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Consensus builds up for ₹40 lakh sales threshold for GST registration in all states

Consensus builds up for ₹40 lakh sales threshold for GST registration in all states

All states, barring hill states, are moving towards a uniform sales threshold of ₹40 lakh for businesses to register for goods and services tax (GST) despite the federal indirect tax body, the GST Council, giving them the choice to retain the current limit of ₹20 lakh.

Kerala, which was so far insisting on GST registration for traders and businesses with ₹20 lakh or more in annual sales, is veering towards raising it to ₹40 lakh. Last week, the state had informed the Council that it was taking a fresh look at its earlier position, one person familiar with the discussions said on condition of anonymity.

Punjab, which has been recording revenue loss in the GST regime and was compensated by the Union government under a Constitutional guarantee, too, has decided to go for the ₹40 lakh threshold, said a second person, who also requested anonymity. Punjab had serious concerns about raising the threshold considering the possibility of a further decline in tax collections, which could pose a fiscal crisis when the central government compensation comes to an end in 2022. In spite of that, the state decided to go for the higher threshold limit as there is still time to step up revenue collection, the person added.

Punjab had received compensation of over ₹4,600 crore in FY18, the second highest after Karnataka, which got ₹7,500 crore during the period, as per official data. States are betting on a boost in revenue when the lenient approach to tax administration in the initial two years of the tax reform gives way to stricter enforcement thereafter.

All states are expected to inform the Council about their decision on the registration criteria sometime this week. The fact that states, which had earlier preferred a lower threshold limit, coming on board for the higher limit imply that finally, a consensus is set to prevail in resetting a key feature of the GST architecture.

The proposal for a liberal registration requirement had threatened to necessitate voting at the 10 January meeting of the Council, in which chairman Arun Jaitley had allowed states to opt for a suitable threshold to avoid a vote. So far, all decisions in the Council have been taken by consensus and Jaitley did not want to break that tradition.

The latest development indicates that even if states have the liberty to set the appropriate indirect tax base depending on the number and size of local taxpayers, it is practically difficult for them to move away from the rest of the Union. “If a state retains a tighter registration requirement compared to its neighbor, it is likely that there will be a flow of trade to that neighboring state,” explained R. Muralidharan, senior director, Deloitte India. This will adversely affect tax receipts and economic activity in the state that has a lower sales threshold for GST registration. A uniform GST architecture prevents distortions in economic activity caused by the policy choices of individual states.

The idea of liberalizing the registration requirement was aimed at easing the compliance burden of small taxpayers, but it comes with trade-offs. “Now, the chances of both suppliers and buyers going out of the tax net are higher. This could affect revenue receipts,” explained a third official, who also spoke on the condition of anonymity. Field officers see the possibility of big businesses organizing their operations as smaller units with less than ₹40 lakh sales to avoid registration. Such splitting of operations was harder at a lower sales threshold.

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Source: live mint
‘Changes in GST will boost SMEs but may complicate tax system’

‘Changes in GST will boost SMEs but may complicate tax system’

The goods and services tax (GST) was intended to bring uniformity and harmony to India’s indirect tax laws. But all that is set to change yet again with a few states opting out of the recently announced registration criteria for businesses, wherein the annual sales threshold for GST registration was doubled to ₹40 lakh.

While Delhi, Jammu and Kashmir, and Assam have opted for doubling the annual sales threshold for GST registration, Kerala has opted to retain it at ₹20 lakh, a person familiar with the development said. The remaining states, however, are expected to decide sometime this week.

During the announcement of the new threshold on 10 January, the GST Council, chaired by finance minister Arun Jaitley, had allowed states to opt for either of the two levels after some states objected to raising the threshold limit uniformly for all states to ₹40 lakh barring the hill states. The freedom applies only to supply of goods and not for services, which account for a little over half of India’s $2.7 trillion economy.

The states were given a week’s time to take a call, according to the official statement issued after the last Council meeting. “It is not proper to hurry them through a decision,” a second person privy to the talks at the meeting said, requesting anonymity. The Council’s decision gives states flexibility to decide their optimum tax base without hurting small businesses and merchants with red tape. Experts said state governments will exercise this liberty keeping in mind the number and size of businesses in its territory. Inter-state suppliers anyway require GST registration irrespective of turnover. The Council had favoured a higher threshold as small manufacturers with annual sales below ₹1.5 crore, who were exempted from central excise duty in the pre-GST era, had come under GST when registration for businesses was made compulsory for those with annual sales of ₹20 lakh or more. Traders with sales ranging between ₹5 lakh and ₹40 lakh, depending on their state, were required to register for value added tax (VAT) in the earlier regime.

