FAQ Category: Goods and Services Tax

1. What is GST?

• GST means Goods and Services Tax.
• It is dual structure-based tax levied by both Union and State Government.
• It has been introduced to curb the various limitations present in earlier indirect tax regimes.
• The taxable event under GST is ‘supply’ of goods or services or both.

2. What are the different types GST?

• CGST : Levied by Central Government on intra-State supplies through CGST Act, 2017.
• SGST : Levied by State Governments / Union Territories with Legislatures on intra-State supplies through SGST Acts, 2017.
• UTGST : Levied by Union Territories without Legislatures on intra-State supplies through UTGST Act, 2017.
• IGST : Levied by Central Government on inter-State supplies through IGST Act, 2017.
• Compensation Cess : Levied by Central Government on certain specific supplies through GST (Compensation to States) Act, 2017.

3. What are ‘Goods’ under GST?

GST is a single tax levied on both ‘Goods’ or ‘Services’ unlike the earlier tax regimes where there were separate taxes for goods and services.

• It shall also include.

• 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.
• Intangibles like duty credit scrips, copyright and carbon credit shall also be covered under ‘Goods’.

• It does not include.

• Money and securities.
• Alcoholic liquor for human consumption.

4. What are the ‘services’ under GST?

• Any transfer of title in goods is considered as supply of goods. Any transfer of right in goods or an undivided share in goods without the transfer of title is treated as supply of services.
• Any lease, tenancy, easement, license to occupy land shall be a supply of service. Further, any lease or letting out of the building shall also be a supply of service.
• Any treatment of process which is applied to another person’s goods i.e., job work shall be a supply of service.

• Following shall be treated as supply of services:

• Renting of immovable property.
• Construction including additions, alterations, replacements or remodelling of any existing civil structure, complex or a building intended for sale to a buyer except where the entire consideration has been received after the issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.
• Temporary transfer or permitting the use or enjoyment of any intellectual property right.
• Development, design, programming, customization, adaptation, upgradation, enhancement, implementation of information technology software.
• Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act.
• Transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration.

5. What are the advantages of GST?

• Mitigation of Cascading Effect
• Uncomplicated Compliances
• Boost to Make in India
• Regularization of unorganized sector
• Tackles corruption
• Easy Operations for E- Commerce
• Composition Scheme
• Technology Driven

6. What is CGST?

• CGST means Central Goods and Services Tax.
• It is applicable on intra-state supplies i.e., supplies made within a State.
• It is leviable in all States and Union Territories on intra-State supplies.
• The revenue of CGST goes to Central Government.

7. What is the maximum rate prescribed under CGST Act 2017?

• Presently, the different CGST rates notified are 0, 2.5%, 6%, 9%, 14%.
• As per the CGST Act, 2017, maximum rate of CGST cannot exceed 20%.
• The applicable rate of CGST is notified by the Central Government on the recommendations of the GST Council.

8. What is SGST?

• SGST means State Goods and Services Tax.
• It is applicable on intra-State supplies i.e., supplies made within the State.
• It is leviable within the respective State only.
• The revenue of SGST goes to respective State Governments.

9. What is the maximum rate prescribed under SGST Act 2017?

• Presently, the different SGST rates notified are 0, 2.5%, 6%, 9% and 14%.
• However, the maximum rate of SGST cannot exceed 20%.
• The applicable rate of SGST is notified by the respective State Government on the recommendations of the GST Council

10. What is IGST?

• IGST means Integrated Goods and Services Tax.
• It is applicable on inter-state supplies.
• It is applicable across all States and Union Territories of India.
• IGST is collected by the Central Government.

11. What is the maximum rate prescribed under IGST Act 2017?

• Presently, the different IGST rates notified are 0, 5%, 12%, 18% and 28% levied on all taxable inter-state supplies.
• However, the maximum rate of IGST cannot exceed 40% i.e., sum total of CGST and SGST/ UTGST.
• The applicable rate of IGST is notified by the Central Government on the recommendations of the GST Council.

12. What are Composite Supplies under ‘GST’?

The following composite supplies shall be treated as a supply of services:

• Works contract
• Supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration.

13. Are Petroleum products liable to GST?

Following five petroleum products, even though satisfy the definition of ‘Goods’, GST shall be levied on them from a date to be notified:

• Petroleum Crude
• High Speed Diesel
• Motor Spirit or Petrol
• Natural Gas
• Aviation Turbine Fuel

14. What is HSN Code and SAC Code?

The HSN code also known as the Harmonized System Nomenclature code is a commodity description code that is internationally adopted and recognized commodity description and coding system. It is developed by the World Customs Organization.

With the introduction of GST in India, the HSN is now being used as a 3-tiered system. Businesses having a turnover below prescribed limit do not need to provide HSN while others need 2-digit HSN codes 4-digit HSN codes or 8-digit HSN codes depending on the amount of turnover.

