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GST on Real Estate Industry - Practical Aspects Presented by: CA SUHAS P. BORA Senior Partner 1
GST on Real Estate Industry - Practical
Aspects Presented by:
CA SUHAS P. BORASenior Partner
1
Concepts & Analysis
Basics First
Taxability – Past & Future
Excise Duty
• Manufacture
• Duty Paid on Removal of Goods from Factory
Sales Tax
• Sale
• Tax levied at the time of transfer of Property
Service Tax
• Service
• Tax levied at the time of Rendering of Service
GST
• Goods & Services
• Tax levied at the time of Supply
GST – Multiple Taxes SubsumedCGST
Excise Duty
Service Tax
Addl. Excise Duty
Central Surcharge & Cess
SGST
VAT
Purchase Tax
Luxury Tax
State Surcharge & Cess
Entry Tax & LBT
IGST
CST
CVD & SAD
Levied by Central Govt. for Intra-State Supplies
Levied by State Govt. for Intra-State Supplies
Levied by Central Govt. for Inter-State Supplies
Goods & Services Defined
Sec. 2(52) - “Goods” means every kind of movable property other than money and
securities but includes actionable claim, growing crops, grass and things attached to or
forming part of the land which are agreed to be severed before supply or under a
contract of supply.
Sec. 2(102) - “Services” means anything other than goods, money and securities but
includes activities relating to the use of money or its conversion by cash or by any other
mode, from one form, currency or denomination, to another form, currency or
denomination for which a separate consideration is charged.
Works Contract – Sec. 2 (119)
… means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract;
As per Sch. II(6)(a) – Works Contract is deemed to be a “Service” As per Sch. II(5)(b) – Sale of Building after BCC is neither a Supply of Service nor Supply
of Goods As per Sch. III(5) – Sale of Land is neither a Supply of Service nor Supply of Goods
Goods or Service?
Nature of Activity ClassificationWorks Contract (Material +Labour) Service
Construction Activity Service
Labour Supply Service
Renting of Property Service
Land Sale No Service & No Goods
TDR Sale Goods
Summery of Works Contract: Scope of Supply
Works Contract…• Involving Supply of Land
• Supply is BEFORE Completion of Construction
• It is “Supply of Service”
• GST Applicable
Works Contract...• Involving Supply of Land /
Building
• Supply is AFTER Completion of Construction
• It is “Sale of Immovable Property”
• GST Not Applicable
Works Contract…• Does not involve Supply of
Land
• Supply is BEFORE or AFTER Completion of Construction
• It is “Supply of Service”
• GST Applicable
Concept of Supply (Chapter III-Sec. 7)
“Supply” includes all forms of supply such as Sale, Transfer, Barter, Exchange,License, Rental, Lease or disposal made or agreed to be made for a consideration.
Includes Importation of service, for a consideration whether or not in the course orfurtherance of business.
First identify whether the transaction is for Goods or Services This will enable to decide the rules in relation to point of taxation i.e., Time of
Supply and Place of Supply (for levy of tax)
As per Schedule II (5) - Construction Activity is being described as “Service”, hence allthe provisions of Place of Supply & Time of Supply relevant to “Services” shall apply toConstruction Activity.
Time of Supply of Services - Point of Taxation – Sec. 13
Liability to pay GST on Supply of Services shall arise at the earliest of the followingdates: date of issue of invoice / demand note or date of provision of service or the date of receipt of payment or in absence of above, date on which recipient shows the receipt of service in Books of
A/c
In case of Continuous Supply of Services, Time of Supply shall be… the due date of ascertainable from Contract or the date on which the supplier receives the payment with respect to the supply
Place of Supply - Significance
Whether Supplies are intra-state or inter-state / inter-national Which tax to pay - CGST & SGST or IGST? Achieving the objective of destination based taxation ITC of IGST allowed to purchaser in his state i.e., destination State
Location of Supplier
Place of Supply Intra-State or Inter-State
Tax Applicable
Maharashtra Maharashtra Intra-State CGST + SGST
Gujarat Maharashtra Inter-State IGST
Place of Supply – Exception for Immovable Properties
In case of Immovable Properties, the Place of Supply shall be deemed to the “Location ofImmovable Property”Few Illustrations:
Location of Service Provider
Recipient of Service
Immovable Property Location
Place of Provision of Services(Tax Applicable)
Maharashtra Madhya Pradesh Madhya Pradesh
Madhya Pradesh (IGST)
Maharashtra Madhya Pradesh Jharkhand Jharkhand (IGST)
Maharashtra Dubai Maharashtra Maharashtra (CGST + SGST)
Maharashtra Dubai Dubai Dubai (will be treated as Export of Services)
Valuation – Sec. 15
Transaction value is the price actually paid or payable for the said supply of goods orservices between un-related parties and price is the sole consideration.
