Assignment of corporate tax planning
- 1. 1 | P a g e ASSIGNMENT OF CORPORATE TAX PLANNING ON GOODS AND SERVICE TAX ACT, 2016 SUBMITTED TO: SUBMITTED BY: POONAM MAM SAKSHA SHARMA 5810, M.COM (II)
- 2. 2 | P a g e MEANING OF GOODS AND SERVICE TAX A country wide tax which will be levied on almost all the goods and services, except a list specified for exemption purpose (restricted so as to reduce the laxities and to avoid creating loopholes for evasion), with a purpose to increase the tax base in the country and to reduce the burden of tax on the customers. This tax is proposed to be levied in place of major indirect taxes at centre or state level. “It is a value added tax levied at all points in the supply chain with credit allowed at any tax paid at input level acquired for use in making the supply. It would apply to both goods and services in a comprehensive manner with exemptions restricted to a minimum.” All goods or services likely to be covered under GST except: for human consumption –State Excise + VAT -Electricity Duty of Real Estate –Stamp Duty + Property Taxes specified petroleum Products–to be brought under GST from a later date on recommendation of GSTC Products–under GST + Central Excise DESTINATION PRINCIPLE: The tax under GST is levied under the principle of destination which states that tax would be levied on consumption every time when the goods/services will be removed/provided. It is a consumption based tax. Accordingly, imports would be subject to GST, while exports would be zero-rated. In the case of inter-state transactions within India, State tax would apply in the state of destination as opposed to that of origin CURRENT SCENARIO OF INDIRECT TAXATION IN THE COUNTRY At present there are a number of taxes , out of which some are levied by the state and other are levied by the centre namely- excise duty, customs, sales tax, value added tax, luxury tax, entertainment tax, octori, entry tax, service tax etc. These can be more specifically divided on the basis of charge ad levy by the respective administrating authority: CENTRE LEVIES: Central excise duty, surcharges and cesse, service tax, additional duty of customs, excise duty levied under the medical and toiletries preparation, additional duty of excise. STATE LEVIES: VAT, CST, luxury tax, entry tax, purchase tax, entertainment tax (except hat levied by the local authorities), tax on lottery, betting, gambling etc. ABOVE MENTIONED LEVIES OF BOTH THE CENTRE AND THE STATE WOULD CEASE TO EXIST AND WOULD BE SUBSUMED IN GOODS AND SERVICES ACT. BENEFITS OF IMPLEMENTING A GST REDUCE THE PROBLEM OF DOUBLE TAXATION: Levy of this tax would reduce the problem of double taxation and as a result the prices of the goods and services as well as the final burden of tax on the customer would reduce. It would reduce the cascading effect of taxes and as a result would lead to a more transparent system of taxation. HELP IN MOVING TOWARDS1 NATION, 1 TAX: The main motto of introducing a GST Act is to move towards an integrated market and make the nation result into a transparent and interlinked tax administrating system, simplifying a lot of procedures and help in nation building.
- 3. 3 | P a g e GROWTH IN GDP: As a result of simpler tax structure the companies would find it easier to tap the potential of the Indian market and cater to the need of a larger population. It is expected that it would add another 2% to the GDP of the country. The competitive status of the economy would improve as there are around 140 countries already offering the concept and hence open up new opportunities in the economy. INCREASE COMPETITIVENESS OF INDIAN PRODUCTS: Due to the reduction of the cascading impact of taxes and also due to easier implementation and transparency of the system the prices of the Indian products as well as the cost of production would improve and provide opportunity to improve the process of production and hence improve the efficiency of the Indian products. REDUCTION IN TAX BURDEN: Implementation of GST would reduce the tax burden on the general public by around 25-30% and hence would introduce a relief and increase the competition and quality of the product. PROMOTE TRANSPARENCY: A nationwide similar approach will lead to greater transparency and less creation of loop holes that lead to evasion and this would enhance the tax base for indirect taxes in the nation. EASY TO ADMINISTER: As a single tax would replace the existing cumbersome system of taxation and would provide simple and easy to understand law, t would create greater administrative integration and readiness to implement and administer this law. STRUCTURE OF GST IN INDIA While most of the countries have a single structure of tax but keeping in view the federal structure of India, the tax is being levied at 2 levels: 1. CENTRE GOODS AND SERVICES TAX (CGST) 2. STATE GOODS AND SERVICES TAX (SGST) 3. INTEGRATED GOODS AND SERVICE TAX (IGST) The law will define the particular constitution and the rules of levy under which the centre and the state have to levy and collect tax but the taxes mentioned above under the head of centre and state levies(above) are assumed to be subsumed under their respective tax. In addition to these 2 taxes another tax called as INTEGRATED GOODS AND SERVICES TAX would also be levied by the centre on interstate transfer of goods and services. In addition to IGST – in respect of supply of goods an additional tax of up to 1% has been proposed to be levied by centre. Revenue of this tax is proposed to be assigned to the respective state. This tax is proposed to be levied for initial 2 years or a period longer as notified by GST council. WORKING OF CGST, SGST AND IGST
