimously argued for exclusion of these products from the ambit of GST. In the 115th Amendment Bill alcoholic liquor for human consumption and five petroleum products namely crude petroleum, high speed diesel, motor spirit or petrol, aviation turbine fuel and natural gas were kept out of GST. But in the 122nd Amendment Bill, only alcoholic liquor for human consumption was kept outside GST and above mentioned five petroleum products were proposed to be brought under GST from a date to be recommended by the Council. The Central Government has also retained its power to tax tobacco and tobacco products, though these are also under GST. Thus, to ensure smooth transition and provide fiscal buffer to States, it was agreed to keep alcohol completely out of the ambit of GST. 8. CONSTITUTIONAL AMENDMENT: 8.1 As explained above, unification of Central VAT and State VAT was possible in form of a dual levy under the constitutional scheme. Power of taxation is assigned to either Union or States subject-wise under Schedule VII of the Constitution. While the Centre is empowered to tax goods upto the production or 15 | 49 manufacturing stage, the States have the power to tax goods at distribution stage. The Union can tax services using residuary powers but States could not. Under a unified Goods and Services Tax scheme, both should have power to tax the complete supply chain from production to distribution, and both goods and services. The scheme of the Constitution did not provide for any concurrent taxing powers to the Union as well as the States and for the purpose of introducing goods and services tax amendment of the Constitution conferring simultaneous power on Parliament as well as the State Legislatures to make laws for levying goods and services tax on every transaction of supply of goods or services was necessary. 8.2 The Constitution (115th Amendment) Bill, 2011, in relation to the introduction of GST, was introduced in the Lok Sabha on 11th March, 2011. The Bill was referred to the Standing Committee on Finance on 29th March, 2011. The Standing Committee submitted its report on the Bill in August, 2013. However, the Bill, which was pending in the Lok Sabha, lapsed with the dissolution of the 15th Lok Sabha. 8.3 The Constitution (122nd Amendment) Bill, 2014 was introduced in the 16th Lok Sabha on 19th December, 2014. The Constitution Amendment Bill was passed by the Lok Sabha in May, 2015. The Bill was referred to the Select Committee of Rajya Sabha on 12th May, 2015. The Select Committee submitted its Report on the Bill on 22nd July, 2015. The Bill with certain amendments was finally passed in the Rajya Sabha and thereafter by Lok Sabha in August, 2016. Further the bill was ratified by required number of States and received assent of the President on 8th September, 2016 and has since been enacted as Constitution (101st Amendment) Act, 2016 w.e.f. 16th September, 2016. 16 | 49 8.4 The important changes introduced in the Constitution by the 101st Amendment Act are the following: • Insertion of new article 246A which makes enabling provisions for the Union and States with respect to the GST legislation. It further specifies that Parliament has exclusive power to make laws with respect to GST on inter-State supplies. • Article 268A of the Constitution has been omitted. The said article empowered the Government of India to levy taxes on services. As tax on services has been brought under GST, such a provision was no longer required. • Article 269A has been inserted which provides for goods and services tax on supplies in the course of inter-State trade or commerce which shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of the Goods and Services Tax Council. It also provides that Parliament may, by law, formulate the principles for determining the place of supply, and when a supply of goods, or of services, or both takes place in the course of interState trade or commerce. • Article 270 has been amended to provide for distribution of goods and services tax collected by the Union between the Union and the States. • Article 271 has been amended which restricts power of the Parliament to levy surcharge under GST. In effect, surcharge cannot be imposed on goods and services which are subject to tax under Article 246A. • Article 279A has been inserted to provide for the constitution and mandate 17 | 49 of GST Council. • Article 366 has been amended to exclude alcoholic liquor for human consumption from the ambit of GST, and services have been defined. • Article 368 has been amended to provide for a special procedure which requires the ratification of the Bill by the legislatures of not less than one half of the States in addition to the method of voting provided for amendment of the Constitution. Thus, any modification in GST Council shall also require the ratification by the legislatures of one half of the States. • Entries in List I and List II have been either substituted or omitted to restrict power to tax goods or services specified in these Lists or to take away powers to tax goods and services which have been subsumed in GST. • Parliament shall, by law, on the recommendation of the Goods and Services Tax Council, provide for compensation to the States for loss of revenue arising on account of implementation of the goods and services tax for five years. • In case of petroleum and petroleum products, it has been provided that these goods shall not be subject to the levy of Goods and Services Tax till a date notified on the recommendation of the Goods and Services Tax Council. 9. GOODS & SERVICE TAX COUNCIL: 9.1 As provided for in Article 279A of the Constitution, the Goods and Services Tax Council (the Council) was notified with effect from 12th September, 2016. The Council is comprised of the Union Finance Minister (who will be the Chairman of 18 | 49 the Council), the Minister of State (Revenue) and the State Finance/Taxation Ministers as members. It shall make recommendations to the Union and the States on the following issues: • the taxes, cesses and surcharges levied by the Centre, the States and the local bodies which may be subsumed under GST; • the goods and services that may be subjected to or exempted from the GST; • model GST laws, principles of levy, apportionment of IGST and the principles that govern the place of supply; • the threshold limit of turnover below which the goods and services may be exempted from GST; • the rates including floor rates with bands of GST; • any special rate or rates for a specified period to raise additional resources during any natural calamity or disaster; • special provision with respect to the North- East States, J&K, Himachal Pradesh and Uttarakhand; and • any other matter relating to the GST, as the Council may decide. 9.2 The Council shall recommend the date on which the goods and services tax be levied on petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel. While discharging the functions conferred by this article, the Goods and Services Tax Council shall be guided by the need for a harmonized structure of goods and services tax and for the development of a harmonized national market for goods and services. 19 | 49 9.3 One half of the total number of Members of the Goods and Services Tax Council shall constitute the quorum at its meetings. The Goods and Services Tax Council shall determine the procedure in the performance of its functions. Every decision of the Goods and Services Tax Council shall be taken at a meeting, by a majority of not less than three-fourths of the weighted votes of the members present and voting, in accordance with the following principles, namely: — (a) the vote of the Central Government shall have a weightage of one-third of the total votes cast, and (b) the votes of all the State Governments taken together shall have a weightage of two-thirds of the total votes cast, in that meeting. 