Intra state Supply Vs Inter- state Supply:
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 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 procurement’s and outward supplies if CGST and SGST is charged in place of IGST or vice versa in terms of Input tax credit.
Imports are subjected to GST. BCD would be continued while CVD and SAD would be replaced by “IGST”
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.
To that extent, there will be cost saving to traders & service providers compared to existing law.
Sales in Transit
Currently sales in transit are not subjected to tax provided form E is submitted
In GST regime there are no specific provisions relating to sales in transit. Clarity is awaited on the same before appointed day
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.
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
Hence, all interstate stock transfers are subjected to IGST, where as intra state stock transfers are not liable to GST.
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
Eg:2 : Unit A and Unit B both in TG. Stock transfer not liable to GST. Supplier shall issue only a delivery challan
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
a) 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.
b) Export goods on payment of IGST and claim refund (rebate). (similar to Rule 18 of Central Excise Rules)
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
For eg: 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
In GST, there are no such provisions as the concept of manufacture is ruled out completely
Presently manufacturer removes goods to depot upon paying duty on the value arrived as per the valuation rules (Value prevailing at depot).
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
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
If Depot located outside the state IGST need to be charged. Valuation need to be determined as per valuation rules
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
In GST manufacturer charges GST to dealer and dealer there after charges GST to Customer
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.
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
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
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.
GST is not leviable on goods distributed as free samples, as the GST is not leviable on transactions made without consideration.
However if the same are given to related parties, GST is leviable. Value will be 110% of cost of production
Also Input tax credit is restricted on articles distributed as free samples or as gift.
Sale on approval basis
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.
Goods can be removed by way of a delivery challan when the goods are removed.
Where the goods supplied are returned supplier may issue to the recipient a credit note containing such particulars as may be prescribed.
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.
The recipient need to reverse the input tax credit based on the credit note
Reimbursement of Expenditure:
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
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
Presently, there is no implication under VAT, Excise or Service tax where interest is recovered for delayed payment of consideration.
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.
Tax need to be discharged when such interest, late fee or penalty is received by the supplier.
Reverse charge on Purchases made from Un registered dealers:
Reverse charge mechanism (RCM) would apply on Supply of taxable goods or services by an unregistered supplier to a registered person.
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.
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.
Details of RCM receipts must be disclosed in GSTR-2. RCM liability should be paid in cash by debiting electronic cash ledger.
Recipient would be eligible to take credit of input tax credit subject to satisfaction of other conditions.
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
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.
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
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.
The responsibility for keeping proper accounts for the inputs or capital goods lie with the principal.
Goods can be directly supplied from job work premises subject to certain conditions
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.