All you need to know about the 1st week of GST

All you need to know about the 1^st week of GST

1. Demonetization drive has led to an increase in the estimated number of taxpayers from 52.4 million in FY 2016 to 62.5 million in FY 2017. Once GST is in place this figure will jump further.
2. Exports have been impacted by the lack of clarification in the GST regime on the process of claiming input tax credit, documentation and use of input tax credit to pay IGST. Although government has already issued one set of desired clarifications, the industry seeks more. 
3.  Reckitt Benckiser is the first global company claiming that GST roll-out has hit its sales. Most large consumer-facing companies had stopped sales towards June-end to avoid unsold stocks.
4. The auto industry is set for an accelerated growth following the price reduction in the industry due to GST.  Hyundai and Skoda have slashed prices to pass on the benefits of revised tax structure to the consumers.
5. GST has narrowed down the gap between the iPhone prices in e-commerce and in offline trade. Apple billed the iPhones in India from states which provided a competitive VAT arbitrage due to which e-commerce industry was able to offer considerable discounts, this arbitrage is no longer available post GST, and hence e-commerce looses the edge on iPhone pricing.
6. Sovereign gold bonds have become a more attractive investment as they are not taxed under current regime of GST, compared to gold coins & bars which are liable to GST @ 3%.
7. To end the confusion over the unsold stock on 1^st July, government said that the old stock can be sold after mentioning new MRP till 30^th September. Though the intention of the government is right but the consumer goods makers are unlikely to change prices of pre- GST stock as it will be a long-drawn, costly and cumbersome process.
8. States are mulling over raising road tax to compensate revenue loss due to loss of octroi in the automobile industry.
9. Government states that the free services which are not a part of employment contract and gifts above Rs. 50000 are supplies and will come under GST net, input tax credit on the same will be allowed.
10. Power gear makers say that despite GST, Chinese companies still have an edge due to lack of investment in the power sector in our country.
11. Road transport and shipment minister, Nitin Gadkari, estimates that India’s logistics sector will be the biggest gainer from GST as its cost will decline by 20%.
12. A 6-day GST master-class is being conducted since 6^th July by revenue secretary, Hasmukh Adhiya, along with CBEC team to clear doubts pertaining to the new tax regime.

Your guide to various GST rates

Most of the goods and services have been listed under the four broad tax slabs - 5 per cent, 12 per cent, 18 per cent and 28 per cent. Some items like gold and rough diamonds have exclusive tax rates while some have been exempted from taxation. 

As India wakes up to a new tax regime, here is a quick guide to all the goods and services and their respective tax slabs: 

Tax exempted Goods 

1. A number of food items have been exempted from any of the tax slabs. Fresh meat, fish, chicken, eggs, milk, butter milk, curd, natural honey, fresh fruits and vegetables, flour, besan, bread, all kinds of salt, jaggery and hulled cereal grains have been kept out of the taxation system. 
2. Bindi, sindoor, kajal, palmyra, human hair and bangles also do not attract any tax under GST. 
3. Drawing or colouring books alongside stamps, judicial papers, printed books, newspapers also fall under this category. 
4. Other items in the exempted list include jute and handloom, bones and horn cores, hoof meal, horn meal, bone grist, bone meal etc.

Tax exempted Services

1. Grandfathering service has been exempted under GST.
2. A low budget holiday may get cheaper as hotels and lodges with tariff below Rs 1,000 are in this category.
3. Rough precious and semi-precious stones will attract GST rate of 0.25 per cent. 

5% Tax Goods

1. An array of food items such as fish fillet, packaged food items, cream, skimmed milk powder, branded paneer, frozen vegetables, coffee, tea, spices, pizza bread, rusk, sabudana, cashew nut, cashew nut in shell, raisin, ice and snow will be priced at 5 per cent tax. 
2. Apparel below Rs 1000 and footwear below Rs 500 are also in this category.
3. Some items in the fuel category like bio gas, kerosene and coal are in this slab. 
4. Items from the health industry in this category include medicine, insulin and stent.
5. Other items in this slab are agarbatti (incense sticks), kites, postage or revenue stamps, stamp-post marks, fertilizers, first-day covers and lifeboats. 