9.4 The Council has met for 30 times and no occasion has arisen so far that required voting to decide any matter. The following major recommendations have been made by the Council: (i) The threshold exemption limit would be Rs. 20 lakh. For special category States (except J&K) enumerated in article 279A of the Constitution, threshold exemption limit has been fixed at Rs. 10 lakh. (ii) Composition threshold shall be Rs. 1 Cr. As decided in the 23rd meeting of the Council, this limit shall be raised to Rs. 1.5 Cr after necessary amendments in the Act. Composition scheme shall not be available to interState suppliers, service providers (except restaurant service) and specified category of manufacturers. For special category States (except J&K and Uttarakhand) enumerated in article 279A of the Constitution, threshold exemption limit has been fixed at Rs. 75 lakh. (iii) Existing tax incentive schemes of Central or State governments may be continued by respective government by way of reimbursement through 20 | 49 budgetary route. The schemes, in the present form, would not continue in GST. Further, 50% exemption of the CGST portion will be provided to CSD (Defense Canteens). (iv) Recommending GST laws, namely CGST Law, UTGST Law, IGST Law, SGST Law and GST Compensation Law paving the way for implementation of GST. (v) In order to ensure single interface, all administrative control over 90% of taxpayers having turnover below Rs. 1.5 crore would vest with State tax administration and over 10% with the Central tax administration. Further all administrative control over taxpayers having turnover above Rs.1.5 crore shall be divided equally in the ratio of 50% each for the Central and State tax administration. (vi) Powers under the IGST Act shall also be cross-empowered on the same basis as under CGST and SGST Acts with few exceptions. (vii)Power to collect GST in territorial waters shall be delegated by Central Government to the States. (viii) Formula and mechanism for GST Compensation Cess has been finalized. (ix) Rules on composition, registration, input tax credit, invoice, determination of value of supply, accounts and records, returns, payment, refund, assessment and audit, advance ruling, appeals and revision, transitional provisions, anti-profiteering, E-way Bill, inspection, search and seizure, demands and recovery and offences and penalties have been recommended. (x) The following classes of taxpayers shall be exempted from obtaining registration: 21 | 49 o Suppliers of services, having turnover upto Rs. 20 lakh, making inter State supplies; o Suppliers of services, having turnover upto Rs. 20 lakh, making supplies through e-commerce platforms. (xi) The reverse charge mechanism under sub-section (4) of section 9 of the CGST Act, 2017 and under sub-section (4) of section 5 of the IGST Act, 2017 has been suspended till 30.09.2019. (xii)There shall be no requirement on payment of tax on advance received for supply of goods by all taxpayers. (xiii) Supply from GTA to unregistered persons has been exempted from tax. (xiv) TDS/TCS provisions to be implemented from 01.10.2018. Further, to provide some more time to TDS deductor to familiarize themselves with the new system, last date for furnishing return in FORM GSTR-7 for the months of October, November & December has been extended upto 31st January, 2019. Further, exemption from TDS for been made for supply made by PSU to PSU. (xv) E-Wallet Scheme shall be introduced for exporters from 01.04.2019 and till then relief for exporters shall be given in form of broadly existing practice. (xvi) All taxpayers are required to file return FORM GSTR-3B & pay tax on monthly basis. (xvii) Taxpayers with turnover upto Rs. 1.5 Cr are required to file information in FORM GSTR-1 on a quarterly basis. Other taxpayers 22 | 49 would have to file FORM GSTR-1 on a monthly basis. (xviii) In order to facilitate trade, one-time extension for furnishing of FORM GSTR-1 has been granted. For the months from July, 2017 to September, 2018, FORM GSTR-1 can be furnished till 31st October, 2018. (xix) GST Council has once again allowed the migration process for taxpayers from erstwhile tax regimes. Due dates for furnishing return in FORM GSTR-3B & FORM GSTR-1 (for taxpayers with turnover more than Rs. 1.5 crore) for the months from July, 2017 to November, 2018 has been extended till 31st December, 2018. Similarly, FORM GSTR-1 (for taxpayers with turnover upto Rs. 1.5 crore) for the quarters falling under months from July, 2017 to September, 2018 has been extended till 31st December, 2018. (xx)Late fee for delayed filing of return in FORM GSTR-3B for the months of July, 2017 to September, 2017 has been waived. The amount of late fee already paid but subsequently waived off shall be re-credited to the Electronic Cash Ledger of registered person under “Tax” head instead of “Fee” head. (xxi) From October 2017 onwards, the amount of late fee for late filing of GSTR-3B payable by a registered person is as follows: o whose tax liability for that month was ‘NIL’ will be Rs. 20/- per day instead of Rs. 200/- per day; o whose tax liability for that month was not ‘NIL’ will be Rs. 50/- per day instead of Rs. 200/- per day. (xxi) Facility has been introduced for manual filing of refund application. 23 | 49 (xxii) Supply of services to Nepal and Bhutan shall be exempted from GST even if payment has not been received in foreign convertible currency – such suppliers shall be eligible for input tax credit. (xxiii) Centralized UIN shall be issued to every Foreign Diplomatic Mission / UN Organization by the Central Government. (xxiv) Rate of interest on delayed payments and delayed refund has been recommended. (xxv) Migration window was opened one more time till 31.08.2018. (xxvi) A Group of Ministers has been constituted to look into the issues being faced by MSMEs and to provide solutions for the same. (xxvii) A Group of Ministers has been constituted to look into the matter of revenue mobilization. (xxviii) A Group of Ministers constituted for promoting digital payment has recommended to allow cashback to an amount equal to 20% of GST paid or Rs. 100, whichever is lower for cases where payment is made by BHIM or Rupay card. The necessary infrastructure is being developed and soon the scheme would be implemented on pilot basis in State of Assam and few other States which volunteer for the same. 9.5 In its 28th meeting held in New Delhi on 21.07.2018, the GST Council recommended certain amendments in the CGST Act, IGST Act, UTGST Act and the GST (Compensation to States) Act. These amendments have been passed by Parliament and have been enacted, after receiving the assent of the Hon’ble President of India on 29.08.2018, as the Central Goods and Services Tax (Amendment) Act, 2018, the Integrated Goods and Services Tax 24 | 49 (Amendment) Act, 2018, the Union Territory Goods and Services Tax (Amendment) Act, 2018 and the Goods and Services Tax (Compensation to States) Amendment Act, 2018, respectively. The major amendments brought about by these Acts are as below: (i) Upper limit of turnover for opting for composition scheme to be raised from Rs. 1 Cr to Rs. 1.5 Cr. Present limit of turnover can now be raised on the recommendations of the Council. (ii) Composition dealers to be allowed to supply services (other than restaurant services), for up to a value not exceeding 10% of turnover in the preceding financial year, or Rs. 5 lakh, whichever is higher. (iii) Levy of GST on reverse charge mechanism on receipt of supplies from unregistered suppliers, to be applicable to only specified goods in case of certain notified classes of registered persons, on the recommendations of the GST Council. (iv) The threshold exemption limit for registration in the States of Assam, Arunachal Pradesh, Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand to be increased to Rs. 20 Lakh from Rs. 10 Lakh. (v) Taxpayers may opt for multiple registrations within a State/Union territory in respect of multiple places of business located within the same State/Union territory. (vi) Mandatory registration is required for only those e-commerce operators who are required to collect tax at source. (vii) Registration to remain temporarily suspended while cancellation of registration is under process, so that the taxpayer is relieved of continued 25 | 49 compliance under the law. (viii) The following transactions to be treated as no supply (no tax payable) under Schedule III: (a) Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India; (b)Supply of warehoused goods to any person before clearance for home consumption; and (c) Supply of goods in case of high sea sales. (ix) Scope of input tax credit is being widened, and it would now be made available in respect of the following: (a) Most of the activities or transactions specified in Schedule III; (b) Motor vehicles for transportation of persons having seating capacity of more than thirteen (including driver), vessels and aircraft (c) Services of general insurance, repair and maintenance in respect of motor vehicles, vessels and aircraft on which credit