Overview of GST

overview OF
GOODS AND SERVICE TAX

ACT
(AS PROPOSED TO BE APPLICABLE FROM 1st JULY 2017)
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Background of GST
The present structure of Indirect Taxes in India is based on three lists in Seventh Schedule to Constitution of
India, which came into effect on 26-1-1950. These lists are mostly based on Government of India Act, 1935.
The provisions were based on situation prevailing in 1935. That structure has become outdated due to
changes in situations, technology etc.
World has moved towards common Goods and Services Tax (GST) long ago. However, so far as India is
concerned, GST is the tax for twenty first century [It is rightly said that India is like elephant. It takes time to
start, but once started, it is very difficult to stop it].
Major defects in present structure of indirect taxes
Following can be summarized as major defects in present structure of indirect taxes:
Central Sales Tax (CST) is payable for every movement of goods from one State to other. If the sale is direct,
CST is payable, even in case of stock transfers or branch transfers, there is incidence of tax as input service
credit (set off) of input taxes is not fully available.
Central Sales Tax is an orphan. Hence, if there is any difficulty, there is no authority to sort it out and find
solutions. This creates numerous problems in CST.
Cascading effect of taxes cannot be avoided due to CST and Entry Tax.
India does not have a national market due to invisible barriers of central sales tax, Entry Tax and State Vat
and visible barriers of check posts.
Millions of man-hours and truck hours are lost at check posts. Besides, huge corruption is involved.
Central Government cannot impose tax on goods beyond manufacturing level [CST though levied by Central
Government is collected and retained by State Government only].
State Government cannot impose service tax.
Over the years, distinction between goods and services has become hazy, due to which there is overlapping
of State Vat and Central Service Tax on transactions like works contract, food rated services (restaurants,
outdoor catering, man dap services), Software, IPR Related services, lottery, SIM cards, renting of movable
property etc.
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Same transaction is taxed both by Central and State Government which creates confusion, litigation and
double taxation in many cases.
What is Goods and Services Tax?
Goods and Services Tax means a tax on supply of goods or services, or both, except taxes on supply of
alcoholic liquor for human consumption.
Note that the word used is 'supply' and not 'sale'. Thus, stock transfers, branch transfers will also get covered
under GST net. GST will be payable on free supplies made to related persons. GST will not be payable to free
gifts and free samples to unrelated person, but input tax credit in respect of such goods will have to be
reversed.
IGST will be payable on inter-state stock transfers and branch transfers [Though CGST Act and IGST Act have
not been extended to J&K, IGST will be payable].
For stock transfers or branch transfer within the State (except J&K), SGST and CGST will be payable only where
the taxable person has more than one GST registrations within the State. If there is single registration within
State, 'Bill of Supply' (challan) will be sufficient.
Basic scheme of GST is as follows
Goods and Services Tax (GST) will be on 'supply' of goods or services or both, for purpose of GST.
For supplies within the State or Union Territory - (a) Central GST (CGST) will be payable to Central
Government and (b) State GST (SGST) or UTGST (Union Territory GST) will be payable to State Government or
Union Territory (as applicable).
For inter-state supplies (supply from one State or Union Territory to another State or Union Territory),
Integrated GST (IGST) will be payable to Central Government.
Basic customs duty. Education Cess and Secondary and Higher Education Cess of Customs, will be payable
on import of goods.
Distinction between goods and services will be mostly eliminated. This will eliminate problem of dual taxation
presently faced by construction industry, works contract, food related services like restaurant and outdoor
catering, leasing and hire services and software services.
GST is based on Vat concept of allowing input tax credit of tax paid on inputs, input services and capital
goods, for payment of output tax. This will avoid cascading effect of taxes.
GST is consumption based tax i.e. tax is payable in the State where goods or services or both are finally
consumed.
The rates of GST - (CGST + SGST/UTGST) -Nil, 5%, 12%, 18% and 28%. These rates will apply to IGST also.
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GST is consumption based tax based on Vat principle
GST is consumption based tax, i.e. tax will be payable in the State in which goods and services are finally
consumed. GST will be based on Vat system of allowing input tax credit for payment of tax on output supply.
The States from which goods are supplied will not get any tax as goods are consumed in another State. In case
of inter-state supplies, IGST will be payable. Input Tax Credit of IGST paid in one State will be
available to receiver of goods or services in another State.
Now who is taxable person under GST
A taxable person under GST, is a person who carries on any business at any place in India and who is
registered or required to be registered under the GST Act. Any person who engages in economic activity
including trade and commerce is treated as taxable person.
Person here includes:
a. Individuals,
b. HUF,
c. Company,
d. firm,
e. LLP,
f. an AOP/BOI,
g. any corporation or Government company,
h. body corporate incorporated under laws of foreign country,
i. co-operative society,
j. local authority,
k. government,
l. trust,
m. Artificial juridical person.
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Who is Liable to get Register Under GST:
GST registration is mandatory for:

