The Goods and Services Tax (GST) is the biggest reform in India’s indirect tax structure. It is a destination based tax on consumption of goods and services. It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as set off. In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer.
How will GST help the Trading Community?
Under GST, a trader would be entitled to avail input tax credit paid on his domestic procurement of goods and services unlike the present indirect tax regime. Presently, a significant portion of indirect taxes namely Central Excise and Service Tax form part of the cost component for a trader. This will not be the case under GST. He will now be able to take credit of all taxes paid by him.
In respect of imports, the landed cost is expected to reduce significantly under GST. Hence, the traders will gain significantly in terms of input tax credit on their operating expenses thereby decreasing their operating costs.
CST which was non-creditable has been subsumed in GST. This will be a huge benefit for the traders. Entry tax has also been subsumed in GST. Removal of CST and entry tax shall immensely benefit the traders. Traders will be able to sell their goods to farthest areas.
Is it compulsory for all the traders to register under GST?
A trader dealing only in exempted goods or where his turnover is below Rs 20 lakh in the financial year (but not engaged in inter-State supplies) is not required to register under GST.
Do traders who are not opting to pay tax under the composition scheme required to file monthly return?
Traders not opting to pay tax under composition scheme need to file return on a monthly basis. Form GSTR-1 is to be filled for upward supplies made by the trader (Made in the month for which return is being filed) by the 10th of the next month. Other parts of the return Form GSTR-2 and Form GSTR-3 are auto-populated and inly needs to be verified and submitted by the 15th and the 20th of the next month respectively.
What information do the trader need while filling GSTR-1?
The details to be entered in the return of outward supplies Form GSTR-1, made by the trader depend upon the nature of supplies made. The provisions are as follows:
1. Intra-Stae supplies to consumers (B2C supplies)- tax rate wide summar;
2. Inter-State supplies to consumers (B2C supplies) of value up to Rs 2.5 lakh- State-wise and tax-rate wise summary,
3. Inter-State supplies to consumers (B2C supplies) of value above Rs 2.5 lakh- specified invoice wise details,
4. Supplies to re sellers (B2B)- specified invoice-wise details.
Are traders required to declare their IEC at the time of imports and exports, under GST?
For the time being, both GSTIN and IEC have to be declared, But over a period of time, traders need to declare only their HSTIN instead of IEC at the time of imports and exports.
Can traders get the credit of IGST paid at the time of imports for discharging their domestic liabilities under GST? If yes, how?
Yes. Under GST, traders will be on par with manufacturers. IGST paid at the time of import will be available as credit which can be used for payment of taxes on further supplies. GSTIN would be used for the purpose of credit flow of IGST on import of goods and refund of IGST paid in case of export.
When will a trader have to pay tax?
A trader, if registered under GST, will have to pay tax on monthly basis on or before 20th of the succeeding month. A person who has opted for composition levy will have ti pay tax on quarterly basis on or before 18th of the month succeeding the quarter relating to supplies.
A trader whose turnover is below twenty lakhs, or deals with exempted goods, need not register for GST. However, GST registration is mandatory if the trader is involved in intra-state supplies. Also, the aggregate turnover threshold for GST registration is lower in certain special category states like Jammu & Kashmir.
Input Tax Credit
Certain taxes in the indirect tax era weren’t creditable. For example, a trader wouldn’t be able to take credit for CST or entry tax. GST brings them all together under a single umbrella, making it possible for the trader to claim input tax credit on most purchases and inputs.
Further, IGST paid on imports will be available as credit which can be used for payment of tax on further supplies. GSTIN would be used for the purpose of credit flow of IGST on import of goods, and refund of IGST paid in case of exports. Hence, all traders involved in import of goods would require both import export code and GST registration to clear customs.
Filing of GST Returns
Traders who haven’t opted for GST composition scheme and have less than Rs.1.5 crores of annual turnover must file GST returns every month. GSTR-1 must be filled for outward supplies made by the trader by the 10th of the next month (Due dates may vary for the months of July 2017 – March 2018). Other parts of the return, namely Form GSTR-2 and GSTR-3 are also populated and needs to be verified and submitted by the 15th and 20th of the next month respectively. (Due dates may vary for the months of July 2017 – March 2018)
The following details has to be entered in Form GSTR-1:
Intra-state supplies to consumers (B2C supplies)- tax-rate wise summary.
Inter-state supplies to consumers(B2C supplies) of value up to rs 2.5 lakhs- State-wise and tax-rate wise summary.
Inter-state supplies to consumers(B2C supplies)of value above rs 2.5 lakhs- Specified invoice wise details.
Supplies to re-sellers(B2B)- Specified invoice wise details.
On the other hand, traders who choose composition scheme must file returns on a quarterly basis in Form GSTR-4. GSTR-4 must be filed by the 18th day of the month succeeding the quarter relating to the supplies. (Due dates may vary for the months of July 2017 – March 2018)
Form GSTR-4 must contain the following details:
Details of turnover in the State or Union territory.
Inward supply of goods or services or both.
Tax payable on reverse charge basis if supply of goods are received from an unregistered person.
Total tax payable.
GST Composition Scheme
Traders with a turnover of less than 75 lakhs can opt for the GST composition scheme. The basic objective here is to bring simplicity and reduce the cost of compliance for the small taxpayers. The rate for traders under the GST composition scheme would be 1%(0.5% CGST, 0.5% SGST) of the turnover of the state.
The following persons are not eligible for composition levy:
Supplier of services (except restaurants).
Supply of exempted goods.
Person engaged in inter-state supply of goods.
A supplier making any supply of goods through an electronic operator, who is required to collect tax at source.
Note:-People enrolled in composition scheme are not eligible to claim Input Tax Credit.
Reverse Charge Mechanism
A person who operates his business under composition scheme is liable to pay taxes on reverse charge basis, if he/she receives goods from an unregistered person. The person here is liable to pay tax at the actual rate, and not the composition rate. The tax though, in concurrence with the rules of composition scheme, can be paid in the 18th day of the month succeeding the quarter in which the supplies were received. The composition dealer must mention this detail in Table-4 of Form GSTR-4.
Note: GST reverse charge mechanism was temporarily suspended by the 22nd GST Council Meeting.
Payment of Tax
A registered trader must deposit his/her taxes on a monthly basis, on or before the 20th of the succeeding month of liability. A person who have opted for composition levy will have to make the payment on a quarterly basis on or before 18th of the month succeeding the quarter relating to supplies.
Stock transfers to another state are taxed for the sole purpose of ensuring dispersal of proper credits to the trader. If the same is not taxable, then the Input Tax Credit wouldn’t reach its ultimate place of consumption. This would in-turn make the trader void of claiming credits for inputs. Therefore, the act of taxing stock transfers has been introduced to curb this deficit.
In situations where the recipient is eligible for full Input Tax Credit, then the value declared by a trader in the invoice shall be taken as the open market value, and the same will taken for the purpose of assessment. The trader can himself assess the value of supplies. In these cases, the value shall normally be the value of inward supply+the transport costs etc. involved for stock transfer.
GST Invoicing for Traders
GST invoice created by traders must be as per the GST invoice format rules. You can create GST invoices using LEDGERS GST Software for free. In GST invoices, HSN code must be mentioned along with various other information like invoice number, invoice date, etc., The following is the criteria for mentioning HSN code on GST invoices.
Taxpayers whose turnover is below 1.5 crores need not mention HSN code in their invoices.
Taxpayers whose turnover is above 1.5 crores, but less than 5 crores shall use a two-digit code.
Taxpayers whose turnover is above 5 crores shall use a four-digit code.