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Overview of Goods and Services Tax (GST)

Goods and Services Tax (GST) is a multi-stage tax on domestic consumption. Payment of tax is made in stages by the intermediaries in the production and distribution process. Although the tax would be paid throughout the production and distribution chain, only the value added at each stage is taxed thus avoiding double taxation.

A registered person is required to charge GST (output tax) on his taxable supply of goods and services made to his customers. He is allowed to claim back any GST incurred on his purchases (input tax) which are inputs to his business. Therefore, the tax itself is not a cost to the intermediaries and does not appear as an expense item in their financial statements.

GST will have a dual rate mechanism I.e. A supply within a state will attract CGST+SGST. And a supply outside the state will attract IGST. It will have minimum exemptions to ensure free flow of credits.

The following taxes will be subsumed in GST:

Introduction

The Indian retail industry has emerged as one of the most dynamic and fast-paced industries due to the entry of several new players. It accounts for over 10 per cent of the country’s Gross Domestic Product (GDP) and around 8 per cent of the employment. India is the world’s fifth-largest global destination in the retail space.

This publication is prepared to give an overview to businesses in understanding matters with regards to Goods and Services Tax (GST) treatment on retailing and related industry.

Impact study

What will be the input tax credit available to the retailer?

In the present scenario,

  • The duty payment made at the time of import (CVD+SAD) of goods
  • The CST paid on interstate procurement of goods and service tax paid on input services (Services like include professional charges from various agencies, deemed services like rent on buildings and warehouses) are currently are a cost to the retailers.

The whole game is going to be in favor of the retail industry after the introduction of GST as the above taxes will be available as tax credit resulting in a favorable impact on the entire eco-system.

What are the positive impacts on retail sector as a whole?

Retail, FMCG and logistics business are most likely to be benefited of the GST implementation.

Procurement of raw materials:
  • Movement of goods would become less cumbersome, which would open up many opportunities for more suppliers /vendors to merge.
  •  Following this, a wider base of distributors would be available as state boundary paperwork will not be a hurdle, resulting to better access and low transportation costs.
  •  A favorable environment for a supply chain will reduce in transit inventory that will further reduce the working capital requirement. Simplified taxes & availability of input tax credits can also help fetch better margins.
Overhead cost:
  • As discussed earlier Services like include professional charges from various agencies, deemed services like rent on buildings and warehouses are one of the main costs of retailing industry and it attracts service tax at 14.5 per cent. Currently, the retailers cannot set off these costs like the other industries.
  • Thus it is an additional cost of operating in this industry which is burden. Under GST, taxes on services would be available for set off against taxes on goods. Thus, the retailers would be positively impacted.

What are the adverse impacts that retail sectors might face due to implementation of GST?

  • As per the model GST law, if any assesse has a multiple branches in different states and is involved in stock transfers, such transfers are subject to tax at IGST rate. This would result in an increased cash flow impact.
  • In the present system of taxation stock transfers are not taxable if sent against F forms. The major practice which is involved currently is if there is a frequent procurement located outside the assesse state, they normally set up a warehouse or a branch and route the stock against the F form to avoid CST.
  • However on a positive note, The IGST is a credible tax and the industry can thus shut down some of the locations which were just used to transfer goods from depot to branches cutting down the costs.

Time of supply

What is the relevant time of supply?

The Time of Supply of Goods is the earliest of any of the events given below:

  • The date of issue of invoice by the supplier or the last date on which he is required under Section 31, to issue the invoice with respect to the supply; or
  • The date on which the supplier receives the payment with respect to the supply.
The Time of Supply of Goods in case of reverse charge is the earliest of any of the events given below:
  • Date of receipt of goods; or
  • Date on which payment is made; or
  • The date immediately following 30 days from the date of issue of invoice by the supplier
The Time of Supply of service in case of reverse charge is the earliest of any of the events given below:
  • Date on which payment is made; or
  • The date immediately following sixty days from the date of issue of invoice by the supplier

Place of supply

What is the relevant place of supply?