a. Any business whose turnover in a financial year exceeds Rs 20 lakhs).
b. Every person who is registered under an earlier law (i.e., Excise, VAT, Service Tax etc.) needs
to register under GST, too.
c. When a business which is registered has been transferred to someone/demerged, the transferee shall
take registration with effect from the date of transfer.
d. Anyone who drives inter-state supply of goods
e. Agents of a supplier
GST registration by type of Taxable Person:
Every person must apply for registration in every State in which he is liable, within thirty days from the date on
which he becomes liable to registration.
Registration number in GST will be PAN based and hence, having PAN would be a prerequisite for obtaining
registration.
The assessee must obtain separate registration for each State, as registration under GST will be State-wise.
The assessee has an option to obtain a separate registration for each of the business vertical in the same
State.
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Invoice
Invoicing forms a crucial function when it comes to the execution of a transaction. On every sale/purchase an
invoice is issued by the supplier i.e. person making the sale. The invoice contains S No. details of product such
as product name, description, quantity, etc along with details of supplier, purchaser, tax charged and other
particulars such as discounts, terms of sale etc. Based on the same invoice the seller and buyer make entry in
their books of accounts. When audit (link) is conducted, the invoices are rechecked for their accuracy (this
process is called vouching) as invoices are considered as primary documents based on which other documents
are prepared such as trial balance, profit and loss account and balance sheet Based on the tax invoices only
purchaser can claim input credit. The government has notified rules of invoicing under GST along with a
template of invoice (GST INV-01) covering the elements such as suppliers details, GST tax rates etc. that need
to be presented. In this section we will be covering all aspects of invoicing under GST.
Format of Invoice:
Based on GST Invoice Rules three kinds of invoices can be issued under GST namely:
A. Invoice Format for supply of goods (Format Enclosed)
B. Invoice Format for supply of services (Format Enclosed)
C. Invoice Format for Debit Note / Credit Note. (Format Enclosed)
Time Limit for Issuance of Invoice
In normal cases, the tax invoice (for services) is to be issued within 30 days from the date of supply of service.
In the case of continuous supply of services, invoice is to be issued within 30 days from the date when each
event specified in the contract, which requires the recipient to make any payment to the supplier of services, is
completed.
Accounts to be maintained Under GST:
Goods and service tax or GST will be one tax to subsume all taxes. It will bring in One nation one tax regime.
While there will be certain initial transition challenges, GST will bring in much clarity in many areas of business.
One of the areas is accounting and bookkeeping.
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Current scenario:
Separate accounts must be maintained for excise, VAT, CST and service tax. Heres a list of the few accounts
currently any business must maintain (apart from accounts like purchase, sales, stock)
a. Excise payable a/c (for manufacturers)
b. CENVAT credit a/c (for manufacturers/Service Provider)
c. Output VAT a/c
d. Input VAT a/c
e. Input Service tax a/c
f. Output Service tax a/c
GST Regime
Under GST all these taxes (excise, VAT, service tax) will get subsumed into one account.
The same trader must then maintain the following account (apart from accounts like purchase, sales, stock)
a. Input CGST Account
b. Output CGST Account
c. Input SGST Account
d. Output SGST Account
e. Input IGST Account
f. Output IGST Account
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Electronic Cash Ledger (to be maintained on Government GST portal to pay GST)
Account/Records Information Required By Whom?
Register of Goods Account should contain detail of goods manufactured in Every assessee carrying out
Produced a factory or production house manufacturing activity
Purchase Register All the purchases made within a tax period for All Assessee
manufacturing of goods or provision of services
Sales Register Account of all the sales made within a tax period must All Assessee
be maintained
Stock Register This register should contain a correct stock of inventory All Assessee
available at any given point of time
Input Tax Credit Availed This register should maintain the details of Input Tax All Assessee
Credit availed for a given tax period
Output Tax Liability This register should maintain the details of GST liability All Assessee
outstanding to be adjusted against input credit or paid
out directly
Output Tax Paid This register should maintain the details of GST paid for All Assessee
a particular tax period
Other Records Government can further specify by way of a notification, Specific Businesses as notified
Specified additional records and accounts to be maintained by the government
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Summary of Transitional provisions at the time of switching to GST on 1-7-2017
Taxable Persons who are paying service tax, State Vat or Central Excise are required to migrate to GST. They
will get temporary PAN based registration number. Final registration will be granted after submitting necessary
information and papers - section 139 of CGST Act.
A manufacturer who is having Cenvat Credit balance in his return on 30-6-2017 can carry forward his Cenvat
credit as CGST Credit. He can also take unavailed Cenvat credit of excise duty paid on capital goods.
A dealer or manufacturer who has input tax credit under State Vat or Entry Tax in his return on 30- 6-2017
can carry forward his input tax credit as SGST Credit. He can also take unavailed credit of State Vat paid on
capital goods.
A taxable person who was not eligible to take Cenvat Credit but is now under GST can take input tax credit of
excise duty which was paid on the stock with him, if he has Invoice or other documents evidencing payment of
excise duty. He has to submit stock statement.
A taxable person who was not earlier under Central Excise but is now under GST and does not have excise
duty paying documents evidencing payment of excise duty, can take input tax credit of 40% of CGST payable by
him. He takes credit when he sales this stock after 1-7-2017 by charging CGST. He can sale old stock upto six
months. He has to submit stock statement and submit statement in form.
A taxable person who was not earlier under State Vat but is now under GST can take input tax credit of State
Vat which was paid on the stock with him, if he has tax invoices or other documents evidencing payment of
State Vat. He has to submit stock statement.
A taxable person who was not earlier under State Vat or was under composition scheme but is now under
GST and does not have documents evidencing payment of State Vat, can take input tax credit of 40% of SGST
payable by him. He takes credit when he sales this stock after 1-7-2017 by charging SGST. He can sale old
stock upto six months. He has to submit stock statement and submit statement in form.
If goods were cleared by supplier prior to 1-7-2017 by paying excise duty and State Vat but goods were
received after 1-7-2017 by recipient, input tax credit of such excise duty or State Vat is available if such invoice
was recorded in books of account within 30 days i.e. before 30-7-2017.
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COMMON INVOICE
YOUR COMPANY NAME
YOUR COMPLETE BUSINESS ADDRESS LINE -1
YOUR COMPLETE BUSINESS ADDRESS LINE - 2
Email ID
Your Gstin Number: Transportation Mode: (Apply for Supply of Goods only)
Tax Is Payable On Reverse Charge: (Yes/No) Veh.No :
Your Invoice Serial Number: Date & Time of Supply:
Your Invoice Date: Place OF Supply:
Details of Receiver (Billed to) Details of Consignee (Shipped to)
Name: Name:
Address : Address :
State: State:
State Code : State Code :
GSTIN Number: GSTIN Number:
Description of Goods HSN CGST SGST IGST
Taxable
S.No Code Qty UOM Rate Total Discount
value Rate Amount Rate Amount Rate Amount
(GST)
- - - - - -
- - -
Invoice Value (In Words) Total -
Freight Charges -
Loading and Packing Charges -
Insurance Charges -
Other Charges -
Invoice Total -
Amount of Tax Subject to Reverse Charge - - -
Certified that the Particulars given above are true and correct Electronic Reference Number :
YOUR TERM & CONDITION OF SALE YOUR COMPANY NAME
Signature:
Authorised Signatory
Name:
Designation:
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EXPORT INVOICE
"SUPPLY MEANT FOR EXPORT ON PAYMENT OF IGST" / "SUPPLY MEANT FOR EXPORT UNDER BOND WITHOUT PAYMENT OF IGST"
(As case may be)
YOUR COMPANY NAME

