Goods and Service Tax

EduPristine www.edupristine.com
EduPristine For [GST - Business Accounting & Taxation]
 Agenda

1) Introduction
2) Concept of GST
3) Benefits and Flaws of GST
4) Current Indirect Tax Structure
5) GST Story so far
6) GST Model
7) GST Registration
8) GST Payment and Refund
9) GST Returns
10) Fiscal Impact of GST
11) GST Accounting Entries
12) Composition Scheme
13) GST Sector Impact
14) Penalty provisions

EduPristine For [GST - Business Accounting & Taxation] 1

 Introduction

Mr. Rakesh, being in the FMCG industry is concerned about the impact of GST regime on his
company. He is very curious to chart roadmap to realign firm's strategy accordingly. He has hired
Mr. Abhi, a renowned tax consultant, to advice him on streamlining operations and preparing the
guidelines to be followed after the introduction of goods and services tax (GST).
He wants Mr. Abhi to help him in the following areas
Understand key areas of impact in their business
Prepare different scenarios for the design and application of GST
Continually track policy development regarding GST and update prepared scenarios
Identify any areas of adverse impact and prepare contingency measures
Identify issues and concerns requiring representation to authorities and develop a strategy for effective
advocacy

EduPristine For [GST - Business Accounting & Taxation] 2

 Contd

Abhi replied, Rakesh let me first given you a brief background of GST
GST is a value added tax, levied at all stages of the supply chain, right from manufacture to final
consumption, where credit shall be allowed for taxes paid at previous steps as set-off
GST would be applicable on the supply of goods or services, as against the present concept of tax on the
manufacture and sale of goods or provision of services
GST would be a destination based consumption tax ie, tax would accrue to the taxing authority which
has jurisdiction on place of compsumption.
GST would apply to both goods and services barring a few exceptions
GST would be levied concurrently by both Centre and State. GST to be levied by the Centre on
intraState supply of goods and / or services would be called the Central GST (CGST) and that to be
levied by the States would be called the State GST (SGST).
However it is contemplated that the base and other essential design features would be common
between CGST and SGST, across SGSTs for the individual States
Inter-State supplies within India would attract an Integrated GST (aggregate of CGST and the SGST of the
destination State).
Destination based Consumption type GST should be adopted as it contributes towards increased international
competitiveness and sustainability of domestic industries Under Destination based Tax, exports are not taxed but
imports are..

EduPristine For [GST - Business Accounting & Taxation] 3

 Contd

Rakesh asks Abhi, whether GST shall replace all the indirect taxes?
Abhi replies, this new levy, GST would replace almost all of the indirect taxes. In particular, it
would replace the following indirect taxes:

Central taxes State taxes

Central Excise duty State VAT
Duties of Excise (Medicinal and Toilet Central Sales Tax
Preparations) Luxury Tax
Additional Duties of Excise (Goods of Special Entry Tax (all forms)
Importance) Entertainment and Amusement Tax (except
Additional Duties of Excise (Textiles and Textile when levied by the local bodies)
Products) Taxes on advertisements
Additional Duties of Customs (commonly known Purchase Tax
as CVD) Taxes on lotteries, betting and gambling
Special Additional Duty of Customs (SAD) State Surcharges and cesses so far as they relate
Service Tax to supply of goods and Services
Central Surcharges and cesses so far as they
relate to supply of goods and Services

EduPristine For [GST - Business Accounting & Taxation] 4

 Benefits and Flaws of GST

EduPristine For [GST - Business Accounting & Taxation] 5

 Benefits of GST

Rakesh asks Abhi, But do we need GST, when we already have Indirect tax legislations?
Abhi explains having GST in place of existing indirect tax legislations, can lead to following
benefits:
Reduction in multiplicity of taxes and thereby also mitigating
cascading/ double taxation
Currently there is a lack of common integrated market in India,
as different tax rates are levied on same product under existing
Benefits to Assesse VAT / Sales Tax under different States. With the implementation
of GST it is possible to create one national market in India
With the implementation in GST it shall be possible to bring
more certainty and equity in tax laws and thereby reducing
litigations

Simpler Tax system

Broadening of Tax base. GST to include almost all goods and
services barring a few exceptions
Benefits to Government Improved compliance & revenue collections
Efficient use of resources.

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 Flaws under GST structure

Rakesh further asks Abhi, Do you think there are any flaws under GST Model?
Abhi states, Yes even GST has few flaws, such as:
Local dealers have to pay CGST in addition to SGST (earlier they had to pay just VAT).
There shall be no differentiation between goods & services under GST model, services supply
within the state would attract SGST at each stage in the supply chain ,but in the mean time Assesse
have to pay CGST also.
Introduction of GST model could affect negatively (than positively) to few Industries/sectors.
Under the GST Model , the state should face heavy losses in terms of tax collection but they also get
compensated on the other hand by the states. Infact some states are of the view that there should
not be any time frame for compensation scheme.

EduPristine For [GST - Business Accounting & Taxation] 7

 Current Indirect Tax Structure

EduPristine For [GST - Business Accounting & Taxation] 8

 Existing Tax structure in India

Abhi further illustrates the current tax structure in India and tax structure post implementation of
GST
Tax Structure

Direct Tax Indirect Tax

Income Tax Central Tax State Tax

Entry Tax,
Customs Excise Service Tax VAT Luxury Tax,
Lottery Tax, etc.

EduPristine For [GST - Business Accounting & Taxation] 9

 Proposed Tax structure in India

Tax Structure

Indirect Tax
Direct Tax
(Except Customs)

Income Tax Intra-State Inter-State

CGST SGST IGST

(Centre) (State) (Centre)

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 GST Story so far

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 GST Story so far

2006 2007 2008 2009 2011

Finance Empowered Committee EC finalized its First Discussion IT strategy for GST
(EC) of State Finance released
Minister in the overall strategy paper on GST
Ministers constituted Constitutional
budget speech Joint Working Group for GST structure was released Amendment Bill,
proposed (JWG) CST rate further 13th Finance placed before the
01.04.2010 as JWG submitted its report reduced from 3% Commission Parliament and
on GST to EC referred to
date for to 2% released its
CST rate reduced from 4 Standing
introduction of to 3% Report on GST Committee (SC)
GST

2013 2014 2015 2016*

SC tabled its Revised Passage of Constitutional Model draft law released in

report on GST Constitutional Amendment Bill in Lok public domain in June 2016
Amendment Bill Sabha Passage of Constitutional
tabled in Joint Committee Amendment Bill in Rajya
Parliament constituted by EC Sabha in August 2016
releases its business Lok Sabha passes bill with
process reports on GST Rajya Sabha amendments

* Work still in progress

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 GST Next Steps

Rakesh, So Abhi, now, since Rajya Sabha has pass the GST bill, GST shall be effective and we
would be required to implement the GST instead of other indirect taxes?
Abhi, No Rakesh, not yet, following steps are pending
GST Bill needs ratified by at least half of the State assemblies^
Presidents assent for the enactment of GST
After Presidential assent, a GST Council comprising representatives from Centre and State shall be set up
GST Council will help codify Central and State GST laws which would be passes by Parliament and State
assemblies
GST Network, the online portal to facilitate registration, payment, return filing to be launched.