5% Tax Services

1. Transport services like railways and air travel fall under this category. 
2. Small restaurants will also be under the 5% category.
3. Gold has been taxed under a separate slab of 3 per cent. 

12% Tax Goods

1. Yet another category of edibles like frozen meat products, butter, cheese, ghee, dry fruits in packaged form, animal fat, sausage, fruit juices, namkeen and ketchup & sauces will attract 12 per cent tax.
2. Cellphones will also be priced in this category.
3. Cutlery items like Spoons, forks, ladles, skimmers, cake servers, fish knives, tongs fall in this slab.
4. Ayurvedic medicines and all diagnostic kits and reagents are taxed at 12 per cent.
5. Utility items like tooth powder, umbrella, sewing machine and spectacles and indoor game items like playing cards, chess board, carom board and other board games like ludo are in this slab.
6. Apparel above Rs 1000 will attract 12 per cent tax 

12% Tax Services

Non-AC hotels, business class air ticket, state-run lottery, work contracts will fall under 12 per cent GST tax slab 

18% Tax Goods

1. Another set of consumables are listed under the 18 per cent category- biscuits, flavoured refined sugar, pasta, cornflakes, pastries and cakes, preserved vegetables, jams, sauces, soups, ice cream, instant food mixes, curry paste, mayonnaise and salad dressings, mixed condiments and mixed seasonings and mineral water.
2. Footwear costing more than Rs 500 are in this category.
3. Items like Printed circuits, camera, speakers and monitors, printers (other than multi function printers), electrical transformer, CCTV, optical fiber are priced at 18 per cent tax under GST.
4. Other items in this slab include bidi leaves, tissues, envelopes, sanitary napkins, note books, steel products, kajal pencil sticks, headgear and its parts, aluminium foil, weighing machinery (other than electric or electronic weighing machinery), bamboo furniture, swimming pools and padding pools. 

18% Tax Services

AC hotels that serve liquor, telecom services, IT services, branded garments and financial services will attract 18 per cent tax under GST. 

28% Tax Goods

1. The residuary set of edibles which include chewing gum, molasses, chocolate not containing cocoa, waffles and wafers coated with choclate, pan masala and aerated water fall in this category.
2. Bidi attracts 28 per cent tax.
3. An array of personal care items like deodorants, shaving creams, after shave, hair shampoo, dye and sunscreen are in the highest tax slab as well.
4. Paint, wallpaper and ceramic tiles are priced at 28 per cent.
5. Water heater, dishwasher, weighing machine, washing machine, ATM, vending machines, vacuum cleaner, shavers and hair clippers have been clubbed together in this slab.
6. Automobiles, motorcycles and aircraft for personal use will attract 28 % tax - the highest under GST system. 

28% Tax Services

1. 5-star hotels, race club betting, private lottery and movie tickets above Rs 100 are under the 28 per cent category.
2. The GST on restaurants in five-star and luxury hotels has been reduced to 18 per cent from 28 per cent, bringing it at par with standalone air-conditioned (AC) restaurants. Even at some air-conditioned restaurants, the bills may come down, as GST will subsume service tax and value-added tax (VAT) that is currently charged. 

Key provisions in GST for manufacturers

In GST the taxable person on the taxable supplies made shall charge CGST+SGST on Intra state supplies or IGST on Interstate supplies. The same is dependent on two major factors viz the place of registered person making the supplies and the place of supply. 

The location of registered person is defined in IGST Act. Further the place of Supply needs to be determined on case to case basis. 

Registered taxable person will have impact on both his procurements and outward supplies if  CGST and SGST is charged in place of IGST or vice versa in terms of Input tax credit.

