Indian Goods and Service Tax - Procedural Aspect

Sandesh Mundra & Associates – Prepared by Naimesh Padhiar - [email protected] - 9426024975

Procedural Changes in GST from Stakeholders Prospective


GST – Interesting fact

IGST credit transfer - Politics


Involving Stakeholder’s Consultation on GST

• First welcome step by the Government in its journey towards GST implementation.

• Various proposals on the compliance process as suggested in the reports would facilitate greater efficiency in tax administration and ease of doing business.

• All the stakeholders should take this opportunity of providing feedback on the draft proposals

• comments/feedback on the same can be submitted through the MyGov.in portal, on which the discussion threads on GST would be made available


GST Implementation Time (inMonths)

•Both houses pass the bill independently with 2/3rd majority 1

•50% of the states ratify in their assemblies + Receipt ofPresidential Assent

3

•Formation of GST Council 1•Model GST law should come out for public suggestion at bothcentral and state level

3

•Elaborate Discussion on the Negative List 1•Central GST Law is passed by the centre + Presidential Assent 1

•State GST Law is passed by the states (after battling withMunicipalities and Local Bodies) + Governor’s Assent

3

•Educating the end users 3•GSTN – IT Network is established 1•New Registration numbers are allotted 1Minimum Time 18


Procedural Aspect grossly includes:

I. Registration II. PaymentIII. ReturnIV. Refund


Let us discuss them one by oneI. Registration process

Introduction:• Includes the process for registration

under the GST• Procedures & requirements for

registration• Procedures to be followed by registered

dealer under VAT & service provider under service tax

• Procedures for supplier under composition scheme

• GST number / GSTIN structure


Registration Process Under GST

1.Registration For New Tax Payers


Registration Crux For New Registrations

• Single process across the country for all

• PAN based unified Registration Mandatory

Regime Under GST Current Regime

• Different according to different States & Centre

• Only under Service Tax & Excise Regime.



• Simplified reg. for entities having presence in more than one state

• Link all transactions of a person


• Separate for ST/Excise/Different State VAT Laws

• No such linking under the current laws


• Registration on the basis of unified turnover threshold

• Within a PAN, separate registration for separate business verticals within a State possible


• Registration on the basis of different turnover thresholds

• Different registrations under different States & Centre



• Exempted turnover should also be included in threshold

• Input credit prior to registration

• Unified application to both tax authorities – State / Centre


• Only taxable turnover to be included in threshold

• Different rules

• Different applications to different tax authorities



• Real-time verification & validation of PAN, Aadhar Number & CIN.• Hard copy of the documents will not required to be sent if Digitally Signed


• No Real-time verification under the current procedures

• Hard copies are required to be send mandatory




• Deemed approval after 3 days

• Refusal to register by one tax authority deemed as refusal by both• In case of error the same shall be communicated to the applicant either by the Tax Authority directly or through the GST Common Portal


• Different time limits in States & Central laws

• Refusal according to prevailing State and Central Laws

• No such common portal. Different methods according to State Rules & procedures



2. Registration For Existing Tax Payer’s


Registration Crux For Registered Tax Payers

• Dealers registered under VAT laws, Service Tax or Central Excise will be granted GSTIN

• Validation of PAN• On the basis of validated PAN GSTIN shall be

generated • Intimated to taxpayer through State and Central authorities

• Remaining data shall be collected & verification shall be conducted after allotment of the number

• Cancellation if business not commenced within stipulated time• Rating to dealers / Blacklisting norms – sms facility



3. Registration For Suppliers Under Composition Scheme


Registration For Supplier Under Composition Scheme

• Threshold for composition scheme

• No input tax credit can be claimed

• Switch from composition to regular scheme - voluntarily or on crossing threshold


• Different Composition Schemes as per different State Laws• Different methods defined under various State Laws• As per Rules prescribed under various State Laws


Registration For Supplier Under Composition Scheme

• To opt at the beginning of the year – applicable till eligibility or opting out

• Interstate supplies restricted


• As per Rules prescribed under various State Laws

• As per Rules prescribed under various State Laws



4. GSTIN Number Structure


Structure of GSTIN Number

• 15 digit Alphanumeric structure

• First Two digits State Code

• Next 10 Digits will be PAN numbers

• 13th Digit for Business Verticals of entities with same PAN in same State

• 14th digit left blank for future use & 15th digit – Checksum


• For Service Tax 15digit alphanumeric number but different in States as per State Rules


GST – Interesting facts – Numbers in Rajya Sabha

Opposition – Strength of 132 / 243 members 69 of the Congress, SP 15, 12 of the TMC, the JD(U)’s 12, the CPM’s 9, 6 of the NCP,

the CPI’s 2, the NC’s 2, the RJD 1, the JD(S) 1, the JMM 1, Kerala Congress-M 1 and INLD 1.

Besides this the House has 12 nominated members who owe their berths to the Manmohan Singh government

As against this, the BJP (45) and its allies - add up to only 60 members. As many as 42 MPs — belonging to the AIADMK (11), BSP (10), BJD (7), DMK (4),

Independents and others (7) can swing either way.