^As on 1-Sep-2016, 16 States have ratified the GST Bill, so now Bill shall be sent for Presidents assent

EduPristine For [GST - Business Accounting & Taxation] 13

 GST Model

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 GST Model

Abhi further explains the levy of tax under GST regime

In the GST system, both Central and State taxes will be collected at
the point of sale.
CGST /SGST shall be levied on all intraState supplies of goods and/or

Intra-state Transaction services

Further CGST/SGST shall also be levied on specific categories of
supply of goods and/or services on which tax is payable on reverse
charge basis

On interstate transaction i.e, supply of goods/ services, Integrated

GST (IGST) shall be levied
Inter-state Transaction IGST would be levied, administered and collected by the Centre
IGST collected, would be settled periodically between the Centre and
the States

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 GST Rate Structure

Rates for CGST and SGST should be common across the states and shared between Central &
State.
There is no proper rate spelt till date, however, there are different rates suggested by different
bodies.
Four rate structure for goods proposed:-
Standard Rate
Lower Rate necessary items
Special Rate precious metals
Exempted Items
Exempted List to be finalized considering the goods and services of national importance and local
importance.
Exports of Goods and Services to be Zero-rated.

It is likely that the GST rate should lie in the range of 16% to 20%
EduPristine For [GST - Business Accounting & Taxation] 16
 GST Illustration

Illustration 1
Mr. X manufactures goods. He purchased goods locally for INR 100,000 and incurred expenses of
INR 10,000. Manufactured Goods are sold for INR 125,000. Computed Sale Price. (Assuming CGST
@ 8%, SGST @8% and IGST @16%)

Intra-state sale Inter-state sale

Particulars Amount (Rs.) Particulars Amount (Rs.)
Cost of Goods 100,000 Cost of Goods 100,000
Add Expenses 10,000 Add Expenses 10,000
Add Profit (Sales T. Cost) Add Profit (Sales T. Cost)
Sales 125,000 Sales 125,000
CGST @ 8% 10,000 IGST @ 16% 20,000
SGST @ 8% 10,000
Total Sales 145,000 Total Sales 145,000

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 GST Set-off chain

Abhi further explains the set-off of taxes under GST regime

Manufacturer shall claim input credit of taxes paid on input goods

Manufacturer and services
After taking input credit, it pay the output liability on value additions

Wholesaler shall claim input credit of taxes paid on input goods and
Wholesaler services from manufacturer
After taking input credit, it pay the output liability on value additions

Retailer shall claim input credit of taxes paid on input goods and

Retailer services from wholesaler

After taking input credit, it pay the output liability on value additions

Consumer Ultimate tax liability borne by the Consumer

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 GST Set-off chain

Input tax credit on account of CGST can be utilized for CGST and IGST liability, in this order.
However CGST input cannot be utilized towards payment of SGST output.

CSGT input CSGT output ISGT output

Input tax credit on account of SGST can be utilized for SGGT and IGST liability, in this order.
However SGST input cannot be utilized towards payment of CGST output.

SSGT input SSGT output ISGT output

Input tax credit on account of IGST can be utilized for IGST, CGST and SGST, in this order.

ISGT input ISGT output CSGT output SSGT output

EduPristine For [GST - Business Accounting & Taxation] 19

 GST Set-off chain (Some examples)

Case 1 -
A trader has purchased goods locally by paying CGST & SGST. He subsequently sells the goods within the
state then he has to pay CGST & SGST.
At the time of payment of CGST, he can claim the set off of CGST (input) credit and also at the time of
payment of SGST, he can claim the set off of SGST (input) credit. But CGST (input) credit cannot be set
off with SGST and vice-versa.
Case 2 -
A trader has purchased goods locally by paying CGST & SGST. He subsequently sells the goods outside
the state then he has to pay IGST.
At the time of payment of IGST, he can claim the set off of CGST & SGST (input) credit.
Case 3 -
A trader has purchased goods outside the state by paying IGST. He subsequently sells the goods within
the state then he has to pay CGST & SGST.
At the time of payment of CGST & SGST, he can claim the set off of IGST (input) credit.
Case 4 -
A trader has purchased goods outside the state by paying IGST. He subsequently sells the goods outside
the state then he has to pay IGST.
At the time of payment of IGST, he can claim the set off of IGST (input) credit.

EduPristine For [GST - Business Accounting & Taxation] 20

 Example

Illustration 2
Mr. X manufactures 10,000 units of goods. He sold 5,000 units of goods within the state, 3,000
units outside the state and the balance 2,000 units is stock transfer outside the state. Goods were
sold to wholesaler @ Rs. 10 per unit. (Consider ITC in the hands of Mr. X, Rs. 6,000 and Rs. 4,000
for CGST and SGST respectively
Wholesaler sold all the goods @ 14 per unit to retailer
Wholesaler sold all the goods @ 16 per unit to final consumer.
Compute GST Liability (Assuming CGST @ 8%, SGST @8% and IGST @16%).

EduPristine For [GST - Business Accounting & Taxation] 21

 Solution

Calculation of output GST in the hands of Manufacturer

Particulars Intra state sales Inter state sales Stock transfer Total (in Rs.)
Value of Goods sold/ 50,000 30,000 20,000 100,000
transferred [5,000*10] [3,000*10] [2,000*10]

Output CGST @ 8% 4,000 - - 4,000

[50,000*8%]
Output SGST @ 8% 4,000 - - 4,000
[50,000*8%]
Output IGST @ 16% - 4,800 3,200 8,000
[30,000*16%] [20,000*16%]
Total Output liability 8,000 4,800 3,200 16,000

EduPristine For [GST - Business Accounting & Taxation] 22

 Contd

Calculation of GST payable in the hands of Manufacturer

Particulars CGST SGST IGST Total (in Rs.)
Output Liability 4,000 4,000 8,000 16,000
[4,800 + 3,200]

Less ITC claimed

CSGT 4,000 - 2,000 6000
SGST - 4,000 - 4000
IGST - - - -
Amount payable - - 6,000 6,000

Total SGST input Rs. 4,000. First utilized Total CGST input Rs. 6,000. First utilized
against SGST output Rs. 4,000 and balance against CGST output Rs. 4,000 and balance
for IGST output Nil for IGST output Rs. 2,000

EduPristine For [GST - Business Accounting & Taxation] 23

 Contd

Calculation of output GST in the hands of Wholesaler

Particulars Intra state sales Inter state sales Stock transfer Total (in Rs.)
Value of Goods sold/ 70,000 42,000 28,000 140,000
transferred [5,000*14] [3,000*14] [2,000*14]

