Categories
GST

Input Tax Credit (ITC): The Backbone of GST

ITC - Input Tax Credit

When we buy goods and services, we pay tax on them. Imagine yourself to be a businessman. You pay tax on the goods you purchased. When you resell them, you will also collect tax for depositing them to the government. And this cycle goes on and on. What do you think will happen to the price of the good? It will skyrocket due to excessive taxation. But that is not the case today. Thanks to the concept of Input Tax Credit (ITC).

Want to know about this miraculous concept? Here you go.

Table of Contents

  1. What is Input Tax Credit?
  2. Why Input Tax Credit Introduced?
  3. Conditions for claiming ITC
  4. Reversal of Input Tax Credit
  5. How to Claim ITC?
  6. Final Thoughts
  7. Frequently Asked Questions

What is Input Tax Credit?

As the name suggests, Input Tax Credit is the tax credit you can avail while paying GST. It means that the GST paid while purchasing the inputs can be adjusted while depositing GST. Let’s understand it with an example.

Suppose you have paid GST of Rs 100 while buying raw materials of Rs 800. Then, you produce the final product and sell it for Rs 1000. Assuming the rate to be 18%, you have to deposit GST of Rs 180. But here’s a catch. You have to deposit just Rs 80 (180-100), as you have already paid GST while purchasing raw materials.

Why Input Tax Credit Introduced?

You may wonder why the government introduced the concept of Input Tax Credit when it could have earned extra revenue without it.

It is pretty simple. The government did so to ensure public welfare. How? Without ITC, you would charge a higher price, as the input cost includes GST paid on inputs. Due to ITC, you can get a credit of Rs 100. So, you won’t consider it as your cost of production.

This way, you can sell your products at lower prices. It makes the product affordable to more people. Thus, it leads to public welfare. See how generous the government is. It sacrificed its tax revenue for the sake of the people.

Conditions for claiming ITC

As you can see above, an input tax credit reduces the tax revenue of the government. So, the government won’t let you off the hook easily. It has placed some conditions that you will have to fulfil to claim ITC:

  • Only a person registered under GST can claim the input tax credit. After all, unregistered business owners don’t collect GST in the first place. Availing ITC is a distant dream for them.
  • You can claim ITC only for business transactions. If you have bought goods for personal purposes, you are no more than an ordinary customer.
  • The businessman should have proof of the purchase transaction. In this case, you should have a tax invoice for the purchase of inputs. How can you expect the government to believe you if you don’t even have a tax invoice?
  • You should have received the goods: Merely having a tax invoice won’t solve your problem. You should also receive the goods. What if you claimed ITC and returned the goods afterward? It will create a big mess.
  • Both the parties should file the return: Both the buyer and the seller have to file GSTR-3B and GSTR-1. Without you filing these returns, it wouldn’t be possible for the government to track the movement of goods.

Here’s a fun fact. You can claim input tax credit only if the seller has deposited the tax. It means that you have to force the seller to file the return and pay tax on time if you want to avail of ITC.

Our government is a bit savage. It created tensions between the parties and enjoyed the view from the top.  

Special Points

  • In the case of a capital good, you can either claim ITC or write off the tax paid over the asset’s useful life through depreciation. Our government is not that benevolent to allow both ITC and extra depreciation at the same time.
  • If you receive the goods in installments, you can claim ITC on receipt of the last installment.

Note: A businessperson registered under the composition scheme of GST cannot claim ITC. It is so because he pays tax at concessional rates. Letting him avail ITC can even make the total tax liability less than zero. That would make no sense.

Reversal of Input Tax Credit

No doubt, the conditions to claim ITC is cumbersome. But it doesn’t mean that your life will be a bed of roses after you have claimed ITC. It can also get reversed, i.e., you have to pay the ITC previously availed.

It happens in any of the following cases:

  • Using goods for personal purposes: Did you think you can avail ITC on goods by showing them for business use? Well, it is not. If you have done so, you have to pay the ITC you availed previously. You may also have to pay the prescribed penalty for deceiving CBIC.
  • Making exempt supplies: In GST, the sale of essential commodities is exempt from GST. It is to avoid increasing the price of necessities.

But there is one flaw here. The supplier can’t claim ITC. So, he will include the tax paid in the cost as well. And charge the price accordingly. It defeats the entire purpose of making the sale exempt from tax.

  • Non-payment of invoices within 180 days: You could avail of ITC only after the seller has deposited the tax. But it doesn’t mean that you can delay his payment forever. He has a right to receive timely payments as well. And even the government recognizes it.

That is why this rule got implemented. Either pay the supplier within 180 days. Else, you will be ineligible for ITC.

  • Transactions of Blocked Credit: There are some transactions where ITC is blocked. It means that you can’t avail of ITC if you perform any of these services. If you have availed of ITC previously, you have to reverse it.

How to Claim ITC?

All of the above would have helped in knowing about Input Tax Credit. But what is the point if you don’t even know the way to claim ITC? Don’t worry. You will get your answer here.

You have to mention the details in GSTR-3B. It contains the following particulars.

As mentioned above, you can claim ITC only if the seller has filed the return and deposited the tax. But we are quite the forgetful breed. So, some sellers may forget to do the same.

That is why the government allows provisional credit of 5% of the eligible ITC (as per the latest update). For example, if the GST return shows an ITC of Rs 100, you can claim an ITC of Rs 105 if some suppliers have not provided the details.

Final Thoughts

Due to the importance of Input Tax Credit, you can call it the backbone of GST. So, it is essential to have all the necessary documents, especially the GST-compliant invoices. There are some situations where you can’t claim ITC. Even the ITC previously claimed by you may get reversed in exceptional circumstances.

In the end, keep in mind all of them. Else, all of your GST paid will go down the drain.

Frequently Asked Questions

Q1: How do you calculate ITC?

In simple words, ITC is the difference between the tax payable on the sale of goods and the tax already paid on the purchase of inputs.

Q2: What happens if I am not able to utilize the entire ITC?

The balance input tax credit will be carried forward to the next month till you avail it. If you couldn’t claim it till the end of the prescribed period, you can claim a refund of GST.

