Documente Academic
Documente Profesional
Documente Cultură
Project
Report On Goods And ServiceTax (GST).
In Ircon International limited.
Submitted in the partial fulfillment of the requirement for the Degree of
Master of Business Administration to
Dr. A.P.J. Abdul Kalam Technical University,
LUCKNOW.
SUBMITTED TO SUBMITTED BY
Dr. MAMTA SHUKLA NIVEDITA SRIVASTAVA
MBA II Year
ROLL.NO.1752270019
MAHARANA PRATAP COLLEGE OF ENGINEERING.
KOTHI MANDHANA KANPUR.
CERTIFICATE
DECLARATION
Nivedita Srivastava
PLACE: Kanpur
ACKNOWLEDGEMENT
I wish to express my sincere gratitude to my institute to provide this opportunity to
learn the element of GOODS AND SERVICE TAX.
One person is seclusion is hardly ever able to complete any project or training.
There is always discussion with professional about conceptual matters, which
enhance the idea and the knowledge of trainee.
Thereby, I would like to acknowledge the contribution and support that each
person’s at IRCON INTERNATIONAL LTD. extended to me during my training
period.
Nivedita Srivastava.
Date:
FOREWORD
Tax policies play an important role on the economy through their impact on both
efficiency and equity. A good tax system should keep in view issues of income
distribution and ,at the same time , also endeavor to generate tax revenues to
support government expenditure on public service and infrastructure
development .cascading tax revenues have differential impact on firms in the
economy with relatively high burden on those not getting full offsets.
Value added tax was first introduced by Maurice Laure, a French economist, in
1945. The tax was designed such that the burden is borne by the final consumer.
Since VAT can be applied on goods as well as services it has also been termed as
goods and service tax (GST). During the last four decades VAT has become an
important instrument of indirect taxation with 130 countries having adopted this,
resulting in one fifth of the world’s tax revenue. Tax reform in many of the
developing countries has focused on moving VAT. Most of these countries have
gained thus indicating that other countries would gain from its adoption. For a
developing economy like India it is desirable to become more competitive and
efficient in its resources usage. Apart from various other policy instruments, India
must pursue taxation policies that would maximize its economic efficiency and
minimize distortion and impediments to efficient allocation of resources,
specialization, capital formation and international trade.
Traditionally India’s tax regime relied heavily on indirect taxes including customs
and excise revenue from indirect taxes was the major source of tax revenue till tax
reforms were undertaken during nineties. The major argument put forth for heavy
reliance on indirect taxes was the India’s majority of populations was poor and
thus widening base of direct taxes had inherent limitations. Another argument put
forth for heavy reliance on indirect taxes income was not subjected to central
income tax and there were administrative difficulties involved in collecting taxes.
The board objectives of our report relates to analyzing the impact of introducing
comprehensive goods and services tax (GST) on economic growth and
international trade; change in rewards to the factors of production; and output,
prices, capital, employment, efficiency and international trade at the sectoral level .
Executive Summary
The differential multiple tax regime across sectors of production leads to
distortions in allocation of resources thus introducing inefficiencies in the sectors
of domestic production. While indirect taxes paid by the producing firms get
offsets under state VAT and CENVAT, the producers do not receive full offsets
particularly at the state level. The multiplicity of taxes further adds the difficulty in
getting full offsets.
Add to this, the lack of full offsets taxes loaded on the fob export prices. The
export competitiveness gets negatively impacted even further. Efficient allocation
of productive resources and providing full tax offsets is expected to result in gains
for GDP, returns to the factors of production and export of the economy.
The joint working Group of the Empowered Committee of the State Finance
Ministers submitted to its report on the proposed Goods and Service Tax (GST) to
the finance minister in November 2007.A dual GST, one for the entre and other for
the state was to be implemented by 1 April 2010. The new system would replace
the state VAT CENVAT and some other taxes.
The proposed GST would eliminate the cascading effect and would integrate
hitherto disjointed goods and services taxes. It will lead to uniformity in tax rates
and procedures throughout the country.it will ensure better compliance and thus
will increases the revenue of both Centre and state. The export sector will also gain
from his integration of state and Centre taxes. Consumer will be benefited in form
of lower tax rates.