is available; and (d) Goods or services which are obligatory for an employer to provide to its employees, under any law for the time being in force (x) Registered persons may issue consolidated credit/debit notes in respect of multiple invoices issued in a Financial Year. (xi) Amount of pre-deposit payable for filing of appeal before the Appellate Authority and the Appellate Tribunal to be capped at Rs. 25 Cr 26 | 49 and Rs. 50 Cr respectively. (xii) Commissioner to be empowered to extend the time limit for return of inputs and capital sent on job work, upto a period of one year and two years, respectively. (xiii) Supply of services to qualify as exports, even if payment is received in Indian Rupees, where permitted by the RBI. (xiv) Place of supply in case of job work of any treatment or process done on goods temporarily imported into India and then exported without putting them to any other use in India, to be outside India. (xv) Recovery can be made from distinct persons, even if present in different State/Union territories. (xvi) The order of cross-utilisation of input tax credit is being rationalized. (xvii) The amount of IGST not apportioned to the Centre or the States/UTs may, for the time being, on the recommendations of the Council, be apportioned at the rate of fifty per cent. to the Central Government and fifty per cent. to the State Governments or the Union territories, as the case may be, on ad hoc basis and this amount shall be adjusted against the amount finally apportioned. (xviii)Fifty per cent of such amount, as may be recommended by the Council, which remains unutilised in the Compensation Fund, at any point of time in any financial year during the transition period shall be transferred to the Consolidated Fund of India as the share of Centre, and the balance fifty per cent. shall be distributed amongst the States in the ratio of their base year revenue. 27 | 49 (xix) In case of shortfall in the amount collected in the Fund against the requirement of compensation to be released for any two months’ period, fifty per cent. of the same, but not exceeding the total amount transferred to the Centre and the States as recommended by the Council, shall be recovered from the Centre and the balance fifty per cent. from the States in the ratio of their base year revenue. In order to ensure that the changes in the Centre and the State GST laws are brought into force simultaneously, these amendments will be made effective from a date to be notified in the future. 9.6 GST Council in its 28th meeting held on 21.07.2018 in New Delhi, also approved the new return formats and associated changes in law. These changes have been carried out in the law vide the Central Goods and Services Tax (Amendment) Act, 2018. The main features of the new return filing format are as follows: (i) All taxpayers excluding small taxpayers and a few exceptions like ISD etc. shall file one monthly return. (ii) The return is simple with two main tables. One for reporting outward supplies and one for availing input tax credit based on invoices uploaded by the supplier. (iii) Invoices can be uploaded continuously by the supplier and can be continuously viewed and locked by the buyer for availing input tax credit. This process would ensure that very large part of the return is automatically filled based on the invoices uploaded by the buyer and the supplier. Simply put, the process would be “UPLOAD – LOCK – PAY” for most tax payers. 28 | 49 (iv) Taxpayers would have facility to create his profile based on nature of supplies made and received. The fields of information which a taxpayer would be shown and would be required to fill in the return would depend on his profile. (v)NIL return filers (no purchase and no sale) shall be given facility to file return by sending SMS. (vi) There shall be quarterly filing of return for the small taxpayers having turnover below Rs. 5 Cr as an optional facility. Quarterly return shall be similar to main return with monthly payment facility but for two kinds of registered persons – small traders making only B2C supply or making B2B + B2C supply. For such taxpayers, simplified returns have been designed called Sahaj and Sugam. In these returns details of information required to be filled is lesser than that in the regular return. (vii) The new return design provides facility for amendment of invoice and also other details filed in the return. Amendment shall be carried out by filing of a return called amendment return. Payment would be allowed to be made through the amendment return as it will help save interest liability for the taxpayers. In order to ensure that the above changes in the Centre and the State GST laws are brought into force simultaneously, these amendments will be made effective from a date to be notified in the future. 10.THE DESIGN OF INDIAN GST: 10.1 Concurrent dual model of GST: India has adopted dual GST model because of its unique federal nature. Under this model, tax is levied concurrently by the 29 | 49 Centre as well as the States on a common base, i.e. supply of goods or services or both. GST to be levied by the Centre would be called Central GST (Central tax / CGST) and that to be levied by the States would be called State GST (State Tax / SGST). State GST (State Tax / SGST) would be called UTGST (Union territory tax) in Union Territories without legislature. CGST & SGST / UTGST shall be levied on all taxable intra-State supplies. 10.2 The IGST Model: Inter-State supply of goods or services shall be subjected to integrated GST (Integrated tax / IGST). The IGST model is a unique contribution of India in the field of VAT. The IGST Model envisages that Centre would levy IGST (Integrated Goods and Service Tax) which would be CGST plus SGST on all inter-State supply of goods or services or both. The inter-State supplier will pay IGST on value addition after adjusting available credit of IGST, CGST, and SGST on his purchases. The Exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The person based in the destination State will claim credit of IGST while discharging his output tax liability in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST. The relevant information will also be submitted to the Central Agency which will act as a clearing house mechanism, verify the claims and inform the respective governments to transfer the funds. The major advantages of IGST Model are: (i) Maintenance of uninterrupted ITC chain on inter-State transactions. (ii)No upfront payment of tax or substantial blockage of funds for the interState supplier or recipient. (iii) No refund claim in exporting State, as ITC is used up while paying the tax. 30 | 49 (iv) Self-monitoring model. (v)Model takes ‘Business to Business’ as well as ‘Business to Consumer’ transactions into account. 10.3 Tax Rates: Owing to unique Indian socio-economic milieu, four rates namely 5%, 12%, 18% and 28% have been adopted. Besides, some goods and services are exempt also. Rate for precious metals is an exception to ‘four-tax slabrule’ and the same has been fixed at 3%. In addition, unworked diamonds, precious stones, etc. attracts a rate of 0.25%. A cess over the peak rate of 28% on certain specified luxury and demerit goods, like tobacco and tobacco products, pan masala, aerated water, motor vehicles is imposed to compensate States for any revenue loss on account of implementation of GST. The list of goods and services in case of which reverse charge would be applicable has also been notified. 10.4 Compensation to States: The Goods and Services Tax (Compensation to States) Act, 2017 provides for compensation to the States for the loss of revenue arising on account of implementation of the goods and services tax. Compensation will be provided to a State for a period of five years from the date on which the State brings its SGST Act into force. For the purpose of calculating the compensation amount in any financial year, year 2015-16 will be assumed to be the base year, for calculating the revenue to be protected. The growth rate of revenue for a State during the five-year period is assumed be 14% per annum. The base year tax revenue consists of the states’ tax revenues from: (i) State Value Added Tax (VAT), (ii) central sales tax, (iii) entry tax, octroi, local body tax, (iv) taxes on luxuries, (v) taxes on advertisements, etc. However, any revenue among these taxes arising related to supply of alcohol for human consumption, and five specified petroleum products, will not be accounted as part of the base year revenue. A GST Compensation Cess is levied on the supply of certain goods and 31 | 49 services, as recommended by the GST Council to finance the compensation cess. 10.5 E-Way Bill System: The introduction of e-way (electronic way) bill is a monumental shift from the earlier “Departmental Policing Model” to a “SelfDeclaration Model”. It envisages one e-way bill for movement of the goods throughout the country, thereby ensuring a hassle free movement for transporters throughout the country. The e-way bill system has been introduced nation-wide for all inter-State movement of goods with effect from 1st April, 2018. As regards intra-State supplies, option was given to States to choose any date on or before 3rd June, 2018. All States have notified e-way bill rules for intra-State supplies last being NCT of Delhi where it was introduced w.e.f. 16th June, 2018. 