- Intra-State & Inter-State Supply.
- Extent & Commencement of GST Law.
- Levy & Collection of CGST & IGST (Sec 9 of CGST Act & Sec 5 of IGST Act).
- Meaning of Reverse Charge Mechanism (RCM).
- List of Services And Goods Notified Under RCM [Sec 9(3) Of
CGST Act & 5(3) Of IGST Act].
- Rates of GST.
- Composition Scheme [Section 10].
- Conditions & Restrictions for Composition Levy [Rule 5].
- Validity of Composition Levy (Section 10(3) R/W Rule 6).
- Penalty For Irregular Availment of Composition Scheme Sec 10(5) R / W Rule 6(4) & 6(5).
- Intimation of Opting for Composition Levy Rules 3 & 4.
- Composition Scheme for Service Providers (NN 2/2019).
IMPORTANT DEFINITIONS :
Exempt Supply (Sec 2(47) of CGST Act) :
- Means supply which attracts nil rate of tax).
- Which may be wholly exempt from tax u/s 11, or u/s 6 of IGST Act.
- Includes non-taxable supply.
Reverse charge [Section 2(98) of CGST Act] :
- Liability to pay tax is on 'recipient' of supply of G/&S instead of supplier of such G/&S.
India :
- Territory of India &,its territorial waters (TWI).
- Seabed & sub-soil underlying such waters.
- Continental shelf.
- Exclusive economic zone or any other maritime zone.
- Air space above its territory & TWI.
Intra-state & Inter-State supply :
|
Particulars |
Intra-State Supply |
Inter-State Supply |
|
Meaning |
Location of supplier & PoS are in i) Same UT ii) Same State |
Location of supplier & PoS are in i) Different States ii) Different UTs iii) A State & a UT [MH > A&N] |
|
Applicability |
CGST + SCGT/(UTGST for UTs) |
IGST |
EXTENT & COMMENCEMENT OF GST LAW :
LEVY & COLLECTION OF CGST & IGST (Sec 9 of CGST Act & Sec 5 of IGST Act) :
|
Section |
Levy & Collection |
||||||
|
9(1) |
Levy of CGST on
Intra-State Supply on the value determined u/s 15 (Max @ 20%)
|
||||||
|
9(2) |
No Levy of GST on
'petroleum products' till recommended by GST council. |
||||||
|
9(3)
|
Power of Government to specify
category of Supply on which RCM shall apply
|
||||||
|
9(4) (AMD) |
Tax under RCM is payable on-Notified category of Inward Supplies, of
G/& S received from any unregistered supplier by Notified class of
registered persons
|
||||||
|
9(5) |
Payment of GST by electronic commerce
operator (ECO)
Notified Services are :
|
Meaning of ECO :
- ECO is any person who owns/operates/manages an electronic platform for supply of G/&S.
- ECO display products & services on their electronic portal which are actually supplied by some other person to the consumer.
- Consumers buy such goods/services through these portals.
- On placing order for a particular product/service, actual supplier suppliers supplies selected product / service to consumer.
- Price is collected by ECO from consumer and thereafter given to actual supplier after deduction their commission.
WHAT IS THE REVERSE CHARGE MECHANISM (RCM) :
- Reverse charge means the liability to pay tax is on the recipient of supply of G/S instead of the supplier.
- Generally, supplier is liable to pay GST. However, under RCM, liability to pay GST is on recipient of G/S.
- However, underlying principle of an indirect tax is that burden of such tax has to be ultimately passed on to the recipient. GST being an indirect tax, this principle holds good for GST. Therefore, under RCM, only the compliance requirements, (i.e. to obtain registration under GST, deposit the tax with the Government filing returns, etc.) have been shifted from supplier to recipient.
GOODS NOTIFIED UNDER RCM [Sec 9(3) of CGST Act & 5(3) of IGST Act] :
- Cashewntats (not shelled/peeled).
- Bidi wrapper leaves & tobacco leaves.
- Supply of Lottery, Silk yarn, used vchicles.
- Seized and Conficated goods.
- Old &used goods.
- Waste & scrap.
- Raw cotton, etc.