Output CGST @ 8% 5,600 - - 5,600

[70,000*8%]
Output SGST @ 8% 5,600 - - 5,600
[70,000*8%]
Output IGST @ 16% - 6,720 4,480 11,200
[42,000*16%] [28,000*16%]
Total Output liability 11,200 6,720 4,480 22,400

EduPristine For [GST - Business Accounting & Taxation] 24

 Contd

Calculation of GST payable in the hands of Wholesaler

Particulars CGST SGST IGST Total (in Rs.)
Output Liability 5,600 5,600 11,200 22,400
[6,720 + 4,480]

Less ITC claimed

CSGT 4,000 - - 4,000
SGST - 4,000 - 4,000
IGST - - 8,000 8,000
Amount payable 1,600 1,600 3,200 6,400

Output Liability in the hands of Manufacturer

shall be claimed as ITC by wholesaler

EduPristine For [GST - Business Accounting & Taxation] 25

 Contd

Calculation of output GST in the hands of Retailer

Particulars Intra state sales Inter state sales Stock transfer Total (in Rs.)
Value of Goods sold/ 80,000 48,000 32,000 160,000
transferred [5,000*16] [3,000*16] [2,000*16]

Output CGST @ 8% 6,400 - - 6,400

[80,000*8%]
Output SGST @ 8% 6,400 - - 6,400
[80,000*8%]
Output IGST @ 16% - 7,680 5,120 12,800
[48,000*16%] [32,000*16%]
Total Output liability 12,800 7,680 5,120 25,600

EduPristine For [GST - Business Accounting & Taxation] 26

 Contd

Calculation of GST payable in the hands of Retailer

Particulars CGST SGST IGST Total (in Rs.)
Output Liability 6,400 6,400 12,800 25,600
[7,680 + 5,120]

Less ITC claimed

CSGT 5,600 - - 5,600
SGST - 5,600 - 5,600
IGST - - 11,200 11,200
Amount payable 800 800 1,600 3,200

Output Liability in the hands of Manufacturer

shall be claimed as ITC by retailer

EduPristine For [GST - Business Accounting & Taxation] 27

 GST Registration

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 GST Registration

Abhi to Rakesh, please pay special attention to registration procedure as you will be require to
follow the same. Abhi started explaining the registration procedure stating.
Who shall obtain registration?
Every person who is registered or holds a registration certificate under Central Excise law, Service tax
law, Central Sales tax or under State VAT law shall be liable to be registered under GST with effect
from date of enactment of GST
In Case of a person who is not registered under any of the above act shall be liable to be registered
under this act if his turnover in financial year exceeds the taxable threshold.
The threshold limit of turnover for the purpose of registration is kept Rs. 4 Lakhs for North East States
including Sikkim and Rs. 9 Lakhs for other States.
For this purpose turnover means all India Gross Annual turnover including turnover of exempted goods,
exempted services and exports. So if any person is doing the business from more than one location,
turnover of all such units shall be considered for this purpose.
If the turnover is below the threshold limit, then the person can also apply for voluntary registration

EduPristine For [GST - Business Accounting & Taxation] 29

 GST Registration Cont..

Further, a person doing following activities, has to mandatorily apply for registration irrespective of
his turnover:
Inter-state supply; Person liable for payment of GST under reverse charge basis; Casual Taxable
person; Non-resident taxable person; Person Supplying a goods on behalf of other person as an agent
or otherwise; Input service distributor; Person supplying goods and/or services [other than branded
goods] through electronic commerce operator; Electronic commerce operator; An aggregator
supplying goods under his own brand name

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 Time Limit for GST Registration

Time-limit for obtaining registration?

Category Time Limit

Every Manufacturer or a Service provider or a dealer registered under
Already registered Central Excise Act or under Service tax law or State Vat law will get
dealer automatic Pan based registration number without fresh application

Dealer crossing the specified threshold limit Within 30 days from

crossing of such limit
New Dealer
Other than above - Within thirty days from the date on which he
becomes liable for registration

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 How to apply for registration GST Registration?

How to apply for registration under GST?

Every person who wants to obtain a registration needs to apply for registration through Goods
and Services Tax Network portal (GSTN Portal).

Procedure for fresh registration under GST

Application for Person needs to apply online for registration either through GSTN Portal
registration or through Facilitation Center along with prescribed form and documents
Once a completed application is submitted online, a message asking for
confirmation will be sent through e-mail and SMS to the authorized
Confirmation signatory of the applicant.
message On receipt of such confirmation from the authorized signatory,
Acknowledgement Number would be generated and intimated to the
applicant.
Proof of Constitution (for example Certificate of incorporation for Cos)
Documents required Details & Proof of place of business such as copy of electricity bill,
for registration municipal tax receipt, etc.
Details of Bank account, authorized signatories, etc.
EduPristine For [GST - Business Accounting & Taxation] 32
 Fresh Registration under GST
Procedure for fresh registration under GST
Verification of Filed
Information
Grant of Registration
Certificate (RC)
EduPristine For [GST - Business Accounting & Taxation]
On receipt of the online application GSTN system shall carry out a
preliminary verification of documents like PAN number, etc.
A copy of signed application along with the documents as stated above shall
be sent to the GSTN portal
After primary verification GSTN portal shall forward such application to
Central/State tax authorities for further verification
If all the details are found correct, registration certificate shall be granted to
the applicant
If registration is refused reasons for the same shall be communicated
The Central/State authorities must respond on application to GSTN portal
within 3 working days
In case of non-communication of approval or rejection, the application shall
be deemed to be approved
In case if tax authorities raise any query, same shall be communicated to
applicant. In case of non-communication the application will be rejected.
Within next 7 working days, tax authorities will respond to the applicant and
will grant the RC.
33
 Migration of Existing Registrants

Procedure for migration of existing registrants under GST

All existing registrants, who have registered themselves either under
Migration of Data in Central Law or with State Law or with both shall get automatically
GSTN migrated into GST.

Currently for the purpose of registration under Central & State Law,
50 to 107 fields are required to be filled in.
Under proposed GST, 120 fields are designed for registration. So for the
balance gap fields, data will have to be collected from the taxpayer.
Collection of
additional The GSTN shall provide a provisional registration The user name and
information password shall be communicated to tax authorities who shall
communicate the same to taxpayer.
After getting user id and password, taxpayer will have to complete the
remaining details of registration form along with the requisite document
within the stipulated time.

EduPristine For [GST - Business Accounting & Taxation] 34

 Cont.

Procedure for migration of existing registrants under GST

After completion of form, tax authorities shall verify the same with the
documents filled by the taxpayer and will communicate the same to the
Grant of Registration GSTN.
Certificate
After approval from tax authorities, GSTN shall generate the registration
certificate and shall communicate the same to the taxpayer
After successful completion of registration process, GSIN portal shall
provide 15 digit alpha Numeric registration number.
Registration Number
The registration number will be known as Goods and Service Tax
Identification Number (GSTIN).