10.6 Anti-Profiteering Mechanism: Implementation of GST in many countries was coupled with increase in inflation and the prices of the commodities. This happened in spite of the availability of the tax credit. This was happening because the supplier was not passing on the benefit to the consumer and thereby indulging in illegal profiteering. Any reduction in rate of tax or the benefit of increased input tax credit should have been passed on to the recipient by way of commensurate reduction in prices. 10.6.1 National Anti-profiteering Authority (NAPA) has been constituted under GST by the Central Government to examine the complaints of non-passing the benefit of reduced tax incidence. The Authority shall cease to exist after the expiry of two years from the date on which the Chairman enters upon his office unless the Council recommends otherwise. 10.6.2 The Authority may determine whether any reduction in the rate of tax or the benefit of input tax credit has been passed on to the recipient by way of commensurate reduction in prices. It can order reduction in prices, imposition of 32 | 49 penalty, cancellation of registration and any other decision as may deem fit, after inquiry into the case. 10.7 Concept of Supply: GST would be applicable on supply of goods or services as against the present concept of tax on manufacture of goods or on sale of goods or on provision of services. It includes all sorts of activities like manufacture, sale, barter, exchange, transfer etc. It also includes supplies made without consideration when such supplies are made in certain specified situations. 10.8 Threshold Exemption: A common threshold exemption would apply to both CGST and SGST. Taxpayers with an annual turnover of Rs. 20 lakh (Rs. 10 lakh for special category States (except J&K) as specified in article 279A of the Constitution) would be exempt from GST. The GST Act has been amended to raise threshold exemption limit in case of six more special category States. The amendment shall be effective from a date to be notified in the future. The benefit of threshold exemption is not available in inter-State supplies of goods. 10.9 Composition Scheme: An optional composition scheme (i.e. to pay tax at a flat rate on turnover without credits) is available to small taxpayers (including to manufacturers other than specified category of manufacturers and service providers) having an annual turnover of up to Rs. 1 Cr (Rs. 75 lakh for special category States (except J&K and Uttarakhand) enumerated in article 279A of the Constitution). This limit has been raised to Rs. 1.5 Cr after necessary amendments in the GST Acts. The amendment shall be effective from a date to be notified in the future. 10.10 Zero rated Supplies: Export of goods and services are zero rated. Supplies to SEZs developers and SEZ units are also zero-rated. The benefit of zero rating 33 | 49 can be taken either with payment of integrated tax, or without payment of integrated tax under bond or Letter of Undertaking. 10.11 Cross-utilization of ITC: IGST credit can be used for payment of all taxes. CGST credit can be used only for paying CGST or IGST. SGST credit can be used only for paying SGST or IGST. The credit would be permitted to be utilized in the following manner: (a) ITC of CGST allowed for payment of CGST & IGST in that order; (b) ITC of SGST allowed for payment of SGST & IGST in that order; (c) ITC of UTGST allowed for payment of UTGST & IGST in that order; (d) ITC of IGST allowed for payment of IGST, CGST & SGST/UTGST in that order. ITC of CGST cannot be used for payment of SGST/UTGST and vice versa. 10.12 Settlement of Government Accounts: Accounts would be settled periodically between the Centre and the State to ensure that the credit of SGST used for payment of IGST is transferred by the originating State to the Centre. Similarly, the IGST used for payment of SGST would be transferred by Centre to the destination State. Further the SGST portion of IGST collected on B2C supplies would also be transferred by Centre to the destination State. The transfer of funds would be carried out on the basis of information contained in the returns filed by the taxpayers. 10.13 Modes of Payment: Various modes of payment of tax available to the taxpayer including internet banking, debit/ credit card and National Electronic Funds Transfer (NEFT) / Real Time Gross Settlement (RTGS). 34 | 49 10.14 Tax Deduction at Source: Obligation on certain persons including government departments, local authorities and government agencies, who are recipients of supply, to deduct tax at the rate of 1% from the payment made or credited to the supplier where total value of supply, under a contract, exceeds two lakh and fifty thousand rupees. The provision for TDS has been operationalized wef 01st October 2018. Exemption from the provisions of TDS has been given to certain authorities under the Ministry of Defence. 10.15 Refunds: Refund of tax to be sought by taxpayer or by any other person who has borne the incidence of tax within two years from the relevant date. Refund of unutilized ITC also available in zero rated supplies and inverted tax structure. 10. 16 Tax Collection at Source: Obligation on electronic commerce operators to collect ‘tax at source’, at such rate not exceeding two per cent of net value of taxable supplies, out of payments to suppliers supplying goods or services through their portals. The provision for TCS has not been operationalized wef 01st October 2018. 10.17 Self-assessment: Self-assessment of the taxes payable by the registered person shall be the norm. Audit of registered persons shall be conducted on selective basis. Limitation period for raising demand is three (3) years from the due date of filing of annual return or from the date of erroneous refund for raising demand for short-payment or non-payment of tax or erroneous refund and its adjudication in normal cases. Limitation period for raising demand is five (5) years from the due date of filing of annual return or from the date of erroneous refund for raising demand for short-payment or non-payment of tax or erroneous refund and its adjudication in case of fraud, suppression or willful mis-statement. 35 | 49 10.18 Recovery of Arrears: Arrears of tax to be recovered using various modes including detaining and sale of goods, movable and immovable property of defaulting taxable person. 10.19 Appellate Tribunal: Goods and Services Tax Appellate Tribunal would be constituted by the Central Government for hearing appeals against the orders passed by the Appellate Authority or the Revisional Authority. States would adopt the provisions relating to Tribunal in respective SGST Act. 10.20 Advance Ruling Authority: Advance Ruling Authority would be constituted by States in order to enable the taxpayer to seek a binding clarity on taxation matters from the department. Centre would adopt such authority under CGST Act. 10.21 Transitional Provisions: Elaborate transitional provisions have been provided for smooth transition of existing taxpayers to GST regime. 10.21 Subsuming of taxes, duties etc.: Among the taxes and duties levied and collected by the Union, Central Excise duty, Duties of Excise (Medicinal and Toilet Preparations), Additional Duties of Excise (Goods of Special Importance), Additional Duties of Excise (Textiles and Textile Products), Additional Duties of Customs (commonly known as CVD), Special Additional Duty of Customs (SAD), Service Tax and cesses and surcharges insofar as they related to supply of goods or services were subsumed. As far as taxes levied and collected by States are concerned, State VAT, Central Sales Tax, Purchase Tax, Luxury Tax, Entry Tax, Entertainment Tax (except those levied by the local bodies), Taxes on advertisements, Taxes on lotteries, betting and gambling, cesses and surcharges insofar as they related to supply of goods or services were subsumed. 