SERVICES NOTIFIED UNDER RCM [Sec 9(3) of CGST Act & 5(3) of IGST ACT] :
|
SN. |
Nature of Service |
Supplier (BY) |
Recipient [Person liable to pay GST] |
|
1 |
Goods Transport Agency (GTA) Goods by Road
|
Goods Transport Agency paying 2.5% CGST |
|
|
|
AMD : NO RCM on Transportation services provided by GTA to
Department /establishment of CG/SG/UT; LA; Governmental agencies which has
taken registration under GST only for the purpose of deducting tax u/s 51
& not for making a taxable supply of goods or services. Note: Above services have been simultaneously exempted from
payment of tax. |
||
|
|
Meaning of Recipient : Person who pays or is liable to pay freight for the
transportation of goods by road in goods carriage, located in TT shall be
treated as the person who receives the service for the purpose of this
notification. |
||
|
Q. ABC Ltd. availed service of XYZ Ltd. (GTA) for transportation of goods by road from Pune to Mumbai. Ans: GST shall be paid by ABC Ltd. under RCM u/s 9(3) since it is liable to pay freight for transportation of goods. Thus ABC Ltd. shall be treated as recipient ofservice. If GTA has paid GST under forward charge @ 129% then it is not subject to reverse charge. |
|||
|
2. |
Legal Services |
Individual Advocate (including senior advocate or firm of advocates) |
Business Entity located in TT. |
|
3 |
Services by Arbitral Tribunal |
Arbitral Tribunal |
Business Entity located in TT. |
|
4 |
Sponsorship |
Any Person |
Body Corporate or P'ship Firm in TT |
|
Q.ABCLtd.
paid Rs: 1,00,000 towards sponsorship of exhibition. What if Mr. A has paid
Rs. 1,00,000 towards sponsorship of exhibition? Ans:
Sponsorship is received by ABC Ltd. so they are subject to reverse charge U/s
9 (3). If it is provided Mr. A then GST will be payable by supplier of
service. Service provided by way of sponsorship to any body corporate or
partnership firm are subject to reverse charge. |
|||
|
5 |
Services supplied by CG, SG, UT/LA |
CG, SG, UT, LA |
Business Entity located in TT. |
|
|
Excluding [No RCM in case of supply of these services] a) Renting of Immovable Property b) Specified services:
|
||
|
5A |
Services supplied by CG, SG, UT or LA way of renting of immovable property |
CG, SG, UT or LA |
Any Registered Person under GST |
|
Q. Rental income received by Tamil Nadu State Government from renting an
immovable property to Mannappa Pvt. Ltd. (Turnover of the company was
Rs. 22 lacs in preceding FY). Ans : In case of Services supplied by CG/SG/UT/LA by way of renting of
immovable property to a registered person, RCM will be applicable (i.e
recipient will be liable to pay GST). Hence, Mannappa Pvt. Ltd. will be
liable to pay GST under reverse charge mechanism. |
|||
|
5B |
Services of Transfer of development rights or Floor Space Index (FSI) for construction of a project by a promoter. |
Any person |
Promoter |
|
5C |
Long term lease of land(> 30 years) against consideration in the form
of upfront amount (called as premium, salami, cost price, development charges
or by any other name) &/or periodic rent for construction of a project by
a promoter. |
Any person |
Promoter |
|
6 |
Services supplied by a Director |
Director |
Company or Body Corporate |
|
7 |
Services supplied by Insurance Agent |
Insurance Agent |
Insurance Company located in TT. |
|
Q. Insurance company pay Rs. 1,00,000 commission to Mr. A whose turnover
< threshold limit for registration. Ans. : Insurance company will be liable to pay GST under reverse charge
basis u/s 9 (3). |
|||
|
8 |
Services supplied by Recovery Agent |
Recovery agent |
Banking company or financial institution or NBFC located in TT. |
|
9 |
Transfer/permitting use enjoyment of copyright relating to original
literary, dramatic, musical or artistic works. |
Author, music composer, Photographer, Artist etc. |
Publisher, Music company, Producer etc. located in taxable territory. |
|
10 |
Supply of Services by Members of overseeing Committee |
Members of Overseeing Committee constituted by RBI |
RBI |
|
11 |
Services supplied by Individual Direct Selling Agents (DSAs) |
Individual Direct Selling Agents (DSAs) other than BC, P'ship firm or LLP |
Banking company or NBC in TT. |
|
12 |
Services provided by Business facilitator
to a banking company |
Business facilitator |
Banking company, located in TT. |
|
13 |
Services provided by Agent of Business correspondent |
Agent of Business correspondent |
Business Correspondent located in TT |
|
14 |
Security Services (Services Supply of security personnel) |
Any Person other than BC |
Any Registered Person, located in TT |
|
|
Note : Tax has to be paid under RCM on
gross amount charged (Security Personnel cost + PF+ ESI+Service charges +
other charges) by security service providers & not on service charges
only. |
||
|
|
However, nothing contained in this entry shall apply to :
|
||
RATES OF GST :
CLASSIFICATION OF GOODS :
- Classification of goods means identification of the tariff item, sub-heading, heading & chapter in which a particular product will be classified.