There will be dual tax rate viz. Central GST (CGST) and state GST (SGST).also
for interstate sales there will be an integrated GST. However cross credits among
CGST and SGST are yet to be decided .It is also proposed to keep certain taxes
such as taxes on petroleum products to be kept out of purview of GST.
CONTENTS
COVER PAGE
COLLEGE CERTIFICATE
DECLARATION
ACKNOWLEDGEMENT
FOREWORD
EXECUTIVE SUMMARY
CHAPTER– 1
INTRODUCTION OF RESEARCH………………..12 -15
CHAPTER– 2
COMPANY PROFILE…………………………….. 16 - 21
PROJECTS…………………………………………. 22 – 30
FINANCIAL PROFILE……………………………. 31 – 38
BOARD OF DIRECTORS………………………… 39 – 50
OPERATIOAL PROFILE…………………………. 51 – 57
AWARDS ………………………………………….. 58 - 59
SUBSIDIRIES AND JOINT VENTURE COMPANY…. 60 – 68
CHAPTER-3
INTRODUCTION OF TAXATION................ 70 - 79
a. Meaning of Taxation
b. Characteristics of Taxation
c. Principles of Taxation
d. Tax applicable in India.
CHAPTER-4
CHAPTER-5
10
TABLES
3 Operational Performance 33
4 Segment wise Profitability 34
5 Dividend History 35
6 Income tax slab for individual tax payers 76
7 equity structure 93
8 Result Analysis 99-100
9 Place of supply 129-134
10 The Place Of Supply Of Services 137-138
11 Works Contract 144
12 Annual aggregate turnover 156
11
CHAPTER– 1
INTRODUCTION ABOUT
RESEARCH.
12
INTRODUCTION
Background:-
Internship is the process of working as an assistant to gain practical experience and
skills in an occupation. In order to expose the students to the actual working
environment, internship has been included as a compulsory requirement for the
successful completion of two-year MBA (Finance) under AKTU University. MBA
(Finance) is a management program with the provision of four semester
comprising of two month industrial training. Internship is an opportunity to
observe, learn and understand the corporate culture, acquire knowledge and skills
in the respective field which helps the students in their further carrier development.
It is carried out in the organization which suits the area of specialization. Internship
provides the opportunity to understand how the knowledge acquired through the
lectures, group discussion and formal study is applied in real working situation. It
is the best way of knowledge gaining as it provides as experience. Similarly the
assigned responsibilities during the internship period help to enhance the
interpersonal and communicative skills and boost up the confidence level as well.
Even though the interns are not the employees of the organizations, they are given
an opportunity to work as if they are the employees. The interns do what the staffs
of the organizations have to do. However, they do not have obligations or authority
over anything. The interne did there internship in under Mr.Sudhir Gupta. The
interne was given the opportunity to observe and learn about the GST Registration
and Return process.
13
TToo learn
le a r n aabout
b o u t th
thee GGST
S T RRegistration
e g is tra tio n pprocess
ro c e s s
TToo learn
le a rn hhow
o w to
to file
f ile GST
G S T RReturn
e tu r n bboth
o th oonline
n lin e &
&
ooffline
f flin e
TToo help
h e lp cclients
lie n ts in
in th
thee RRegistration
e g is tra tio n pprocess.
ro ce ss.
TToo help
h e lp cclients
lie n ts in d o w n lo a d in g th
in downloading thee offline
o f f lin e return
re tu rn software
s o f tw a r e
Figure:1
14
Methodology
For the preparation of this report both primary and secondary sources of data are
used. The secondary data are collected from annual reports, brochures, website of
GST, different financial magazine, published documents. Most of the information
in this report is written on the basis of experience gained by the internee in the
company during the period of internship. While preparing this report I took help
from company staff and group discussion with friends. I have consulted related
departmental staff as a primary source. For the secondary data I used GST website,
financial express website, and clear tax website.
15
Organization Selection
Selection of the organization is one of the most difficult tasks. However the
specialization of the student in finance has made GST a better option for doing
internship. Since GST is related to financial transaction, it would be easy to
understand various dimensions related to services like registration, quarterly return,
monthly return, annual return. Besides this, one should have strong reference to get
enrollment in the organizations. So because of the reference of the college.