Q3: How do I know my Input Tax Credit?

To know about the available ITC, log in to the GST E-Filing portal. You will find the relevant details in the Electronic Credit Ledger.

Q4: What is the time limit for claiming ITC?

You can claim input tax credit within 180 days from the date of invoice issued by the supplier.

Categories
GENERAL GST

Debit Note and Credit Note: Adjust Your Sales Easily

When we purchase goods, we must collect an invoice. After all, what will you do if you need proof of purchase? There may be situations that may lead to change in the value of invoices. You can’t edit the invoices, can you? That is where a debit note and credit note comes to the rescue.

Here, you will understand these incredible instruments. So, what are you waiting for? Let’s start.

Table of Contents

  1. What is a Debit Note?
  2. What is a Credit Note?
  3. Debit Note and Credit Note in GST
  4. Things You Should Keep in Mind
  5. Frequently Asked Questions (FAQs)
  6. The Bottom Line

What is a Debit Note?

As the name suggests, it is a document which states that a party’s account gets debited in the books of the sender of the debit note. In simple words, you can say that a buyer sends a debit note to the seller if he wants to return the goods due to defects or any other reason. Let’s understand it with an example.

Suppose you (XYZ) buy goods from a person (Let’s call him ABC) worth Rs 20k. But you found that the goods were defective. So, you return the goods to ABC. But merely doing so won’t fulfill the return transaction. You have to send proof of return of goods as well. So, you send a debit note to ABC stating that ABC’s account gets debited in your books.

If you know the concept of journal entries, you will be able to relate easily. When you purchase the goods on credit, you make the following entry in your books.

Purchase A/c Dr
To ABC A/c
20k

20k

In case of return of goods purchased, the above journal entry gets reversed. As the purchase transaction gets reversed as well.

ABC A/c Dr
To Purchase Return A/c
20k

20k

As you can see, the seller gets debited on the return of goods purchased. Hence, the name debit note.

Reasons to Issue Debit Note

Did you think that the buyer issued a debit note only in the case of purchase return? Well, you are not the only one. If you look closely, you will realize that the debit note is issued when the other party gets debited. Purchase return is simply one of the reasons.

Besides that, the buyer can issue a debit note when he receives less quantity of goods. He can also create it in case of an overcharge or discount agreed by the seller. Even more, the seller can issue a debit note if he undercharged the buyer by mistake.

What is a Credit Note?

A Credit Note is a document which states the party’s account gets credited in the books of the sender. Or, you can say that the seller sends a credit note if he delivered defective goods or other reasons. It is issued against the debit note issued by the buyer. In short, it is the opposite of a Debit Note.

Let’s take the same example as above. You (XYZ) issued a debit note to the seller (ABC) as you debited his account in your books. In the same way, ABC will issue a credit note for the same transaction. It will act as proof that the seller has agreed to the authenticity of the debit note.

Here are the journal entries which explain the logic. At the time of sale of goods, the entry in the books of ABC would be:

XYZ A/c Dr
To Sale A/c
20k
20k

But when the buyer returned the goods, ABC made the following entry:

Sales Return A/c Dr
To XYZ A/c
20k
20k

The credit note gets its name from the fact that the account of another party gets credited.

Reasons to Issue a Credit Note

As mentioned in Debit Note, sales return isn’t the sole reason to issue a credit note. Besides that, the seller can also create a credit note if he has overcharged the buyer. Or he has agreed to give a discount to the other party.

Even a buyer can issue a credit note if he believes that the seller has undercharged him. But that will happen once in a blue moon. After all, it is next to impossible to find such an honest man in today’s world.

Debit Note and Credit Note in GST

Besides the accounting use, a debit note and credit note are crucial, even in GST. They help in determining the value of supply. Based on it, the seller of goods and services has to pay GST. So, remember to create them as per the appropriate format to comply with the provisions of Goods and Service Tax.

To do so, you should include the following details:

  • Name, address, and GSTIN of the supplier
  • Unique serial number of the note
  • Date of issue
  • Name, address, and GSTIN (if applicable) of the recipient.
  • The invoice number against which the note is to be issued
  • The taxable value, applicable tax rate, and the amount of tax
  • Stamp, seal, or signature of the seller

Things You Should Keep in Mind

There are some things you should keep in mind regarding the debit note and credit note. They are as follows:

  • You can take the GST credit anytime through a credit note. But don’t forget that you have to take credit before September following the end of the year when the supply takes place.

For example, you sold goods in January 2021. So, the year of supply will be FY 20-21. Hence, you can avail of the credit before September 2021.

  • Only the supplier will be considered legal for tax purposes. So, there will be no effect if the recipient issues one of them.
  • You should retain them until the expiry of 72 months from the due date of filing the annual return of the time of supply. Considering the above example, you should retain the notes until August 2024.

Are you worried about GST compliance? Well, all your problems end here. With Enalo, you can create GST-compliant invoices with a ready-to-use template. You can also track accounts receivables and get real-time cash flow reports through an interactive dashboard.

Frequently Asked Questions (FAQs)

Q1. Can we claim ITC on a debit note?

Ans: A debit note reduces the aggregate turnover of the seller for the purpose of GST. So, you can claim ITC on a debit note. But you should consider the time limit mentioned above.

Q2: How do you create a Credit Note?

Ans: You have to create the credit note via the accounting software you use. Firstly, visit your dashboard of the website/application of the software company. Then, you will see an option to create a credit note. Afterwards, fill in the details and share the credit note with the buyer.

Q3: What is the difference between a Debit Note and a Credit Note?

Ans: A buyer issues a debit note in case of faulty goods, etc. to decrease the value of purchase. On the other hand, a seller issues a credit note in case a refund is to be made.

Q4: Is there any validity of a debit note?

Ans: There is no such concept in the case of a credit or debit note. But the seller can claim the Input Tax Credit benefit in GST up to September of next Financial Year. You can’t use it after that.

The Bottom Line

Due to some circumstances, there may be changes in the value of the invoice. And using a debit note and credit note is the most effective way to do the same. Besides accounting, they are also used in GST to adjust the turnover of the supplier. But remember the above things while using them.