Multiple registrations in case of multiple locations

In case a person is doing business from multiple locations in a State, he has to apply separately for
registration for each and every location of business
For each State, the taxable person will have to take a separate registration, even though the
taxable person may be supplying goods or services or both from more than one State as a single
legal entity.

EduPristine For [GST - Business Accounting & Taxation] 35

 GST Payment and Refund

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 Payment of GST

Payment of GST made towards tax, interest, penalties shall be paid online using debit /credit
cards, NEFT etc. which will be credited to electronic cash ledger account.
Self-assessed ITC claimed in the return shall be credited to electronic credit ledger account.
Payment towards tax, interest, penalties can be made from electronic cash or credit ledger
accounts
subject to the rules, conditions prescribed.
Interest period shall be calculated from the first day such tax was due to be paid.
TDS provisions:
Specified persons shall deduct TDS @1% of the contract value where it exceeds Rs.10 lakhs.
TDS deducted shall be paid within 10 days of the end of the month of deduction and the
certificate to be furnished in 5 days of payment of tax.
The late fee for furnishing of the certificate is Rs.100/ day subject to Rs.5000.

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 Refund process

Refund provisions have been simplified and made more taxpayer friendly under GST regime.
Refund for an amount can be claimed within a period of 2 years from the relevant date.
Refund to be granted on the principal of unjust enrichment. If amount claimed is less than
Rs.5,000, then only self-declaration to be made, otherwise documentary evidences to be
furnished to establish no unjust enrichment.
The said limitation does not apply in case of payments made under protest.
Un-utilized ITC can be claimed as refund in case of inverted duty structures and exports
(accumulation of ITC)
Proper officer may grant provisional refund of 80% of the claim and the rest 20% can be refunded
after due verification of the documents.
Order of refund shall be issued within 90 days of the receipt of application.
Interest at the prescribed rates will be paid for delay in case of refund beyond 3 months.
In cases of unjust enrichment, refund order shall be granted and the amount shall be credited to
the Consumer Welfare Fund.
Refund of un-utilized credit is also allowed in case of export of goods/services except in cases
where export duty is payable and inverted duty structure.

EduPristine For [GST - Business Accounting & Taxation] 38

 GST Returns

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 GST Returns

Rakesh ask Abhi, What will be the procedure to fill return under GST Regime?

Abhi replied, let me explain you in detail how and when to fill GST Return
Under GST, every registered person would be required to file a GST return for the prescribed tax
period.
Even those entities having a GST registration but no activity would be required to file a GST, Nil
Return to stay compliant with GST regulations.
GST Returns must be filed online. There would also be a facility to prepare the returns offline and
upload the same into an online portal.
Government entities / PSUs , etc. not dealing in GST supplies or persons exclusively dealing in
exempted / Nil rated / non GST goods or services would neither be required to obtain
registration nor required to file returns under the GST law
GST returns should be filed after payment of self-assessed tax as per the return. In case of non-
payment of taxes return would be treated as an invalid return
Abhi emphasized that
No returns can be furnished if return for last tax period not furnished.

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 Type of GST Returns & Their Due Dates

Type of
Sl. No. Return for Due Date To be filed by
return
Outward supplies made by taxpayer 10th of the next
1 GSTR 1 (other than compounding taxpayer month
and Input Service Distributor[ISD])
All regular tax payers
Inward supplies received by a 15th of the next
and casual/ non-
2 GSTR 2 taxpayer (other than a compounding month
resident tax payers
taxpayer and ISD)
Monthly return (other than 20th of the next
3 GSTR 3
compounding taxpayer and ISD) month
Quarterly return for compounding 18th of the month Compounding taxpayers
4 GSTR 4
taxpayer next to quarter
Periodic return by Non-resident 7 days from last day Non-resident tax payers
5 GSTR 5
foreign taxpayer of registration
Return for ISD 13th of the next Input Service
6 GSTR 6
month Distributors
Return for Tax Deducted at Source 10th of the next Person deducting GST
7 GSTR 7
month at source
Annual Return 31st December of All regular tax payers
8 GSTR 8
next FY
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 Steps for Return Filing

Abhi continued to explains the steps for return filing

Step 1: The taxpayer will upload the final GSTR- 1 return containing details of outward supplies . The
increase / decrease (in supply invoices) would be allowed, only on the basis of the details uploaded
by the counter-party purchaser in GSTR-2
Step 2: GST Common Portal (GSTN) will auto-draft the provisional GSTR-2 of taxpayer based on the
supply invoice details reported by the counter-party taxpayer (supplier) on a near real-time basis.
Step 3: Purchasing taxpayer will accept/ reject/ modify such auto-drafted provisional GSTR-2.
Step 4: Purchasing taxpayer will also be able to add additional purchase invoice details in his GSTR-2
which have not been uploaded by counter-party taxpayer (supplier) as described in Step 1 and 2
above, provided he is in possession of valid invoice issued by counter-party taxpayer and he has
actually received such supplies.
Step 5:Taxpayers will have the option to do reconciliation of inward supplies with counter-party
taxpayers (suppliers) during the next 7 days by following up with their counter-party taxpayers for
any missing supply invoices in the GSTR- 1 of the counter-party taxpayers, and prompt them to
accept the same as uploaded by the purchasing taxpayer. All the invoices would be auto-populated in
the ITC ledger of taxpayer. The taxpayer would, however, indicate the eligibility ! partial eligibility for
ITC in those cases where either he is not entitled or he is entitled for partial ITC.

EduPristine For [GST - Business Accounting & Taxation] 42

 Cont.

Step 6: Taxpayers will finalize their GSTR- 1 and GSTR-2 by using online facility at Common Portal or
using GSTN compliant off-line facility in their accounting applications, determine the liability on their
supplies, determine the amount of eligible ITC on their purchases and then generate the net tax
liability from the system for each type of tax. Cash details as per personal ledger/carried forward
from previous tax period, ITC carried forward from previous tax period, ITC reversal and associated
Interest/Penalty, taxes paid during the current tax period etc. would get auto-populated in the GSTR-
3.
Step 7: Taxpayers will pay the amount as shown in the draft GSTR-3 return generated automatically
at the Portal post finalization of activities mentioned in Step 6 above.
Step 8: Taxpayer will debit the ITC ledger and cash ledger and mention the debit entry No. in the
GSTR-3 return and would submit the same.

Acknowledgement for returns:

On submission of return, an Acknowledgement Number will be generated. In case of submission of a
return which has been prepared by using offline tools, acknowledgement of submission will take
some time

EduPristine For [GST - Business Accounting & Taxation] 43

 Fiscal Impact of GST

EduPristine For [GST - Business Accounting & Taxation] 44

 Fiscal Impact

Rakesh having good understanding of how GST works, questioned Abhi about fiscal impact of GST
on different businesses. He wants to understand the impact on manufacturers, traders and service
providers including the inter-state transactions.
Rakesh to Abhi, can you please explain the fiscal impact of GST on various stakeholders?
He also asked Abhi to use numbers to explain the impact on each of them.
Abhi replied, okay let me try putting numbers along with different scenarios the manufacturers,
traders and service providers will deal with.
He further said, to better understand the impact lets first know the current (existing) tax structure
and then take a hypothetical business scenario under which he would compare both existing and
proposed GST situation.