11. GST LEGISLATIONS: 11.1. Four Laws namely CGST Act, UTGST Act, IGST Act and GST 36 | 49 (Compensation to States) Act were passed by the Parliament and since been notified on 12th April, 2017. All the other States (except J&K) and Union territories with legislature have passed their respective SGST Acts. The economic integration of India was completed on 8th July, 2017 when the State of J&K also passed the SGST Act and the Central Government also subsequently extended the CGST Act to J&K. 11.2. In its 28th meeting held in New Delhi on 21.07.2018, the GST Council recommended certain amendments in the CGST Act, IGST Act, UTGST Act and the GST (Compensation to States) Act. These amendments have been passed by Parliament and have been enacted, after receiving the assent of the Hon’ble President of India on 29.08.2018, as the Central Goods and Services Tax (Amendment) Act, 2018, the Integrated Goods and Services Tax (Amendment) Act, 2018, the Union Territory Goods and Services Tax (Amendment) Act, 2018 and the Goods and Services Tax (Compensation to States) Amendment Act, 2018, respectively. In order to ensure that the above changes in the Centre and the State GST laws are brought into force simultaneously, these amendments will be made effective from a date to be notified in the future. 11.3. On 22nd June, 2017, the first notification was issued for GST and notified certain sections under CGST. Since then, 141 notifications under CGST Act have been issued notifying sections, notifying rules, amendment to rules and for waiver of penalty, etc. 15, 32 and 1 notifications have also been issued under IGST Act, UTGST Act and GST (Compensation to States) Act respectively. Further 70, 74, 70 and 9 rate related notifications each have been issued under the CGST Act, IGST Act, UTGST Act and GST (Compensation to States) Act respectively. Similar notifications have been issued by all the States under the respective SGST Act. Apart from the notifications, 78 circulars and 16 orders have also been issued 37 | 49 by CBIC on various subjects like proper officers, ease of exports, and extension of last dates for filling up various forms, etc. 12. ROLE OF CBIC: 12.1 CBIC is playing an active role in the drafting of GST law and procedures, particularly the CGST and IGST law, which will be exclusive domain of the Centre. This apart, the CBIC has prepared itself for meeting the implementation challenges, which are quite formidable. The number of taxpayers has gone up significantly. The existing IT infrastructure of CBIC has been suitably scaled up to handle such large volumes of data. Based on the legal provisions and procedure for GST, the content of work-flow software such as ACES (Automated Central Excise & Service Tax) would require re-engineering. The name of IT project of CBIC under GST is ‘SAKSHAM’ involving a total project value of Rs. 2,256 Cr. 12.2 Augmentation of human resources would be necessary to handle large taxpayers’ base in GST scattered across the length and breadth of the country. Capacity building, particularly in the field of Accountancy and Information Technology for the departmental officers has to be taken up in a big way. A massive four-tier training programme has been conducted under the leadership of NACIN. This training project is aimed at imparting training on GST law and procedures to more than 60,000 officers of CBIC and Commercial Tax officers of State Governments. 12.3 CBIC would be responsible for administration of the CGST and IGST law. In addition, excise duty regime would continue to be administered by the CBIC for levy and collection of central excise duty on five specified petroleum products as well as on tobacco products. CBIC would also continue to handle the work relating to levy and collection of customs duties. 38 | 49 12.4 Director General of Anti-profiteering, CBIC has been mandated to conduct detailed enquiry on anti-profiteering cases and should give his recommendation for consideration of the National Anti-profiteering Authority. 12.5 CBIC has been instrumental in handholding the implementation of GST. It had set up the Feedback and Action Room which monitored the GST implementation challenges faced by the taxpayer and act as an active interface between the taxpayer and the Government. 13. GOODS & SERVICES TAX NETWORK: 13.1 Goods and Services Tax Network (GSTN) has been set up by the Government as a private company under erstwhile Section 25 of the Companies Act, 1956. GSTN would provide three front end services to the taxpayers namely registration, payment and return. Besides providing these services to the taxpayers, GSTN would be developing back-end IT modules for 27 States who have opted for the same. Infosys has been appointed as Managed Service Provider (MSP). GSTN has selected 73 IT, ITeS and financial technology companies and 1 Commissioner of Commercial Taxes (CCT, Karnataka), to be called GST Suvidha Providers (GSPs). GSPs would develop applications to be used by taxpayers for interacting with the GSTN. The diagram below shows the work distribution under GST. 39 | 49 13.2 Central Government holds 24.5 percent stake in GSTN while the state government holds 24.5 percent. The remaining 51 percent are held by nonGovernment financial institutions, HDFC and HDFC Bank hold 20%, ICICI Bank holds 10%, NSE Strategic Investment holds 10% and LIC Housing Finance holds 10%. The GST Council in its 27th meeting held on 04th May, 2018 has approved the change in shareholding pattern of GSTN. Considering the nature of ‘state’ function’ performed by GSTN, the GST Council felt that GSTN be converted into a fully owned Government company. Accordingly, the Council approved acquisition of entire 51 per cent of equity held by non-Governmental institutions in GSTN amounting to Rs. 5.1 Cr, equally by the Centre and the State Governments. 13.3 The design of GST systems is based on role based access. The taxpayer can access his own data through identified applications like registration, return, view ledger etc. The tax official having jurisdiction, as per GST law, can access the data. 40 | 49 Data can be accessed by audit authorities as per law. No other entity can have any access to data available with GSTN. 14. GST: A GAME CHANGER FOR INDIAN ECONOMY: 14.1 GST will have a multiplier effect on the economy with benefits accruing to various sectors as discussed below. 14.2 Benefits to the exporters: The subsuming of major Central and State taxes in GST, complete and comprehensive setoff of input goods and services and phasing out of Central Sales Tax (CST) would reduce the cost of locally manufactured goods and services. This will increase the competitiveness of Indian goods and services in the international market and give boost to Indian exports. The uniformity in tax rates and procedures across the country will also go a long way in reducing the compliance cost. 14.3 Benefits to small traders and entrepreneurs: GST has increased the threshold for GST registration for small businesses. Those units having aggregate annual turnover more than Rs 20 lakh (10 lakh in case of North Eastern States) have be registered under GST. Unlike multiple registrations under different tax regimes earlier, a single registration is needed under GST in one State. An additional benefit under Composition scheme has also been provided for businesses with aggregate annual turnover upto Rs 1 Cr. With the creation of a seamless national market across the country, small enterprises will have an opportunity to expand their national footprint with minimal investment. 14.4 Benefits to agriculture and Industry: GST will give more relief to industry, trade and agriculture through a more comprehensive and wider coverage of input tax set-off and service tax set-off, subsuming of several Central and State taxes in the GST and phasing out of CST. The transparent and complete chain of set-offs 41 | 49 which will result in widening of tax base and better tax compliance may also lead to lowering of tax burden on an average dealer in industry, trade and agriculture. 