Until next time.

Categories
GST

GST Audit – A quick guide for Goods and Service Tax Audit 2021.

We all know that businesses will need to do a GST audit with a turnover of more than Rs 2 crores from selling products or services during the financial year. 

But do you know what is GST Audit, GST Audit Limit, GST Audit Applicability?  Well, if you’re in confusion, You have come to the right place. In this article, we will learn about all these.

Table of Contents

What is a GST Audit and why do we need it?

As we know, GST is a taxation system in which a taxpayer must calculate his or her tax liability, pay any taxes, and file returns. As a result, a rigorous audit process is needed to ensure that the taxpayer has adequately self-assessed his tax payments. 

The government has taken several steps to ensure that GST is fully enforced, one of which is an audit.

A Goods and Services Tax audit contains the review of a GST enrolled individual’s records, refunds, and other documents. It also verifies the accuracy of the turnover reported, taxes charged, refunds received, input tax credits claimed, and other GST Act compliances that an approved expert must verify.

Therefore, it is an important process for both the government and businesses having GST.

Types of GST Audit

GST Audit VarietiesWho Performs this?When to do?
Audit on the basis of turnoverChartered Accountant (CA) as appointed by the taxpayerAt the moment of turnover exceeding  2 crores
General AuditCommissioner of CGST/SGST or any Officer authorized by the governmentAs per the order of Commissioner( 15 days notice in advance)
Specialised AuditCA(Chartered Accountant) to be appointed by the taxpayerAs per directions of Deputy Commissioner or Assistant Commissioner with prior approval of Deputy Commissioner

GST Audit Limit

Any taxable individual whose annual turnover exceeds the specified limit must have his accounting audited by a chartered accountant or a cost accountant. GST Audit limit or Threshold is Rs. 2 crore as per the latest GST Rules.

To do the GST Audit, the taxpayer needs to fulfill the following requirements.

  • The audited version of the financial statements.
  • A valid summary document in the form GSTR-9C coordinating the value of products reported in returns with its evaluated annual financial report, and other details as specified.

Things to include while calculating GST Audit Turnover limit

Following are the things that you must include while calculating the GST Audit turnover limit.

  • Applicants need to include the pieces of equipment that agents/workers are given on behalf of the principal.
  • All services that are excluded. Farm produce, for example, is delivered with labelled ready-to-eat food.
  • The GST doesn’t cover both taxes. For example, on the selling of movie tickets, there is an Entertainment Tax.
  • Except for supplies subject to the reverse charge, all taxable (interstate and intrastate) supplies are subject to the reverse charge.
  • The exchange of materials between various business market segments.
  • On a principal-to-principal basis, products in supply to/received from work employees.
  • All export/zero-rated goods that have value at that same amount.

Things to eliminate while calculating GST Audit Turnover Limit

  • All CGST, SGST, or IGST taxes, and Reimbursement Fee that is imposed under the Goods and Service Tax should be eliminated.
  • Inward supplies that are subject to a reverse rate should be excluded while calculating GST Audit Limit.
  • Schedule III of the CGST Rules. It includes activities that are neither a source of products nor a service.
  • Goods shipped to or returned by employees.

Accounts to be audited by the GST auditor:

Businesses eligible for GST audit should review the accounts or records listed as below:

  1. Purchases transaction data, Stock transactions, Sale transactions, and Expenditures transactions.
  2. Any records about the GST department’s interactions for the year. Utilisation records of the input tax credit.
  3. Output tax which is due.
  4. Generate a record of E-way bills during the audit period.

Mandatory Forms for GST Audit Applicability:

Which taxpayer should fill the forms?Mandatory Forms Requirement under GST
An ordinary taxpayer filing GSTR 1 and GSTR 3BGSTR-9
A Taxpayer under Composition SchemeGSTR-9A
E-commerce AdministratorGSTR-9B

Candidates eligible for GST Audit Applicability

Taxpayers whose turnover exceeds Rs. 2 crores in Financial YearGSTR-9C

GST Audit Date

The Ministry of Finance has set the deadline for filing GSTR 9, GSTR 9A, and GSTR 9C form for the fiscal year 2020-21 as of December 31, 2021. In order to avoid penalty, businesses must file the GSTR 9 annual return form and the GSTR 9C audit reconciliation form as soon as possible. However, sometimes the GST Audit Due Date gets an extension. In that case, it is crucial to get the necessary updates from the official press.

Now let us look at why it is vital to do Audit accurately. Because in case of improper GST audit, the government can take strict actions such as special audits or inspections.

Special Audit

1. When a special audit might happen?

The Assistant Commissioner may order a special audit depending on the nature and importance of the situation and also the revenue’s interest. Suppose he believes that the amount is not being accurately disclosed or that the incorrect compensation has been obtained during the inspection, investigation, or review. In that case, he may conduct a special goods and services tax audit.

2. Do Special audits have a time limit?

Yes, the auditor will have 90 days to file the report. However, the tax officer may extend this period for another 90 days on the taxable person’s or auditor’s request.

3. Is there any checklist for Goods and Service Tax Audit?

Yes, we have mentioned the GST Audit Checklist, which auditors should duly take care of.

  • GSTR 3B matches with GSTR 1 and GSTR 2A.
  • GSTR Amendment Correctly complies with ITC.
  • Examine the invoice format carefully.
  • Reversal of the Input Tax Credit (ITC) for failure to pay within 180 days.
  • e-Way Bills and Invoices Reconciliation.

Conclusion

In this article, we have learned about the Goods and Service Tax Audit in detail. It is an essential aspect of the GST, and you should always keep this guide handy to make sure the correct audit of Goods and Service for your business has been done.

Categories
GST

GST Portal Login – a complete guide.

GST portal login

Table of Contents

What is the Government’s GST portal?

One of the options that produce the Goods and Service Tax regime a real winner is that currently, tax management comes with technological support through GST portal login. Now, you can avail of tax services online to file GST, read credit ledgers, or claim tax refunds in place of excess tax paid. The primary step of having the ability to try this is, to login into the Govt. of India’s official Goods and Service Tax login portal hosted at www.gst.gov.in. Here’s a summary of the GST portal login procedure for existing and first-time users on the GST portal.

