GST - Migration Procedure - Flow Chart

Dear Readers,

Migration procedure under GST, explained in a flow-chart:

 

Trust the above information is found useful to the readers. 

Your Views, comments, suggestions and improvements are most welcome.

Best Wishes,

Amol Mahajan

GST - Registration Procedure - Flow Chart

Dear Readers,

Registration procedure under GST, explained in a flow-chart:

Registration shall be effective from the date the person is liable to registration, if application for the same is made within 30 days thereof, else from the date of grant of registration.

Trust the above information is found useful to the readers. 

Your Views, comments, suggestions and improvements are most welcome.

Best Wishes,

Amol Mahajan

Employee Reimbursement – Applicability of GST ?

30^th June, 2017

Employee Reimbursement – Applicability of GST ?

Dear Readers,

Goods and Services Tax (GST) will be applicable on supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, with effect from 1st of July, 2017.

Section 7 of the CGST Act, 2017 defines the word “supply”, which includes and excludes certain activities or transactions under its ambit.  Thus, if the word supply includes certain activities or transactions the same are subject to GST and vice versa.

Section 7, inter alia includes the activities specified in Schedule I, made or agreed to be made without a consideration.  Schedule I inter alia includes supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business, with an exception that, gifts not exceeding Rs.50,000/- in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both.  Employer and employee shall be deemed to be “related persons” as per the Explanation (a) to sub-section (2) of section 15 of the CGST Act.  Thus, any goods or services supplied by the employer to his employee or vice versa, without consideration, shall attract GST.

The word “consideration” in relation to supply of goods or services or both, is defined in sub-section (31) of section 2, which inter alia includes any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person.

Section 7, inter alia excludes activities or transactions specified in Schedule III.  Schedule III specifies activities or transactions which shall be treated neither as a supply of goods nor a supply of services.  Thus, the activities or transactions specified in Schedule III shall be out of ambit of GST.

Entry no.1 of Schedule III specifies that, services by an employee to the employer in the course of or in relation to his employment.

According to this entry, any services provided by the employee to his employer which is as per the terms of his employment shall not be subject to GST.  Thus, services provided by an employee for which salary is paid (either in cash or in kind) by the employer, in the form of consideration, is not subject to tax under GST regime. 

In an employment contract, the employee apart from his cash emoluments is provided with perquisites, like motor car for personal and official use or a common transport facility, reimbursement of telephone line at residence or mobile or internet, use of company laptop, medical reimbursement, free or subsidised lunch, which also forms part of his salary package or Cost to Company (CTC) as commonly known. 

The moot question is whether these are the services provided by the employer to the employee without consideration and covered under Schedule I and therefore attracts GST?

OR

Whether this is a consideration received from the employer in the form of perquisites forming part of salary (refer section 17(1)(iv) read with section 17(2) of the Income Tax Act, 1961) and covered under Schedule III and therefore does not attract GST?

Let’s take an example of Mobile reimbursement.  Here the actual services are provided by M/s X, or Y or Z mobile service provider to the employee.  Here the mobile company does not act on behalf of the employer to be his pure agent.  It will therefore levy GST to the employee as a B to C transaction.  The use of mobile phone is incidental to the provision of service by the employee to his employer.  The employer reimburses the employee for the mobile bill paid by him.  In this case, claim of reimbursement for mobile is not a service in itself but is incidental to the provision of main employment service by the employee to his employer. Also here the employer does not provide the mobile services to his employees, but only reimburses the claims of the employees, for which they have received the services from the third party service provider, and have used those services to provide services to their employers.

Section 15(2) inter alia includes incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services, in the term value of supply.

Although Schedule III is out of the ambit of the term “supply”, in my view, reimbursement of mobile or telephone or internet bills is squarely covered under the term incidental expenses charged by the supplier of service (employee) to the recipient of service (employer).

Let’s take another example where the company policy states that if an employee works late beyond 10 pm, he can claim taxi fare reimbursement to his home or he can eat out and claim dinner reimbursement.  Even these reimbursements also form part of value of supply definition cited above, i.e. any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services (employment service being a continuous service).

To conclude, in my view, the above reimbursements are consideration received by the employee (in the form of perquisites and forming part of his salary) for rendering his services to his employer and not to be considered as services provided by the employer to his employee without consideration.

Whether the employer is required to pay tax as reverse charge under section 9(4) or section 5(4) of the CGST Act, or IGST Act, respectively?

The reimbursement of expenses if considered to be covered by entry no.1 of Schedule III of CGST Act, 2017, the same is not a supply itself.  Accordingly, registration requirement is waived off under section 23. Hence the employee is not an unregistered supplier of taxable goods or services and hence the employer is not required to pay tax under reverse charge under section 9(4) or section 5(4) of the CGST Act, or IGST Act, respectively.