While policymakers consider it expedient to give relief to small businesses from registration, experts say this will complicate the tax system further. “Different threshold limits in various states will take us back to the VAT regime where this was prevalent. Besides, it will add one more layer of complexity to pan-India businesses,” said M.S. Mani, partner, Deloitte India.

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Source: Live Mint
School management committees directed to register under GST

School management committees directed to register under GST

The MaharashtraPrathamik Shikshan Parishad’s directive to bring school management committees under the Goods and Services Tax(GST) net has left teachers’ associations in a fix.

As per the directive, issued through a letter on December 17 last year, the committees of local body-run schools, including those in the rural areas, should be brought under the GST net. However, the teachers’ associations have asked how can education be brought under the definition of ‘Goods and Services’.

The associations have demanded either an exemption or a separate fund to help them meet the cost of account maintenance. “Rural schools get anywhere from Rs 7,000 to Rs 17,000 government aid per year. The GST registration will cost the schools Rs 1,500 to Rs 2,500, while for maintaining the account, schools will have to pay at least Rs 500 to a chartered accountant (CA) each month, which comes to Rs 6,000 a year. The principals are wondering from which account should they pay for this when the money coming for the maintenance of rural schools itself is very low,” a teacher from the Navi Mumbai area said.

A teacher from Chalisgaon said, “Schools in the rural areas generally have just two or three rooms and two teachers. With the aid that we receive, the schools have to pay for electricity, maintenance and stationary. The maintenance fund is hardly enough for the upkeep and even the building fund comes in every three to four years.”

Rajendra Lande, joint director of finance at Samagra Shiksha department, said, “We will train all district coordinators on how to register themselves online, after which they can teach it to their officers. Every year, the schools will spend Rs500-Rs 1,000 if they get it done through a CA. The government has exempted businesses earning up to Rs40 lakh from paying GST. Most of these schools will come under that. However, there is a need to file a nil return. Hence, we have told them to register.”

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Source: Times of India
GST law: Who are the persons eligible to opt for composition scheme?

GST law: Who are the persons eligible to opt for composition scheme?

GST Law model

There’s an event management company that organises events in different states. Does it need to register in all states?

The Government through its ‘FAQ tweets’ has clarified that in case of event-related services, a supplier shall be required to obtain the GST registration in the state where the event is held only if such person supplies services from such state. Where the services are provided from a different state, the supplier can charge IGST, treating the location of the event as the ‘Place of Supply’.

Therefore, the need for the event management company to obtain the GST registration in the state where the event is held would need to be determined based on whether they supply any services from such state or not under GST law.

A company has a registered office in Delhi. It needs to purchase goods from one registered manufacturer located in West Bengal and supply them on IGST to their customer in Haryana. To save time and freight charges from West Bengal to Delhi, the company wants to dispatch the goods directly to the location of his customer in Haryana. Please advise on how to issue the invoice keeping in mind that the supplier located in West Bengal will be directly sending the goods to Haryana. Can the company issue the IGST invoice from Delhi to Haryana and send the same to the transporter?

Under the GST law, if a supplier of goods instructs its vendor to supply products directly to a third person, it shall be deemed that the supplier of goods had received them from its vendor at its principal place of business and the tax is to be determined accordingly.

Based on the facts, the principal place of business of the company is Delhi, for which they have obtained the GST registration. Though the vendor would ship the goods directly from its location in West Bengal to the customer’s location in Haryana, it would be deemed that the company has first received the goods in Delhi. Subsequently, the supply of goods by the company shall be treated as supply from Delhi to Haryana, which shall attract integrated tax.

Also read: What is an e-way bill and why is it important?

Who are the persons eligible to opt for composition scheme under the GST law? Also, I want to know if the liability to pay taxes under Reverse Charge Mechanism is covered under the Composition scheme?

The GST law provides an option to a supplier of goods having an annual aggregate turnover not exceeding Rs10 million to opt for payment of GST under composition scheme.

Similar, option has also been provided to a person engaged in the supply of food/beverages (other than alcohol). However, this option is not available for other service providers. This option is also not available if the supplier is engaged in undertaking inter-State supplies.

The GST payable under reverse charge mechanism is not covered under composition scheme. If a person registered under composition scheme procures any goods/services in respect of which the GST is payable under reverse charge mechanism, the person shall be required to pay the GST at applicable rate and not based on rates prescribed under composition scheme.

What would be the GST liability in case of auction of goods? If the bidder is located outside the state of the auction, will IGST be charged or CGST+SGST?