What is the GST E-method Bill System?

Electronic method Bill, the eWay Bill is a unique document/bill that transporters have to carry once moving product from one state to a different or for intra-state movement. The eWay bill is to trace the product’s movement under the Goods and Service Tax.

It is generated on the eWay portal. The eWay bill should be generated for each consignment of products of value of Rs. 50,000 and more.

When an associate eWay bill is generated, a singular eWay Bill variety is allotted to the transporter, recipient, and provider.

Required details or documents to get the associate eWaybill:

  1. Firstly, we need Invoice/bill of supply/challan of the consignment of products.
  2. Secondly, we need transporter ID or vehicle variety, if we transport consignment by road.
  3. Lastly, we need transporter ID, transport document variety, and date on the document, if we transport consignment by rail, air, or ship.

Before GST implementation method, bills were generated through state-specific portals and were subject to state rules; however, after GST, the eWay bill is ruled by a consistent set of rules applicable to through-out India.

How to register for GST?

  • To register for GST online, visit https://www.gst.gov.in and click on  ‘New Registration’ listed below the ‘Services’ tab. 
  • Before clicking on ‘Proceed’ Enter details like personal profile type, business name, state, email ID, and mobile number and so on.
  • Use the OTP you get on your mobile and email ID to come up with your Temporary Reference Range (TRN).

  • Click on ‘New Registration’ once more and use your TRN at this point.
  • Via the ‘Verification’ tab edit your application, transfer documents, enter details, and submit your application

  • Use the GST Application Reference range that you just get to examine the standing of your application within the future.

GST portal login procedure for first-time user

  • Visit https://www.gst.gov.in and click on on the ‘Login’ button at the top right-hand corner of your screen.
  • On the login page, click on the word ‘here’ that you just can notice within the line: 1st-time login: If you work certain the primary time, click here to login.
  • Enter your probationary ID/GSTIN/UIN and password as received via email.
  • Enter the new username and password that you just would like to use in future and click on ‘Submit.
  • Go back to the login page, and log in with your new credentials.

Moreover, the ability to pay GST online, which is necessary for businesses with turnovers surpassing the turnover limit, saves time and helps you specialize in different aspects of your SME venture.

GST portal login procedure for existing user

  • Visit the GST portal in India, and click on the ‘Login’ button at the top right-hand corner of your screen.
  • Enter your username, password, and the captcha code, and click on ‘Login’ again.
  • The GST portal login procedure is now complete. And the page that follows gives you access to your dashboard.
Categories
GST

How to Calculate GST? GST (Goods and Service Tax) Guide 101?

Table of Contents

How to calculate GST?

Implemented in 2017 with an aim to simplify the burdened taxation system of India, Goods and Services Tax is one of the most significant indirect tax reforms enacted in any democratic country in the world. Before this tax, goods and services were under various taxes such as excise, VAT, state government tax, and more. The overall process was very complex and lengthy. The government came up with the ‘one nation, one tax’ initiative which was first suggested by Asim Dasgupta Committee in 2011. 

The taxation system simplification went through multiple rounds of amendments and updates to make it customer-centric and hassle-free.

Types of GST collections

  • SGST (State Goods and Services Tax): Replaced VAT, Sales tax, Entry tax, Entertainment tax and more.
  • CGST (Central Goods and Services Tax): Replaced CST, SAD, State-tax and more.
  • UTGST (Union Territory Goods and Services Tax): Applicable for goods and services in Indian union territories.
  • IGST (Integrated Goods and Services Tax): Applicable on inter-state transaction of goods and services.

For Goods and Service Providers:

How to Calculate GST on goods and services?

The overall process for Goods and Services Tax calculation is relatively easy as different Goods and Services are segregated into different slab rates according to which taxes are calculated. Check the below steps to know the complete calculating process:

STEP 1: How to Calculate GST Percentage?

Determining the GST slab is the first step of determining the Goods and Services Tax amount associated with your service and goods. The Goods and Services Tax council has uploaded a complete list of details regarding the GST slabs of different goods and services. You can find the list here: http://www.gstcouncil.gov.in/uploaded-pdf-file-under-gst-rates

Meanwhile, some of the major Goods and Services Tax slab rates are presented in the below table.

Slab RateGoods and Services
5%Aircraft MRO, newspaper printing, fertilizers, plastic waste
12%Mobile phones and parts, handmade matches, temporary basis IP rights, building constructions for sale, packed fruits, nuts
18%Outdoor catering, IT services, telecom services, washing machine, camera, freelancing services
28%Cinema, AC 5=Star hotel stay, sunscreen, motorcycles, cars

NOTE: Goods and Services Tax Council frequently revises the goods and services tax slabs. Check the official notification to know the present tax rate

STEP 2: How to Calculate GST Payable?

Once you know the tax slabs applicable on your goods & services, it’s time to calculate the GST payable on that goods & services. This is where you can find the beauty of the tax simplification of GST. The formula for calculating GST payable is given below.

  • GST Payable: (Original Cost Price) x (% GST Rate)/100
  • Net Price to the Buyer: Original Cost Price + GST Payable

Different tax rates were charged at the manufacturer, retailer, and customer end, leading to a complex taxation mechanism and high price in the earlier taxation process. The central government used to charge excise duty at the manufacturing factories while the state government charged VAT. Under Goods and Services Tax, the taxes are charged only at the consumer end, saving hassle in the intermediate production levels. Since the goods & services were fixed under a particular tax slab, prices of many goods came down, which provided a huge relief to the consumers.

Prices of regular commodities such as soaps, shampoos, toothpaste, and milk powder came down drastically. Goods and Services Tax also has exempted many essential commodities from tax, such as wheat and rice. Let’s check some examples of Goods and Services Tax calculation.