  • The Place of Supply rules have gained importance as GST is a destination based tax.
  • The Model Act provides separate provisions which will help to determine the place of supply for goods and services.  
  • Typically for goods the place of supply would be location where the good are delivered. However, the above is a generic rule and will vary according to the goods or services proposed to be provided.
  • The relevant section relating to retail industry states that:

Where Supply involves Movement of Goods
Sec 5(2): Where the supply involves movement of goods, whether by the supplier or the recipient or by any other person, the place of supply of goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient.

So therefore, the place of supply will be determined under this Section based on the site or premises (geographic location) where the ‘delivery’ is complete for each supply.

Stated below is an illustration of the said rules.

Returns

How many returns have to be filled under GST?

GSTR 1 to GSTR 8 (8 Returns)

What are the returns to be filled by an assesse with standard purchases and sales?

Under normal cases returns to be filled are GSTR 1, 2, 3 and 8.

What has to be filled in the above mentioned returns?

  • GSTR 1 – Outward supplies made by the tax payer (Basically sales information) to be filed online on 10th of next month
  • GSTR 2 – Inward supplies for the tax payer (Basically purchase information) to be filed online on 15th of next month
  • GSTR 3 – Monthly tax returns to be filed online on 20th of next month
  • GSTR 8 – Annual tax returns (Basically sales information) to be filed online on 31th of December of the year.

Why the inward and outward supplies are have to be filed separately? What is the logic behind it?

Since all the returns are filled online when the GSTR 1 is filed by the Assesse in the portal the Output GST is reflected automatically in the customer account of the assesse to as input GST. I.e. For example

  • Mr.A Purchased goods from Mr.B a manufacturer and pays GST amounting to Rs. 50,000 (Input GST) on 17th August,2017
  • On 10th September, 2017 Mr.B files GSTR 1 stating his sales made to Mr.A and such other customers.
  • The GST E-filing portal automatically displays such sales of Mr.A as purchases in the E-Filling portal account of Mr.B. Where he is given the option of “Accept/Reject/Hold”
  • Thereafter GSTR2 is filed on 15th September, 2017.

From the above we can observe total transparency in filing of returns.

What is the invoice level details which are required for filing GST returns?

As per the process note on GST returns invoice level information will not be required to be given for a company where supplies are made to customers i.e. B2C supplies but HSN codes will be mandatory for invoice purposes.

For taxable persons up to the turnover of 1.50 cr. HSN codes are not required but in case turnover exceeds 1.50 cr. but up to 5 cr. HSN codes of 2 digits and turnover above 5 cr. HSN codes of 4 digits will be mentioned in invoices.

Frequently asked questions– Retail Industry

As a retailer is it mandatory to register under the GST act?

Any retailer who makes taxable supplies inter or intra state(i.e. standard and zero rated supplies) where the sales turnover in a twelve (12) months period has exceeded the threshold of Rs. 19,00,000 ( North eastern states the threshold is Rs. 9,00,000) is liable to be registered under GST.

What is the rate of GST Charged on Taxable Supply?

A four-tier GST tax structure of 5%, 12%, 18% and 28%, with lower rates for essential items and

Rates as per CEA
S.No. Class of goods Commodities covered Rate of tax under current regime Rate of tax under GST
1 Lower rate goods Steel, cement, iron etc. Steel:       5%
Cement: 14.5% 		Steel:     5.5%
Cement: 15%
2 Basic need items Milk, wheat, fruits etc. Exempt from tax. Nil
3 Standard goods Garments, watches etc. 5 – 5.5% 18%
4 Precious metals Gold, diamond, silver etc. 1 – 2% 2%-6%
5 Luxury goods SUV cars, tobacco, aerated drinks etc. 28% 40%

luxury and de-merits goods that would also attract an additional cess, was decided by the GST Council.

The rates includes both CGST and SGST are as under.

Registered persons supply taxable goods or services, they are required to charge and collect GST. Non-registered persons cannot charge GST on the supplies made by them.

Will GST be included in the price?