Transaction value includes… Taxes other than GST
Expenses incurred by recipient in relation to supply
Incidental expenses charged at the time or before the supply- commission, packing oramount charged for anything done by the supplier
Interest, late fee or penalty for late payment of consideration
Composition Scheme – Sec. 10
Aggregate turnover under 1 PAN does not exceed Rs. 75 Lacs in previous financial year Composition is in lieu of normal tax payable ITC not available to the Supplier & also to the recipient Tax cannot be collected separately Rates of Tax…
Manufacturer Supplying Goods
CGST 1%
SGST 1%
Total 2%
Retailer Supplying Goods
CGST 0.50%
SGST 0.50%
Total 1%
Restaurant Providing Services
CGST 2.5%
SGST 2.5%
Total 5%
Composition Scheme - Applicability
Composition scheme shall not be granted to a taxable person- who makes any supply of goods which are not leviable to tax under the CGST Act; who makes any inter-state outward supplies of goods; who makes any supply of goods through an Electronic Commerce Operator (like
Flipkart / Amazon) who is a manufacturer of such goods, as may be notified by Government
Analysis…Whether Builders or Other Works Contract Service Providers (Viz. Centring Contractors, Painting Contractors etc.) are eligible for Composition Scheme?
Builders or Other Works Contract Service Providers are classified as “Service Providers”, hence not eligible for Composition Scheme.
Pre-GST Scenario
• Tax Credit of VAT was available to Traders / Contractors
• Tax Credit of Service Tax was available to Contractors
Vendor / Contractor
• Tax Credit of Excise Duty & VAT was not available
• Tax Credit of Service Tax was available
Builder / Developer • Tax Credit of Stamp
Duty / VAT / Service Tax was / is not available to Customer
Customer / End-User
Excise Duty 12.5% VAT 6% / 13.5%, Service Tax 15%
VAT 1%,Service Tax 4.5%
Tax Rates under GST for Builders / Contractors
Particulars Tax Rate
Sale of Under Constructed Flat/unit (Value inclusive of Land) 12% (18-6)
Sale of Under Construction of Flat/ Unit (Value excluding land) 18%
Redevelopment of Society 18%
Development Rights / Joint Developments 12%
Works Contract (Original as well as Other works) 18%
Labour Contract 18%
Sale of Completed Flat Not Taxable
Sale of Land or Plot Not Taxable
SGST Notification No. 11/2017 dt. 29 June 2017
GST rate for the Builders has been hiked to 18% from earlier 12% 18 percent would now be charged on two-thirds of the under-construction property
value, which will turn out to be the same as 12 percent on the entire value of theproperty that was announced earlier.
Particulars Amount (Rs.) Amount (Rs.)
Completion of work upto 2nd Slab (A) 2,00,000
Less: Deduction of Land (1/3rd of above) (B) 66,667
Effective Value of Construction Service (C) = (A-B) 1,33,333
Add: CGST @ 9% on Rs. 1,33,333/- (D) 12,000
Add: SGST @ 9% on Rs. 1,33,333/- (E) 12,000 .