- 4. 4 | P a g e Under intrastate transactions- When person P sells timber to person Q at a cost of 100issuing a invoice A and charging 10 % as CGST and 10% as SGST and depositing the same to respective authorities. Now the goods are sold for invoice B again charging 10% and depositing it with the authority. Now here the seller can claim input tax credit and would pay only balance amount I.e. 10 to the respective authorities and hence would be able to get the benefit of the tax paid at the input stage. Now if the person R sells the goods for invoice C to person S then the person S would be the final customer and hence would not be able to take the tax credit and the whole incidence of tax is now falling on S but as compared to the tax of around 60, he will have to bear the tax of 30. Under interstate transactions- Now IGST would be levied and the credit of IGST can be taken for paying IGST, CGST, and SGST. The goods sold for invoice ‘A’ are bearing SGST and cgst of rupees 10 each and as a result the person buying the goods on this invoice pays 20 as input tax. Now when the goods are being sold for invoice ‘B’ , an interstate transaction is coming into effect and hence the person is paying 40 for IGST but would be able claim a credit of rupees 10 paid for SGST and again rupees 10 for cgst. If the goods
- 5. 5 | P a g e are again transferred for invoice ‘C’ and here the sale is intrastate then the person selling the goods would collect rupees 60 (30 for SGST and 30 for cgst) but would be able to get the credit of tax of 20 paid on the input transaction but here he has the option of whether the person wants to use the tax credit of IGST for settling CGST or SGST, here the person has fully utilized the exemption available for the settlement of CGST and pays the balance amount of SGST. INPUT TAX CREDIT This term can be defined as taking the advantage of the tax paid at the input stage. This is a very important term for reducing the cascading impact of taxes. The amount of input tax credit would be credited to electronic credit ledger of the person. Person granted registration shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi finished or finished goods held in stock on the day immediately preceding the date from which he becomes liable to pay tax under the provisions of this Act. The person becomes not eligible for claiming input tax credit on the goods and services after the expiry of 1 year of the issue of the tax invoice of the concerned supply. Input tax credit would be allowed only for the goods used for the purpose of business if the person is using goods partly for business and partly for some other purpose. If there is a change of constitution of the registered person then the person would be allowed to carry forward the amount of tax credit to the business so formed. INPUT TAX CREDIT WOULD NOT BE AVAILABLE IN RESPECT OF THE FOLLOWING a) Motor vehicles except when they are supplied in the usual course of business or for taxable supply b) Goods and services provided in relation to food and beverage, outdoor catering, health and fitness centre and services, beautician services, life insurance, health insurance or any of the services provided for the person consumption of the employees. c) Goods and services used for personal consumption, to the extent they are related to personal consumption d) Where the registered taxable person has claimed depreciation on the tax component of the cost of capital goods under the provisions of the Income Tax Act, 1961, the input tax credit shall not be allowed on the said tax component. REGISTRATION Person who becomes liable for registration shall apply in every state in which he is so liable within 30 days from the date on which he becomes liable for registration under schedule III of this Act. Person having multiple business verticals’ in a state may apply for different registration for every vertical. A person not liable for registration may get himself registered voluntarily and all the provisions of the act shall apply to that person also. Every person shall have PAN or permanent account number for getting registered under the act. The unique Identity Number shall be granted or rejected after due verification as may be prescribed in the Act, at the time registration. 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. Every registered taxable person whose registration is cancelled shall pay an amount, by way of debit in the electronic credit or cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date of such cancellation or the output tax payable on such goods, whichever is higher, calculated in such manner as may be prescribed.