Since GST registered persons are entitled to claim the input tax incurred, GST does not become a cost to them and therefore, the value of goods or services at the point of sales before charging GST should not include the GST incurred on the input.

Introduction

The oil and gas sector is among the six core industries in India and plays a major role in influencing decision making for all the other important sections of the economy.

The Government of India has adopted several policies to fulfil the increasing demand. The government has allowed 100 per cent Foreign Direct Investment (FDI) in many segments of the sector, including natural gas, petroleum products, and refineries, among others. Today, it attracts both domestic and foreign investment, as attested by the presence of Reliance Industries Ltd (RIL) and Cairn India.

This publication is prepared by www.PayMyGST.com to give an insight to businesses aiding them to understand Goods and Services Tax (GST) and its impact on Oil and Gas industry.

Impact study

What is the effect of GST on Oil and Gas products Vis a Vis existing tax structures?

In the present scenario,

Product Applicable taxes in current tax regime Applicable taxes in proposed  tax regime
Crude Oil Cess , NCCD and VAT GST not applicable, current taxes will continue
Natural Gas VAT GST not applicable, current taxes will continue
HSD,MS,ATF Excise Duty, VAT GST not applicable, current taxes will continue
Naphtha, LPG, Kerosene No current tax Will attract CGST+SGST

What are the different categories of GST on production and extraction of crude and natural gas?

  1. Non creditable GST - treated as cost
    1. Import of goods, Import of services
    2. Local procurement of goods and services
    3. Interstate procurement of goods
    4. Extraction and sale of crude
  2. No GST:
    1. Extraction of gas
  3. Depends on end customer:
    1. Supply of gas

What are the different categories of GST on Mid-stream sector?

  1. Creditable GST
    1. Import of goods and services
    2. Local Procurement of goods and services
    3. Interstate procurement of goods

What are the different categories of GST on Refining and sale?

  1. Creditable:
    1. Sale to individual/industrial customer
  2. Proportionate credit:
    1. Local Procurement of goods
    2. Intra-state procurement of services
    3. Import of goods and services
    4. Interstate procurement of goods

What is the sequence of utilizing Credit?

  1. CGST - CGST and IGST
  2. SGST - SGST and IGST
  3. IGST - IGST , CGST and SGST

What are the conditions for availing input Credit?

  1. Any goods or services which are used for furtherance in business availed in credit, can be other ancillary goods or services also

What are the restrictions on reversal of Credits?

  1. Exclusion of MS,HSD,ATF, Natural Gas and crude to GST would result in reversal in majority credits
  2. Amount of credit restricted to  input tax attributable to taxable supplies

How are Interstate stock transfers taxable?

  1. Supply of goods or services by taxable person to another taxable or nontaxable person in the course or furtherance of business
  2. IGST would be a cost to the extent of non GST goods
  3. Taxability would increase GST credit pool and cost

What are the provisions relating to carry forward of existing credits?

  1. Taxable person can take credit of Amount of CENVAT/VAT Credit
  2. Shall not take credit unless such credit was admissible under earlier law and is allowed as credit in  this act

How are Works contract treated under the GST Regime?

  1. Would be taxable as service

General

What is applicability of GST on petroleum products?

The status of the petroleum products are as below:

  1. Crude, Motor Spirit , High Speed Diesel , Aviation Turbine Fuel and Natural Gas to be included at a future date – currently exempt
  2. Services related to petroleum products included in GST

What is the rate of GST Charged on Taxable Supply?

A four-tier GST tax structure of 5%, 12%, 18% and 28%, with lower rates for essential items and the highest for luxury and de-merits goods that would also attract an additional cess, was decided by the GST Council.

The rates includes both CGST and SGST are as under.

Rates as per CEA
S.No. Class of goods Commodities covered Rate of tax under current regime Rate of tax under GST
1 Lower rate goods Steel, cement, iron etc. Steel:       5%
Cement: 14.5%		   Steel:     5.5%
Cement: 15%
2 Basic need items Milk, wheat, fruits etc. Exempt from tax.   Nil
3 Standard goods Garments, watches etc. 5 – 5.5%   18%
4 Precious metals Gold, diamond, silver etc. 1 – 2%   2%-6%
5 Luxury goods SUV cars, tobacco, aerated drinks etc. 28% 40%

Registered persons supply taxable goods or services, they are required to charge and collect GST. Non-registered persons cannot charge GST on the supplies made by them.