 Imports:

1. Imports are subjected to GST. BCD would be continued while CVD and SAD would be replaced by "IGST".
2. IGST paid by company in cash shall be eligible as credit subject to other conditions i.e. payment of tax, receipt of goods, taxpaying document and filing of return. 
3. To that extent, there will be cost saving to traders & service providers compared to existing law. 

Sales in Transit 

1. Currently, sales in transit are not subjected to tax provided form E is submitted. 
2. In GST regime there are no specific provisions relating to sales in transit. Clarity is awaited on the same before appointed day. 

Stock Transfer: 

1. As per section 25 of CGST Act, a person having more than one registration, shall, in respect of each such registration, be treated as distinct persons.  
2. According to Section 7 of CGST act, read with Schedule-I, Supply of goods or services between distinct persons as specified in section 25 even made without consideration is a supply 
3. Hence, all interstate stock transfers are subjected to IGST, where as intra state stock transfers are not liable to GST. 
4. Eg-1: Unit -A in TG and Unit –B in AP both will have two registrations and shall be treated as distinct persons. Stock transfer between A & B will be taxable. tax invoice needs to be raised by the Supplier unit 
5. Eg-2 : Unit A and Unit B both in TG. Stock transfer not liable to GST. Supplier shall issue only a delivery challan. 
6. In case of both inter/intra state stock transfer E-Way bill must be generated when consignment value is more than Rs. 50,000. 

Exports & Supplies made to a SEZ developer or SEZ Unit: 

Export of goods means taking goods out of India to a place outside India.  Export of goods/ Supplies to SEZ are treated as zero rate supply. There are two options available to the supplier 

1. Export goods under bond or letter of undertaking without payment of IGST and claim refund of unutilized input tax credit - (similar to Rule 19 of CER). Refund to be allowed proportionate to export turnover to Total Turnover. 
2. Export goods on payment of IGST and claim refund (rebate). (similar to Rule 18 of Central Excise Rules) 

Captive Consumption: 

1. Presently as per Central Excise provisions exemption is provided so that no Excise duty is payable on Intermediate goods manufactured and used in the production of final product on which tax is payable 
2. For e.g.: A is intermediate product used in production of B. No Excise duty is payable on A if duty id paid on B. However duty needs to be paid on 110% of cost of production if B is exempted. 
3. In GST, there are no such provisions as the concept of manufacture is ruled out completely 

Depot Sales:

1. Presently manufacturer removes goods to depot upon paying duty on the value arrived as per the valuation rules (Value prevailing at depot). 
2. From the Depot goods are sold to the customer by charging appropriate VAT/CST. Credit of Excise duty is also passed on  to the customer. 
3. In GST, if depot is located within the same state goods can be removed on Delivery challan. On supply made to customer from Depot appropriate GST need to be made. 
4. If Depot located outside the state IGST need to be charged. Valuation need to be determined as per valuation rules 

Dealer Sales: 

1. Presently Manufacturer charges, Excise duty & VAT/ CST as applicable to the Dealer thereafter dealer sells the goods to Customer by charging VAT /CST as applicable and passes on the Excise duty charged by Manufacturer proportionately to customer. Therefore dealer has no output excise duty liability and hence can also not avail the credit of excise duty. 
2. In GST manufacturer charges GST to dealer and dealer there after charges GST to Customer
3. Previously, Excise duty is levied even on Items disposed off as the levy of Excise is on manufacture. VAT/ CST are not applicable as the sale does not take place. 
4. As per Section 7 of CGST act supply includes even the disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. Accordingly GST needs to be paid
5. As per Schedule I disposal of business assets where input tax credit has been availed on such assets, will be treated as Supply even if made without any consideration. 