EduPristine For [GST - Business Accounting & Taxation] 45

 Current Indirect Tax Structure

Indirect Taxes Levied by Effective Rate Levied on

Customs Duty
Central Excise duty
Service tax
Central Sales Tax (CST)
Value Added Tax (VAT)
Entry Tax (on entry of
goods into State from
outside)
Others Octroi, Entertainment tax, Luxury tax, professional tax, etc.
Central Government 29.44% Import of goods into India
Creditable against Central
Central Government 12.5%
Excise duty & Service tax
Provision/ Import of taxable
Central Government 15%
services
Levied by Central
Government,
2% to 15% Sale of goods inter-State
administered by State
Governments
State Governments 5% to 15% Sale of goods within the State
Entry of goods within the State
State Governments 2% to 15%
for sale, use or consumption

Remarks No credit of a Central tax allowed against a State tax, and vice-versa

EduPristine For [GST - Business Accounting & Taxation] 46

 Hypothetical Business Overview of a Manufacturer

Import of raw
materials from
outside India

Manufacture of
Local Procurement of goods at factory
Customers
goods from &
manufacturers / located within /
Repair and outside India
Traders
Maintenance
Services

Procurement of
services

EduPristine For [GST - Business Accounting & Taxation] 47

 Fiscal Impact

Rate Card
Present Rate (percent) Proposed Rate (percent)
Applicable on
Central State CGST SGST
15 - Services 8 to 10 8 to 10
12.50 12.5 to 15 Goods (Standard) 8 to 10 8 to 10

12.50 5 Goods (Concessional) 8 to 10 8 to 10

Impact of rate change

Present Proposed
Services Effective rate of tax ~ 15% Effective rate of tax ~ 16% to 20%
Effective rate of tax ~ 25 percent
Goods (Standard) Central Excise = 12.5 percent Effective rate of tax ~ 16% to 20%
Value Added tax = 12.5 percent
Effective rate of tax ~ 17.5 percent
Goods (Concessional) Central Excise = 12.5 percent Effective rate of tax ~ 16% to 20%
Value Added tax = 5 percent

Goods (MRP) Effective rate of tax ~ Variable Effective rate of tax ~ 16% to 20%

EduPristine For [GST - Business Accounting & Taxation] 48

 GST Computation - Illustrative

Particulars Present Proposed

Manufacturer to Wholesaler
Base Price (A) 100 100
Excise Duty @ 12.50% on transaction price 12.50 -
State VAT @ 5% (on 112.50) 5.63 -
CGST @ 8% (on 100) - 8
SGST @ 8% (on 100) - 8
Total Collections 118.13 116
Wholesaler to Retailer
Wholesale price (assuming value addition of 20) 138.13 136
State VAT @ 5% (on value addition of 20) 1.00 -
CGST @ 8% (on value addition of 20) - 1.60
SGST @ 8% (on value addition of 20) - 1.60

EduPristine For [GST - Business Accounting & Taxation] 49

 Contd

SGST @ 8% (on value addition of 20) - 1.60

Retail sales price (inclusive of taxes) 139.13 139.20
Retailer to Customer
Retail sale price (assuming value addition of 20) 159.13 159.20
State VAT @ 5% (on value addition of 20) 1.00 -
CGST @ 8% (on value addition of 20) - 1.60
SGST @ 8% (on value addition of 20) - 1.60
Cumulative tax price 160.13 162.40
Total Taxes 20.13 22.40

EduPristine For [GST - Business Accounting & Taxation] 50

 GST Impact Stock Transfer

Under Current Scenario Under GST Scenario

Under current system, stock transfer are
exempt, hence no VAT/ CST payable. However
there shall be input tax reversal on the same.
Excise Duty being a levy on manufacture, is
payable on stock transfer
Under GST, Stock transfer would be treated as
supply and GST will be levied on it because
definition of GST does not refer to consideration

Illustration 3
Mr. X manufactures goods in West Bengal and transferred to its Maharashtra Depot and goods
were sold from Maharashtra Depot. Calculate total tax payable and total sales price under current
tax regime and proposed GST scenario (Assuming value of Goods Rs. 100,000, Profit Rs. 10,000
Excise Duty @ 12.5%, Maharashtra VAT @ 5.5%, CGST @ 8%, SGST @ 8% and IGST @ 16% )

EduPristine For [GST - Business Accounting & Taxation] 51

 Solution

Under Current Scenario Under GST Scenario

Particulars Amount (Rs.) Particulars Amount (Rs.)
Stock transfer value 100,000 Stock transfer value 100,000
Add Excise Duty @ 12.5% 12,500 Add IGST @ 16% 16,000
Profit 20,000 Profit 20,000
Sale Price 132,500 Sale Price 120,000
VAT @ 5.5% 7,288 CGST @ 8% 9,600
SGST @ 8% 9,600
CGST Payable -
SGST Payable 3,200
Total tax paid to Government 19,788 Total tax paid to Government 19,200
Cost to Final Customer 139,788 Cost to Final Customer 139,200

Refer detailed calculations in the next slide

EduPristine For [GST - Business Accounting & Taxation] 52

 Detailed Calculation Stock Transfer

Current Scenario
Under current scenario, no credit of excise duty against VAT, hence VAT to be computed on Stock
transfer value + Excise Duty + Profit ie, 5.5% of (100,000 + 12,500 + 20,000)
Further, no credit available for payment of VAT
Total tax payable = Excise Duty + VAT = 12,500 + 7,288 = 19,788

GST Scenario
Under GST scenario, input credit of IGST shall be available, hence, CGST and SGST to be calculated
on Stock transfer value + Profit ie, 16% of (100,000 + 20,000)
CGST payable = Output CGST Less Input IGST = 9,600 9,600 = Nil
Balance IGST input after set-off of CGST = 16,000 9,600 = 6,400
SGST payable = Output SGST Less Input IGST = 9,600 6,400 = 3200
Total tax payable = IGST payable + CGST payable + SGST payable = 16,000 + 0 + 3,200 = 19,200

EduPristine For [GST - Business Accounting & Taxation] 53

 GST Impact Inter State Sale

Under Current Scenario Under GST Scenario

Under current system, CST is payable when Under GST, IGST is payable on inter state sale
goods are sold from one state to another
Excise Duty is payable on manufacture

Illustration 4
Mr. X manufactures goods in West Bengal and sales the same to a Buyer in Maharashtra. Calculate
total tax payable and total sales price under current tax regime and proposed GST scenario
(Assuming value of Goods Rs. 100,000, Profit Rs. 10,000 Excise Duty @ 12.5%, Maharashtra VAT @
5.5%, CGST @ 8%, SGST @ 8% and IGST @ 16% )