Duration
The duration of internship period has been defined for 2 Months by the AKTU
University. The intern has completed internship from 10 th June to 10th August in
Ircon international limited.
16
CHAPTER– 2
Company Profile
17
18
IRCON operates not only in a highly competitive environment but also in difficult
terrains and regions in India and abroad and is an active participant in prestigious nation
building projects . Ircon has so for complete more than 300 infrastructure projects in
India and more than 100 projects across the globe in more than 31 countries.
19
During its 42 years of operation, Ircon has emerged as front ranking construction
company of international repute having executed several prestigious projects. Ircon
20
Has been figuring in the list of top 225 International Contractors since 2009-10
consistently, as per Engineering News Record (ENR), published by Mc Graw-hill
Construction (Financial) USA. Ircon has so far completed about 378 major
infrastructure projects of National importance in India and 127 projects across
globe in more than 21 countries. Ircon has over 1000 trained technical personnel
having rich experience in execution of infrastructure projects including Railway
Project. Ircon has capacity to mobilize adequate resources for large projects due to
its strong technical manpower base and financial position. Besides its own
resources Ircon draws its strength from more than 150 years of experience of
Indian Railways in all aspects of Railway Construction and management.
21
FOCUS AREAS--
Railways - SPV/BOT/Concession
ROBs
Road/Highways
22
Himalayas-
New BG rail link project in Kashmir
Algeria-
A new railway line at benisef,Algeria including 70m tall viaducts value
USD87 Million.Double track
line between OUED-SLY and
YELLELL,in progress,value
USD 250 Million
23
Malaysia-
Double track project between Seremban and
Gemas value USD 1.00 Billion.
Malaysia
Rehabilitation of 327 km track from Paloh to Singapore & from Slim river to
Seremban main line.
Bangladesh
Jamuna bridge rail link-II 24km.
Mozambique
24
Sri Lanka
Up gradation of colombo- Matara Coastal
Railway line.value USD 78 Million.
Metro Work
25
Bangladesh
Road Improvent includimg Construction
of Bridges on Dhaka-Chittagong
Highwa,Value USD 46 Million.
Nepal-
Strengthening of Belbari-
Chauharawa Road,value USD
14.41 Million.
Electrical
26
• The Company has to its credit the electrification of over 4500 Track
Km in India and 425 Track Km in Turkey and Indonesia.
Turkey
Railway electrification @ 25KV
AC348
Indonesia
Raiway electrification @1500 VDC-
90 TMK.
27
Area of business
The core competence of the company in order of priority are - Railways, Highways
28
29
Government can issue and does issue guidelines to regulate and bring about some
uniform pattern in the functioning of the Company as a public sector company.
However, no Government department has any supervisory authority to exercise
control over the Company which is managed and run under the superintendence,
control, and direction of its Board of Directors as per the Companies Act.
BUSINESS ENVIRONMENT
India is not only among the world’s fastest growing major economies, but also one
of the few economies enacting major structural reforms. Indian economy registered
a growth of 7.1% for the financial year 2016-17 in the backdrop of two major
domestic development viz. demonetization of two highest denomination notes in
November 2016, and subsequently implementation of Goods & Service Tax (GST)
in July 2017.
To make this growth rate consistent and enduring, the government continues with
its initiatives on economic reforms, increase in public investment in infrastructure
30
and development projects, export growth etc. A total allocation of Rs. 3,96,135
crore for infrastructure development in 2017-18 would afford business
opportunities for your Company. The historic step of merger of the Railways
Budget with the General Budget would facilitate multi-modal transport planning
between railways, highways, and inland waterways.
OUR MISSION
To effectively position the company so as to meet the construction needs of
infrastructure development as per the changing economic scenario in India
and abroad.
To earn global recognition by providing high quality products and services in
time and in conformity with the best engineering practices as well as good
corporate governance and customer satisfaction .
FINANCIAL PROFILE
The operating income of the company has registered an increase of 24% from Rs.
2419 crore in 2015-16 to Rs. 2995 crore in 2016-17, though profit before tax has
31
decreased by 12% from Rs. 602 to Rs. 532 crore during the corresponding period.
Indian project has contributed 90% to the total income of Rs. 3254 crore.