Total GST (F) = (D+E) 24,000
Total Amount Receivable from Customer (A+F) 2,24,000
CGST 9%
SGST 9%Total 18%
Tax Implications of Other TransactionsServices Provided Analysis Tax Rate
Society Membership fees It is corpus fund & “Transaction in Money”
Not a “Supply”, hence Not Taxable
Maintenance Charges If received by Builder 12% if included in agreement, Else 18%
Maintenance Charges If Received by Society Exempt upto Rs. 5000/- p.m. else taxable @ 18%
Electricity / Water Meter Deposit If received by Builder & Extra Amount Charged
12%
Preferential Location Charges It is a “Composite Supply” 12%
Parking Charges It is “Composite Supply” 12%
Flat Cancelation Charges It is “Supply of Service” -“Agreeing to an obligation to tolerate an act”
18%
Sale of flats during construction Already Tax Earlier Not a “Supply”Hence Not Taxable
Tax Implications of Other TransactionsServices Provided Analysis Tax Rate
Renting of Residential Property for Residential Use
Exempt Not Taxable
Renting of Residential Property for Commercial Use
It is “Supply of Service” 18% (Exempt upto Rs. 10,000 p.m.)
Renting of Commercial Property It is “Supply of Service” 18% 18% (Exempt upto Rs. 10,000 p.m.)
Repairs to Building / Extra Work It is “Works Contract” 18%
Hoarding / Advertisements It is “Supply of Service” 18%
Sale of Goods / Scrap Material & Wastes
It is “Supply of Goods” Applicable rate
GTA Service Covered under RCM 5%
Services of Advocate Covered under RCM 18%
Exemptions from GST
Renting of residential dwelling for use as residence
Services by way of pure labour contracts of construction, erection, commissioning, or
installation of original works pertaining to a “single residential unit” otherwise than
as a part of a residential complex – Applicable to Persons Other than Developers
Services provided by way of pure labour contracts of construction, erection,
commissioning, installation, completion, fitting out, repair, maintenance, renovation, or
alteration of a civil structure or any other original works pertaining to the Beneficiary-
led individual house construction / enhancement under the Housing for All (Urban)
Mission/ Pradhan Mantri Awas Yojana (PMAY)
More Clarity is expected in exemptions
Input Tax Credits (ITC)Maximize It for Maximum Gains
ITC means…
… IGST / CGST / SGST/UTGST charged in the invoice on any supply of goods orservices which are used in the course of furtherance of business
Registered Person should posses tax invoice / Debit Note issued by Supplier Goods or Services must be actually received by him. ITC is not available on Mobilisation
Advances provided to Contractors Supplier should have paid the taxes Supplier should have filed valid Return u/s 39 Matching of Invoice
Conditions for claiming ITC
Now Full Credit of Material,
Services, Capital Goods shall be
available
Conditions for claiming ITC
In case the claimant (i.e., Receiver) fails to pay consideration to supplier within 180days from date of invoice the ITC availed earlier, will be added to the output taxliability along with interest
On making payment towards supply he will be entitled for credit of Input Tax.
If Depreciation is claimed on ITC, ITC shall be disallowed
ITC can be claimed within 18 Months i.e., up to September of next year or beforesubmission of Annual Return; whichever is earlier.
Conditions for claiming ITC
Confirm the availability of ITC / Reversal of ITC, where Project is completed andsome units are unsold – the Balance credit needs to be reversed
ITC of 1 Project could be utilised for the other Project (carried out in same firm); subjectto availability as discussed above
Refund, due to excess ITC – Not allowed
Negative List Under ITC / Blocked Credits – Sec. 17
Motor vehicles, Food and beverages, Beauty treatment, health services, Membership of a club, health and fitness centre, Rent-a-cab, life insurance, health insurance Travel benefits extended to employees Tax paid for Goods or Services used for Personal Consumption ITC reversal in case of goods lost, stolen, destroyed in fire / flood / etc. or where goods
have been distributed as free samples / gifts
Negative List Under ITC / Blocked Credits – Sec. 17
Works Contract For Immovable Property – Sec. 17(5)(c) &(d)
The ITC on inward supplies of works contract service is allowed only when the sameis used for supply of works contract service.
ITC on goods and services is denied when such inward supplies is used forconstruction of an immovable property on his own account other than Plant andMachinery even when such immovable property is used in course or furtherance ofbusiness.
Eg.: Immovable property is let out or used for business purpose like mall, theatre orfactory etc.