The ‘Place of Supply’ of goods would be the location of goods at the time at which the delivery of goods terminates for supply to the recipient. If the intention of the parties is to transfer the property in goods during the auction or the goods would be sent to the premises of the recipient with the supplier bearing the risk while the goods are in transit. In the former case, CGST and SGST would be levied while in the latter case, IGST would be levied in case inter-state movement is involved.

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(The author of this article is Amit Bhagat, Tax partner, PwC India. Aditya Khanna, associate director, PwC )
Do you know why a service provider needs to register for GST across several states?

Do you know why a service provider needs to register for GST across several states?

Do you know why a service provider needs to register for GST across several states?

This is one of the tricky questions that often arises when businessmen tend to do business across multiple states or simply offer services across multiple states, apart from the state where they have been registered. There is lot of confusion on this (GST ) and this blog tries to address this ambiguity, using few practical scenarios.

Let’s take the first scenario. Assume that you are a service provider, who has operations in only one state. In such a scenario, GST is going to be quite easy for you, as you need to have a single registration from where you are operating. This way, you can ensure minimal compliance, apart from getting more input tax credit.

Now, let’s take another scenario, where you are offering services in other states, apart from the state, where you have been registered. Even in such a scenario, you are required to have only one GST registration pertaining to the state, where you have the registered office. Simply stated, you can operate with one GST registration, though you may be offering services in multiple states.

Also read: All about Goods & Services Tax

Now, let’s understand a typical scenario, where you would be operating across multiple states, apart from your home state. Or you may be on the verge of establishing an office in other states to expand your business. In such a scenario, you would be required to register in that particular state(s) as well, where you intend to open your office or expand your operations. This is quite cumbersome and complex, considering that you need to have an individual GST registration across each state, where you intend to operate.

In the pre-GST era, though your business might be operating in multiple states, you may still require a single registration, where you have established the office. However, in this post GST era, this single tax has been split that need to paid state wise. This becomes a headache for companies operating across multiple states; a typical example being the banking sector, which operates across Pan India. Though there have been requests to minimize this impact, till date, nothing much has materialized. Let’s hope for the best in the coming days that can ease the burden of multiple GST registrations.

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GST registrations up, but fewer tax returns in August

GST registrations up, but fewer tax returns in August

GST Registration

The tax base or those registered for GST has gone up in August but the number of filings so far is lower than the previous month as businesses grapple with technology issues and take advantage of the government’s decision to waive penalty for late filing.

So far in August, the second month of Goods & Service Tax, around 35 lakh taxpayers of the 67.73 lakh required to file returns have managed to pay tax and file returns, which is a little over half the population. Data available with Goods and Service Tax  Network, the agency managing the IT platform, showed that over 87 lakh businesses have registered so far, which includes nearly 25 lakh new players apart from the 63 lakh or so who migrated from service tax, central excise and state VAT.

Also read: GST interim returns: Over 30 lakh paid tax in August, matching July trend

In contrast, in July, 36 lakh out of 45.58 lakh eligible entities paid GST, and the Centre collected over Rs 92,000 crore, which translates into nearly 79% compliance. September 20 was the last date for paying GST and filing returns for August, and a majority of the registered dealers could not comply due to various reasons, including technical glitches with the GSTN portal.

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Consultants and chartered accountants blamed the IT platform and complained of lack of capacity, a charge that has stoutly been denied by GSTN, with interim chairman A B Pandey telling TOI that the system has sufficient capacity to handle a large volume of filings But traders are not satisfied.

“We expected some improvement in the second month, with the government talking about rectifying the technical glitches. But it has gone from bad to worse,” said Praveen Khandelwar, national secretary-general, Confederation of All-India Traders (CAIT).

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TDS, TCS deductors can apply for GST registration from September 18

TDS, TCS deductors can apply for GST registration from September 18

TDS, TCS deductors can apply for GST registration from September 18

GST registrations for entities mandated to collect and deduct tax at source will start from September 18. However, the date from which tax deducted at source (TDS) or tax collected at source (TCS) will be done will be notified later. The Goods and Services Tax (GST) Council, at its 21st meeting in Hyderabad, decided to open registration of persons liable to deduct TDS and TCS from September 18. As per the Central GST (CGST) Act, the notified entities are required to collect TDS at 1 per cent on payments to suppliers of goods or services in excess of Rs 2.5 lakh.