IRCON has allotted bonus shares in January 2017 in the ratio of 4:1 i.e. bonus
(equity) shares for every one equity share held by the shareholders thereby
increasing the paid up capital from Rs. 19.796 crore to Rs. 98.98 crore.
Table : 1
Operating Turnover
32
Geographical Distribution
(Rs.in
crore)
Foreign Domestic
Table : 2
Operational Performance
33
Buildings 78 2.61
Others 1 0.02
Table : 3
34
(Rs. In Crore)
Table : 4
Dividend History
Financial year Amount (Rs.Cr.) % on Equity
35
Table : 5
Note:-
i. Cumulative dividend (incl.proposed) as on 31.03.2017 is
Rs.1299.91Cr.
ii. Interim dividend for 16-17 Rs. 95.15Cr.,Final diviend for 15-16
Rs.97.25Cr.
37
Income 5 )
18 Foreign Project Reserve - - - - -
19 Other Reserves - - -
2 3
20 Total Reserves & Surplus 3,72 3,64 3,33 2,97 2,2
9 7 4 3 80
21 Net Fixed Assets 13 14 16 17 1
8 9 3 0 80
22 Inventories 13 14 11 11 1
9 1 4 9 25
23 Foreign Exchange Earnings 41 1,04 8
(net) 24 59 8 2 22
24 Share Capital
98.980 19.796 19.796 19.796 19.796
25 Capital Employed 3,82 3,66 3,35 2,99 2,3
8 7 4 3 00
26 Government Investments - - - - -
27 Net Worth
3,828 3,667 3,354 2,993 2,300
Profit Before Tax to Capital
28
Employed (%) 14 16 25 42 44
Operating Margin to
29
Capital Employed (%) 13 17 26 43 46
Profit After Tax to Share 3,6
30 373 1,995 2,924 4,578
Capital (%) 87
31 Expenditure to Income (%)
85 78 73 70 76
1,7
32 Number of Employees 1,496 1,499 1,472 1,579 04
2.
33 Income per Employee 2.18 1.91 2.12 2.73 62
Foreign Exchange Earning
34 0.
per Employee 0.02 0.04 0.28 0.66 48
38
BOARD OF DIRECTORS
39
As on 31st March 2017, the strength of Board of Directors was nine comprising
40
He started his career with IRCON and worked for about 23 years in various
capacities. He has handles national & international tendering works having funding
from World Bank, ADB bank etc., along with construction projects involving
flyovers, roads, railway line, etc.
41
Born on 25th September 1961, Mr. Singh’s academic qualification BA. (Hones.).
MA. (Mathematics), M.Phil. (mathematics), and post graduate diploma in financial
management form IGNOU. He is an Indian railway accounts service (IRAS)
officer of 1990 Batch. Prior to joining Indian railways he worked as a lecturer of
mathematics in the University of Delhi.
He has gained rich experience in various branches of railway accounts and finance
including exposures of working in multi-department set up of Indian railways. He
has worked in the area of financial matters of construction issues of rail
infrastructure pertaining to SPVs, financials of railway projects and appraisal of
PPP projects in Indian railways, compilation and preparation of accounts package
system and other relation database management system packages of accounting
and finance in zonal headquarters and divisions in the railway finance and accounts
in two major decisions.
42
43
44
45
Ved pal, aged 59 years, is the government nominee (Part-time officially). Director
of our company. He holds a bachelor’s degree and a master’s degree in electrical
engineering from university of Roorkee.
46
47
She is experienced in the education sector and is associated with various foreign
universities for the fellowship programmers and in the capacities of visiting
scholar. In the past, she has held the post of joint director at the central institute of
educational technology a constituent unit of National Council of educational
research and training and vice- chancellor of S.N.D.T women’s university thereby
retiring from the post in 2016.
She is also a part of the committee constitute for preparation of the draft national
education policy. She has been on the board of our Company since April 22, 2016
48
He has experienced in the public services sector and has been on the board of our
Company since September 28, 2017.
49
he was posted as the range officer grade 1, Jammu and Kashmir, Department of
forest and then as the assistant professor agroforestry with Sheer-e-Kashmir
University of agricultural Science and technology of Jammu.