ITC on Cancelation of Agreement
As per Sec. 31(3)(e)… where advance payment has been received for which receipt voucher is issued but subsequently no supply is made and no tax invoice is issued then Registered person may issue Refund Voucher against such payment and claim the ITC paid as refund
However this provision is applicable when no service is started (if construction for the saidunit is begun than this will be treated as continuous supply of service and in such case, creditnote is required to be issued for cancellation of agreement – (Applicable only if within 6months)
Reversal of ITC on Sale of Completed Flats
Section 17(2) provides that where goods or services are used partly for effecting taxable supplies and partly for exempt supplies, ITC credit attributable to taxable supplies can only be taken
Sale of completed flat will be exempt supply for the purpose of reversal of ITC u/s 17(2) of the Act
If the supply is not taxable, then ITC will have to be reversed
When to reverse the tax? at the stage of completion of project or at the point when such completed flats/units are sold?
Apportionment of Credit – Sec. 17
Input credit on goods and/or services
ITC allowed
Used in taxable supplies
Used in zero-rated supplies
ITC NOT allowed
Used for non-business purpose
Used for exempt supplies
Utilization of ITC (Sequence)
Input CGST
First to Pay CGST
Second to Pay IGST
Input SGST
First to Pay SGST
Second to Pay IGST
Input IGST
First to Pay IGST
Second to Pay CGST
Third to Pay SGST
SGST Not Allowed to Pay
CGST Not Allowed to Pay
Tax Impact on Input Costs (Material + Services)
5%• Red Bricks, River Sand, Crush Sand, Stone, Shahabad, GTA
12%• Sand Lime Bricks, Fly Ash Bricks
18%
• RMC, Iron & Steel, GI Fittings, CP Fittings, Tiles, Aluminum Windows, Renting of Machineries, Works Contract Services, All Contractors, Labour Charges, Advt., Services of Architect / Engineer / Advocates / Chartered Accountants / Agents
28%
• Cement, Cement Bricks, Façade, Toughened Glass, Aluminum Windows, Paint, Ceramic Tiles, Marble, Granites, Sanitary Fittings, CP Fittings, Tiles, Wires & Cables, Wallpapers & Other Interior Decoration Material
Transitional Provisions for ITC
Immediate Steps
Transitional Provisions Sec. 139 to 142
CENVAT Credit of Inputs / Capital Goods as available in Return Filing of previous six months returns is mandatory Availment Period – within 90 days from 01/07/2017 in Form No. TRAN-1
(date extended to 31st October 2017) Ensure that all credit shown in the books of account is reflected in the return; else it will
result in loss of credit under the GST regime Credit available of materials procured from 01/07/2016 to 30/06/2017 – 1 Year Old
Stock For Builders, credits shall be available as per the Percentage completion method. If
input goods / services are procured more than the work completed, Credit shall be available
The benefit of such credit is passed on, by way of reduced prices, to the recipient
Credit in respect of inputs held in stock – Sec. 140(3)
A registered taxable person under GST who was: Providing works contract service and
Availing benefit of Notification No. 26/2012 ST Dated 20/06/2012 under earlier laws
Eligible to take the credit of following: Excise Duty, VAT, CVD, SAD, Entry Tax, Purchase Tax
In respect of Inputs held in Stock as on 30/06/2017
Inputs contained in Semi-Finished Goods as on 30/06/2017
Inputs contained in Finished Goods as on 30/06/2017
Such inputs / goods are used / intended to be used for making taxable supplies
Credit in respect of inputs held in stock – Sec. 140(3)
Relevant Section from Form No. TRAN-1
Transitional Provisions Sec. 139 to 142
Sec 142 – Miscellaneous Transitional Provisions (Issuing Supplementary Invoice / Dr. Note / Cr. Note)
Contracts entered prior to 01/07/2017
where there is Revision of Contract Price after 01/07/2017
Upward RevisionIssue Supplementary Invoice / Debit Note
within30 days of price revision
Downward Revision