EmailID
Your Gstin Number: Transportation Mode: (Apply for Supply of Goods only)
Tax Is Payable On Reverse Charge: (Yes/No) Veh.No :
Your Invoice Serial Number: Date & Time of Supply:
Your Invoice Date: Place OF Supply:
Name: Name:
Address : Address :
Destination Country Name: Destination Country Name:
ARE- 1 Number:
ARE - 1 Date:
Taxable
(GST)
- - - - - -
- - -
Freight Charges -
Insurance Charges -
Other Charges -
Invoice Total -
Signature:
Name:
Designation:
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"SUPPLYMENTRY INVOICE / DEBIT NOTE / CREDIT NOTE"
(As case may be)
YOUR COMPANY NAME

Email ID
Your GSTIN Number: Transportation Mode: (Apply for Supply of Goods only)
Tax Is Payable On Reverse Charge: (Yes/No) Your Veh.No :
SI/DN/CN Serial Number: Date & Time of Supply: Place
Date: OF Supply:
Name: Address : Name: Address :
State: State:
State Code : GSTIN State Code : GSTIN
Number: Number:

Taxable
(GST)
- - - - - -
- - -
Freight Charges -
Insurance Charges -
Other Charges -
Invoice Total -
Declaration
This SI/DN/CN is issued in adjustment to Original InvoiceNo:
Orginal InvoiceDated
Signature:
Name:
Designation:
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Overview of GST

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overview OF

GOODS AND SERVICE TAX

Knowledge Partners: A A R S H & ASSOCIATES

Major defects in present structure of indirect taxes

Following can be summarized as major defects in present structure of indirect taxes:

State Government cannot impose service tax.

What is Goods and Services Tax?

Basic scheme of GST is as follows

GST is consumption based tax based on Vat principle

Now who is taxable person under GST

Who is Liable to get Register Under GST:

GST registration is mandatory for:

GST registration by type of Taxable Person:

Accounts to be maintained Under GST:

Account/Records Information Required By Whom?

Summary of Transitional provisions at the time of switching to GST on 1-7-2017

YOUR TERM & CONDITION OF SALE YOUR COMPANY NAME

YOUR COMPANY NAME

YOUR TERM & CONDITION OF SALE YOUR COMPANY NAME

YOUR COMPANY NAME

Description of Goods HSN CGST SGST IGST

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