Answer to your frequent tax questions

Small taxpayers with an aggregate turnover in a financial year up to [Rs.75 lakhs] shall be eligible for composition levy.
Under the scheme, a taxpayer shall pay tax as a percentage of his turnover during the year without the benefit of ITC.
A tax payer opting for composition levy shall not collect any tax from his customers. The Composition scheme is not mandatory but optional.

Aggregate turnover means the aggregate value of

(1) all taxable supplies, excluding the value of inward supplies on which tax is payable by a person on reverse charge basis,
(2) exempt supplies,
(3) exports of goods or services or both and
(4) inter-state supplies of persons having the same Permanent Account Number,

to be computed on an all-India basis but excludes Central tax, State tax, Union territory tax, Integrated tax and cess.

Businesses dealing only in goods can only opt for composition scheme

Tax payers making inter- state supplies or paying tax on reverse charge basis shall not be eligible for composition scheme. Also, Services providers have been kept outside the scope of this scheme. However, restaurant sector taxpayers may also opt for the scheme.

A registered taxpayer, who is registered under the Composite Scheme, will pay tax at a rate not more than 1% for manufacturer, 2.5% for restaurant sector and 0.5% for other suppliers of turnover.

No, taxable person under composition scheme is not eligible to claim input tax credit

No, customer who buys goods from taxable person who is under composition scheme is not eligible for composition input tax credit because a composition scheme supplier cannot issue a tax invoice

Registration

Any existing taxpayer not under Composition Scheme may choose to opt for it (subject to being qualified), only from the beginning of the next Financial Year. The application will have to be filed on or before 31st March of the Previous Year so that returns can be filed accordingly.

Dealers under Composition Scheme may be allowed to switch over to normal scheme even during the year if they want to. However, they cannot switch over to Composition Scheme again during the same Financial Year.

Returns

A registered taxable person paying tax under the provisions of Composite Scheme shall furnish a return for each quarter in prescribed form in prescribed manner within eighteen days after the end of relevant quarter.

GSTR-4 has been prescribed by the government as a tax return form to be filed by a dealer under Composition Scheme.

Composition dealers need to furnish the first return for the period starting from the date on which they become a registered taxable entity till the end of the quarter in which the registration has been granted.

Following are the conditions which must be addressed by the taxpayer to avail credit on input at the time of transition from composition scheme to the normal scheme:

(1) Such inputs or goods are intended to be used for making taxable supplies under GST law.
(2) Taxpayer was eligible for CENVAT Credit on such goods under the previous regime, however, couldn’t claim it being under composition scheme.
(3) Such goods are eligible for input tax credit under GST regime.
(4) The taxpayer has legal evidence of input tax paid on such goods.
(5) Such invoices were issued within a period of 12 months from GST applicable date.

When switching from normal scheme to composition scheme, the taxpayer shall be liable to pay an amount equal to the credit of input tax in respect of inputs held in stock on the day immediately preceding the date of such switchover. The balance of input tax credit after payment of such amount, if any lying in the credit ledger shall lapse.

Yes, a composition dealer will be liable to pay tax on reverse charge basis for supplies from unregistered person.

GST is a destination based tax on consumption of Goods and Services. GST is levied at all stages right from manufacturer up to the final consumption with input credit of taxes paid at the previous stage in the supply chain.

The tax would accrue to the taxing authority which has jurisdiction over the place of consumption which is also termed as place of supply.

For example, if the manufacturer/ Dealer/ Service Provider is situated in the state of Maharashtra and the goods and/or services sold/ provided by the said person are getting consumed in the state Uttar Pradesh, then the Uttar Pradesh State Government is the appropriate taxing authority who shall levy GST, as per the principle of destination based taxation system.

India is a federal country where both the Centre and the States have been assigned the powers to levy and collect taxes through appropriate legislation. Both the levels of Government have distinct responsibilities to perform according to the division of powers prescribed in the Constitution for which they need to raise resources. A dual GST will, therefore, be in keeping with the Constitutional requirement of fiscal federalism.