Issue Credit Note within30 days of price revision (Recipient to
reduce his ITC accordingly)
Transitional Contracts & Case Studies
Ongoing Projects – Taxability – Sec. 142(11)(C)
Under old regime… Service Tax was discharged on receipt basis / accrual basis VAT was discharged at the time of agreement upto 31/05/2017 & from 01/06/2017
VAT was applicable on receipt basis
Under GST regime… For ongoing projects, GST shall be payable to the extent supplies are made after
01/07/2017 taxable person will be entitled to credit of VAT or service tax paid under existing law to
the extent supplies made after 01/07/2017 Such Credit shall be computed in the manner, as may be prescribed
Ongoing Projects – Taxability – Case StudyCase Situation as on
30/06/2017Situation after
01/07/2017Taxability in GST
1 Agreement to Sell + 50% Advance Recd.(VAT & ST paid on
Advances only)
Balance 50% Received Pay GST on balance 50% receipts @ 12%
2 Agreement to Sell + 50% Advance Recd.(VAT & ST paid on
Full Agreement value)
Balance 50% Received Pay GST on balance 50% receipts @ 12% after deducting
the 50% (VAT + ST) paid earlier
- Sec. 142(11)(c)3 Agreement to Sell + 5%
Advance Recd.(VAT & ST Not Paid)
Balance 95% Received Pay GST @ 12% on full value
Ongoing Projects – Taxability – Case StudyCase Situation as on
30/06/2017Situation after
01/07/2017Taxability in GST
4 Agreement to Sell + 50% Advance Recd.(VAT & ST paid on
Advances only)
Agreement Cancelled Claim refund u/s 142(5)
5 Agreement to Sell + 50% Advance Recd.(VAT & ST paid on
Advances only)
Out of balance 25% Received & then
Agreement is cancelled
Pay GST @ 12% on 25%What about refund of taxes
paid???
6 Sale post BCC (OC Received)
50% Advance ReceivedAgreement not
executed
Balance 50% Received + Sale Deed executed
GST not applicable on Completed Building
Sale of Under Construction Flats – Time of Supply in GST
Date Particulars GST Applicability
Amount
01/10/2017 Agreement Registered for Rs. 50Lacs. Amount Payable on
execution of Agreement Rs. 5 Lacs
Yes 12% of Rs. 5 Lacs = Rs. 60,000
15/11/2017 Amount Payable on Plinth Rs. 5 Lacs
Yes 12% of Rs. 5 Lacs = Rs. 60,000
20/11/2017 Demand Letter raised for plinth No NIL
01/01/2018 Customer paid the entire balance amount of Rs. 40 Lacs
Status of Work Completed 50%
Yes 1. 12% of Rs. 15 Lacs = Rs. 1.80 Lacs
2. 12% on advance of Rs. 25 Lacs = 3 Lacs (Advance will be separately shown in Return)
Ministry of Finance – Press Note dt. 15 June 2017
CBEC says it is against GST law to ask buyers of the flats (who have booked & paid part consideration) to make full payment before GST comes into effect as higher rates will be applicable on money received post GST.
It is further stated that: At present, builders are not eligible for credit of excise duty, VAT, entry tax, etc. paid
on materials and thus form part of cost of construction. Under GST full ITC will be available against payment of GST liability at 12% and
hence it will no longer form part of cost. Builders are expected to pass on the benefits lower tax burden under GST regime
to buyers by way of reduced prices / instalments. Despite this clarity on law position, if any builder resorts to such practice, the
same can be deemed to be profiteering u/s 171 of CGST Act
Anti-Profiteering Clause
Section 171 of GST law makes it mandatory to pass the input tax credit benefit to buyers Builder has to pass reduction of any tax rate to the flat purchaser by way of
commensurate reduction is sale prices Concerned authorities under GST have given powers to verify the same No Form / methodology has been prescribed Following may be the steps to calculate…
1. Take the Stock as on 30/06/2017 and its input tax component2. Make estimation of cost to be incurred on the project and its input tax component3. Divide the input tax components as stated in First Step and Second Step with
saleable area4. You will arrive at the Per Sq. Ft. amount of reduction from the sales price
Microsoft Excel Worksheet
Taxability of FSI / Development Rights, etc.