14.5 Benefits for common consumers: With the introduction of GST, the cascading effects of CENVAT, State VAT and service tax will be more comprehensively removed with a continuous chain of set-off from the producer’s point to the retailer’s point than what was possible under the prevailing CENVAT and VAT regime. Certain major Central and State taxes will also be subsumed in GST and CST will be phased out. Other things remaining the same, the burden of tax on goods would, in general, fall under GST and that would benefit the consumers. 14.6 Promote “Make in India”: GST will help to create a unified common national market for India, giving a boost to foreign investment and “Make in India” campaign. It will prevent cascading of taxes and make products cheaper, thus boosting aggregate demand. It will result in harmonization of laws, procedures and rates of tax. It will boost export and manufacturing activity, generate more employment and thus increase GDP with gainful employment leading to substantive economic growth. Ultimately it will help in poverty eradication by generating more employment and more financial resources. More efficient neutralization of taxes especially for exports thereby making our products more competitive in the international market and give boost to Indian Exports. It will also improve the overall investment climate in the country which will naturally benefit the development in the states. Uniform CGST & SGST and IGST rates will reduce the incentive for evasion by eliminating rate arbitrage between neighboring States and that between intra and inter-State supplies. Average tax burden on companies is likely to come down which is expected to reduce prices and lower prices mean more consumption, which in turn means more production thereby 42 | 49 helping in the growth of the industries. This will create India as a “Manufacturing hub”. 14.7 Ease of Doing Business: Simpler tax regime with fewer exemptions along with reduction in multiplicity of taxes that are at present governing our indirect tax system will lead to simplification and uniformity. Reduction in compliance costs as multiple record-keeping for a variety of taxes will not be needed, therefore, lesser investment of resources and manpower in maintaining records. It will result in simplified and automated procedures for various processes such as registration, returns, refunds, tax payments. All interaction shall be through the common GSTN portal, therefore, less public interface between the taxpayer and the tax administration. It will improve environment of compliance as all returns to be filed online, input credits to be verified online, encouraging more paper trail of transactions. Common procedures for registration of taxpayers, refund of taxes, uniform formats of tax return, common tax base, common system of classification of goods and services will lend greater certainty to taxation system. 15. EXPERIENCE OF REGISTRATION,RETURN FILING & REVNUE: 15.1 Registration & Returns Snapshot: S. No. Details As on 30th November, 2018 1. No. of transited (migrated) taxpayers 66,23,376 2. Total No. of new applications received for registration 67,44,012 43 | 49 3. No. of applications approved 57,75,732 4. No. of applications rejected 9,13,582 5. Total No. of taxpayers; new + migrated (1 + 3) 1,23,99,108 6. No. of taxpayers who have opted for composition scheme 17,74,379 7. No. of 3 (B) returns filed for July, 2017 65,20,179 8. No. of 3(B) returns filed for August, 2017 70,71,942 9. No. of 3(B) returns filed for September, 2017 73,94,796 10. No. of 3(B) returns filed for October, 2017 71,29,202 11. No. of 3(B) returns filed for November, 2017 71,63,244 12. No. of 3(B) returns filed for December, 2017 72,19,088 44 | 49 13. No. of 3(B) returns filed for January, 2018 72,99,792 14. No. of 3(B) returns filed for February, 2018 73,86,339 15. No. of 3(B) returns filed for March, 2018 74,44,829 16. No. of 3(B) returns filed for April, 2018 74,05,472 17. No. of 3(B) returns filed for May, 2018 74,89,674 18. No. of 3(B) returns filed for June, 2018 75,22,043 19. No. of 3(B) returns filed for July, 2018 75,15,731 20. No. of 3(B) returns filed for August, 2018 74,84,227 45 | 49 21. No. of 3(B) returns filed for September, 2018 73,53,188 22. No. of 3(B) returns filed for October, 2018 69,60,318 23. No. of GSTR 1 returns filed for July, 2017 59,41,377 24. No. of GSTR 1 returns filed for August, 2017 24,63,078 25. No. of GSTR 1 returns filed for September, 2017 66,32,774 26. No. of GSTR 1 returns filed for October, 2017 25,30,098 27. No. of GSTR 1 returns filed for November, 2017 25,59,048 28. No. of GSTR 1 returns filed for December, 2017 66,59,016 29. No. of GSTR 1 returns filed for January, 2018 25,38,847 30. No. of GSTR 1 returns filed for February, 2018 25,32,136 46 | 49 31. No. of GSTR 1 returns filed for March, 2018 66,84,783 32. No. of GSTR 1 returns filed for April, 2018 25,95,998 33. No. of GSTR 1 returns filed for May, 2018 26,02,598 34. No. of GSTR 1 returns filed for June, 2018 65,92,662 35. No. of GSTR 1 returns filed for July, 2018 25,44,914 36. No. of GSTR 1 returns filed for August, 2018 24,63,643 37. No. of GSTR 1 returns filed for September, 2018 60,98,372 38. No. of GSTR 1 returns filed for October, 2018 20,18,587 39. No. of GSTR 2 returns filed for July, 2017 25,72,552 40. No. of GSTR 4 returns filed for quarter JulySeptember, 2017 9,68,617 47 | 49 41. No. of GSTR 4 returns filed for quarter OctoberDecember, 2017 14,46,935 42. No. of GSTR 4 returns filed for quarter JanuaryMarch, 2018 14,79,925 43. No. of GSTR 4 returns filed for quarter AprilJune, 2018 14,15,870 44. No. of GSTR 4 returns filed for quarter JulySeptember, 2018 12,94,450 15.2 Revenue Collection Snapshot: S. No. Revenue Collected in the Month of Amount (in Rs. Thousand crore) 1. August, 17 95,633 2. September, 17 94,064 3. October, 17 93,333 4. November, 17 83,780 5. December, 17 84,314 6. January, 18 89,825 7. February, 18 85,962 8. March, 18 92,167 9. April, 18 1,03,459 10. May, 18 94,016 48 | 49 11. June, 18 95,610 12. July, 18 96,483 13. August, 18 93,960 14. September, 18 94,442 15. October, 18 1,00,710 16. November, 18 97,637 16. CHALLENGES & FUTURE AHEAD: 16.1 Any new change is accompanied by difficulties and problems at the outset. A change as comprehensive as GST is bound to pose certain challenges not only for the government but also for business community, tax administration and even common citizens of the country. Some of these challenges relate to the unfamiliarity with the new regime and IT systems, legal challenges, return filing and reconciliations, passing on transition credit. Lack of robust IT infrastructure and system delays makes compliance difficult for the taxpayers. Many of the processes in the GST are new for small and medium enterprises in particular, who were not used to regular and online filing of returns and other formalities. 16.2 Based on the feedback received from businesses, consumers and taxpayers from across the country, attempt has been made to incorporate suggestions and reduce problems through short-term as well as long-term solutions. After rectifying system glitches, E-way bill for inter-State movement of goods has been successfully implemented from 1st April 2018. As regards intra-State supplies, option was given to States to choose any date on or before 3rd June, 2018. All States have notified e-way bill rules for intra-State supplies last being NCT of Delhi where it was introduced w.e.f. 16th June, 2018. 49 | 49 16.3 NAPA has initiated investigation into various complaints of anti-profiteering and has passed orders in some cases to protect consumer interest. 16.4 To expedite sanction of refund, manual filing and processing of refunds has been enabled. Clarificatory Circulars and notifications have been issued to guide field formations of CBIC and States in this regard. The government has put in place an IT grievance redressal mechanism to address the difficulties faced by taxpayers owing to technical glitches on the GST portal. 16.5 The introduction of GST is truly a game changer for Indian economy as it has replaced multi-layered, complex indirect tax structure with a simple, transparent and technology–driven tax regime. It will integrate India into a single, common market by breaking barriers to inter-State trade and commerce. By eliminating cascading of taxes and reducing transaction costs, it will enhance ease of doing business in the country and provide an impetus to “Make in India” campaign. GST will result in “ONE NATION, ONE TAX, ONE MARKET”. ***** Note: This write-up is for education purposes only

