Aurangabad Branch of WIRC of ICAI DOCUMENTATION AND
Aurangabad Branch of WIRC of ICAI DOCUMENTATION AND TEETHING PROBLEMS & PROBABLE SOLUTIONS (27. 09. 2017) CA Avinash Poddar www. avinashpoddar. com www. gstclub. in
www. avinashpoddar. com www. gstclub. in Presentation Plan ØDiscussion on certain critical issues of GST Law ØImportant Documents under GST ØTeething problems and Probable solutions 2
www. avinashpoddar. com www. gstclub. in Discussion on certain critical issues of GST Law 3
www. avinashpoddar. com www. gstclub. in Trade Circular 4
www. avinashpoddar. com www. gstclub. in Trailer is good – picture not so good ØThe idea of GST was initiated to create a national market and to avoid cascading effect of taxes. ØHowever, the final shape of GST that has come on 1 -7 -2017 is not good at all. ØIn fact, some of GST provisions are ‘terrors’. ØMost certainly the compliance costs are heavy and there is absolutely no ‘ease of doing business’. 5
www. avinashpoddar. com www. gstclub. in Achievements ØNational Market – about 70% achieved ØAvoid cascading effect of taxes – about 70% achieved ØProblems due to overlapping of Vat and service tax – practically eliminated ØUniform GST Law all over India – 95% achieved 6
www. avinashpoddar. com www. gstclub. in Unique features of GST as introduced in India • Concept of IGST is a unique idea – nowhere else tried • GST on supply and not on manufacture or sale. This changes entire structure of tax • Dual structure is unique • Distinction between goods and services considerably reduced – avoiding overlapping of taxes • Uniform law on goods and services all over India • Heavy compliance cost 7
www. avinashpoddar. com www. gstclub. in Special features of Indian GST • Invoice and debit/credit note matching on such a grand scale has nowhere else been tried • Centre State Cooperation at unprecedented level. All decisions so far in GST Council by consensus and not by voting • Most complex GST law in the world 8
www. avinashpoddar. com www. gstclub. in Basic philosophy behind GST Law • All taxable persons are crooks and rascals • The taxable persons are not trust worthy and they are out to cheat Government • On the other hand, all tax officers are saints and honest people • Most unfriendly tax administration 9
www. avinashpoddar. com www. gstclub. in Brain Hard Disk has to be formatted • GST conceptually different from excise, service tax and Vat • Many concepts like captive consumption, invoice at the time of clearance find no place in GST • No basic exemption of 20 lakhs in GST • The old concepts have to be completely wiped off • Not easy to get out of hangover of the past 10
www. avinashpoddar. com www. gstclub. in Mandatory Registration • In some cases, even if service is exempt or under reverse charge, if some taxable service is supplied, then registration mandatory • Education services, hospital services – even Advocate Services • Petrol pumps selling lubricants and other products • Once registered, reverse charge applies – no exemption of 20 lakhs 11
www. avinashpoddar. com www. gstclub. in CGST/SGST paid when IGST was payable and vice versa • Interpretation of provisions of ‘place of supply’ and ‘fixed establishment’ are critical in determining whether IGST is payable or SGST/CGST are payable. • A taxable person who has paid CGST/SGST on a transaction considered by him to be an intra-state supply, but which is subsequently held to be an inter-state supply, shall be granted refund of CGST /SGST (in SGST Act). This means that he will have to pay IGST and then claim refund of SGST/CGST paid. • There is Parallel provision in IGST Law also. • Really, there should be adjustment between State and Centre. • If the receiver had availed input tax credit, refund will not be admissible. 12
www. avinashpoddar. com www. gstclub. in Post supply discounts and price reductions not eligible for deduction from value • Giving trade discounts and price reductions during negotiations after supply of goods and services is very common in business. However, if such post supply discounts were not anticipated at the time of supply, it is not allowed to be deducted from value. • This provision completely ignores business reality. as post supply negotiations and price reductions are common in business. • Further, if payment is not made within 180 days, then input tax credit is to be reversed. This is double whammy. 13
www. avinashpoddar. com www. gstclub. in Artificial disallowances of input tax credit • disallowing input tax credit on rent-a-cab service makes no sense, as this service is used for legitimate business purposes. In fact, no definition of ‘rent a cab’ • Some services like food and beverages and beauty treatment are legitimate business expenses for some kinds of businesses. In those cases, these should be allowable. • Interpretation of term – ‘for personal consumption’ • Construction related services not eligible even if in relation to business. Input tax credit of legitimate expenditure like telecom towers and pipelines outside the factory is being denied. 14
www. avinashpoddar. com www. gstclub. in SGST and CGST paid in one State • Can credit of CGST and SGST paid in one State be availed in another State? • For example, hotel or rent bill in another State, can ITC be availed? • Can be done through ISD, then why not direct? 15
www. avinashpoddar. com www. gstclub. in Payment of GST on advances received • Receiving advance from customers is common. However, GST is proposed to be payable when advance is received, even if supply of goods and services is to be made at a later stage. • This will throw the accounting out of gear. • Input Tax Credit will not be available when GST is paid on advance received. • Interestingly, if you term the amount as ‘adjustable deposit’ in separate account, GST is not payable, though Company Law issues will arise. 16
www. avinashpoddar. com www. gstclub. in Reversal of input tax credit if payment not made to supplier within 180 days • If payment of bill and tax thereon is not made within 180 days, input tax credit is required to be proportionately reversed with interest • The purpose seems to be to avoid bogus invoices. However, since tax has been received by Government, there is no loss to Government when transactions are genuine. • It is not clear why Government is acting as recovery agent for supplier. • Some deductions from invoices, discounts are common in business. In construction industry, retention of 5%/10% amount for one or two years is common. In such cases, reversal of ITC will be required. 17