Distribution of Free Samples: 

1. Previously, Excise duty is levied on Items distributed as free samples, as the levy of Excise is on manufacture & VAT/ CST are not applicable as the sale does not take place. However majority of states have a provision for reversal of proportionate input tax credit in those cases where free samples are given. 
2. GST is not leviable on goods distributed as free samples, as the GST is not leviable on transactions made without consideration. 
3. However if the same are given to related parties, GST is leviable. Value will be 110% of cost of production
4. Also Input tax credit is restricted on articles distributed as free samples or as gift 

Sale on approval basis 

1. In case of supplies made on sale or approval basis invoice needs to be issued on earlier of before or at the time when it becomes known that the supply has taken place or Within 6 months from the date of removal. 
2. Goods can be removed by way of a delivery challan when the goods are removed 

Sales Return: 

1. Where the goods supplied are returned supplier may issue to the recipient a credit note containing such particulars as may be prescribed. 
2. Details of such credit note are to be declared in return for the month during which such credit note has been issued. However the credit note cannot be issued after September following the end of the year in which such supply was made, or the date of filing of annual return, whichever is earlier. 
3. The recipient need to reverse the input tax credit based on the credit note. 

Reimbursement of Expenditure: 

1. Value of the supply includes, incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of goods or services or both at the time of, or before delivery of goods or supply of services. 
2. The expenditure or costs incurred by the supplier as a pure agent of the recipient of supply of service shall be excluded from the value of supply subject to conditions specified in Rule 7 of GST valuation rules (pure agent). 

Interest charged for late payment of consideration: 

1. Presently, there is no implication under VAT, Excise or Service tax where interest is recovered for delayed payment of consideration. 
2. As per section 15(2), the value of supply includes interest or late fee or penalty for delayed payment of any consideration for any supply. 
3. Tax need to be discharged when such interest, late fee or penalty is received by the supplier 

Reverse charge on Purchases made from Unregistered dealers: 

1. Reverse charge mechanism (RCM) would apply on Supply of taxable goods or services by an unregistered supplier to a registered person. 
2. The exemptions as applicable to particular category of goods or services would apply on goods or services covered under reverse charge. The rate of tax as applicable to particular goods or services would apply on goods or services covered under reverse charge. 
3. The recipient will be required to issue invoice on the date of receipt of goods or services containing details of tax invoice. Such requirement is not there in existing laws. The recipient would be required raise payment voucher when payment is made to vendors supplying RCM goods or services. 
4. Details of RCM receipts must be disclosed in GSTR-2. RCM liability should be paid in cash by debiting electronic cash ledger. 
5. Recipient would be eligible to take credit of input tax credit subject to satisfaction of other conditions. 

Job work: 

1. Principal may send the goods to Job work without payment of GST provided such goods are returned back to principal within 1 year from the date of its dispatch. Capital goods other than Tools, Moulds, Jigs & Fixtures must be received within 3 years. Moreover there isn’t any time limit for Tools, Moulds, Jigs & Fixtures. 
2. As per conditions of Input tax credit , Goods should be received by registered person, for availing the credit. However, in case of Job work, Principal shall be eligible to take the credit, even if the goods are directly shipped to the Job worker’s premises. 
3. Under GST, it is permitted to supply goods directly from job worker's location to customer, if the job worker is registered person or the  location of Job worker has been declared as additional place of business. 
4. Waste/scrap can be directly supplied from JW premise on payment of tax by job worker if he is registered or by principal, if JW is unregistered. There is no compulsory requirement to bring back scrap/waste to principal's premise. 
5. The responsibility for keeping proper accounts for the inputs or capital goods lie with the principal. 
6. Goods can be directly supplied from job work premises subject to certain conditions. 
7. If the job worker fails to return the goods within above specified time period, then Initial supply made to job worker by principal would become chargeable to GST from the original date of dispatch of goods for JW. Principal is liable to pay GST along with interest. The Delivery challan issued earlier will be treated as invoice and Tax will be charged as per the value shown in the delivery challan on the date of dispatch of inputs/CG to JW.