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E-Way Bill

7 03-12-2018

Press Release No. 71 dated 03-12-2018 - Central Tax

Status of GST refunds.

PRESS RELEASE 03 December 2018 Status of GST Refunds Total GST refunds to the tune of Rs 91,149 crores have been disposed by CBIC and State authorities out of the total refund claims of Rs 97,202 crores received so far. Thus, the disposal rate of 93.77 per cent has been achieved. The pending GST refund claims amounting to Rs 6,053 crores are being expeditiously processed so as to provide relief to eligible claimants. Refund claims without any deficiency are being cleared expeditiously. 2. In case of IGST refunds, about 95 % (Rs 48,455 crores) of the total IGST refund claims (Rs. 50,928 crore) transmitted to Customs from GSTN as on 28.11.2018 have already been disposed. The remaining claims amounting to Rs. 2,473 crores are held up on account of various deficiencies which have been communicated to exporters for remedial action. 3. In the case of RFD-01A (ITC Refunds plus other refunds) claims, out of the total refund claims of Rs. 46,274 crores received in the jurisdictional tax offices, the pendency as on 03.12.2018 is Rs. 902 crores with Centre and Rs 2,678 crore with States. Provisional/final order has been issued in case of refunds amounting to Rs. 37,406 crores. In claims amounting to Rs. 5,288 crore, deficiency memos have been issued by respective GST authorities and action will be taken after receipt of replies from the claimants. 4. Efforts are being made continuously to clear all the pending refund claims, where ever requisite information is provided and found eligible. Cooperation of the exporter community is solicited to ensure that they respond to the deficiency memos and errors communicated by Centre and State GST as well as Customs Authorities and also exercise due diligence while filing GSTR 1 and GSTR 3B returns as well as Shipping Bills. *****

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8 01-12-2018

FAQ No. - dated 01-12-2018 - Other

CBIC has released the Updated FAQ on TCS under GST as on 30.11.2018

(Up dated as on 30.11.2018 dated as on 30.11.2018 dated as on 30.11.2018 dated as on 30.11.2018 ) LAW COMMITTEE COMMITTEE COMMITTEE GST COUNCIL OUNCIL MIN 28 TH SEPTEMBER EPTEMBER EPTEMBER, 2018 , 2018 , 2018 Page 1 of 11 Frequently Asked Questions on TCS Sr. no. Question Answer 1. What is Electronic Commerce? As per Section 2(44) of the CGST Act, 2017, electronic Commerce means the supply of goods or services or both, including digital products over digital or electronic network. 2. Who is an e-commerce operator? As per Section 2(45) of the CGST Act, 2017, electronic Commerce operator means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce. 3. What is Tax Collection at Source (TCS)? As per Section 52 of the CGST Act, 2017 the e-commerce operator, not being an agent, is required to collect an amount calculated at the rate not exceeding one per cent., as notified by the Government on the recommendations of the Council, of the net value of taxable supplies made through it, where the consideration with respect to such supplies is to be collected by such operator. The amount so collected is called as Tax Collection at Source (TCS). 4. What is the rate of TCS notified by Government? Rate of TCS is 0.5% under each Act (i.e. the CGST Act, 2017 and the respective SGST Act / UTGST Act respectively) and the same is 1% under the IGST Act, 2017. Notifications No. 52/2018 – Central Tax and 02/2018-Integrated Tax both dated 20th September, 2018 have been Page 2 of 11 issued in this regard. Similar notifications have been issued by the respective State Governments also. 5. Is it mandatory for e-commerce operator to obtain registration? Yes. As per section 24(x) of the CGST Act, 2017, every electronic commerce operator has to obtain compulsory registration irrespective of the value of supply made by him. 6. Whether a supplier of goods or services supplying through e-commerce operator would be entitled to threshold exemption? As per Section 24(ix) of the CGST Act, 2017, every person supplying goods through an e-commerce operator shall be mandatorily required to register irrespective of the value of supply made by him. However, a person supplying services, other than supplier of services under section 9 (5) of the CGST Act, 2017, through an e-commerce platform are exempted from obtaining compulsory registration provided their aggregate turnover does not exceed INR 20 lakhs (or INR 10 lakhs in case of specified special category States) in a financial year. Government has issued the notification No. 65/2017 – Central Tax dated 15th November, 2017 in this regard. 7. Whether TCS is required to be collected by e-commerce operators on supply of services by unregistered suppliers through their portal? As per Section 24(ix) of the CGST Act, 2017, every person supplying goods or services through an ecommerce operator is mandatorily required to register. However, vide Notification 65/2017-Central Tax dated 15th November, 2017 a person supplying services, other than supplier of services under section 9 (5) of the CGST Act, 2017, through an e-commerce Page 3 of 11 platform were exempted from obtaining compulsory registration provided their aggregate turnover does not exceed INR 20 lakhs (or INR 10 lakhs in case of specified special category States) in a financial year. Since such suppliers are not liable for registration, e-commerce operators are not required to collect TCS on supply of services being made by such suppliers through their portal. 8. Whether e-Commerce operator is required to obtain registration in every State/UT in which suppliers listed on their e-commerce platform are located to undertake the necessary compliance as mandated under the law? As per the extant law, registration for TCS would be required in each State / UT as the obligation for collecting TCS would be there for every intra-State or inter-State supply. In order to facilitate the obtaining of registration in each State / UT, the e-commerce operator may declare the Head Office as its place of business for obtaining registration in that State / UT where it does not have physical presence. It may be noted that each State/UT has indicated one administrative jurisdiction where all e-commerce operators having business (but not having physical presence) in that State/UT shall register. The proper officer for the purpose of registration of ECOs has also been notified by each State/UT. Page 4 of 11 9. Foreign e-commerce operator do not have place of business in India since they operate from outside. But their supplier and customers are located in India. So, in this scenario will the TCS provision be applicable to such e-commerce operator and if yes, how will foreign e-commerce operator obtain registration? Where registered supplier is supplying goods or services through a foreign e-commerce operator to a customer in India, such foreign e-commerce operator would be liable to collect TCS on such supply and would be required to obtain registration in each State / UT. It may be noted that each State/UT has indicated one administrative jurisdiction where all e-commerce operators having business (but not having physical presence) in that State/UT shall register. The proper officer for the purpose of registration of ECOs has also been notified by each State/UT. If the foreign e-commerce operator does not have physical presence in a particular State / UT, he may appoint an agent on his behalf. 10. Is it necessary for e-Commerce operators who are already registered under GST and have GSTIN, to have separate registration for TCS as well? E-Commerce operator has to obtain separate registration for TCS irrespective of the fact whether e-Commerce operator is already registered under GST as a supplier or otherwise and has GSTIN. 11. What is meant by “net value of taxable supplies”? The “net value of taxable supplies” means the aggregate value of taxable supplies of goods or services or both, other than the services on which entire tax is payable by the e-commerce operator, made during any month by a registered supplier through such operator Page 5 of 11 reduced by the aggregate value of taxable supplies returned to such supplier during the said month. 11. Whether value of net taxable supplies to be calculated at gross level or at GSTIN level? The value of net taxable supplies is calculated at GSTIN level. 12. Is every e-commerce operator required to collect tax on behalf of actual supplier? Yes, every e-commerce operator is required to collect tax where the supplier is supplying goods or services through e-commerce operator and consideration with respect to the supply is to be collected by the said e-commerce operator. 13. At what time should the e-commerce operator collect TCS? TCS is to be collected once supply has been made through the e-commerce operator and where the business model is that the consideration is to be collected by the e-commerce operator irrespective of the actual collection of the consideration. For example, if the supply has taken place through the e-commerce operator on 30th October, 2018 but the consideration for the same has been collected in the month of November, 2018, then TCS for such supply has to be collected and reported in the statement for the month of October, 2018. 14. Whether TCS to be collected on exempt supplies? No, TCS is not required to be collected on exempt supplies. Page 6 of 11 15. Whether TCS to be collected on supplies on which the recipient is required to pay tax on reverse charge basis? No, TCS is not required to be collected on supplies on which the recipient is required to pay tax on reverse charge basis. 16. Whether TCS is to be collected in respect of supplies made by the composition taxpayer? As per section 10(2)(d) of the CGST Act, 2017, a composition taxpayer cannot make supplies through e-commerce operator. Thus, question of collecting TCS in respect of supplies made by the composition taxpayer does not arise. 17. Whether TCS is to be collected on import of goods or services or both? TCS is not liable to be collected on any supplies on which the recipient is required to pay tax on reverse charge basis. As far as import of goods is concerned since same would fall within the domain of Customs Act, 1962, it would be outside the purview of TCS. Thus, TCS is not liable to be collected on import of goods or services. 18. Is there any exemption on Gold, owing to the fact that rate of GST is only 3% and TCS on it would erode the margin for the seller? No such exemption from TCS has been granted. 19. Whether payment of TCS through Input Tax Credit of operator for depositing TCS as No, payment of TCS is not allowed through Input Tax Credit of e-Commerce operator. Page 7 of 11 per Section 52 (3) of the CGST Act, 2017 is allowed? 20. It is very common that customers of e-commerce companies return goods. How these sales returns are going to be adjusted? An e-commerce company is required to collect tax only on the net value of taxable supplies made through it. In other words, value of the supplies which are returned (supply return) may be adjusted from the aggregate value of taxable supplies made by each supplier (i.e. on GSTIN basis). In other words, if two suppliers “A” and “B” are making supplies through an e-commerce operator, the “net value of taxable supplies” would be calculated separately in respect of “A” and “B”. If the value of returned supplies is more than supplies made on behalf of any of such supplier during any tax period, the same would be ignored in his case. 21. Under Section 52, e-commerce operator collects TCS at the net of returns. Sometimes sales return is more than sales and hence can negative amount be reported? Negative amount cannot be declared. There will be no impact in next tax period also. In other words, if returns are more than the supplies made during any tax period, the same would be ignored in current as well as future tax period(s). 22. What is the time within which such TCS is to be remitted by the e-commerce The amount collected by the operator is to be paid to appropriate government within 10 days after the end of the month in which the said amount was so collected. Page 8 of 11 operator to the Government account? 23. How can actual suppliers claim credit of TCS? The amount of TCS deposited by the operator with the appropriate Government will be reflected in the electronic cash ledger of the actual registered supplier (on whose account such collection has been made) on the basis of the statement filed by the operator in FORM GSTR-8 in terms of Rule 67 of the CGST Rules, 2017. The said credit can be used at the time of discharge of tax liability by the actual supplier. 24. How is TCS to be credited in cash ledger? Whether the refund of such TCS credit lying in the ledger would be allowed at par with the refund provisions contained in section 54(1) of the CGST Act, 2017? TCS collected is to be deposited by the e-commerce operator separately under the respectvive tax head (i.e. Central tax / State tax / Union territory tax / Integrated tax). Based on the statement (FORM GSTR-8) filed by the e-commerce opertaor, the same would be credited to the electronic cash ledger of the the actual supplier in the respective tax head. If the supplier is not able to use the amount lying in the said cash ledger, the actual supplier may claim refund of the excess balance lying in his electronic cash ledger in accordance with the provisions contained in section 54(1) of the CGST Act, 2017. 25. Is the e-commerce operator required to submit any statement? What are Yes, every operator is required to furnish a statement, electronically, containing the details of outward supplies of goods or services effected through it, including the supplies of Page 9 of 11 the details that are required to be submitted in the statement? goods or services returned through it, and the amount collected by it as TCS during a month within 10 days after the end of such month in FORM GSTR-8. The operator is also required to file an annual statement by 31st day of December following the end of the financial year in which the tax was collected in FORM GSTR-9B. 26. Whether interest would be applicable on non-collection of TCS? As per section 52(6) of the CGST Act, 2017, interest is applicable on omission as well in case of incorrect particulars noticed. In such a case, interest is applicable since it is a case of omission. Further penalty under section 122(vi) of the CGST Act, 2017 would also be leviable. 27. What will be the place of supply for e-commerce operator for recharge of talk time of the Telecom Operator / recharge of DTH / in relation to convenience fee charged from the customers on booking of air tickets, rail supplied through its online platform? As per section 12(11) of the IGST Act, 2017, the address on record of the customer with the supplier of services is the place of supply. 28. Under multiple e-commerce model, Customer books a TCS is to be collected by that e-Commerce operator who is making payment to the supplier Page 10 of 11 Hotel via ECO-1 who in turn is integrated with ECO-2 who has agreement with the hotelier. In this case, ECO-1 will not have any GST information of the hotelier. Under such circumstances, which e-commerce operator should be liable to collect TCS? for the particular supply happening through it, which is in this case will be ECO-2. 29. Are there any additional powers available to tax officers under this Act? As per section 52(12) of the CGST Act, 2017, any authority not below the rank of Deputy Commissioner may serve a notice requiring the operator to furnish the details of their supplies of goods or services or both as well as stock of goods held by the suppliers within 15 working days of the date of service of such notice. 30. Certain e-commerce operators who have been unable to obtain registration in the month of October, 2018 but have already collected TCS for the said month have expressed challenges in relation to the filing of such details in GTSR-8. It has been E-commerce operators, who have been unable to obtain registration in the month of October, 2018 but have already collected TCS for the said month, may furnish the details of TCS collected in the month of October, 2018 in the first return in FORM GTSR-8 to be filed after obtaining registration. Page 11 of 11 asked as to how these details are to be furnished on the common portal? (The highlighted portions in red are the newly added answers to the earlier FAQ) ********************