EduPristine For [GST - Business Accounting & Taxation] 54

 Solution

Under Current Scenario Under GST Scenario

Particulars Amount (Rs.) Particulars Amount (Rs.)
Stock transfer value 100,000 Stock transfer value 100,000
Add Excise Duty @ 12.5% 12,500 Add IGST @ 16% 16,000
Profit 20,000 Profit 20,000
Sale Price 132,500 Sale Price 136,000
CST @ 2% 2,650

Total tax paid to Government 15,150 Total tax paid to Government 20,000
Cost to Buyer 135,150 Cost to Buyer 136,000

Current structure - CST paid is cost to the Buyer

GST regime - IGST can be claimed as input credit by the Buyer

EduPristine For [GST - Business Accounting & Taxation] 55

 Illustration 5 GST Vs Current Indirect Tax Inter State Sale
State X State Y
Current Scenario Inter State Sale
State X tax = 110 State Y tax =
VAT = 110 (110+0) Entry Tax = 10
146.86
VAT = 136.86
(136.86+10)
CST = 24.2, ITC = 24.2
Payable = 0

Product
Input Manufacturer A B Dealer C Consumer
Manufacturer

Excise payable = 110

Total Excise paid =
Excise = 100 Less ITC = 100
Net payable = 10 110 (100+10) The final price to
be paid by the
Total Invoice B Total Invoice C Consumer is
Total Invoice A Cost = 1000.00 Rs.1505.48
Cost = 1244.2
Value = 1000.00 Value = 1100.00
Value = 1368.62
Excise = 100.00 Excise = 110.00
Vat = 110.00 VAT = 136.86
CST = 24.20 Assumptions - Excise = 10% ;
Total = 1210.00 Total = 1234.20 Total = 1505.48 Value Addition = 10% ; VAT =
(1100+110+24.2) (1368.62+136.86) 10% ; CST = 2% ; ITC = Input Tax
Credit

EduPristine For [GST - Business Accounting & Taxation] 56

 Illustration 5 GST Impact Inter State Sale
State X State Y
GST Scenario Inter State Sale
SGST = 122 State Y tax = 122
State X tax = 0 Less - IGST = 98
SGST = 100 (24 + 9)
(100-100) State Y = 24

Input Product
A B Dealer C Consumer
Manufacturer Manufacturer

IGST = 220 Centre Tax total =

Less CGST = 100 122
CGST = 100 The final price to
Less SGST = 100 (100+20+100-98)
Net payable = 20 be paid by the
Total Invoice C Consumer is Rs.
Total Invoice A Total Invoice B 1464.00
Cost = 1100
Cost = 1000
Value = 1000 Value = 1220
Value = 1100 CGST = 122
CGST = 100
IGST = 220 SGST = 122
SGST = 100 Assumptions - CGST = 10%
Total = 1320 Total = 1464
Total = 1200 (1100+220) SGST = 10% ; IGST = 20%
(1220+122+122)

EduPristine For [GST - Business Accounting & Taxation] 57

 GST Impact Service provider

Sl. Issue Under Current Scenario Under GST Scenario

No.
Tax Rate Services are subject to service tax at Services would be subject to dual
1 an effective rate of @ 15% GST (SGST and CGST for intra state)
in the range of 16% to 20%
Import of services Service tax is payable on remittance Services to be taxed in the State of
by the respective office i.e. head consumption
2 office Supply rules to determine the place
of consumption for cross-border
services

Supply of services Subject to single central levy Determination of actual place of

3 involving multiple
states
Registration Presently, assesse has the option to
either hold individual registrations for
each office or hold a centralized
4 registration from one office either on
the basis of centralized accounting or
centralized billing
effective use / enjoyment of services
required to levy State GST
CGST should provide for centralized
registration of assesse with more
than one offices in different states
In case of business in different states,
separate registration may be
required under SGST

EduPristine For [GST - Business Accounting & Taxation] 58

 Current Indirect Tax Vs GST Service Provider
Current Scenario Service Industry
State X State Y
Outside India India
Service
Import of goods provider
BCD & SAD No ITC
Services
available
Service Tax ITC
CVD ITC can be 4
can be claimed
claimed
Consultancy Services
Supplier 1 Service Tax payable
Service
6 5
provider Customer

Export of
services
2 Local purchases
No tax
payable Excise duty ITC can be claimed
3 VAT No ITC available
Customer Supplier

Inter-state purchases Supplier

Excise duty ITC can be claimed
CST No ITC available

EduPristine For [GST - Business Accounting & Taxation] 59

 GST Impact Service provider
GST Scenario Service Industry
State X State Y
Outside India India
Service
Import of goods provider
BCD No ITC
available Services
Import GST ITC CGST & SGST ITC
4
can be claimed can be claimed
Consultancy Services
Supplier 1 GST payable
Service
6 5
provider Customer

Export of
services
2
Likely no tax
payable Local purchases
3 GST ITC can be claimed
Customer Supplier

Inter-state purchases Supplier

IGST ITC can be claimed

EduPristine For [GST - Business Accounting & Taxation] 60

 GST Impact Importer

Abhi further explains the impact of GST on imports i.e, when goods are purchased from outside
India

Under Current Scenario Under GST Scenario

Under current system, when goods purchased Under GST, when goods purchased from outside
from outside India then Basic Custom Duty India BCD and IGST shall be levied
(BCD), Countervailing Duty(CVD), Special
Additional Duty (SAD), Education Cess (EC) &
Secondary & Higher Education Cess (SHEC) are
levied

EduPristine For [GST - Business Accounting & Taxation] 61

 Illustration of GST Impact on Importer

Under Current Scenario Under GST Scenario

Particulars Amount (Rs.) Particulars Amount (Rs.)
Assessable value (A) - assumed 100,000 Assessable value(A) - assumed 100,000
Add BCD @ 10% (B) 10,000 Add BCD @ 10% (B) 10,000
Value [(C) = (A) + (B)] 110,000 Value [(C) = (A) + (B)] 110,000
CVD @ 12.5% (D) 13,750 IGST @ 20% on value (since BCD is 22,000
not creditable (D)
EC on CVD @ 2% Nil
SHEC on CVD @ 1% Nil
Customs Duty for Cess 23,750
[(E) = (B) + (D)]
EC on Customs Duty @ 2% (F) 475
SHEC on Customs Duty @ 1% (G) 238
Value for SAD 124,463
[(H) = (A)+(E)+(F)+(G)]
SAD @ 4% (I) 4,979
Total Duty [(E)+(F)+(G)+(I)] 29,941 Total Duty [(B)+(D)] 32,000

EduPristine For [GST - Business Accounting & Taxation] 62

 GST Impact Importer

Imported by Manufacturer:
Under Current Scenario Under GST Scenario

Particulars Amount (Rs.) Particulars Amount (Rs.)