What will be the impact of imposing GST on Petroleum products?

  1. Will reduce the imperfections in the new levy
  2. Will narrow the inflationary impact of the tax

What might be the idea behind imposing GST on Petroleum products?

  1. To have some minimal  tax of about 2-3% so that:
    1. seamless flow of credit is not broken
    2. Cascading is removed

Time of supply

What is the relevant time of supply?

The Time of Supply of Goods is the earliest of any of the events given below:

  • The date of issue of invoice by the supplier or the last date on which he is required under Section 31, to issue the invoice with respect to the supply; or
  • The date on which the supplier receives the payment with respect to the supply.
The Time of Supply of Goods in case of reverse charge is the earliest of any of the events given below:
  • Date of receipt of goods; or
  • Date on which payment is made; or
  • The date immediately following 30 days from the date of issue of invoice by the supplier
The Time of Supply of service in case of reverse charge is the earliest of any of the events given below:
  • Date on which payment is made; or
  • The date immediately following sixty days from the date of issue of invoice by the supplier

Place of supply

What is the relevant place of supply?

  • The Place of Supply rules have gained importance as GST is a destination based tax.
  • The Model Act provides separate provisions which will help to determine the place of supply for goods and services.  
  • Typically for goods the place of supply would be location where the good are delivered. However, the above is a generic rule and will vary according to the goods or services proposed to be provided.
  • The relevant section relating to retail industry states that:

Where Supply involves Movement of Goods
Sec 5(2): Where the supply involves movement of goods, whether by the supplier or the recipient or by any other person, the place of supply of goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient.

So therefore, the place of supply will be determined under this Section based on the site or premises (geographic location) where the ‘delivery’ is complete for each supply.

Stated below is an illustration of the said rules.

Returns

How many returns have to be filled under GST?

GSTR 1 to GSTR 8 (8 Returns)

What are the returns to be filled by an assesse with standard purchases and sales?

Under normal cases returns to be filled are GSTR 1, 2, 3 and 8.

What has to be filled in the above mentioned returns?

  • GSTR 1 – Outward supplies made by the tax payer (Basically sales information) to be filed online on 10th of next month
  • GSTR 2 – Inward supplies for the tax payer (Basically purchase information) to be filed online on 15th of next month
  • GSTR 3 – Monthly tax returns to be filed online on 20th of next month
  • GSTR 8 – Annual tax returns (Basically sales information) to be filed online on 31th of December of the year.

Why the inward and outward supplies are have to be filed separately? What is the logic behind it?

Since all the returns are filled online when the GSTR 1 is filed by the Assesse in the portal the Output GST is reflected automatically in the customer account of the assesse to as input GST. I.e. For example

  • Mr.A Purchased goods from Mr.B a manufacturer and pays GST amounting to Rs. 50,000 (Input GST) on 17th August,2017
  • On 10th September, 2017 Mr.B files GSTR 1 stating his sales made to Mr.A and such other customers.
  • The GST E-filing portal automatically displays such sales of Mr.A as purchases in the E-Filling portal account of Mr.B. Where he is given the option of “Accept/Reject/Hold”
  • Thereafter GSTR2 is filed on 15th September, 2017.

From the above we can observe total transparency in filing of returns.

What is the invoice level details which are required for filing GST returns?

As per the process note on GST returns invoice level information will not be required to be given for a company where supplies are made to customers i.e. B2C supplies but HSN codes will be mandatory for invoice purposes.

For taxable persons up to the turnover of 1.50 cr. HSN codes are not required but in case turnover exceeds 1.50 cr. but up to 5 cr. HSN codes of 2 digits and turnover above 5 cr. HSN codes of 4 digits will be mentioned in invoices.