Under General Clauses Act ‘Immovable property’ is defined to include land, benefits to arise out of land and things attached to earth or permanently fastened to anything attached to earth
Term “Land” and “Building” is not defined under GST
Whether under GST regime rights in land and/or building can be regarded as land and/or building?
If yes, sale of development rights, FSI, etc. will not be treated as supply liable to GST
If not, then development potential, FSI, etc. will be exposed to GST liability
Joint Development Agreement (Area Sharing)
Development potentials to Developer (Full / Partial)
Land Owner’s Flats
Saleable Flats
Land Owner Developer
Customers
Joint Development Agreement (Area Sharing)Taxability of flats allotted to Land Owner: Supply includes all barter and exchanges Flats allotted to land owner will be a taxable supply liable to GST; where consideration is
received in kind form of development potentials Time of supply:
Receipt of development rights amounts to advance receipt of consideration in kind Hence, date when irrevocable rights are received will be time of supply Receipt voucher has to be issued by developer to owner on receipt of development
right Taxable under works contract service category @ 18% or 12% depending on facts Valuation will be open market value of such flats as per Valuation Rules
Taxability of Saleable flats: Taxable on Transaction Value or Govt. Value; whichever is higher
Joint Development Agreement (Revenue Sharing)
Jointly Develop the Property
Share the Revenue in agreed Ratios
Saleable Flats
Developer Joint Developer
Customers
Joint Development Agreement (Revenue Sharing)
Taxability of Share of Revenue in the hands of Owner: Issue may be checked up whether there is a supply of goods / service between two joint
developers? Revenue share to owner / developer is a consideration in lieu of development potentials
received from owner / developer If transfer of development potentials are considered to be “supply” then revenue share
will be liable to GST If transfer of development rights are not considered to be “supply” then revenue share
will not liable to GST
Taxability of Saleable flats: Taxable on Transaction Value or Govt. Value; whichever is higher
Reverse Charge Mechanism (RCM)
Doing own Business and managing tax liability of others
Reverse Charge Mechanism (RCM)
Reverse Charge V/s Forward Charge In case of supplies from Un-registered person, RCM applicable GST Returns specifically require furnishing of information of transactions of RCM
Need to pay in cash (cannot be paid by way of utilization of credit) earliest of followingdates: date of receipt of goods / services date of payment being entered in Books of A/c or actual payment being debited in
Bank A/c immediate date after completion of 30 days from the date of issue of invoice
Funds will be blocked for 1 month with department
RCM - Provisions
Compulsory RCM – Irrespective of Amount
•Import of Service
•Services of Goods Transport Agency (GTA)
•Legal services provided by Advocates
•Services provided by Director of Company (who is not a whole-time Director)
RCM where total per day purchase exceed Rs. 5000/- (Not. No. 8/2017 28.06.2017)
• URD Purchases / Petty Cash Expenses
• Labour Charges / Sub-Contracting Charges
• Services of Un-Regd. Commission Agents / Service Providers viz. Architects / Engineers / CAs
GST on RCM shall be payable at the rates applicable to the goods/services procured
RCM on Works Contract & Security Services – Now Removed
RCM - AnalysisParticulars RCM Applicability
ABC Ltd. hires legal drafting services of Advocate Mr. Prakash valued at Rs. 4000/-
ABC Ltd. Shall pay Rs. 4000/- to Mr. Prakash & also pay Rs. 720/- as GST on RCM
Credit of Rs. 720/- shall be available in next month
On 08/07/2017, ABC Ltd. purchases stationery of Rs. 1200/- from Un-Regd. PersonThere is no any other purchase on this date
GST on RCM not payable, as daily purchase does not exceed Rs. 5000/-
On 08/07/2017, ABC Ltd. purchases stationery of Rs. 1200/- and also pays Rs. 5000/-as Labour Charges (Both are Un-Regd. Persons)