Payment Process Under GST

Introduction:• Includes the process for

payment of tax under the GST• Types of taxes under GST &

modes of payments• Procedures to be followed by

departments• Proposed accounting &

reconciliation systems for the receipts



1. Tax types and modes of payments


Tax Types and Modes of Payments

• Included 4 types of Taxes viz. CGST, IGST, Additional Tax and SGST


• Separate payment of taxes as per the State wise Laws



• Three Modes of Payment• Electronic including CC/DC

(Mode I)• Over The Counter Payment

(for Payments upto Rs.10,000/-) (Mode II)

• Payment through RTGS/NEFT (Mode III) – any bank


• Payment can be made through online Net banking or manual through authorized banks. Only few banks are authorized to collect.



• Payment can be accepted by Departmental officers in enforcement cases only


• Different rules & procedures as prescribed by States & Centre for recovery of taxes



2. Basic Features


Basic Features

• Only electronically generated Challan from GSTN for all 3 modes

• Unique 14-digit Common Portal Identification Number (CPIN) for each challan

• Challan can be generated by Taxpayer, authorized representative or Departmental officers


• Challans generated can be either electronic or manual

• Unique 20 digit CIN is generated under service tax & different for VAT as per State wise

• Challan is normally generated once at the time of payment


Basic Features

• Single challan for all four types of taxes

• System of electronic Personal Ledger Account (cash ledger) on GSTN for each taxpayer


• Different for VAT Service Tax & Excise

• No such system under current regime


Basic Features

• RBI to act as aggregator and anchor of flow of fund and information about receipts

• Automation and transparency in flow of information

• E-scroll (statement of tax payment) facility will be provided by RBI


• No such mediator under current laws

• Transparency & flow of information depending on the State`s working

• No such procedures under current laws



Will CGST be the only thing that gets passed



3. Proposed Accounting System


Proposed Accounting System

• 4 account heads for each tax and its interest, penalties etc.

• Standard uniform Accounting Codes for all taxes to facilitate settlement of IGST on the basis of centralized reporting

• Common Accounting Codes for Centre & States


• Under service tax different codes as per services. Account heads under VAT as per State wise

• Different schedules & codes of payments for VAT & service tax

• Different for States & Centre



4. Reconciliation of Receipts


Reconciliation of Receipts

• Use of only system generated challans – no re-digitization in the entire work flow

• CPIN to be generated by GSTN - to be used as a key identifier up till receipt by Bank

• CIN to be generated by collecting Bank - to be used as a key identifier


• Different reconciliation methods as per States & Centres


Reconciliation of Receipts

• Accounting Authorities to play a paramount role in reconciliation• Accounting on the

basis of RBI data,• Reconciliation on the

basis of GSTN and bank data


• Different reconciliation methods as per States & Centres




Congress opposition Grounds Dispute settlement 1% levy 18% Rate No definition of Supply Exclusion of Tobacco / Electrity / Alcohol GST Council – centre’s weight Revenue of Panchayat’s and Municipalities to be safeguarded Special provisions for states like Goa / Puducherry


Returns Under GST

Introduction:• Includes the procedures & types of returns to be filed under the GST

• Periodicity & due dates for the returns

• Invoicing & credits under GST

• Revision of filed returns


Returns Under GST

1.Basic Features


Basic Features

• Common e-Return for all taxes

• Separate returns for different categories of taxpayers• Returns in sequential manner with different cut-off dates for auto-population of return and invoice


• Different returns for Centre & State taxes

• Different returns for categories tax payers State wise

• Different due dates & procedures State wise


• Provision for filing revised information• Differential Tax

liability to be captured through Debit Note / Credit Note / Supplementary invoices / correction mechanism


Basic Features

• Complete return is revised


• Payment of due tax is must

• Maintenance of electronic Cash Ledger


Basic Features

• Technically tax can remain unpaid under ST


• Maintenance of electronic ITC Ledger

• Maintenance of electronic Tax liability Ledger


Basic Features

• No such provisions


Returns Under GST

2. Periodicity of Returns



Periodicity of Returns

• Normal/Regular taxpayers – monthly return - GSTR -1

• Compounding taxpayers to file quarterly return: by 18th day of succeeding month of the Quarter - GSTR-4• Foreign Non-resident Taxpayers to file monthly return within 7 days after expiry of registration- GSTR-5


• Different due dates & Return forms as per States & Centre



• Input Service Distributors (ISD) taxpayers to file monthly return by 5th day of succeeding month-GSTR-6

• Tax Deductors to file monthly TDS return: by 10th of succeeding month – GSTR- 7





• Casual taxpayers to file same return form of normal taxpayer

• UN agencies to file return for the month in which they make purchases





• All Regular and Compounding taxpayers to file Annual Return

• Last date - 31st December following the end of the financial year

• Reconciliation statement to be filed by taxpayers who are required to get accounts audited under IT Act