Landed cost including BCD 110,000 Landed cost including BCD 110,000
Cenvat Credit CVD 13,750 IGST credit 22,000
Cenvat Credit SAD 4,979

Imported by Trader:

Under Current Scenario Under GST Scenario

Particulars Amount (Rs.) Particulars Amount (Rs.)
Landed cost including BCD, CVD 124,463 Landed cost including BCD 110,000
(+ EC & SHEC)
Cenvat Credit SAD 4,979 IGST credit 22,000

EduPristine For [GST - Business Accounting & Taxation] 63

 Cont.

Imported by Service Provider:

Under Current Scenario Under GST Scenario
Particulars Amount (Rs.) Particulars Amount (Rs.)
Value 100,000 Landed cost including BCD 100,000
Service tax under reverse charge 15,000 IGST assumed @ 20% 20,000
[14% + 0.5% (SBC) + 0.5% (KKC)]
Cenvat Credit 14,500 IGST credit 20,000
(No credit for SBC)
Tax outflow 15,000 Tax outflow 20,000

* Under Reverse Tax Mechanism

EduPristine For [GST - Business Accounting & Taxation] 64

 GST Impact on Financials

Now, Rakesh wants to understand the GST impact on financials.

Abhi, draw the following chart and tried to explain the impact.

Profit & Loss Account

Particulars Rs. Particulars Rs.
Raw material XXX Sales XXX Impact on sale revenue may
consumption vary from industry to industry
Purchases XXX
Depreciation XXX
Other expenses XXX

Saving in cost due to removal of

non-creditable taxes

Rationalization in overall cost on

account of seamless credit flow of
goods & services
EduPristine For [GST - Business Accounting & Taxation] 65
 GST Impact on Financials

Balance Sheet
Liabilities Rs. Assets Rs.
Reduction in capitalized value
Capital XXX Fixed assets XXX on account of possible input
credits

Current liabilities XXX Current assets XXX

Tax payable XXX Credit receivable XXX

Changes on account of seamless

credit flow

EduPristine For [GST - Business Accounting & Taxation] 66

 GST Accounting Entries

EduPristine For [GST - Business Accounting & Taxation] 67

 Dealing with Business Transactions

After having high level of understanding of impact on financials, Rakesh wants to know how daily
business transactions will be recorded under GST regime.
Rakesk, Abhi please explain how journal entries related to business transactions will be recorded
having said that GST is in action.

Knowing Rakesh desire to understand how books of account will be maintained, Abhi replied
Lets look at examples having few business transactions

EduPristine For [GST - Business Accounting & Taxation] 68

 GST Accounting Entries

Illustration 6
1) Mr. X purchased goods for Rs. 100,000 locally
2) Mr. X sold goods for Rs. 150,000 locally
3) Mr. X received consultancy services for Rs. 20,000 locally
4) Mr. X purchased capital goods for Rs. 50,000 locally
Abhi explained the detailed Journal Entries (assuming CGST @ 8% and SGST @ 8%, amount above
exclusive of taxes) of the above transactions

EduPristine For [GST - Business Accounting & Taxation] 69

 GST Accounting Entries

S. No. Particulars Dr. Amount Cr Amount

Purchase A/c.Dr. 100,000
Input CGST A/c.Dr. 8,000
1 Input SGST A/c.Dr. 8,000
To Creditors A/c 116,000
Debtors A/c.Dr. 174,000

2 To Sales A/c 150,000

To Output CGST A/c 12,000
To Output SGST A/c 12,000
Consultancy services A/c.Dr. 20,000
Input CGST A/c.Dr. 1,600
3 Input SGST A/c.Dr. 1,600
To Creditors for services A/c 23,200
4 Capital goods A/c.Dr. 50,000
Input CGST A/c.Dr. 4,000
Input SGST A/c.Dr. 4,000

To Creditors for capital goods A/c 58,000

EduPristine For [GST - Business Accounting & Taxation] 70

 GST Accounting Entries

Total CGST input = 8,000 + 1,600 + 4,000 = 13,600 ; Total SGST input = 8,000 + 1,600 + 4,000 = 13,600
Total CGST output = 12,000; Total SGST output = 12,000
Hence, no output tax payable, as input tax greater than output tax

5 Output CGST A/c.Dr. 12,000

Output SGST A/c.Dr. 12,000

To Input CGST A/c 12,000

To Input SGST A/c 12,000

Balance Input credit shall be carried forward to next period

Abhi, let me add one more example having set-off against GST output

EduPristine For [GST - Business Accounting & Taxation] 71

 GST Accounting Entries

Illustration 7
1) Mr. X purchased goods for Rs. 150,000 from outside the state
2) Mr. X sold goods for Rs. 150,000 locally
3) Mr. X sold goods for Rs. 100,000 outside the state
4) Mr. X received consultancy services for Rs. 20,000 locally
5) Mr. X purchased capital goods for Rs. 50,000 locally
Pass Journal Entries (assuming CGST @ 8%, SGST @ 8% and IGST @ 16%, amount above exclusive of
taxes)

EduPristine For [GST - Business Accounting & Taxation] 72

 GST Accounting Entries

S. No. Particulars Dr. Amount Cr Amount

Purchase A/c.Dr. 150,000

Input IGST A/c.Dr. 24,000
1
To Creditors A/c 174,000

Debtors A/c.Dr. 174,000

To Sales A/c 150,000

2
To Output CGST A/c 12,000
To Output SGST A/c 12,000

Debtors A/c.Dr. 116,000

3 To Sales A/c 100,000
To Output IGST A/c 16,000

Consultancy services A/c.Dr. 20,000

Input CGST A/c.Dr. 1,600
4 Input SGST A/c.Dr. 1,600

To Creditors for services A/c 23,200

EduPristine For [GST - Business Accounting & Taxation] 73

 GST Accounting Entries

Capital goods A/c.Dr. 50,000

Input CGST A/c.Dr. 4,000
Input SGST A/c.Dr. 4,000
5
To Creditors for capital goods A/c 58,000

Total CGST input = 1,600+4,000 = 5,600; Total SGST input = 1,600+4,000 = 5,600; Total IGST input = 24,000
Total CGST output = 12,000; Total SGST output = 12,000; Total IGST output = 16,000

CGST output after set-off of CGST input = 12,000 5,600 = 6,400 (A)
SGST output after set-off of SGST input = 12,000 5,600 = 6,400 (B)
IGST input after set-off of SGST output = 24,000 16,000 = 8,000 (C)
IGST input after set-off of CGST output = 8,000 (C) 6,400 (A) = 1,600 (D)
SGST output after set-off of IGST input = 6,400 (B) 1,600 (D) = 4,800

EduPristine For [GST - Business Accounting & Taxation] 74

 Calculation of GST Payable

Calculation of GST payable

Particulars CGST SGST IGST
Output Liability 12,000 12,000 16,000

Less ITC claimed

CSGT 5,600 - -
SGST - 5,600 -
IGST 6,400 1,600 16,000
Amount payable - 4,800 -

EduPristine For [GST - Business Accounting & Taxation] 75

 GST Accounting Entries

S. No. Particulars Dr. Amount Cr Amount

Set-off of against CGST output
Output CGST A/c.Dr. 12,000
6
To Input CGST A/c 5,600
To Input IGST A/c 6,400
Set-off of against SGST output
Output SGST A/c.Dr. 8,000
7
To Input SGST A/c 5,600
To Input IGST A/c 1,600
Set-off of against IGST output
8 Output IGST A/c.Dr. 16,000
To Input IGST A/c 16,000
Payment of SGST
9 Output IGST A/c.Dr. 4,800
To Bank 4,800

EduPristine For [GST - Business Accounting & Taxation] 76

 Composition Scheme

EduPristine For [GST - Business Accounting & Taxation] 77

 Composition Scheme

Rakesh further questioned that is there any composition scheme available under GST as available
under other Indirect tax laws?