GST on RCM payable:1. Stationery @ 12% = Rs. 144/-2. Labour Charges @ 18% = Rs. 900/-
Credit of Rs. 1044/- shall be available in next monthOn 08/07/2017, ABC Ltd. orders food & beverages of Rs. 7500/- from Restaurant, which is not registered
GST on RCM payable @ 12% = Rs. 900/-
Credit of Rs. 900/- shall NOT be available, as F&B are covered under Negative List of ITC
TDS & Returns in GST
Timeliness is the Key to Success
GST - TDS U/s 51Persons Liable 1. Central Government or State Government
2. Local authority3. Governmental agencies4. Such category of persons as may be notified
Threshold Limit Contract Value exceeding Rs. 2,50,000/-
Tax Rate 2% (CGST 1% + SGST 1% OR IGST 2%)
Time of Deduction Payment or Credit, whichever is earlier
Due Date for Payment / Filing of Return
10th of subsequent month
Due Date to Issue Certificate within 5 days of payment to the Government
Late Fees Rs.100 per day; subject to a maximum amount of Rs. 5,000/-
Type Form No. Due Date
Outward Supply GSTR-1 10th of next month
Inward Supply GSTR-2 15th of next month
Consolidated Return GSTR-3 20th of next month
Return of TDS GSTR-7 10th of next month
Annual Return GSTR-9/9A 31st Dec of next year
Annual Audit & Reconciliation Statement
GSTR-9B 31st Dec of next year
Filing of Returns37 ReturnsPer GSTIN
It is not 1 Return
If it was 1 Return, Why
Different Dates of Filing & Penalties?
Interest & Late Fees
Interest Delay in payment of Tax – 18% p.a. payable per day of delay Wrong availment of ITC – 24% p.a. payable per day of delay
Late Fees Delay in filing of Return - Rs. 100/- per return per day. Maximum penalty shall be Rs.
5,000/- per return per month Delay in filing of Annual Return - Rs. 100/- per return per day. Maximum penalty shall
be 0.25% of Turnover in the State
Electronic Ledgers
maintained on dashboard of a taxpayer by GSTN updated in real time will get auto populated
• Electronic Tax Liability LedgerGST PMT-01GST PMT-01
• Electronic Credit LedgerGST PMT-02GST PMT-02
• Electronic Cash LedgerGST PMT-05GST PMT-05
Books of Accounts
Strengthening the Back-Office Operations
Invoicing
Tax Invoice in Proper Format, duly signed, to be issued within 30 Days B2B & B2C Transactions
Tax Invoice / Demand Note– Specify the Land Deduction, CGST & SGST
RCM Invoices – Monthly 1 Invoice
Advances Received – Specify the Service Component & Tax Component
Invoices after Certifications – Raise final invoices after certifications
Proforma Invoices – An estimate of completion of Service
Credit Notes & Debit Notes
Only Supplier shall be the person to issue the Credit Notes / Debit Notes Recipient will be at mercy of Supplier
Short Supplies
Wrong Supplies
Material Returned / Rejections
Rate Difference
Reversal of Invoices raised for Other Group Companies
Accounts & Records to be Maintained
Maintain… Records related to construction & all other services, inward & outward supply of goods / services, stock of goods, details of input tax credit availed details of output tax payable and paid such other particulars as may be prescribed
Records to be maintained upto 72 months from the due date of furnishing of annual return for the year
Vendor Management / Selection
Vendor Registration Careful scrutiny of the vendors Avoid purchases from URD / Dealers under Composition Re-negotiate with vendors to provide new quotations with reduced prices as
everybody will get benefit of ITC so naturally the prices will come down Release of payment only after the vendor has uploaded the invoice on the GSTN Use GST Compliance Rating to identify non-compliant vendors In case of RCM, the GST payable amount could also be withheld, to avoid working
capital blockage Immediately don’t force the sub-contractors to get registered. If they fail to comply, it
will cost you. They, themselves will get register over the period
Adverse GST Compliance Rating
Chances of Scrutiny Blocking of ITC Lesser preference while trading Slower processing of refund claims Black-listed GSTINs cannot be uploaded in purchase details
Immediate Actions to be Taken
First things First!