Example 1: For Goods

ParticularsRate Amount (INR)
Cost Price of Good100000100000
Profit WantedProfit -10%10000
Total110000
CGST6%6600
SGST6%6600
Net Amount (To Buyer)123200

Example 2: For Services

ParticularsRate Amount (INR)
Freelancing Service100000
Total100000
GST%18000
Net Amount (To Buyer)118000

NOTE: Freelancers with turnover exceeding 20 lakhs in a year are mandatory required to register for Goods and Services Tax

For Customers

This section of the blog is dedicated to the consumers and final buyers who are paying the net price to the goods & service providers.

Understanding GST Inclusive & GST Exclusive Amount:

  • Goods and Services Tax Inclusive: The net amount is payable to the goods & service providers that includes the GST portion and the cost price. You don’t need to pay anything extra over this price.
  • Goods and Services Tax Exclusive: The cost price of the goods & services includes the manufacturer/ service provider’s profit margin. Hence, remain aware that it is not the final price as the GST tax would be applied on it before the final purchase.

Removing Goods and Services Tax from the Base Price: 

  • GST Amount = Base Cost Price – [Original Cost x {100/ (100+GST %)}]
  • Net Price: Base Cost Price – GST Amount

NOTE: Be a rational and educated consumer. Never pay anything more than the MRP price because it includes the Goods and Services Tax portion in it. It is not calculated over the MRP price listed on the goods.

Frequently Asked Questions:

  1. How is Goods and Service calculated?

GST is calculated based on the tax slab that accompanies that particular goods & service and the tax rate is added to the base price to calculate the net payable amount.

  1. What are the different tax slabs in the GST?

There are four broad divisions of tax slabs which are 5%, 12%, 18% and 28%. The GST council is planning to simplify these four slabs and make lesser and uniform tax slabs.

  1. Do I need to pay Goods and Services Tax on MRP also?

Remember that MRP price is inclusive of GST taxes, and you don’t need to pay an extra amount on MRP in the name of taxes.

  1. Which tax slab is applicable to my service?

You need to consult a financial expert to find out all the information regarding your tax structure and you can contact us for the same.

  1. How can I file my GST?

You need to register for the GST on the portal and generate your unique GSTIN number, and you can also consult a financial expert for more guidance.

Categories
GST

GST – Meaning, Advantage, and Component of Goods and Service Tax.

The full form of GST is “Goods and Service Tax“. The journey of GST in India began in 2000 when the government set up a panel for drafting the law. It took 17 years for the law to evolve, and was finally implemented on 1st July 2017. Now let’s see what is the meaning of GST.

Table of Contents

What is the meaning of GST?

First and foremost, it is essential to know the meaning of GST. It is a multi-stage indirect taxation system where tax is levied at every value addition that goods and service go through. In other words, tax is applicable at every point of sales, such as raw material purchase, manufacture or production, warehousing finished goods, sale of the product to a wholesaler, sale to retailer, and final sale to the consumer.

Who introduced Goods and Service Tax in India?

Prime Minister Narendra Modi launched Goods and Service Tax into operation on the midnight of 1st July 2017. But it was almost two decades in the making since the concept was first proposed under the Atal Bihari Vajpayee government.

How does the Goods and Service Tax System work?

Let us understand how Goods and Service Tax works.

Stage 1: The Manufacturer

Let us consider a shirt manufacturer that buys raw material worth 1000 INR and 60 INR tax. He added the value of 300 INR to manufacture the shirt. Now the total value of the shirt became 1300 (1000+300). Assuming the GST rate on the shirt be 5%, that will be 65 INR. This applicable GST amount (65 INR) can be set off by the manufacturer against the tax paid by him on the raw material i.e., 60 INR. Hence the effective Goods and Service Tax rate applicable will be only 5 INR (65-60). This makes GST a value-added tax.

Stage 2: Distributor or Service Provider

The next stage is where the goods are given to the distributor. The distributor buys the same shirt for 1300 INR and adds on the value to that shirt of around 200 INR. Now the value of the shirt will be 1,500, that is (1300+200). Under the Goods and Service Tax, he will need to pay the tax around 75 INR (5%), which again can be set off against the tax on the purchased shirt from the manufacturer that is 65 INR. Now the actual tax incidence under GST on the distributor will be 75-65= 10 INR.

Stage 3: Retailer

At this stage, the retailer gets the goods from the wholesaler or service provider. Now the retailer adds a margin of 100 INR on the purchase of a shirt. The total cost of the product will become 1600 INR (1500 + 100). Under GST, he will now need to pay tax (assuming a 5% rate of GST) that will become 80 INR that can be set off by him against 75 INR tax paid by wholesaler. Now the tax incidence under GST on the retailer will be 5 INR (80-75).

Stage 4: End Consumer

This amount of 1600 INR is paid by the end consumer purchasing this shirt.

Through the above examples given, We can conclude that Goods and Service Tax is a value-added tax that provides benefits of an input tax credit on every stage, excluding the end consumer stage. Hence, we can say that GST is one nation one tax providing economic freedom to the traders.

Advantages Of GST

GST has mainly removed the cascading effect on the sale of goods and service. Thus removal of the cascading effect has impacted the cost of goods. Since the GST regime eliminates the tax on tax, the cost of goods decreases.

Below are few advantages of Goods and Service Tax

  • Removes the cascading effect of tax.
  • Higher threshold for GST registration.
  • Composition scheme for small businesses.
  • Simpler online facility for GST compliance.
  • Relatively lesser compliances under GST.
  • Defined treatment for e-Commerce activities.
  • Increased efficiency in logistics.
  • Regulating and unorganized sectors.

Component of the Goods and Service Tax

There are three taxes applicable under the Goods and Service Tax system: CGST, SGST, and IGST.

  1. CGST: It is the tax collected by the Central Government on an intra-state sale, i.e. sale happening within a state.
  2. SGST: It is the tax collected by the state government on an intra-state sale, i.e. sale happening within a state.
  3. IGST: If goods or service are provided within two states, i.e., from one state to another, then IGST or Integrated Goods and Service Tax is applicable on the transaction.

Categories
GST

GST State Code List – Everything You Need to Know

As you may know, GST is a tax shared by the state and the central government. And the advanced technology and infrastructure have facilitated inter-state transactions significantly. So, it is essential to classify the place of supply to allocate the GST appropriately. To do the same, every state and UT is allotted a unique GST State Code.

