GST and its Critical Components

GST is a consumption based tax where only final consumption is treated as the final use of a good. GST is expected to integrate taxes on goods and services across all supply chain for availing set-off and capture value addition at each stage. A continuous chain of set-off is expected to be established from the original producer's/ service provider's level upto the retailer's level which would eliminate the burden of all cascading effects. Suppliers at each stage would be permitted to set-off the GST paid on the purchase of input goods and services against GST to be paid on the supply of goods and services.

The critical components that form an integral part of the GST structure are elaborated as under:

a) Registration: Every supplier will be liable to be registered under GST in the State or Union territory, other than special category States (i.e.  Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, Uttarakhand), from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds 20 lakhs.

And where such person makes taxable supplies of goods or services or both from any of the special category States (Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, Uttarakhand), he will be liable to be registered if his aggregate turnover in a financial year exceeds 10 Lakhs.

    

b)  Invoicing: A registered person supplying taxable goods must, before or at the time of—

1. Removal of goods for supply to the recipient, where the supply involves movement of goods; or

2. Delivery of goods or making available thereof to the recipient, in any other case,

 

should issue a Tax Invoice within a period of 30 days from the date of provision of services, mentioning the details given below:

 

(a) name, address and GSTIN of the supplier;

(b) a consecutive serial number, in one or multiple series, containing alphabets or numerals or special characters- hyphen or dash and slash symbolized as “-” and “/” respectively, and any combination thereof, unique for a financial year;

(c) date of its issue;

(d) name, address and GSTIN or UIN, if registered, of the recipient;

(e) name and address of the recipient and the address of delivery, along with the name of State and its code, if such recipient is un-registered and where the value of taxable supply is fifty thousand rupees or more;

(f) HSN code of goods or Accounting Code of services;

(g) description of goods or services;

(h) quantity in case of goods and unit or Unique Quantity Code thereof;

(i) total value of supply of goods or services or both;

(j) taxable value of supply of goods or services or both taking into account discount or abatement, if any;

(k) rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);

(l) amount of tax charged in respect of taxable goods or services (central tax, State tax, integrated tax, Union territory tax or cess);

(m) place of supply along with the name of State, in case of a supply in the course of inter-State trade or commerce;

(n) address of delivery where the same is different from the place of supply;

(o) whether the tax is payable on reverse charge basis; and

(p) signature or digital signature of the supplier or his authorized representative:

 

c) Place of Supply: Supply of Goods or Services can be categorized in “Intra-state supply” & “Inter-state supply”. Inter-state supply includes international transactions. CGST/SGST/UTGST is to be levied on intra-state transactions while IGST is to be levied on inter-state transactions. These two types supplies are to be determined based on the destination of supplies. This can be concluded as follows:

· Location of supplier & place of supply in different states, it is “Inter-state supply”.

· Location of supplier & place of supply in same state, it is “Intra-state supply”.

Thus, place of supply is also essential to determine whether supply is inter-state or intra-state supply

 

d) Time of Supply: The time of supply fixes the point when the liability to charge GST arises. It also indicates when a supply is deemed to have been made. The CGST/IGST Act provides separate time of supply for goods and services.

 

e) Valuations: The value of a supply of goods and/or services shall be the transaction value that is the price actually paid or payable for the said supply of goods and/or services where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. The department has notified valuation rules mentioning the valuation methods for determining the value of goods or services under different scenarios.

 

f) Input Tax Credits: Input tax is the GST incurred on any purchase or acquisition of goods and services by a taxable person for the purpose of making a taxable supply in the course or furtherance of business. A person entitled to claim credit of the input tax can set off the same against the output tax liabilities, only if he satisfies the following criteria:

· he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents

· he has received the goods or services or both.

· the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilization of input tax credit admissible in respect of the said supply

· he has furnished monthly return in GSTR-3 (as per Section 39)

 

g) Returns:  Every registered taxable person must furnish outward supply details in Form GSTR-1 by the 10th of the subsequent month, for the Inward supplies received by a taxpayer (other than a compounding taxpayer and ISD) Form GSTR-2 will be filed by 15th of the next month which would be auto populated from the GSTR 1 details of the supplier. A consolidated monthly return in Form GSTR-3 is required to be filed within 20th of the next month.

 

Conclusion:

GST is a single tax on the supply of goods or services, right from manufacturer to consumer. Credits of input taxes paid at each stage will be available at the subsequent stage of value addition, which makes GST essentially a tax only on value addition on each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

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