Currently, the fiscal powers between the Centre and the States are clearly demarcated in the Constitution with almost no overlap between the respective domains.
The Centre has the powers to levy tax on the manufacture of goods (except alcoholic liquor for human consumption, opium, narcotics etc.) while the States have the powers to levy tax on the sale of goods. In the case of inter-State sales, the Centre has the power to levy a tax (the Central Sales Tax) but, the tax is collected and retained entirely by the States. As for services, it is the Centre alone that is empowered to levy service tax.
Introduction of the GST required amendments in the Constitution so as to simultaneously empower the Centre and the States to levy and collect this tax.
The Constitution of India has been amended by the Constitution (one hundred and first amendment) Act, 2016 recently for this purpose. Article 246A of the Constitution empowers the Centre and the States to levy and collect the GST.

There are 17 taxes (Central as well as State) and 33 (Central as well as State) different kinds of cesses getting subsumed under GST.

Taxes currently Levied and Collected by the Centre Taxes currently Levied and Collected by the States
Central Excise Duty State VAT
Duties of Excise (Medicinal and Toilet Preparations) Central Sales Tax
Additional Duties of Excise (Goods of Special Importance) Luxury Tax
Additional Duties of Excise (Textiles and Textile Products) Entry Tax
Additional Duties of Customs (CVD) Entertainment and Amusement Tax (Except when levied by local bodies)
Special Additional Duty of Customs (SAD) Taxes on Advertisements
Service Tax Purchase Tax
Central Surcharges and cesses so far as they relate to the supply of goods and services Taxes on lotteries, betting and gambling
State Surcharges and cesses so far as they relate to the supply of goods and services

The following Commodities are kept outside the purview of GST:

(a) Alcoholic Liquor for Human Consumption
(b) Petroleum Products viz.
– Petroleum Crude
– Motor spirit (petrol)
– High speed diesel
– Natural Gas
– Aviation Turbine Fuel (ATF)
(c) Electricity

The existing taxation system will continue in respect of the above commodities.

VAT or Sales Tax on petroleum products contributes to nearly 33% of state revenues and they do not want to share it with Centre, at least in initial days of GST. Once, revenue under GST stabilizes the GST council will gradually include petroleum also.
Centre also earns significant customs and other import duties on petroleum today and also Excise for generation of petroleum products from crude.
Similarly for many states the revenue from state excise imposed on alcohol brings in revenue of 25% of total. Hence states do not want to bring alcohol under GST.

Tobacco and Tobacco Products would be subject to GST. In addition Centre would have the power to levy Central Excise Duty on such products.

India has opted for the Dual GST system wherein the Centre and States, both will levy GST on the same tax base.

Type of Taxes Nature of Transaction Taxing Authority (Levy and Administration)
Central Goods and Services Tax (CGST) Intra State/UT supply of Goods and/ or Services Central Government
State Goods and Services Tax (SGST) Intra State supply of Goods and/ or Services State Governments/ Union Territories with Legislatur
Union Territory Goods and Services Tax (UTGST) Intra UT supply of Goods and/ or Services Central Government
Integrated Goods and Services Tax Inter State/UT supply of Goods and/ or Services Central Government

*Union Territory Goods and Services Tax (UTGST)

The Constitution (One Hundred and first Amendment) Act, 2016, has inserted a new clause, namely Clause 26B on “State” in Article 366. As per this clause, “State” with reference to Articles 246A, 268, 269, 269A, and 279A includes a Union territory with Legislature. Even ‘State’ for the purposes of GST, includes a Union territory with Legislature.
Therefore, technically SGST cannot be levied in a Union Territory without legislature. This applies to the following Union Territories of India:
1. Chandigarh
2. Lakshadweep
3. Daman and Diu
4. Dadra and Nagar Haveli
5. Andaman and Nicobar Islands
To plug this loophole, GST Council has decided to have Union Territory GST Law (UTGST) – which would be at par with SGST. However, SGST can be applied in Union Territories such as New Delhi and Pondicherry, since both have their individual legislatures, and can be considered as “States” as per GST process.