Immediate Actions to be Taken
Project Assess the Project Completion %age of all Projects Check the completion of project vis-à-vis each customer / unit Forecast the future projections for balance project Identify the “indirect taxes” in the projections Check whether BCC could be obtained Compare the “GST Credit Benefit” Arrive at a discount structure to pass on the GST benefit
Immediate Actions to be Taken
Stock Closing stock of inputs, WIP & finished goods as on 30/06/2017 to be ascertained –
Physical Verification Description, Qty., Rate, Value, HSN Codes shall be necessary Such stock to be further bifurcated Rate wise for easy reconciliation Copies of invoices of the items lying in stock to be maintained separately (Purchase Bills,
Bill of Entry, Excise Paying Documents) Stock ageing to be made to ascertain if any stock is more than 1 year old Transitional Credit shall be available only of Excise Paid Stock
Immediate Actions to be Taken
Suppliers Reconcile the ledgers of Suppliers for 31/03/2017 & 30/06/2017 Collect the GSTIN of all the suppliers & their branches (if in different State) Avoid URD Purchases & Purchases from Composition DealersCustomers: Reconcile the ledgers of Customers for 31/03/2017 & 30/06/2017 Confirm whether the taxes under old law (VAT & Service Tax) have been completely
paid Inform them the applicable rate of GST @ 12% on unfinished part Analyse, whether any discount is feasible to be passed on (irrespective of the agreement
value) Negotiate with the Customers
Immediate Actions to be Taken
Books of Accounts / Accounting System Finalization of Books of Accounts for FY 2016-17, to get the correct picture as on
30/06/2017 Analyse P&L to ascertain the Expenses liable for RCM Changes in Accounting System / Software considering change of concept Adopt Bill-to-bill payments to Vendors Changes in Invoice formats / demand note formats Scheme wise accounts & profitability– to claim appropriate ITC Data to be available on “Real-Time” basis Continuous monitoring of all the transactions to avoid RCM and also to confirm the
availability of ITC / Reversal of ITC, where Project is completed and some units are unsold
Immediate Actions to be Taken
Working Capital Blockages RCM Tax Payments @ 12% - Customer not ready RERA
Employee Training Train the procurement staff Train the site engineers Train the accounts People, to adapt to the changes of reporting and accounting Invoices directly delivered on sites to reach the Accounts Department immediately
Immediate Actions to be Taken
Consult Professionals Architects – %age Certifications & BCC Engineers – Analyse the Procurements & Tax Structure Chartered Accountants – Analyse the GST Impact on Accounts, Direct Taxes, Cash Flow
Management & Working Capital Requirements Advocates – Changes in Agreement drafts
GST Specific Accounts Input Tax Credit Related Ledgers…
Output Tax Related Ledgers…
Bifurcating the taxes into transaction-type-specific ledgers will help proper reconciliation of books of accounts & data as per GSTN
ITC: CGST (Transitional) ITC: CGST ITC: SGST ITC: IGST
ITC: Deferred Credit (180 days) ITC: Not Admissible ITC: Taxes Paid
O/P: CGST O/P: SGST O/P: IGST O/P: RCM (Compulsory)
O/P: RCM (URD Admissible)
O/P: RCM (URD Inadmissible)
O/P: Advances Received
O/P: Interest, Late Fees, Etc.
Advantages & Dis-advantages
Pros & Cons
Advantages
No. of Indirect Taxes Reduced Manufactures, Retailers, Service Providers – At Par Online reporting will bring more transparency Simplification in Tax Structure - Division of transaction value into value of services /
goods not necessary for taxation For Inter-State transactions – No Declaration Forms Persons from un-organised sectors will come under tax regime GST will not be a cost to registered persons – No Hidden Taxes Prices will come down over the period of time
Dis-advantages
Implemented in Hurry 31 States – 31 GSTs + 1 at Central Level Too many Notifications – CGST, SGST, UTGST, IGST – already crossed 100 till date Complex Online Procedures Huge Compliance – Multiple Returns – Transaction Level Reporting ITC available – Only if it is available Online Blockage of Funds - Taxes on Advances Received / RCM / TDS / Non-availability of
Refund System of E-Way Bills in respect of movement of goods exceeding Rs. 50,000/- Large manufacturers / traders will be preferred over the smaller ones In cases of B2B transactions, recipient will not deal with the persons under Composition Real-Time maintenance of data will increase the compliance cost
Thank You…