Also, e-commerce companies are required to collect 1 per cent TCS while making payment to suppliers under GST, which kicked in from July 1. Following industry demands, the government in June had decided to defer the TDS and TCS provision for smooth rollout of GST. GST subsumed a host of levies including excise and service tax and transformed India into a single market for seamless movement of goods and services. Also, accommodating industry demands, the GST Council, chaired by Union Finance Minister Arun Jaitley and comprising state counterparts, on Saturday decided to extend the deadline for filing TRAN-1 form by a month to October 31. TRAN-1 is to be filed by those businesses that want to claim credit for taxes paid before the launch of GST. This form can now be revised once by businesses in the case of any discrepancy.

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According to states, the transitional credit claimed by businesses is huge running up to Rs 60,000 crore. In the maiden returns for July, as much as Rs 95,000 crore taxes have been earned from about 45 lakh assessees. With regard to people opting for the composition scheme, the GST Council has decided to give businesses time till September 30 to avail of it. “Such registered person shall be permitted to avail of the benefit of the composition scheme with effect from October 1,” an official statement said.

Besides, the over 10 lakh registered businesses who have already opted for the composition scheme will be required to file their returns for the July-September quarter by October 18 and pay their taxes. Under GST, as many as 72 lakh businesses have migrated from excise, service tax and VAT registration. The composition scheme is an alternative to the levy of tax designed for small taxpayers whose turnover is up to Rs 75 lakh — Rs 50 lakh in the case of eight north-eastern states and the hilly state of Himachal Pradesh. The objective is to bring simplicity and reduce the compliance cost for small taxpayers. The scheme is optional under which manufacturers other than those of ice cream, pan masala and tobacco products have to pay a 2 per cent tax on their annual turnover. The tax rate is 5 per cent for the rest.

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Source :  MillenniumPost
GST Registration: Who is Liable to get Registered under GST?

GST Registration: Who is Liable to get Registered under GST?

A taxable person under GST is anyone who is registered under GST or required GST Registration. Various criteria’s like turnover, business activity or transaction have been specified in GST Act, which details persons liable to be registered under GST. Further, any person having the registration under Service Tax, VAT or Central Excise on the date of GST coming into force will automatically be considered a taxable person under GST.

GST registration is compulsory for:-

  • Any business whose turnover in a money related year exceeds Rs 20 lakhs (Rs 10 lakhs for North East and slope states). [Note: If your turnover is supply of just exempted goods/administrations which are excluded under the GST, this condition does not apply.]
  • Every individual who is enlisted under a before law (i.e., Excise, VAT, Service Tax and so on.) needs to register under the GST, as well.
  • When a business which is enlisted has been exchanged to somebody/demerged, the transfer might produce an enrollment with results from the date of exchange.
  • Anyone who drives between the state supply of merchandise.
  • Casual assessable individual.
  • Non-Resident assessable individual.
  • Agents of a provider.
  • Those paying duty under the turn around charge component.
  • Input benefit merchant.
  • E-business operator or aggregator.
  • A person who supplies by means of internet business aggregator.
  • The person supplying on the web data and database get to or recovery administrations from a place outside India to a man in India, other than an enrolled assessable individual.

Who is a Casual Taxable Person under GST?

A man who sporadically supplies stock or possibly services in an area where GST is germane anyway he doesn’t have a settled place of business. Such a man will be managed as an agreeable assessable individual as indicated by GST.

Case: A man who has a place of business in Bangalore supplies assessable guiding organizations in Pune where he has no place of business would be managed as a nice assessable individual in Pune.

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Who is a Non-Resident Taxable person under GST?

Right when a non-occupant every so often supplies items/benefits in an area where GST applies, yet he doesn’t have a settled place of business in India. As indicated by GST, he will be managed as a non-occupant assessable person. It resembles above beside the non-resident has no place of business in India.

Who is an Input Service Distributor?

‘Data Service Distributor’ infers an office of the supplier of items/organizations which gets evaluated requesting on receipt of data organizations and issues accuse sales of the true objective of scattering the credit of CGST/SGST/IGST paid on the said organizations to your branch with same PAN. (It must be a supplier of assessable items/organizations having an undefined PAN from that of the working environment implied previously).

In this manner, simply credit on ‘input organizations’ can be passed on and not on input stock or capital items. This will be another thought for assessors who are starting at now not enrolled as a data advantage trader. In any case, this office is optional in nature.

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GST base looks set to be at least 25% wider than earlier tax regime

GST base looks set to be at least 25% wider than earlier tax regime

finance ministry : GST

Sticking to the 1 July deadline for rolling out the GST (goods and service tax) seems to have paid off as far as the number of registered indirect tax assessees, referred to as the tax base, and the potential for a revenue boost to the exchequer are concerned.

The number of indirect tax assessees who have applied for registration or registered to pay GST is set to cross the 10 million mark soon, a 25% expansion from the 8 million assessees registered under the earlier tax system for paying excise duty, service tax and state-level value-added tax (VAT), said a senior finance ministry official who asked not to be named.