- 6. 6 | P a g e Person whose turnover during a financial year increases 10 lakhs (5 lakhs in case of business in N-E states) is a taxable person. RETURNS Every registered taxable person shall, for every calendar month or part thereof, furnish, in such form and in such manner as may be prescribed, a return, electronically, of inward and outward supplies of goods and/or services, input tax credit availed, tax payable, tax paid and other particulars as may be prescribed within twenty days after the end of such month. Every registered taxable person, other than an input service distributor, a deductor under section 37, a casual taxable person and a non-resident taxable person, shall furnish an annual return for every financial year electronically in such form and in such manner as may be prescribed on or before the thirty first day of December following the end of such financial year. Every registered taxable person who applies for cancellation of registration shall furnish a final return within three months of the date of cancellation or date of cancellation order, whichever is later, in such form and in such manner as may be prescribed. PAYMENT OF TAX, INTEREST, PENALITY AND OTHER AMOUNTS Every deposit made towards tax, interest, penalty, fee or any other amount by a taxable person by internet banking or by using credit/debit cards or National Electronic Fund Transfer or Real Time Gross Settlement or by any other mode, subject to such conditions and restrictions as may be prescribed in this behalf, shall be credited to the electronic cash ledger of such person to be maintained in the manner as may be prescribed. Explanation - (1) The date of credit to the account of the appropriate Government in the authorized bank shall be deemed to be the date of deposit. (2) The input tax credit as self-assessed in the return of a taxable person shall be credited to his electronic credit ledger to be maintained in the manner as may be prescribed. (3) The amount available in the electronic cash ledger may be used for making any payment towards tax, interest, penalty, fees or any other amount payable under the provisions of the Act or the rules made there under in such manner and subject to such conditions and within such time as may be prescribed. (4) The amount available in the electronic credit ledger may be used for making any payment towards tax payable under the provisions of the Act or the rules made there under in such manner and subject to such conditions and within such time as may be prescribed. CONSUMER WELFARE FUND (1) There shall be established by the Central or a State Government a fund, to be called the Consumer Welfare Fund. (2) There shall be credited to the Fund, in such manner as may be prescribed, - (a) The amount of tax referred to in sub-section (4) or sub-section (4A) of section 38; and (b) Any income from investment of the amount credited to the Fund and any other monies received by the Central or a State Government for the purposes of this Fund. Utilization of the Fund (1) Any money credited to the Fund shall be utilized by the Central/State Government for the welfare of the consumers in accordance with such rules as that Government may make in this behalf.
- 7. 7 | P a g e (2) The Central/State Government shall maintain or, if it thinks fit, specify the authority which shall maintain, proper and separate account and other relevant records in relation to the Fund in such form as may be prescribed in consultation with the Comptroller and Auditor-General of India. TIME OF SUPPLY OF GOODS AND SERVICES The liability to pay CGST / SGST on the goods shall arise at the time of supply as determined in terms of the provisions of this section. The time of supply of goods shall be the earliest of the following dates, namely,- (1 the date on which the goods are removed by the supplier for supply to the recipient, in a case where the goods are required to be removed or (2) the date on which the goods are made available to the recipient, in a case where the goods are not required to be removed; or (b) the date on which the supplier issues the invoice with respect to the supply; or (c) the date on which the supplier receives the payment with respect to the supply; or (d) the date on which the recipient shows the receipt of the goods in his books of account. (3) In case of continuous supply of goods, where successive statements of accounts or successive payments are involved, the time of supply shall be the date of expiry of the period to which such successive statements of accounts or successive payments relate. If there are no successive statements of account, the date of issue of the invoice (or any other document) or the date of receipt of payment, whichever is earlier, shall be the time of supply. (4) For the purposes of sub section (3) above, the Central or a State Government may, on the recommendation of the Council, specify, by notification, the supply of goods that shall be treated as continuous supply of goods. TIME OF SUPPLY OF SERVICES (1) The liability to pay CGST/SGST on services shall arise at the time of supply, as determined in terms of the provisions of this section. (2) The time of supply of services shall be:- (a) the date of issue of invoice or the date of receipt of payment, whichever is earlier, if the invoice is issued within the prescribed period; or (b) the date of completion of the provision of service or the date of receipt of payment, whichever is earlier, if the invoice is not issued within the prescribed period; or (c) the date on which the recipient shows the receipt of services in his books of account, in a case where the provisions of clause (a) or (b) do not apply. (3) In case