The CGST and the SGST would be levied simultaneously on every transaction of supply of goods and services except the exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits. Further, both would be levied on the same price or value unlike State VAT which is levied on the value of the goods inclusive of CENVAT.
While the location of the supplier and the recipient within the country is immaterial for the purpose of CGST, SGST would be chargeable only when the supplier and the recipient are both located within the State.

Under the GST regime, an Integrated GST (IGST) would be levied and collected by the Centre on interState supply of goods and services. Under Article 269A of the Constitution, the GST on supplies in the course of interstate trade or commerce shall be levied and collected by the Government of India and such tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of the Goods and Services Tax Council.

Amongst other benefits which will be accrued by the implementation of GST, following are the key advantages that will accrue to the Country as a whole by the enactment of GST viz.

For Business and Industry For Central and State Governments For the Consumer
Easy Compliance Simple and Easy to administer Single and transparent tax proportionate to the value of goods and services
Uniformity of tax rates and structure Better Controls on Leakage Relief in overall tax burden
Removal of cascading effect Higher Revenue efficiency
Improved Competitiveness

Under the GST regime, tax is payable by the taxable person on the supply of goods and/or services.
Following chart shows the threshold above which the registration and the liability to pay tax is mandatory viz.:

Particulars Threshold (Aggregate Turnover in FY exceeds)
States of:
Arunachal Pradesh
Assam
Jammu & Kashmir
Manipur
Meghalaya
Mizoram
Nagaland
Sikkim
Tripura
Himachal Pradesh
Uttarakhand
Rs. 10 Lakhs
Other States Rs. 20 Lakhs

Aggregate turnover means the aggregate value of
(1) all taxable supplies, excluding the value of inward supplies on which tax is payable by a person on reverse charge basis,
(2) exempt supplies,
(3) exports of goods or services or both and
(4) inter-state supplies of persons having the same Permanent Account Number,
to be computed on an all-India basis but excludes Central tax, State tax, Union territory tax, Integrated tax and cess.
The person who has not crossed the threshold as specified above can voluntarily get itself registered and the provisions of the Act shall apply to such person accordingly.
In certain specified cases the taxable person is liable to pay GST even though he has not crossed the threshold limit.
For example: GST to be paid under the Reverse Charge mechanism, wherein the recipient and not the supplier of goods and/or services is liable to collect and pay taxes to the Government.

HSN code shall be used for classifying the goods under the GST regime.
Services will be classified as per the Services Accounting Code (SAC).

HSN

The Harmonized Commodity Description and Coding System generally referred to as “Harmonized System of Nomenclature” or simply “HSN” is a multipurpose international product nomenclature developed by the World Customs Organization (WCO).

HSN code description in the invoice

Turnover Limit Code
Turnover of Rs.5 Crores or above 4 digits code
Turnover Between Rs. 1.5 Crores but below Rs.5 Crores 2 digits code
Turnover below Rs. 1.5 Crores No required to mention HSN code

Imports of Goods and Services will be treated as inter-state supplies and IGST will be levied on import of goods and services into the country. The incidence of tax will follow the destination principle and the tax revenue in case of SGST will accrue to the State where the imported goods and services are consumed. Full and complete set-off 14 will be available on the GST paid on import on goods and services.

[Customs duty and cess as applicable (+) IGST+ GST compensation cess.]
IGST and GST compensation cess shall be paid after adding all customs duty and customs cess to the value of imports.

Exports will be treated as zero rated supplies. No tax will be payable on exports of goods or services, however credit of input tax credit will be available and same will be available as refund to the exporters.

GSTN stands for Goods and Service Tax Network (GSTN). A Special Purpose Vehicle called the GSTN has been set up to cater to the needs of GST. The GSTN shall provide a shared IT infrastructure and services to Central and State Governments, tax payers and other stakeholders for implementation of GST. The functions of the GSTN would, inter alia, include:

(i) Facilitating registration;
(ii) Forwarding the returns to Central and State authorities;
(iii) Computation and settlement of IGST;
(iv) Matching of tax payment details with banking network;
(v) Providing various MIS reports to the Central and the State Governments based on the tax payer return information;
(vi) Providing analysis of tax payers’ profile; and
(vii) Running the matching engine for matching, reversal and reclaim of input tax credit.