Trust the above information is found useful to the readers. 

Your Views, comments, suggestions and improvements are most welcome.

Best Wishes,

Amol Mahajan

Draft Rules for Registration under GST

Draft Rules for Registration under GST

Dear Readers,

In continuation of our previous paper, please find details of various draft forms prescribed under the Draft Rules for Registration, their purpose and timelines.

Form No.	Purpose	Time period
GST REG-01	Application for registration	Within 30 days of becoming liable.
GST REG-02	Acknowledgement for receipt of application for registration	On submission of REG-01
GST REG-03	Notice for seeking additional information for REG-01	Within 3 common working days from date of submission of REG-01
GST REG-04	Filing additional information	Within 7 common working days from date of receipt of REG-03
GST REG-05	Order of Rejection	Within 7 common working days of receipt of REG-04
GST REG-06	Registration Certificate	Within 7 common working days of receipt of REG-04
GST REG-07	Application for registration – TDS / TCS	RC in REG-06, within 3 common working days from date of submission of REG-07
GST REG-08	Order of cancellation of TDS / TCS	Officer satisfied for no requirement to be registered for TDS/TCS
GST REG-09	Application for allotment of Unique Identity Number	RC in REG-06, within 3 common working days from date of submission of REG-09
GST REG-10	Application for registration – Non-Resident	At least 5 days prior to commencement of business, shall be given temporary identification number for making advance tax payment
GST REG-11	Application for amendments for REG-01, REG-07, REG-09, or REG-10	Within 15 days of such change
GST REG-12	Order of amendment for – change in (a) name of business, (b) Principal place of business, (c) details of partners/directors/karta/managing committee/board of trustees/CEO For PAN change - For any other amendment -	Within 15 common working days from date of receipt of REG-11 Fresh registration required in REG-01 On submission of REG-11
GST REG-03	Notice for seeking additional information for REG-11	Within 15 common working days from date of submission of REG-11
GST REG-04	Filing additional information for REG-11	Within 7 common working days from date of receipt of REG-03
GST REG-05	Order of Rejection for REG-11	Within 7 common working days of receipt of REG-04
GST REG-13	Order of allotment of temporary registration – Suo Moto Registration	Within 30 days shall file REG-01 or appeal against temporary registration
GST REG-14	Application for cancellation of registration	Not before 1 year from effective date of registration in case of voluntary registration
GST REG-15	Show cause notice for why registration should not be cancelled	To reply within 7 days of receipt
GST REG-16	Order of cancellation of registration	Within 30 days of REG-14 or date of reply to REG-15
GST REG-17	Application for revocation of cancellation	Within 30 days from the date of service of order
GST REG-03	Notice for seeking additional information for REG-17	Within 3 common working days from date of submission of REG-17
GST REG-04	Filing additional information for REG-17	Within 7 common working days from date of receipt of REG-03
GST REG-18	Order of approval of revocation of cancellation	Within 30 days from date of receipt of REG-17 or REG-04
GST REG-19	Notice for clarification for application for revocation of cancellation	Within 30 days from date of receipt of REG-17
GST REG-05	Order of Rejection	Within 30 days from date of receipt of REG-17 or REG-04
GST REG-20	Application for Enrolment of Existing Taxpayer	As per Enrolment Schedule given at www.gst.gov.in
GST REG-21	Provisional registration Certificate	On filing of REG-20
GST REG-22	Order of cancellation of provisional registration Certificate	Where particulars furnished not correct
GST REG-23	Intimation of discrepancies in Application for Enrolment	Show cause
GST REG-24	Application for cancellation of registration for migrated taxpayer not liable for registration under GST Act	Person registered under earlier law who is not liable under the GST Act
GST REG-25	Application for extension of registration period by Casual/non-resident taxable person.	Before the last date of certificate
GST REG-26	Form for field visit report.	For physical verification of place of business

Cancellation of registration can happen in the following cases:

a)    Where the business is discontinued, or transferred;

b)   Where taxable person is no longer liable to be registered under Schedule V;

c)    Where registered taxable person has contravened provisions of the Act;

d)   Where Composition dealer has not furnished returns for 3 consecutive tax periods;

e)    Where any other taxable person has not furnished returns for continuous period of 6 months;

f)     Person who has taken voluntary registration has not commenced business within 6 months from date of registration;

g)    Where registration is obtained by fraud, wilful misstatement, suppression of facts.

Registration granted or amended or cancellation or revocation of cancellation under one Act (say CGST) shall be deemed to be under the other Act (say SGST) and vice versa.

Trust the above information is found useful to the readers. 

Comments, suggestions and improvements are most welcome.