of continuous supply of services, the time of supply shall be - (a) where the due date of payment is ascertainable from the contract, the date on which the payment is liable to be made by the recipient of service, whether or not any invoice has been issued or any payment has been received by the supplier of service; (b) where the due date of payment is not ascertainable from the contract, each such time when the supplier of service receives the payment, or issues an invoice, whichever is earlier; Page 32 of 190 (c) where the payment is linked to the completion of an event, the time of completion of that event. (4) For the purposes of sub section (3) above, the Central or a State Government may on the recommendation of the Council, specify, by notification, the supply of services that shall be treated as continuous supply of services. (5) In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earliest of the following dates, namely- (a) the date of receipt of services, or (b) the date
- 8. 8 | P a g e on which the payment is made, or (c) the date of receipt of invoice, or (d) the date of debit in the books of accounts. GOODS AND SERVICE NETWORK This is a private limited company formed by the government along with state governments and other financial institutions. Excise department is playing a key role in this. This will provide a single platform for filing of registration forms, returns, tax credit and refund under this act. Incorporated on 28.03.2013 as Section 25 private limited company with authorized equity of Rs.10 Crore control to remain with Government Equity Holders Central Government-24.5% All States together-24.5% Financial Institutions–51% To function as a Common Pass- through portal for tax payers- Submit registration application File returns Make tax payments Appointed Infosys as Managed Service Provider (MSP). ACCOUNTS AND OTHER RECORDS Every registered person shall keep and maintain, at his principal place of business, as mentioned in the certificate of registration, a true and correct account of production or manufacture of goods, of inward or outward supply of goods and/or services, of stock of goods, of input tax credit availed, of output tax payable and paid, and such other particulars as may be prescribed in this behalf. Every registered taxable person required keeping and maintaining books of account or other records shall retain them until the expiry of sixty months from the last date of filing of Annual Return for the year pertaining to such accounts and records. APPEALS TO FIRST APPELLATE AUTHORITY Any person aggrieved by any decision or order passed against him under this Act by an adjudicating authority, may appeal to the prescribed First Appellate Authority. Every appeal under this section shall be filed within three months from the date on which the decision or order sought to be appealed against is communicated to the Commissioner of GST, or, as the case may be, the person preferring the appeal: Provided that the First Appellate Authority may, if he is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of three months, allow it to be presented within a further period of one month. The order of the First Appellate Authority disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reasons for the decision. The First Appellate Authority shall, where it is possible to do so, hear and decide every appeal within a period of one year from the date on which it is filed NATIONAL APPLLATE TRIBUNAL The Central Government shall on the recommendation of the GST Council constitute a National Goods and Services Tax Appellate Tribunal (hereinafter referred to as the Appellate Tribunal).
- 9. 9 | P a g e (2) The Appellate Tribunal shall be headed by a National President. (3) The Appellate Tribunal shall have one branch for each state, which shall be called as the State GST Tribunal. (4) Every State GST Tribunal will be headed by a State President. (5) Every State GST Tribunal shall consist of as many Members (Judicial), Members (Technical - CGST) and Members (Technical - SGST) as may be prescribed, to exercise the powers and discharge the functions conferred on the Appellate Tribunal by this Act. NEW ROLE OF CENTRAL BOARD OF EXCISE AND TAXATION It plays now a prominent role as custodian of Centre’s fiscal destiny in relation to indirect taxes. Role in Policy making: Drafting of GST Law, Rules & Procedures– CGST & IGST Law Assessment, Audit, Anti-evasion & enforcement under CGST & IGST Law Levy&collectionofCentralExcisedutyonproductsoutsideGST–PetroleumProducts&Tobacco Levy & collection of Customs duties Evolving a joint Dispute resolution mechanism Developing linkages of CBEC -GST System with GSTN Training of officials of both Centre & States. AUDIT Audit to be completed within 3 months or can be extended up to a period of 6 months. After the completion of audit the assessee to be informed of the result and adjudicating order to be issued within 3/5 years of filling of the return in normal cases. REFUNDS PROVISIONS Time limit for refund of tax or interest is two years. of accumulated ITC allowed in case of exports or where the credit accumulation is on account of inverted duty structure to be granted within 90 days from the date of receipt of complete application is payable if refund is not sanctioned within 90 days claim along with documentary evidence is to be filed online without any physical interface with tax authorities Immediate provisional sanction of 80% of refund claim on account of exports of “Unjust enrichment” to be satisfied refund will be directly credited to the bank account of applicant can be with held in specified circumstances even without any stay from any higher appellate.