There will be no area based exemption under GST.

No. GSTN shall migrate all such assessees/dealers to the GSTN and shall issue GSTIN and password.
They will be asked to submit all requisite documents and information required for registration in a prescribed period of time.
Failure to do so will result in cancellation of GSTIN number.
The service tax assessees having centralized registration will have to apply afresh in the respective states wherever they have their businesses.

GST registration process is online through a portal maintained by Central Government of India.
Government will also appoint GSPs (GST Suvidha Providers) to help businesses with the registration process.
Based on the information provided by GSTN, registration process looks like this:
The applicant will need to submit his PAN, mobile number and email address in Part A of Form GST REG– 01 on the GSTN portal or through Facilitation center (notified by board or commissioner).
The PAN is verified on the GST Portal. Mobile number and E-mail address are verified with a one-time password (OTP). Once the verification is complete, applicant will receive an application reference number on the registered mobile number and via E-mail. An acknowledgement should be issued to the applicant in FORM GST REG-02 electronically.
Applicant needs to fill Part- B of Form GST REG-01 and specify the application reference number. Then the form can be submitted after attaching required documents.
If additional information is required, Form GST REG-03 will be issued. Applicant needs to respond in Form GST REG-04 with required information within 7 working days from the date of receipt of Form GST REG-03.
If you have provided all required information via Form GST REG-01 or Form GST REG-04, the registration certificate in Form GST REG –06 for the principal place of business as well as for every additional place of business will be issued to the applicant.
If the person has multiple business verticals within a state he can file a separate application for the registration in Form GST REG-01 for each business verticals.
If the details submitted are not satisfactory, the registration application is rejected using Form GST REG05.
The applicant who is required to deduct TDS or collect TCS shall submit an application in Form GST REG – 07 for registration.
If he is no longer liable to deduct or collect tax at source then the officer may cancel and communicate the cancel of registration.

Registration under Goods and Service Tax (GST) regime will confer following advantages to the business:
(1) Legally recognized as supplier of goods or services.
(2) Proper accounting of taxes paid on the input goods or services which can be utilized for payment of GST due on Goods or Services or both by the business.
(3) Legally authorized to collect tax from his purchasers and pass on the credit of the taxes paid on the goods or services supplied to purchasers or recipients.

No. A person without GST registration can neither collect GST from his customers nor claim any input tax credit of GST paid by him.

Cases Effective Date of Registration
Application for registration has been submitted within thirty days from the date on which the person becomes liable to registration Date of his liability for registration
Application for registration has been submitted by the applicant after thirty days from the date of his becoming liable to registration Date of grant of registration
Suo-moto registration Date of order of registration

Any supplier who carries on any business at any place in India and whose aggregate turnover exceeds threshold limit as prescribed in a year is liable to get himself registered.
However, certain categories of persons are liable to be registered irrespective of this threshold. An agriculturist shall not be considered as a taxable person and shall not be liable to take registration.

In case of following categories of persons registration under GST is compulsory irrespective of the threshold limit:

(1) Person making an interstate taxable supply
(2) Casual Taxable Person
(3) Person who are required to pay under reverse charge
(4) Nonresident taxable person
(5) Persons who are required to deduct tax under Section 37
(6) Persons who supply goods and/or services on behalf of other registered taxable persons whether as an agent or otherwise
(7) Input service Distributor
(8) Person who supply goods and/or services, other than branded services, through e-commerce operator
(9) Every e-commerce operator
(10) An aggregator who supplies services under his brand name or trade name
(11) Such other persons as may be notified

Any person should take a Registration, within thirty days from the date on which he becomes liable to registration.

No. Every person who is liable to take a Registration will have to get registered separately for each of the States where he has a business operation and is liable to pay GST.