- Tariff item, sub-heading, heading & chapters referred in the Schedules of rate notification for goods under GST a the Tariff item, sub-heading, heading & chapters of the First Schedule to the Customs Tariff Act, 1975.
- Indian Customs Tariff is based on HSN. HSN stands for Harmonized System of Nomenclature.
- It is a multipurpose international product nomenclature developed by the World Customs Organization (WCO) for the purpose of classifying goods across the World in a systematic manner.
- It comprises of about 5,000 commodity groups; each identified by a 6-digit code [code can be extended), arranged in a legal & logical structure & is supported by well-defined rules to achieve uniform classification.
- India has developed an 8-digit code of HSN.
- Along the lines of HSN, the Indian Customs Tariff has a set of Rules of Interpretation of the First Schedule & General Explanatory notes. These rules & the general explanatory notes give clear direction as to how the nomenclature in the schedule is to be interpreted. These Rules for Interpretation including section & chapter notes & the General Explanatory Notes of the First Schedule apply to the interpretation of the rate notification for goods under GST also.
- Consequently, under GST, goods are classified on the basis of HSN in accordance with the Rules for Interpretationd the Customs Tariff.
- Once classification fora product has becn determined on this basis, applicable rate has to be determined as per the rate prescribed in the rate notification issued under GST.
|
CGST |
0% |
0.125% |
1.5% |
2.5% |
6% |
9% |
14% |
|
SGST |
0% |
0.125% |
1.5% |
2.5% |
6% |
9% |
14% |
|
TOTAL |
0% |
0.250% |
3% |
5% |
12% |
18% |
28% |
CLASSIFICATION OF SERVICES :
- A new Scheme of Classification of Services has been devised under GST. It is a modified version of the United Nations Central Product Classification.
- Under this scheme, the services of various descriptions have been classified under various sections, headings & groups. Chapter 99 has been assigned for services. This chapter has following sections :
|
Section 5 |
Construction Services. |
|
Section 6 |
Distributive Trade Services; Accommodation, Food
& Beverage Service; Transport Services; Gas & Electricity
Distribution Services. |
|
Section 7 |
Financial & related services; real estate
services; & rental & leasing services. |
|
Section 8 |
Business & Production Services. |
|
Section 9 |
Community, social & personal services &
other miscellaneous services. |
- Each section is divided into various headings which is further divided into Groups. Its further division is made in the form of Tariff item'/ Service Codes. Rate of tax is determined as per the Service Code in which the service is classified.
- Gambling Services, Services of admission to entertainment events/sporting event attract 28% GST.
- Services not covered under any specific heading are taxed @18% (CGST@9% & SGST @ 9%).
|
CGST |
0% |
2.5% |
6% |
9% |
14% |
|
SGST |
0% |
2.5% |
6% |
9% |
14% |
|
TOTAL |
0% |
5% |
12% |
18% |
28% |
COMPOSITION SCHEME [SECTION 10] :
Aggregate Turnover Sec 2(6) :
- All Taxable Supplies (Excluding value of Inward supplies on which tax is payable by a person on RCM basis).
- Exempt supplies (Nil Rated + Wholly Exempt + Non-taxable Supply).
- Exports of G/&S (Zero-rated Supply).
- Inter-State supplies of Persons having Same PAN (Stock transfer or branch transfers).
- but Excludes CGST, SGST, UTGST, IGST & GST Cess.
- Value of Inward supplies on which tax is payable under RCM basis by a person shall not be included in his Aggregate Turnover.
- Value of supply of any exempt services including services by way of extending deposits, loans or advances; consideration for which is represented by way of interest or discount, shall not be taken into account for calculating Aggregate turnover.
Turnover in State/UT Sec 2(112) :
- All Taxable Supplies (Excluding value of Inward supplies on which tax is payable by a Person on RCM basis).
- Exempt supplies made within a state or UT by a taxable person, Exports of G/&S.
- Inter-State supplies made from State/UT by the said taxable person.