A wider tax base may lead to increased tax buoyancy, the official said. Tax collection is said to be buoyant when growth in tax receipts surpasses the economic growth rate.

A wider tax base is of immense significance to the government as it will help it stick to the fiscal deficit target of 3.2% for 2017-18 even if some of the non-tax revenue receipts such as disinvestment proceeds, payments from the telecom industry for spectrum and other levies fall below the levels estimated at the time of making the budget.

“The registration process under the GST Network (the company that processes tax returns) is going on very well. It may cross the 10 million mark soon,” said the official. On 4 August, finance minister Arun Jaitley said 7.2 million dealers of the 8 million under the old regime have registered under GSTN, while an additional 1.3 million new dealers have also registered under GSTN.

On Wednesday, the cabinet committee on economic affairs chaired by Prime Minister Narendra Modi cleared a Rs27,413 crore budgetary support to make the transition to GST easier for factories set up in hill states of Jammu & Kashmir, Uttarakhand and Himachal Pradesh, and in northeastern states. Despite the overhaul of the indirect tax regime on 1 July, more than 4,200 industrial units located in these remote areas will continue to receive the tax benefits promised to them when the authorities wooed them to invest there.

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The budgetary support will let the central government refund part of the GST these units pay. It will ensure that the excise duty exemption available to them in the earlier regime continues in a modified form. An official statement issued after the cabinet meeting said that the refund scheme is applicable from 1 July 2017 till 31 March 2027.

The excise duty exemption available in these states comes to an end in different years but all those who have set up units before that terminal date will get the benefit of exemption for the subsequent 10 years. The benefit will be in the form of refund in GST regime.

The official statement said the share of GST which goes to the Union government—central GST and the central government’s share of integrated GST (IGST) levied on inter-state commerce—will be refunded under the scheme. Operational guidelines of the scheme will be notified in six weeks by the department of industrial policy and promotion, the statement said.

Jaitley, who briefed reporters about the cabinet decision, clarified that the central government will refund only 58% of the taxes it collects from these units as it transfers 42% of its tax proceeds to states under the formula recommended by the 14th Finance Commission. The respective states have to take a call on refunding the 42% of GST proceeds they get from these units.

“The refund benefit, it seems, will be available up to 2027 and may be customized separately for different industry sectors,” said Abhishek Jain, tax partner, EY.

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Source: Livemint
Registrations under GST likely to hit 1 crore this financial year

Registrations under GST likely to hit 1 crore this financial year

gst registration

The government estimates that total registrations, old and new, under the GST will add up to between 90 lakh and one crore by the end of the financial year, substantially increasing the tax base and ushering in greater compliance.

Official sources said multiple registrations under VAT, excise and service tax are expected to be eliminated once GST is fully implemented, and this will mean that the total number of old registrations will drop from 86 lakh to around 70 lakh.

However, the addition of those businesses that go out of the tax net and even entire sectors like textiles will push the registrations to close to a crore or 10 million.

This will mean the number of tax assessees could jump between 28% (if registrations touch 90 lakh) and 40% (if registrations touch a crore) over the older registrations that have migrated to the new regime, sources said.

A drop in the older registrations is explained, said officials, by a reduction in multiple registrations under VAT, service tax and excise.

So, the increase in the number of tax assessees is calculated on the basis of the number of businesses that have migrated to the new regime.

Government officials are breathing a little easier as the initial rollout has not resulted in any serious or prolonged disruptions. The number of new registrations is increasing, having touched 11 lakh over the weekend.

Protests by the textile sector in Gujarat, in particular, do not seem to have moved the Centre, which is not keen to make an exemption.

“This gives us comfort that there is a horizontal expansion of base. This will also lead to greater compliance,” finance minister Arun Jaitley said in Chennai.

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On Saturday, a new milestone was reached as new registrations crossed the 10 lakh mark. About two lakh new registrations are pending.

The sharp spurt in new registrations has brought cheer to policymakers who were expecting an increase in the tax base. Widening of the tax base and pushing up growth are two of the key benefits of GST identified by the government.

Sources said that the number of new registrations may go up as businesses have time to register with GST netowrk (GSTN), the IT backbone as and when they cross the threshold of Rs 20 lakh.

Economists also expect a significant expansion in the tax base even if 8-9 lakh of the 12 lakh new registrations file returns. The government’s drive against black money has also resulted in a sharp uptick in returns being filed on the direct taxes side as well.

An overall expansion of the tax base augurs well for the economy and may ultimately help the government in lowering tax rates.

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Source: TOI