Yes. A person having multiple business verticals in a State may obtain a separate registration for each business vertical.

Yes. A person, though not liable to be registered under the Law, may get himself registered voluntarily, and all provisions of this Act, as are applicable to a registered taxable person, shall apply to such person.

Yes. Every person shall have a Permanent Account Number in order to be eligible for grant of registration under GST Law. However PAN is not mandatory for a non-resident taxable person who may be granted registration on the basis of any other document as may be prescribed.

Yes. Where a person who is liable to be registered under this Act fails to obtain registration, the proper officer may, without prejudice to any action that is, or may be taken under the Act, or under any other law for the time being in force, proceed to register such person in the manner as may be prescribed.

Yes. The proper officer can reject an application for registration after due verification.
However, the proper officer shall not reject the application for registration or the Unique Identity Number without giving a notice to show cause and without giving the person a reasonable opportunity of being heard.

Yes, the Registration Certificate once granted is permanent unless surrendered, cancelled, suspended or revoked.

Casual Taxable Person means a person who occasionally undertakes transactions involving supply of goods and/or services in the course of furtherance of business, whether as a Principal, agent or in any other capacity, in a taxable territory where he has no fixed place of business.

Non-resident Taxable Person means a taxable person who occasionally undertakes transactions involving supply of goods and/or services whether as principal or agent or in any other capacity but who has no fixed place of business in India.

The certificate of registration issued to a “casual taxable person” or a “non-resident taxable person” shall be valid for a period of ninety days from the effective date of registration. However, the proper officer, at the request of the said taxable person, may extend the validity of the aforesaid period of ninety days by a further period not exceeding ninety days.

The proper officer may, on the basis of such information furnished either by the registrant or as ascertained by him, approve or reject amendments in the registration particulars in the manner and within such period as may be prescribed.
It is to be noted that permission of the proper officer for making amendments will be required for only certain core fields of information, whereas for the other fields, the registrant can himself carry out the amendments

Yes. Any Registration granted under this Act may be cancelled by the Proper Officer, in circumstances as may be prescribed under the Act.
The proper officer may, either on his own motion or on an application filed, in the prescribed manner, by the registered taxable person or by his legal heirs, in case of death of such person, cancel the registration, in such manner and within such period as may be prescribed.

Yes. The cancellation of registration under one Act (say CGST Act) shall be deemed to be a cancellation of registration under the other Act (i.e. SGST Act).

Yes, in certain circumstances, the proper officer can cancel the registration on his own. Such circumstances include
(1) not filing return for a continuous period of six months (for a normal taxable person) or three months (for a compounding taxpayer) and
(2) not commencing business within six months from the date of registration.
However, before cancelling the registration, the proper officer has to follow the principles of natural justice. (Section 21 (4))

No. There is no such option available to the person taking the registration under this Act.

No. However the taxpayer has the option to register such separate business verticals independently.

ISD stands for Input Service Distributor. It is basically an office meant to receive tax invoices towards receipt of input services and further distribute the credit to supplier units proportionately.

Yes. The ISD registration is for one office of the taxpayer which will be different from the normal registration.

Yes. Different offices of a taxpayer can apply for ISD Registration.

The transferee or the successor shall be liable to be registered with effect from such transfer or succession and he will have to obtain a fresh registration with effect from such date.