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9 29-11-2018

Press Release No. 70 dated 29-11-2018 - Central Tax

GSTPs in the relevant category enrolled on GSTN after 15.11.2018 and till 26.11.2018 are also invited to register on the portal

PRESS RELEASE November 29 th, 2018 EXAMINATION FOR CONFIRMATION OF ENROLLMENT OF GST PRACTITIONERS Reference is invited to Press Release dated 1.11.2018 and 19.11.2018 regarding exam for GST Practitioners (GSTPs) scheduled on 17.12.2018. For this exam, only those GSTPs of the relevant category were invited to register on examination portal whose enrolment on GST Network was approved as on 15.11.2018. Now the GSTPs in the relevant category, who are enrolled on GSTN after 15.11.2018 and till 26.11.2018, are also invited to register on the portal. The portal is open for registration upto 5.12.2018. ****

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10 29-11-2018

Notification No. 66/2018 dated 29-11-2018 - Central Tax

Seeks to extend the due date for filing of FORM GSTR – 7 for the months of October, 2018 to December, 2018

[[To be published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i)] Government of India Ministry of Finance (Department of Revenue) Central Board of Indirect Taxes and Customs Notification No. 66/2018 – Central Tax New Delhi, the 29th November, 2018 G.S.R. .....(E).—In exercise of the powers conferred by sub-section (6) of section 39 read with section 168 of the Central Goods and Services Tax Act, 2017 (12 of 2017) (hereinafter referred to as the said Act), the Commissioner hereby extends the time limit for furnishing the return by a registered person required to deduct tax at source under the provisions of section 51 of the said Act in FORM GSTR-7 of the Central Goods and Services Tax Rules, 2017 under sub-section (3) of section 39 of the said Act read with rule 66 of the Central Goods and Services Tax Rules, 2017 for the months of October, 2018 to December, 2018 till the 31 st day of January, 2019. [F. No. 20/06/17/2018-GST (Pt. I)] (Dr. Sreeparvathy S.L.) Under Secretary to the Government of India

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Section 39 - CGSTACT

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Section 168 - CGSTACT

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Section 51 - CGSTACT

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Rule 66 - CGSTRULES

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GSTR-7 - FORM

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