- But Excludes CGST, SGST, UTGST, IGST & GST Cess.
- They are not required to raise any lax invoice, however, they need to issue of bill of supply in which no tax can be charged from the recipient.
- Yearly filing of Return (GSTR 4).
- Quarterly Payment of Tax (@certain specified of his turnewer.
- Registered person, whose Aggregate turnover in Preceding (last) FY < Rs.1.5 crore.
- Eligibility Limit for Special Category states is as follows :
|
Limit |
Name of Special category states |
|
Rs. 75 Lacs
|
Manipur, Meghalaya, Mizoram (MMM), Tripura,
Arunachal Pradesh, Sikkim (TAPS), Uttarakhand & Nagaland (UK &
Nagaland) |
|
Rs. 1.5 Crores |
Assam, Himachal Pradesh & J & K |
|
Rs. 1.5 Crores |
Other States & UTs |
|
Category of Registered person |
Rate |
|
Manufacturers other than manufacturers of
Notified goods (i.e. Ice cream, pan masala & tobacco) |
1% of Turnover in State/UT
|
|
Restaurant service (referred in clause (b) of
Para 6 of Schedule II) |
2.5% of Turnover in State/UT
|
|
Any other supplier [Traders) |
0.5% of Turnover of Taxable Supplies of Gas in
State/UT |
Non - Eligibility Sec. 10(2) :
- Person Making Inter-State Supply of goods (Supplying goods outside state).
- Persons supplying goods through Eco (who are required to collect TCS).
- Manufacturers of Ice cream, pan masala & tobacco (Trader - Eligible).
- Supplier of goods which are not taxable under GST.
- Supply of Services other than restaurant services (Refer - Second Proviso to Sec 10(1)).
- If RP supplies services (other than restaurant services), value of such services shall not exceed: Higher of (a) Rs. 5 Lacs or (b) 10% of Turnover in State/UT in preceding FY.
- Person providing Exempted Service is eligible for composition scheme.
- If more than one registered persons are having same PAN, registered person shall not be eligible to opt for composition scheme unless all such registered persons opt to pay tax under composition scheme.
Composition Taxpayers now permitted to render Services upto specified limit along with Supply of Goods or Restaurant Service (Second proviso to Sec 10(1) r/w sec 10(2)(a) :
|
Turnover in preceding FY |
Limit for Supply of
Services in Current FY |
|
Upto 50 Lacs |
Rs. 5 Lacs |
|
More than 50 Lacs but upto
1.5 Crores |
10% of State/UT turnover
in preceding FY. |
Interest Income shall be Excluded while computing Aggregate Turnover for determining Eligibility for composition scheme.
Conditions & Restrictions for Composition levy [Rule 5] :
- He is neither a CTP nor NRTP.
- Goods held in stock by him have not been purchased from unregistered supplier & if purchased, he pays the tax on RCM basis u/s 9(4).
- He shall pay tax u/s 9(3)/9(4) (reverse charge) on Inward supply of G/&S (in addition to composition tax).
- Not engaged in manufacture of notified goods u/s 10(2)(e) during the preceding FY. Ice cream; Pan masala; Tobacco & manufactured substitutes.
- He shall mention words "composition taxable person, not eligible to collect tax on supplies" at top of bill of supply issued by him.
- He shall mention words "composition taxable person" on every notice or signboard displayed at a prominent place at his principal place of business & at every additional place or places of business.
|
Unit |
Location |
Turnover in previous FY |
Turnover in 1st quarter of this FY |
Total Tax (@1%)
|
|
A1 |
UP |
Rs. 85 lacs |
Rs. 5 lacs |
Rs. 5,000 |
|
A2 |
MP |
Rs. 30 lacs |
Rs. 10 lacs |
Rs. 10,000 |
|
|
|
Rs. 115 lacs |
Rs. 15 lacs |
|
VALIDITY OF COMPOSITION LEVY (Section 10(3) r/w rule 6) :
- Pay GST under regular scheme under section 9(1) from the day he ceases to satisfy any of conditions prescribed for composition levy.
- Issue tax invoice for every taxable supply made thereafter.
- File and intimation for withdrawal from scheme in prescribed form within 7 days of occurrence of such event.
- Effective date from which withdrawal from the composition scheme shall take effect shall be the date indicated by him in his application.
- But, such date may not be prior to the commencement of FY in which such application for withdrawal is being filed.