www. avinashpoddar. com www. gstclub. in GST on fringe benefits to employees • Employer and employee have been defined as ‘related persons’. Hence, fringe benefits provided to employees will be subject to GST. • It will be similar to fringe benefit tax, which will lead to tremendous litigation. • Gifts upto Rs 50, 000 to employees may be exempted. However, reversal of input tax credit may be required. 18
www. avinashpoddar. com www. gstclub. in Electronic way Bill • E-way Bill is required to be generated if value of goods exceeds Rs 50, 000 • Transporters have to prepare fresh e-way bill if goods are transhipped (from one vehicle to another) • Transport time one day upto 100 Kms • Presently postponed but will come soon 19
www. avinashpoddar. com www. gstclub. in Reverse charge if supply received from unregistered person • There is provision of payment of GST under reverse charge if procurement is from unregistered person. • This will create tremendous accounting and record keeping challenges • In many cases, this will be revenue neutral exercise as input tax credit will be available. • Heavy compliance cost in maintaining records of petty expenses and preparing invoices 20
www. avinashpoddar. com www. gstclub. in System is the master not human being • There is not likely to be human touch in many aspects of GST – registration and refund also computer based • This is particularly in case of input tax credit where human will be helpless against system • Mismatches, adjustment of payments on FIFO basis – all at mercy of system • Huge amount of data uploading and date crunching required – 300 crore invoices per month • If system fails, whole mechanism of input tax credit fails. • IT Infrastructure highly insufficient to take this load 21
www. avinashpoddar. com www. gstclub. in Confusion about place of supply and location of supplier • Place of supply only determines whether IGST is payable or CGST and SGST payable • Place of supply does not mean registration required at that place • Registration only if a person has fixed establishment at that place • Casual Registration is not mandatory • Renting, erection and commissioning, repairs 22
www. avinashpoddar. com www. gstclub. in Customs and Foreign Trade Policy • Duty drawback will be mostly restricted to customs portion • IGST payable at time of imports by EOU • Advance Authorisations, Duty Credit Scrips, EPCG only for basic customs duty • IGST on value plus basic customs duty plus education cess • Imports to be uploaded in GSTR 2 and credit will be matched by customs • GSTIN number and Invice Number in shipping Bill • Refund of duty paid at the time of exports after ship or aircraft leaves • If no payment within one year, then export benefits to be reversed • Bond/LTU but no ARE 1 23
www. avinashpoddar. com www. gstclub. in Transitory provisions • Many questions – few answers • If no duty paying document then only 40% /60% credit – only for traders – not for manufacturers or service suppliers or works contracts • Service tax paid after 6 -7 -2017 e. g. cash basis or reverse charge – GST should be paid – but how to file return • Textile – can deemed credit of excise be availed? • Works contract – credit of excise on steel, cemen 24
www. avinashpoddar. com www. gstclub. in Anti profiteering measures • Benefit of input tax credit and reduction in tax rates should be passed on to customer • Political gimmick but good source of harassment to taxable persons – no penalty provisions • Show should be made of price reduction when GST comes • After some time, bring prices to normal 25
www. avinashpoddar. com www. gstclub. in Accounting challenges • GST on advance – correlation when actual supply made • Reversal of input tax credit if payment not made in 180 days • Bill entry and passing system has to be changed • Provisional entry when goods despatched by supplier to take ITC • Bill should be passed in full and then issue credit/debit note – otherwise no invoice matching 26
www. avinashpoddar. com www. gstclub. in Important Documents under GST 27
www. avinashpoddar. com www. gstclub. in Important Documents under GST ØInvoice ØDelivery Challan ØChallan for Goods sent on approval ØDebit / Credit Note ØE-Way Bill 28
www. avinashpoddar. com www. gstclub. in Teething problems and Probable solutions 29
www. avinashpoddar. com www. gstclub. in Whether problems of GSTN are Teething problems. . . ? 30
www. avinashpoddar. com www. gstclub. in Teething problems and Probable solutions ØNon preparedness of Government, GSTN Portal, GSPs and ASPs ØApplied in July and got registered in August ØInvoice issued on the basis of ARN ØEditing data in GSTR-3 B ØRefund Forms ØHSN Code (Classification) of some items – for e. g. item of Chapter 87, Water, Safety items for electricity arresters, etc. ØInvoicing under Reverse Charge Mechanism ØAppeals and Advance Ruling application not get functional 31
www. avinashpoddar. com www. gstclub. in Teething problems and Probable solutions ØPenalty of GSTR – 3 B paid for July month ØAmendment of Core-filed of Registration ØLinking of IEC code to GSTN even after entering details while applying for registration ØB 2 B data of GSTR – 1 will be reflected in other person’s GSTR – 2 A but other person is not able to Accept or Reject or Modify. ØPrevious year and present year (up to June) Turnover will be entered with Tax or without Tax ØForm ITC-01 not available for taking Credit for new registrants 32
www. avinashpoddar. com www. gstclub. in Many more critical issues • What we have discussed in only tip of iceberg. Many more complications would arise in due course. • No worry about job security to persons in GST department and consultants of GST • Let us hope that GST, as it finally comes out is ‘Good and Sensible Tax’. 33
www. avinashpoddar. com www. gstclub. in
www. avinashpoddar. com www. gstclub. in Thank You CA Avinash Poddar Email - caavinash@gmail. com
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