Sr.No. Name of Document Individual Partnership Limited Liability Partnership Corporation
Entity Details
1 Permanent Account Number Yes Yes Yes Yes
2 Incorporation Certificate No No Yes Yes
3 Company Identification Number No No No Yes
4 Additional Place of Business Yes Yes Yes Yes
Address Proof
Contact Details
Proprietors/Partners/ Directors
1 PAN details Yes Yes Yes Yes
2 Address Proof Yes Yes Yes Yes
3 Contact Details (phone no., mail id) Yes Yes Yes Yes
4 Director’s Identification Number No No No Yes
5 Designated Partner Identification Number No No Yes No
6 Digital Signature Certificate No No Yes Yes
7 Photo(upto 100KB) Yes Yes Yes Yes
Authorised Signatory
1 Letter of Authorisation (Board Resolution) Yes/No Yes/No Yes Yes
2 PAN details Yes/No Yes/No Yes Yes
3 Address Proof Yes/No Yes/No Yes Yes
4 Contact Details (phone no., mail id) Yes/No Yes/No Yes Yes
5 Photo(upto 100KB) Yes/No Yes/No Yes Yes
Utility Bills (any of the below mentioned doc.) Yes Yes Yes Yes
In case of own premises
1 Electriity Bill
2 Water Bill
3 Municipal Taxes Paid Receipt
4 Tax Paid Receipt (Income Tax)
Documents required in case of Rented or
Leased Premises Yes Yes Yes Yes
1 No Objection Certificate
Or
Consent Letter
2 Rent Agreement
Miscellaneous
1 5 Major Commodities/ Services Yes Yes Yes Yes
Description
2 Bank Statement/first page of passbook/ Cancelled Cheque (upto 500KB) Yes Yes Yes Yes

No. It is not mandatory for job worker to get registered under GST unless he crosses the threshold limit for the registration.

Yes. But only in cases where the job worker is registered or the principal declares the place of business of the job worker as his additional place of business.

Yes. The taxpayer will have to declare the principal place of business as well as the details of additional places of business in the registration form.

Taxpayers would have the option to sign the submitted application using valid digital signatures (if the applicant is required to obtain DSC under any other prevalent law then he will have to submit his registration application using the same).
For those who do not have a digital signature, alternative mechanisms (like EVC) will be provided in the GST Rules on Registration.

If the information and the uploaded documents are found in order, the State and the Central authorities shall approve the application and communicate the approval to the common portal within three common working days.
The portal will then automatically generate the Registration Certificate.
In case no deficiency is communicated to the applicant by both the tax authorities within three common working days, the registration shall be deemed to have been granted and the portal will automatically generate the Registration Certificate.

If during the process of verification, one of the tax authorities raises some query or notices some error, the same shall be communicated to the applicant and to the other tax authority through the GST Common Portal within 3 common working days.
The applicant will reply to the query / rectify the error / answer the query within a period informed by the concerned tax authorities (Normally this period would be seven days).
On receipt of additional document or clarification, the relevant tax authority will respond within seven common working days.

In case registration is refused, the applicant will be informed about the reasons for such refusal through a speaking order.
The applicant shall have the right to appeal against the decision of the Authority.
Any rejection of application for registration by one authority (i.e. under the CGST Act / SGST Act) shall be deemed to be a rejection of application for registration by the other tax authority (i.e. under the SGST Act / CGST Act).

The applicant shall be informed of the fact of grant or rejection of his registration application through an e-mail and SMS by the GST common portal.

In case registration is granted, applicant can download the Registration Certificate from the GST common portal.

A tax professional shall register himself with central and state authorities to enable him to act on behalf of taxpayer for preparation and filing return under GST. However, the liability to pay tax remain with the taxpayer.

One can track the status by using the Registration → Services Track Application Status.
Then the taxpayer is required to provide his Acknowledgement Reference Number (ARN) which is generated after submission of Registration form.

Provisional GSTIN should be converted into final GSTIN within 90 days.
Provisional GSTIN can be used till final GSTIN is issued.

He is liable to register if the aggregate turnover (all India) is more than Rs. 20 Lakhs or if he is engaged in interstate supplies.

If the services are being provided from Maharashtra then registration is required to be taken only in Maharashtra and IGST to be paid on inter state supplies.

A person dealing with 100% exempted supply is not liable to register irrespective of turnover.

There is no liability of registration if the person is dealing with 100% exempt supplies.

Any person who makes make inter-state taxable supply is required to take registration. Therefore in this case AP dealer shall take registration and pay tax.

You can apply for cancellation of Provisional ID on or before 31st July 2017.

No. Turnover of agent is not clubbed with the turnover of principal for the purpose of calculating aggregate turnover in case of registration.