- Allowed to avail ITC of stock of inputs & inputs contained in semi-finished or finished goods held in stock by him & on capital goods held by him on date or withdrawal.
- He shall furnish a statement, within 30 days of withdrawal of option, containinE details of such stock held on common portal.
Penalty for Irregular Availment of Composition Scheme Sec 10(5) r / w rule 6(4) & 6(5) :
- If a taxable person has paid tax under composition scheme though he was not eligible for scheme, person would be liable to penalty & provisions of section 73 or 74 of CGST Act shall be applicable for determination of tax & penalty.
- Further, where proper officer has reasons to believe that registered person was not eligible to pay tax under composition levy or has contravened provisions of Act/provisions of this Chapter, he may issue a show cause notice (SCN) to such person in prescribed form.
- Upon receipt of reply to such SCN from registered person in prescribed form, proper officer shall issue an order in prescribed form within 30 days of receipt of such reply, either (a) accepting reply, b) eying option to pay tax under composition levy from date of option or from date of event concerning such contravention (as case may be).
- In case of denial of option to pay tax under composition levy by the tax authorities, the effective date of such denial shall be from a date, including any retrospective date, as may be determined by tax authorities. However, such effective date shall not be prior to the date of contravention of the provisions of the CGST Act/ CGST Rules.
INTIMATION OF OPTING FOR COMPOSITION LEVY RULES 3 & 4 :
|
Type of Applicant
|
Intimation
|
Effective date under composition levy |
|
New Registration
|
|
Date from which registration is effective. |
|
Exisiting Registration |
|
From beginning of FY |
Details of Stock to be furnished :
- Stock, including inward supply of goods received from unregistered persons.
- Held by him on day preceding date from which he opts for composition levy.
- Electronically, in prescribed form, on common portal.
- Within a period of 90 days from date on which option for composition levy is exercised or within such further period as may be extended by Commissioner in this behalf.
Points to Remember :
- Composition scheme to be adopted uniformly by al! registered persons having same PAN.
- Composition scheme supplier cannot collect tax from recipient of G/&S.
- Taxable person opting for composition scheme is not entitled to any ITC.
COMPOSITION SCHEME for service providers (NN 2/2019) :
- Registered person whose aggregate turnover m preceding is upto Rs. 50 lacs.
- Who is exclusively engaged in supplying services other than restaurant services.
- Who is not eligible to pay tax under composition scheme u/s 10.
- On first supplies of G&/S upto Aggregate turnover of Rs. 50 lacs made on/after 1st April in any FY, subject to specified conditions.
- Registered person whose aggregate turnover in preceding FY < Rs. 50 lacs.
- who is exclusively engaged in supplying services other than restaurant services.
- who is engaged in supply of services (other than restaurant services) along with supply of goods &/or restaurant services of value exceeding Rs.5 lacs in current FY.
- Any supply (G/S) which is not leviable to tax under the said Act.
- Any inter-State outward supply of G&/S.
- Any supply through ECO who is required to collect tax at source u/s 52.
- Supplies of Notified goods (Ice cream; Pan masala; Tobacco & manufactured tobacco substitutes).
Tax Payable by Registered Person opting to pay tax under NN 2/2019 :
- CGST @ 3% + SGST/UTGST @ 3% on all outward supplies - first supplies of G&/S upto an aggregate turnover of Rs. 50 lacs made on/after 1st April in any FY - regardless of any exemption available to such supplies or any notification issued u/s 9(1).
- CGST on inward supplies u/s 9(3) or 914) (RCM basis) at the applicable rates.
- Where more than one registered persons are having same PAN, CGST on supplies by all such registered persons is paid @ 3% under this notification. (i.e. All branches shall pay tax @ 3%.)
- In computing aggregate turnover to determine eligibility of a registered person to pay CST @ 3% under this notification, value of supply of exempt services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, shall not be taken into account.
- If any RP who has availed ITC opts to pay tax under this notification :
• he shall pay an amount by way of debit in electronic credit ledger or electronic cash ledger.• equivalent to ITC in respect of inputs held in stock & inputs contained in SFG or FG held in stock & on capital goods as if supply made under this notification attracts the provisions of sec 18(4).• after payment of such amount, balance of ITC lying in his electronic credit ledger shall lapse.
- CGST Rules as applicable to composition dealer shall mutatis mutandis apply to a person paying tax under this notification.
- Option to pay tax by availing the benefit of this notification would be effective from the beginning of the FY or from the date of registration (in cases of new registration during FY).