Best Wishes,

Amol Mahajan

Registration under Proposed GST Regime

Registration under Proposed GST Regime

Dear Readers,

With positive signals coming from the resolution of the deadlock between the Centre and the States over ‘dual control’ issue, the possibility of implementation of GST in India is positively looked at 1^st July 2017.

In this backdrop, let us understand some important concepts under the GST, to begin with Registration.

Section 23 of the revised Model GST law requires every person who is liable to be registered under Schedule V of this Act, to register in every such State, within 30 days from when he becomes liable. 

Schedule V requires every supplier shall be liable to register in the State from where he makes a taxable supply, if his aggregate turnover¹ in a financial year exceeds Rs.20 lakhs.  However, if you make a taxable supply from the North-Eastern States, or Himachal Pradesh, or Uttarakhand, or J&K, you will have to get registered if your aggregate turnover¹ in a financial year exceeds Rs.10 lakhs.

Further if the Principal (Registered Taxable Person) who on intimation, supplies inputs without payment of tax to a registered job-worker, who intern supplies goods on completion of job-work within 1 year, with payment of tax within India or with/without tax for Export, shall be treated as supply of goods by the principal and shall not be included in the aggregate turnover of the registered job-worker. 

Schedule V further lists out the persons who are required / not-required to be registered:

Persons NOT liable to be registered:

a)    Exclusively in business of supplying goods and/or services which are not liable to tax or wholly exempt from tax.

b)   Agriculturist.

Persons liable to be registered irrespective of threshold:

1)         Person making inter-State taxable supply;

2)         Person liable to pay tax under reverse charge;

3)         Agents;

4)         Casual taxable person²;

5)         Non-resident taxable persons³;

6)         Person supplying Online information and database access or retrieval services (OIDARS) from place outside India to un-registered person in India;

7)         E-commerce operators;

8)         Person who supplies goods through e-commerce operators;

9)         Input Service Distributor (ISD)⁴ (separate registration);

10)      Person required to deduct tax at source (separate registration);

11)      Person required to collect tax at source (separate registration);

12)      Such other person as may be notified by the Govt.

Schedule V further states that every person who is registered under the earlier law, shall be liable to be registered with effect from the appointed day⁵.

Other requirements for registration are:

a)        For the purpose of registration PAN is compulsory, except for non-resident taxable person for whom any other document will be prescribed.

b)        For the purpose of tax deduction, TAN is compulsory.

c)         Specialised agency of UNO or organisations notified under United Nations (Privileges and Immunities) Act, 1947, shall be granted Unique Identity Number.  Any other person notified by Commissioner shall also obtain Unique Identity Number.

d)        Voluntary registration is permissible under the Act.

e)         Separate registration is permissible for multiple business verticals in a same State.

The Govt. may notify categories of persons exempted from obtaining registration.

Special provisions for casual taxable person or a non-resident taxable person:

1)        A casual taxable person or a non-resident taxable person shall apply for registration at least 5 days prior to commencement of business.

2)        Casual taxable person or a non-resident taxable person can do supplies only after issuance of certificate of registration.

3)        Casual taxable person or a non-resident taxable person to pay advance tax for estimated tax liability at the time of application for registration.  He shall be given a temporary identification number for the same.

4)        Certificate issued to a casual taxable person or a non-resident taxable person shall be valid for the period specified in the application or 90 days from the effective date of registration, whichever is earlier, which can be extended on request by further period not exceeding 90 days. 

Certificate of Registration shall be effective from the date person becomes liable to register, where application is submitted within 30 days from such date, else date of grant of registration.

Every Registration Certificate shall be displayed at prominent location at the principal place of business and at every additional place of business.  The GSTIN (which will be 15 digit alpha numeric structure) shall be displayed in the name board exhibited at the entry of the principal place of business and at every additional place of business.

In the next paper we shall see the proposed draft forms prescribed under the Draft Registration Rules and cancellation of registration.

Trust the above information is found useful to the readers. 

Comments, suggestions and improvements are most welcome.

Best Wishes,

Amol Mahajan.

1.aggregate turnover = All India, Taxable + Exempt (Not Taxable + Nil Tax + Exempt u/s 11 by notification or order) + Exports + Inter-State, supplies of goods and/or services having same PAN, but does not include = CGST + SGST + IGST + Reverse charge supplies + Inward supplies.

2.Casual taxable person – means a person who occasionally supply goods and/or services in the course or furtherance of business, in a taxable territory where he has no fixed place of business.

3. Non-resident taxable person – means a taxable person who occasionally supply goods and/or services in India, where he has no fixed place of business.

4.Input Service Distributor (ISD) – means Office of the supplier of goods and/or services which receives tax invoice for receipt of input services and issues prescribed document for distribution of credit of CGST/SGST/IGST, to the supplier of taxable goods and/or services having same PAN.

5.Appointed day – means the day on which section 1 of the Act comes into effect.