In this article, you will get to know the GST codes for all the states. Let’s start.

Table of Contents

What is GST State Code?

As per the GSTIN format, the first two digits represent the GST State Code, where the business entity is registered. While moving towards Goods and Service Tax registration or going for new GST registration, most businesses would receive a 15 digit GSTIN (Goods and Services Tax Identification Number).

Knowing the GSTIN format is crucial for a business – to ensure that one’s suppliers have quoted the correct GSTIN in their invoices, and ensure that one mentions their own GSTIN correctly in invoices to customers – as the input tax credit depends on this due diligence.

GST Number Format

The 15 digit GSTIN ID is a unique alphanumeric number that comprises of –

  1. First, two digits signify the GST State Code.
  2. The next ten-digit signify the PAN number of the entity.
  3. The next digit indicates the number of registrations an entity has within a state for the same PAN.
  4. And next 14th digit is of no use currently. Therefore will be “Z” by default.
  5. And the last digit is the checksum value. It will be used for error detection.

GST State Code List

Here is the complete list of the respective GST State Codes in India:

Sr. No.NAMESTATE CODE
1.JAMMU AND KASHMIR1
2.HIMACHAL PRADESH2
3.PUNJAB3
4.CHANDIGARH4
5.UTTARAKHAND5
6.HARYANA6
7.DELHI7
8.RAJASTHAN8
9.UTTAR PRADESH9
10.BIHAR10
11.SIKKIM11
12.ARUNACHAL PRADESH12
13.NAGALAND13
14.MANIPUR14
15.MIZORAM15
16.TRIPURA16
17.MEGHALAYA17
18.ASSAM18
19.WEST BENGAL19
20.JHARKHAND20
21.ODISHA21
22.CHATTISGARH22
23.MADHYA PRADESH23
24.GUJARAT24
25.DADRA AND NAGAR HAVELI
AND DAMAN AND DIU (NEWLY MERGED UT)
26
26.MAHARASHTRA27
27.ANDHRA PRADESH (BEFORE DIVISION)28
28.KARNATAKA29
29.GOA30
30.LAKSHWADEEP31
31.KERALA32
32.TAMIL NADU33
33.PUDUCHERRY34
34.ANDAMAN AND NICOBAR ISLANDS35
35.TELANGANA36
36.ANDHRA PRADESH 37
37.LADAKH38

Know Your GST Jurisdiction

As mentioned above, the Goods and Services Tax is a tax shared by the Central and State governments. So, each of them has its own to solve the confusion among the taxpayers. As the name suggests, the central government controls the central jurisdiction. And the state governments control the respective jurisdiction. According to the CGST circular, the criteria for classification is as follows:

  • 90% of all the taxpayers having the turnover less than Rs 1.5 Crore will be under the state administration. The remaining 10% will fall under the hands of the Central Government.
  • The entities having turnover exceeding Rs 1.5 Crore will be shared equally among both the governments.

Maybe the central government wants more big players under its control. But the classification is done randomly by using Stratified Random Sampling. So, there is no bias among the governments regarding the process. Also, the jurisdiction is subdivided on the basis of the zone, commissionerate, division and, range offices.

How to Know Your GST Jurisdiction?

The CBIC department also has a website dedicated to checking the Jurisdiction. The process of finding your jurisdiction is no rocket science. All you need to do is go to CBIC GST: Know Your Jurisdiction > Select your state, zone, division, and range.

The above process is to find your central jurisdiction. Similarly, you can find the state jurisdiction by visiting the respective site. For example, if you are situated in Delhi, you can find your jurisdiction on the website CGST Delhi Zone.

What’s more, you can even find the state and central jurisdiction on your GST Registration Certificate in the form REG-06.

Key Takeaways

As each state has its unique code, so you will get different GSTIN for branches in various states. What’s more, even the different intra-state branches will have different GST Numbers. So, the transfers between different registered branches will also be treated as a supply of goods and services. Also, remember that the UTs of Dadra and Nagar Haveli and Daman and Diu have been merged. (Looks like the government loves altering the map). So, they have a common Code of 26.

In the end, don’t forget to enter the accurate details while registering yourself on the GST portal. Else, you may have to face a problem to rectify your mistakes.

Frequently Asked Questions (FAQs)

Q1: Can we take 2 GST numbers in states?

Yes, you can take 2 GSTIN for the same state if you carry more than one business. For that, you have to register both businesses under GST. The place which was registered first will have the 13th digit of GSTIN as 1. And the other place will have 2 as the 13th digit of GSTIN.

Q2: How do I find my GST officer?

To find the details, visit GST Portal. Click on Search Taxpayer. Here, you will find different options. Choose any one of them and enter the GSTIN/ PAN. All the relevant details will be shown.

Q3: Can we find GSTIN by name?

No, it is not possible to find the GSTIN of all taxpayers by name. You can find it only if the GSTIN is mentioned on the website of the company. Or the state government has shared the list of the taxpayers. 

Categories
GST

GST Annual Return: A Complete Guide to GST Compliance.

What is GST annual return?

The GSTR 9 is a GST annual return form that must be filed once a year by business taxpayers with all combined information of SGST, CGST, and IGST as charged during the prior year.

In this blog, we summarise all of the information, laws, and regulations for filing GSTR 9 and 9c online, as well as a step-by-step compliance procedure. 

Reading this article, we will learn about how to file GST 9, types of GST return, annual return under GST, and Due Date for GST returns. But before getting into it, let’s understand GST and its benefits.

Table of Contents

What is GST?

The Goods and Services Tax (GST) is a tax on goods and services. It is an indirect tax that has mostly replaced many other indirect taxes in India, such as excise duty, VAT, and services tax. Government of India passed the Goods and Service Tax Act on March 29, 2017. It became operation on July 1, 2017.

What are the Advantages of GST?

GST is primarily technologically focused. All operations, such as GST registration, GST return filing, refund application, and response to the notice, are done online via the GST portal, which speeds up the process.

The cascading impact on the selling of goods and services has mostly been eliminated by the GST. Due to this, the cost of goods has decreased.