Abhi answered, Yes for small dealer composition scheme is available

Composition scheme permit a registered taxable person, whose aggregate turnover in a financial
year does not exceed Rs. 50 lacs, to pay tax at the rate not exceeding 1%, of the turnover.
Aggregate turnover = Value of all (taxable and non-taxable supplies + Exempt supplies + Exports)
(Taxes + Value of inward supplies + Value of supplies taxable under reverse charge) of a person
having the same PAN.
This scheme would be applicable only to taxable person whose supplies are restricted to a
particular State. In other words, a person effecting inter-State supplies cannot opt for this scheme.
The taxable person should make an application exercising his option to pay tax under this scheme.
Once granted, the eligibility would be valid unless his permission is cancelled under law or he
becomes ineligible.

EduPristine For [GST - Business Accounting & Taxation] 78

 Composition Scheme

Conditions for availing the options of composition scheme

The taxable person should not effect any inter-State supplies of goods and / or
services

Would be applicable for all transactions under the same PAN

Person opting to pay tax under the composition scheme is prohibited from
collecting tax

Taxable person opting to pay tax under the composition scheme will not be
eligible for any input tax credit.

There may be other conditions or restrictions which may be prescribed under the
Rules.

EduPristine For [GST - Business Accounting & Taxation] 79

 Composition Scheme

Example
A taxable person is engaged in the following business, all separately registered:
Sale of garments
Sale of electronics
Restaurants
In the above scenario, the composition scheme would be applicable for all the 3 business verticals
in total. Taxable person will not be eligible to opt for composition scheme say for sale of garments
and sale of electronics and opt to pay taxes under the regular scheme for Restaurants.

EduPristine For [GST - Business Accounting & Taxation] 80

 GST Sector Impact

EduPristine For [GST - Business Accounting & Taxation] 81

 GST Sector Impact

Abhi further briefly explained the impact of GST on various sectors

Nature of Impact Possible impact

Rate of Tax is expected between 16-20% as compared to 30-47% in

current scenario.
Automobiles Industry Drive overall demand & reduce cost for end user by about 10%.
Transportation time & overall cost will be reduced.
Cost of Logistics will be curtailed by almost 30-40%.
Reduction of the Price gap between organized & unorganized sector.
Consumer Durables
Warehouse/logistics costs will be curtailed.
Improve the operational profitability by almost 300-400 bps.
Boost demand for high tonnage trucks.
Overall reduction in transportation costs.
Logistics
Improving growth opportunities for the organized players.
Facilitate seamless inter-state flow of Goods.
Cement Tax rate expected to decline to 18-20% as compared to 27-32%.
Able to save their logistics costs/transportation costs.
EduPristine For [GST - Business Accounting & Taxation] 82
 GST Sector Impact

Abhi further briefly, explains the impact of GST on various sectors

Nature of Impact Possible impact

Under GST , effective tax rate is expected to increase to 18-20% as 15%

Banking & Financial earlier.
services
Moderate increase in the cost of financial services like loan processing
fees, debit/credit charges, insurance premium etc.
Tax Rate is expected to increase to 18-20%.
IT
Litigation around taxability of canned software will probably end under
GST Regime
May be negatively impacted in case the output tax rate is high.
No clarity whether a lower rate will continue in the proposed Tax
regime.
Textile /Garments
No clarity about the duty drawback benefits
Taxability of inter-State stock transfers including transfers to / from job
worker
Tax rate of around 18-20% as compared to 20-21%.
Media
Post GST, we expect concessional rate in news & Print sector.

EduPristine For [GST - Business Accounting & Taxation] 83

 Penalty Provisions

EduPristine For [GST - Business Accounting & Taxation] 84

 Penalty Provisions

Rakesh further questions under what circumstances can there be penalties charges in GST?
Abhi replied, following table shows the conditions for penalty
Sr. No. Nature of Default Penalty Amount
Penalty for not Where a taxable person who is liable to be registered under this Act but
applying for fails to obtain registration, he shall be liable to penalty of higher of the
registration following:
Rs. 10,000/ or an amount equivalent to the tax evaded or the tax not
1. deducted or short deducted or deducted but not paid to the
Government or
Input tax credit availed of or passed on or distributed irregularly, or
Refund claimed fraudulently
Penalty of late Annual return: Rs. 100 /day for each day of default (max to 0.25%
filing of returns aggregate turnover)
2.
Other than annual return: Rs. 100 /day for each day of default (max
to Rs.5000)
Tax collected but Officer shall issue a show cause notice as to why said amount be not
3. not deposited deposited to the State or Central Govt. and the penalty equivalent to the
amount be not levied

EduPristine For [GST - Business Accounting & Taxation] 85

 Cont.
Sr. No. Nature of Default
Penalty for wrong
availment of ITC
4.
Penalty for default in
furnishing TDS
certificates
5.
Short payment of tax
repeatedly (short
payment in three
6.
return for last six
consecutive tax
periods)
EduPristine For [GST - Business Accounting & Taxation]
Penalty Amount
Where a taxable person takes and/or utilizes ITC without actual receipt
of goods and/or services either fully or partially, he shall be liable to a
penalty of higher of the following:
Rs. 10,000/ or
an amount equivalent to ITC availed of.
If any deductor fails to furnish to the deductee the certificate, after
deducting the TDS within 5 days of crediting the amount so deducted to
the appropriate Government, the deductor shall be liable to pay, by way
of a late fee, a sum of Rs. 100/ per day from the day after the expiry of
the five day period until the failure is rectified. However, the amount of
fee shall not exceed Rs. 5,000/.
Higher of the following
Rs. 10,000/ or
10% of tax short paid.
86
 Cont.

Sr. No. Nature of Default Penalty Amount

Aids or abets in contravention of the law, fails to issue an Extend up to Rs.25,000

invoice or fails to account an invoice in books, fails to
7. appear before CGST/SGST officer when issued a
summon for appearance to produce a document in a an
enquiry.
8. General penalty Extend up to Rs.25,000

EduPristine For [GST - Business Accounting & Taxation] 87

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