GST is levied on the ‘transaction value’. The taxable value of supply under GST includes:

• Except GST, any taxes, duties, cess, fees, and charges levied under any Act.
• GST Compensation Cess will be excluded if charged separately by the supplier.
• Any amount paid or payable by the supplier that the recipient has incurred but not added in the price.
• Any expenses incurred in relation to the supply like transport etc. should be included in the value.
• Other than Government subsidies, all subsidies received for the supply shall be included.
• Interest payable for delayed payment of consideration is also included.
• Value of supply excludes discount if it is given on the invoice or when it is given post supply as a part of agreement entered into at the time of supply and the recipient reverses the proportionate credit.

Registration is the first step of any tax system to ensure taxpayers are following the tax rules. Under the registration process, statutory authorities will issue a unique number to the business entity who is registering. Through this number, Government collects tax from the entity and gives him input tax credit for his purchases. No tax implications can be entertained without registration process.

Registration has many advantages as mentioned below for the business entity that pays tax:

• Authority to collect taxes from suppliers and provide input tax credit to recipients who have purchased from them.
• Establish a legal identity that identifies a business entity as a supplier of goods and/or services.
• Input credit tax flows across the right chain and reaches the right people giving them the benefits.
• Tax liability of entity settles smoothly as the taxpayer can avail input tax credit for taxes paid by him and further pay the same when the tax liability on outward supplies arise.

While registering for GST, there is an option to choose from below schemes:

• Composition Scheme (subject to prescribed limit of aggregate turnover)
• Regular Scheme.

Composition Scheme

It is an easy to understand and execute scheme which is optional and voluntary. It can be availed by those who have a turnover of less than 1.5 crore (for North-Eastern State – 75 lakhs) where supply of goods is involved and 50 lakhs where supply of services is involved. However, there are exceptions where some people or businesses can’t register under this scheme:

• Entities that manufacture ice cream, pan masala, tobacco or aerated water.
• Inter-State suppliers
• Casual taxable person or non-resident taxable person.
• Entities selling on e-commerce platforms.

In cases, where entities don’t wish to opt for composition scheme or are ineligible, they can apply for Regular Scheme.

Voluntary Registration

Any person having annual turnover less than the pre-defined limit or when there is no liability arising to take mandatory registration may apply for voluntary GST registration.

Calculation of Aggregate Turnover

To choose a scheme based on turnover limit condition, following are to be included while calculating the turnover:

1. All taxable supplies

2. All exempt supplies

3. Export supplies

4. Inter-State supplies between units of person with same PAN to be computed on all India basis.

GST paid on supplies or value of purchases having a tax liability on reverse charge basis shall be excluded from this calculation.

Once registered under GST, all the invoices issued to customers will be GST invoices. Let’s learn more about it.

Tax Invoice

Complete details of goods or services provided which include supply details, amount of the same and other expenses listed together is known as a Tax invoice.

Who should issue Tax Invoice?

If you have been issued a GST number after registration, you need to provide tax invoices to your clients for sale of good and/or services. On purchase, your GST registered vendors will provide GST-compliant invoices to you.

Mandatory fields to be included in a Tax Invoice

A tax invoice is generally issued to charge the tax and pass on the input tax credit to the buyer. A Tax Invoice must have the following mandatory fields-

• Invoice number and date
• Customer name
• Shipping and billing address
• Customer’s and taxpayer’s GSTIN (if registered)
• Place of supply
• HSN Code/ SAC code
• Item details i.e., description, quantity (number), unit (meter, kg etc.), total value
• Taxable value and discounts
• Rate and amount of taxes i.e., CGST/ SGST/ IGST
• Whether GST is payable on reverse charge basis
• Signature of the supplier

If the recipient is not registered under GST and the value of taxable supply is Rs. 50,000 or more, then the invoice should carry:

• name and address of the recipient,
• address of delivery,
• state name and state code

OTHER TYPES OF INVOICES

Bill of Supply

It has some similarities to a GST invoice except that bill of supply is devoid of any tax amount as the seller is not allowed to charge GST to the buyer. A bill of supply is issued in cases where tax cannot be charged like when a registered entity supplies exempted goods/services or registered person has opted the composition scheme.

Invoice-cum-bill of supply

If a registered entity is involved in sale of taxable as well as exempted goods/ services to an unregistered person, then he can issue a single “invoice-cum-bill of supply” for all such supplies.

Consolidated Invoice

If there are multiple invoices of less than Rs. 200 and the buyer is unregistered, the seller can issue a consolidated invoice for the multiple invoices at the close of each day.

For example, you may have issued 6 invoices in a day of Rs.50, Rs.70 and Rs. 100. In such a case, you can issue a single invoice, totalling to Rs 220, to be called a consolidated invoice.

Debit and credit note

Where the taxable value or tax charged in a tax invoice issued earlier is found to be less, the supplier shall issue to the recipient a debit note containing prescribed particulars. Where the taxable value or tax charged in a tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the supplier can issue to the recipient a credit note containing prescribed particulars.