Compliance under Goods and Service Tax

The major compliance under GST are as follows.

1. E-way Bills

By introducing “E-way bills,” the GST created a centralized system of waybills. Government of India introduced this framework on April 1, 2018, for inter-state goods movement and on April 15, 2018, for synchronized intra-state goods movement.

Manufacturing companies, distributors, and carriers can quickly produce e-way bills for goods transported from their origin point to the destination point using the e-way bill system. Tax authorities win from this method as well, as this method reduces time spent at checkpoints and aids in facilitating tax avoidance.

2. E-invoicing

For companies with an annual gross turnover of more than Rs.500 crore in any previous financial year, the e-invoicing system became operational on October 1, 2020. (from 2017-18). The Government applied this framework to those with an annual gross income of over Rs.100 crore as of January 1, 2021.

Every B2B invoice must be assigned a unique invoice reference number (IRN) by posting it to the GSTN’s bill registration portal. Then, invoice is verified for accuracy and authenticity by the portal. It then gets authorization with the use of a digital signature and a QR code.

e-Invoicing enables invoice integration and reduces data entry errors. It aims to send invoice information directly from the IRP to the Goods and services tax and eway billing portals. As a result, it will remove the need for manual processing while filing GSTR-1 and generating e-way bills.

3. Annual Return under GST

A GST annual return is a report that a business taxpayer needs to file with the tax administration authorities that contains information about their earnings. Tax officials use this to figure out how much money they owe for taxes.

Depending on the type of company, all registered businesses must file monthly, quarterly, or annual GST returns. The GST site is where all of these online GST filings take place. 

Types of GST Annual Return

The various types of GST returns are as follows:

1. GSTR-1 

GSTR-1 is the return that companies must file to record all outward supplies of goods and services or sales transactions made within a tax period and report debit and credit notes released. Any changes to sales invoices should be recorded in the GSTR-1 return, even if they relate to previous tax periods.

2. GSTR-2A 

The GSTR-2A is a tax return that contains information about all inward supplies of products and services or purchases made from registered suppliers within a tax period. The data gets auto-populated using information from the supplier’s GSTR-1 returns. Companies can take no action with GSTR-2A, since it is a read-only return.

3. GSTR-2

The GSTR-2 return is for registering inbound supplies of goods and services or sales made within a tax cycle. The GSTR-2A auto-populates the information in the GSTR-2 return. Here, taxpayer can edit the GSTR-2 return, unlike the GSTR-2A.

All regular taxpayers GST registered are required to file GSTR-2. However, since the inception of GST, government has suspended the filing of this form.

4. GSTR-3

GSTR-3 is a monthly summary return that summarises information on all outward supplies made, inward supplies collected, and input tax credit claims, as well as information about tax liability and taxes paid. This return gets generated automatically based on the filed GSTR-1 and GSTR-2 returns. All regular taxpayers, registered under GST must file GSTR-3. However, similar to GSTR-2, GST autorities have suspended the filing of this form.

5. GSTR-4 

A taxpayers, who is using the GST Composition Scheme are required to submit GSTR-4 return.

6. GSTR-5 

GSTR-5 is the return that non-resident foreign taxpayers registered for GST and conduct business in India must file. The return includes information about all outbound goods, inbound supplies, credit/debit notes, tax liability, and taxes paid. Companies need to file monthly return.

7. GSTR-6 

GSTR-6 is a monthly return that an Input Service Distributor(ISD) must submit. It outlines the ISD’s receipt and distribution of input tax credits. It will also provide a list of all documents provided to distribute input credit and how businesses spread them.

8. GSTR-7 

GSTR-7 is a monthly return that must be submitted by anyone who is supposed to deduct TDS (tax deducted at source) as part of the GST system. TDS deducted, TDS liability payable & charged, and TDS refund claimed, if any, will all be listed on GSTR 7.

9. GSTR-8

It is a monthly return that must be submitted by e-commerce operators who are eligible to collect tax at source under the GST (TCS). GSTR-8 will report all items sold via the E-commerce portal, as well as the TCS received.

10. GSTR-9

GSTR 9 is an annual return that GST-registered taxpayers must file once a year. It contains information on outbound and inbound supplies made/received during the relevant financial year under various tax heads, such as CGST, SGST, IGST, and HSN codes.

It is a compilation of all monthly/quarterly returns (GSTR-1, GSTR-2A, GSTR-3B) filed during that calendar year. This return facilitates comprehensive data reconciliation for complete open disclosures. 

11. GSTR-9C

GSTR-9C is a reconciliation document that must be filed by all GST-registered taxpayers, whose annual revenue exceeds Rs. 2 crore. A Chartered Accountant or Auditor must audit the registered person’s books of accounts. The reconciliation statement is the correlation between the taxpayer’s audited financial statements and the filed annual GSTR-9 return.

12. GSTR-10 

A business owner whose GST registration got terminated or has been withdrawn must file GSTR-10. This return is also known as a final return. The business owner must file GSTR-10 return within three months from termination date or closure order, whichever is earlier.

13. GSTR-11 

GSTR-11 is the return that individuals who have been given a Unique Identity Number (UIN) must file to receive GST reimbursement for products and services, purchased in India. UIN is a classification, created for international diplomatic missions and embassies that are not taxable in India to receive a tax refund.

Now we know the types of GST return, let us now look at GST annual return due dates for FY-2021.

Due Date for GST Return and other Compliances.

The following table shows the GST Return filing due date.

Type of Returns Under GSTPeriodDue Date 
GSTR-7 And GSTR-8February 202110th March 2021
GSTR-1February 202111th March 2021
GSTR-6 And B2B Outward SuppliesFebruary 202113th March 2021
PF and ESIFebruary 202115th March 2021
GSTR-5, GSTR-5A,GSTR-3BFebruary 202120th March 2021
PMT-06February 202125th March 2021
RFD-11FY 2021-2231st March 2021
CMP-09FY 2021-2231st March 2021
GSTR-9 and GSTR-9CFY 2019-2031st March 2021

How to file GSTR-9

Filing GSTR-9 is very easy if you use GSTR-9 filling software. It Automatically fills tables 1-14 of GSTR-9 form with precision. And moreover, you get 19 points on the essential checklist to recognize mismatches across the form. Let us now look at the steps to file gstr-9.