Expected Tax Rates under GST RegimeGST RatesoExpected to be in the range of 18-27%oNo clarity on composition schemes without ITC benefit

o Rates may be lower by 4% if we are under exemption inService

Tax

Existing Taxes under a Building ContractParticulars Amt in Rs. Excise VAT Service

TaxTotal Tax Tax in Rs

Cement 15 12% 15% 27.00% 4.05Steel 25 12% 5% 17.00% 4.25

Other Materials 15 12% 10% 22.00% 3.30Sand / Aggregate 10 0% 5% 5.00% 0.50

Labour 20 14% 14.00% 2.80Admin & o/h 3 14% 14.00% 0.42Depreciation 2 15% 14% 29.00% 0.58

Profit 10 14% 14.00% 1.40Composition VAT 2% 2.00

Total 100 19.40


Returns Under GST

3. Invoice Matching & Credit Reversal


Un-matchedMatched

ITC Reversed to be paid along with Interest by Purchaser

Two months period for reconciliation

Reconciled Non-Reconciled

ITC Finalized in Purchaser's ITC Ledger

ITC finalized in Purchaser's ITC ledger

GSTN to inform purchaser

GSTN to inform both parties

Matching by GSTN


Invoice Matching & Credit Reversal

• B2B supply information given by the supplying taxpayer in GSTR-1will be auto-populated into GSTR-2 of the counterparty

• Purchasing taxpayers allowed to add invoice details in GSTR-2 & avail credit if they have received supply goods/service




Invoice Matching & Credit Reversal

• Counterparty registered taxpayers to have a 2-day window to reconcile invoice information among themselves prior to filing of GSTR-3

• Credit availed on unmatched invoices shall be auto-reversed in subsequent return




Returns Under GST

3. Revision of Return


Revision of Returns

• Revision of information permitted

• Changes in Tax liability / ITC amount to be handled through Debit- Credit Notes, Revision of supply invoices, Amendments / Corrections


• Permitted under current regime

• No such provisions under current regime


Refund Process Under GST

Introduction:• Includes the situations where

refunds may arise• Procedures & requirements for

refund of GST• Time limit for application of

refund• Interest on refunds• Date of application of interest

on refunds


1. Situation where refund would arise



Situation where refund would arise


Different rules & procedures for States & Centre


2. Time limit and Documents required for filling refund




• Different dates & procedures as per States & Centre

Time limit required for filing refund

• It is recommended that a period of one year from the relevant date may be allowed for filing of refund application.

The following dates are recommended as relevant dates for different type of refund cases under GST:


Time limit required for filing refundS. N. Situation of Refund 1 year from below Relevant

Date1 On account of excess payment Date of payment of GST

2 On account of Export of GoodsDate on which proper officer gives an order for export known as “LET EXPORT ORDER ”

3 On account of Export of Services Date of BRC

4 On account of finalization of provisional assessment Date of the finalization order

5In pursuance of an appellateauthority’s order in favour ofthe taxpayer.

Date of communication of the appellate authority’s order


Time limit required for filing refundS. N. Situation of Refund Relevant Date

6On account of no/less liability arose at the time of finalization of investigation proceedings

Date of communication of adjudication order or order relating to completion of investigation

7On account of accumulated credit of GST in case of a liability to pay service tax in partial reverse charge cases.

Date of providing of service

8For refund arising out of payment of GST to Embassies or UN bodies, etc. on the basis of applications filed by such persons

Date of payment of GST

9 On account of refund of accumulated ITC due to inverted duty structure

Last day of the financial year


• Documents evidencing tax payments required to be enclosed with the refund application

• Copy of proof of deposit of tax & invoices & Documents evidencing export

• A CA Certificate may be called for evidencing that the tax burden has not been passed on to the buyer. (“unjust enrichment”)


• Different Rules & procedures as per States & Centres

Documents to be filed for refund:


3. Interest on Refunds



• Prescribed time limit of 90 days from the date of the system generated ack, after which interest clause will start automatically

• Rate of interest in case of refund may be around 6%


• Different Rules & procedures as per States & Centres

Interest on Refunds:


Issues Under Current GST Process

• Whether any self declarations / affidavit to be filed at the time of registration or surrender

• No details for authorization or declarant filing the application

• Generally it is expected that there would be lesser compliance burden in GST regime but looking at the return process, every registered taxpayer would be required to file 3 returns each month, it means where a company is registered in 10 states, the number of returns required to be filed would be (10*3*12) 360 returns!!


Issues Under Current GST Process

• “over the counter” payment will be available for payments upto Rs. 10000/- per challan only. However, the report does not describe whether Rs. 10000/- per challan will be per challan per day or per challan per month or something else

• Proposed payment process does not allow other means of payment such as book adjustments under Service Tax


Views on Current GST Process

• RCM should be avoided in GST except for transaction from non-taxable territories or RCM with a threshold to be introduced.

• A statement similar to 26AS should be made effective for ITC credit & transparency

• Since almost all procedures are done on real time & online basis process of refund of taxes should be prompt without any delays


Date post:	21-Apr-2017
Category:	Law
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