Steps to file GSTR-9

  1. To file Form GSTR-9, go over to Services
  2. Then Returns 
  3. And lastly at Annual Return.

Prerequisites for filing GSTR-9

  • Every day, a taxpayer must have an operational GSTIN during the financial accounting year.
  • Before filing the Annual Report, the taxpayer must submit all applicable returns for the financial accounting year, namely Form GSTR-1 and Form GSTR-3B.

Companies can file Nil GSTR-9 form if,

  • Not generated any sale and not purchased any goods/services.
  • No other liability for reporting.
  • And not obtained any input credit and not tried claiming any refund.
  • And not collected any order generating demand and there is no delayed fee to pay, etc.

Conclusion

To conclude, Goods and Service tax is the tax that speeds up the taxation process. A business must file annual gst return to stay gst compliant and avoid any penalty by authorities.

Categories
GST

Download GST Registration Certificate from GST Portal – a complete guide.

Introduction

Taxpayer, who has registered for GST, can download GST Registration Certificate from GST Portal. The government does not issue any physical copy of the GST Registration certificate. We need a GST Registration certificate for various purposes – doing partnership with other business, opening a bank account, GST audit, etc. GST certificate is also called Form GST REG-06, which can be downloaded from the official GST Portal.

Steps to download GST Registration Certificate:

To download GST certificates issued by the GST authorities, follow the steps given below:

Step 1: Access this website www.gst.gov.in. The GST Home page will open.

Step 2: Log in to the GST Portal with valid credentials.

Step 3: After that, click the Services > User Services > View/Download Certificates command.

Then, all the Goods and Service Tax certificates are displayed in descending order as below.

Here, you can download the GST registration certificate by clicking on the download icon as shown in the image.

However, if you have not yet registered your business under GST in India, then you must register it to get the GST registration certificate. You may read our article on the GST registration process to register your business to get a GST registration certificate under GST. After you complete GST registration online you can download GST Certificate.

Categories
GST

How to avail Input Tax Credit (ITC) if Supplier has not uploaded Invoices?

Input Tax Credit

Table of Contents

What is the Input Tax Credit (ITC)?

The Input Tax Credit (ITC) is the tax paid on the purchase of goods or service, which can be set off against the tax liability on the sale of goods or services.

How to avail Input Tax Credit (ITC) if your Supplier has not uploaded Invoices?

Generally, under the system of GSTR-1 and GSTR-3B, the tax credit is claimed by the recipient according to the sales invoice uploaded by the seller. However, the ITC claim will not be allowed if the supplier has not uploaded Invoices.

The ITC in the buyer’s account reflects as soon as the seller uploads the invoice, but in case of a delay, the buyer’s ITC cannot be availed for that particular month. In this case, the CBIC released an important notification on 9 October 2019, inserting under rule 36(4) of the CGST Rules, 2017.

This rule states that, the provisional tax credit (without invoices on GSTR-2B) can be claimed in the GSTR-3B to the extent of 5% of eligible ITC reflected in the GSTR-2B.

Hence, the total ITC that can be claimed in GSTR-3B is 105% of the eligible ITC appearing in GSTR-2B of a particular period. As per the sub-rule 4 inserted in rule 36 of the Central Goods and Service Tax Rules, 2017, a taxpayer filing GSTR-3B can claim provisional Input Tax Credit (ITC) only to the extent of 5% of the eligible credit available in GSTR-2A.

The amount of eligible credit arrives upon those invoices or debit notes, whose details have been uploaded by the supplier in the GSTR-2A only.

The new percentage applies from 1 Jan 2021 onwards. The ITC claim was earlier restricted to 10% between 1 Jan 2020 and 31 Dec 2020, whereas it was 20% for the period from 9 Oct 2019 till 31 Dec 2019.

After implementation of Tax Rule what changes will take place?

I will take an example to make you understand this thing.

If a taxpayer is filing his GSTR-3B for the month of January 2021, here is how he could claim the input tax credit in his GSTR-3B after the implementation of the rule.

  1. The total eligible ITC is Rs.1,00,000 ,eligible ITC available in the GSTR-2B will be Rs.60,000.
  2. ITC that can be claimed, as the provisional credit will be Rs.3,000 (60,000*5%),
  3. Total ITC that can be claimed in the GSTR-3B will be 63,000; and ITC not allowed in the GSTR-3B of January 2021 will be Rs. 37,000.

It is noteworthy that the amount of ITC that is not available this month, will become available once the seller uploads the corresponding invoice in their subsequent GST returns.

So, if the buyer’s GST liability is Rs.80,000, they will have to pay the balance amount of Rs.17,000 in cash (Rs.80,000 – Rs.63,000).

But if the entire ITC is available, the buyer need not pay anything in cash.

What is the Eligible ITC?

It is the ITC related to a taxpayer’s business activities such as purchases made, services received, capital assets bought, etc. which is eligible to be claimed to set off GST liabilities.

The GSTR-2B could also contain ineligible ITC reflecting that relates to expenses such as food, club memberships, personal expenditure, etc or even ITC mistakenly reflected due to the wrong GSTIN entered by a supplier.

Hence, only eligible ITC will be considered while calculating the limit for 5% provisional credit.

In the initial phase of 6 months, the recipient will have an option to avail ITC on a self-declaration basis even on the invoices not uploaded by the supplier by the 10th of the next month by using the facility of availing ITC on missing invoices.

The input claimed on the missing invoices by the recipient shall be filed by the seller within the next two tax periods from the input claimed by the recipient.

If this is not filed by the supplier, the input claimed by the recipient shall be reversed with interest and penalty.

For example, if Mr. A purchased goods from Mr. B in the month of March 2018, Mr. B failed to report the same in the March 18 returns. Mr. A has an option to claim the credit in March 2018 returns and Mr. B has to report the same by May 18 returns. If Mr. B missed reporting the same by May 18 then the ITC claimed by Mr. A shall be reversed on June 18 returns with interest and penalty.