50
Sh. Ashok Kumar Ganju, aged 65 years, is an independent (part –time Non-
Official). Director of our Company. He holds a bachelor’s degree in science (civil
engineering) from University of Delhi and a master’s degree in technology (Water
resources) form Indian institute of technology, Delhi. He also holds a post graduate
diploma in Hydraulics from IHE Delft institute for water education, Netherlands.
Presently, he is providing consultancy on water resources development projects to
PSUs.
OPERATIOAL PROFILE
51
During 2016-17, IRCON has completed four projects, two in India and one each in
Bhutan and Bangladesh. Ircon is having pan India presence through more than 24
projects across various states of India. In addition, the company executing projects
in Bangladesh, Algeria, and South Africa.
The product mix of IRCON is varied and includes signaling projects, electrical
sub-stations, and road over bridges, buildings, road projects from NHAI, apart
from railway projects of track laying, up gradation, doubling, railway sidings, coal
connectivity projects, redevelopment of stations, etc.
The mode of execution of some of these projects is EPC whereas road projects
from NHAI are being executed through wholly owned subsidiary companies
(WOS) formed for this purpose, and coal connectivity projects are being executed
through joint venture companies formed as a strategic alliance with other PSUs,
Ircon’s equity stake in such JVs being 26%.
PERSONNEL DEVELOPMENT
52
IRCON has been continuously taking steps for building capacity of its
human resource through training in functional and general management
areas, contract & arbitration, leadership, information technology, as well as
soft skills. External faculty is arranged wherever required and officials are
nominated for workshops, seminars, etc. with reputed institutes. During the
year 2016-17, a total 912 man-days training was imparted to officials of
Ircon through workshops, seminars, conferences, in-house trainings and
training in external institutes, etc.
Ircon has various schemes for staff welfare like educational scholarships,
one-time educational grant for admission to professional degrees and
diploma courses, educational awards to meritorious children of employees,
educational assistance to the wards of deceased employees, assistance for
marriage of daughters and dependent sisters of group ‘C’ and ‘D’
53
54
55
For the first time in Indian Railways, Overhead Equipment (OHE) design for
Railway Electrification Project is being carried out by using Drone camera for
picking the coordinates and Geographical Information System (GIS). The OHE
layout plans are then prepared with the help of Autocad. Ircon has also planned for
use of Drone Camera for Katni Singrauli Doubling project.
A concept paper on adoption of Semi High Speed on existing routes was presented
in IPWE Seminary in January 2017.
56
IRCON does not undertake any pure research project but takes the help of
consultants and firms to innovate and to develop methods and techniques to
execute projects in a cost effective manner, with requisite quality, to enhance the
technological competence and efficiency.
With an objective to enable IT facility in all domain, efforts were directed towards
enhancement of SAP ECC 6.0 based Finance-Controlling module to incorporate
additional functionalities like fixed asset accounting for calculation of depreciation
as per Indian Income Tax Act, Bank Reconciliation System, FOREX reporting in
Functional currency, local currency and reporting currency, Implementation of
IndAS functionality (age analysis and discounting of Financial Asset and liability),
reports for quarterly and annual financial statements as per schedule III of the
Companies Act, 2013; implementation of E-recruitment system on SAAS model
with functionalities like on-line submission of application with payment gateway,
generation of admit card and communication through SMS / e-mail with the
57
To reduce paper usage and transparent working, use of IT has been enhanced in all
the functional domains.
58
AWARDS
India Pride Awards 2015-16 instituted by Dainik Bhaskar for ‘Excellence in Public
Sector Undertaking – Central in CSR/Environment Protection and Conservation’.
The award was presented by Mr. Venkaiah Naidu, Honable Union Minister for
Urban Development to Mr. Mohan Tiwari, former Chairman & Managing
Director, Ircon, at a function held in New Delhi on 4th April 2016.
Dun & Bradstreet Infra Awards 2016, in the category of “Best Infrastructure
Project: Setting up of Rail Coach Factory, Rae Bareli at Lalganj (U.P.) Phase-I
Project”. The award was presented by Mr. Mansukh L. Mandaviya, Hon’ble
59
Minister of State for Transport & Highways to Mr. M.K. Singh, Director Finance,
Ircon, at a function held in New Delhi on 8th November 2016.
Governance Now 4th PSU Awards 2016 in the category of “HR Initiative
(Miniratna I)”. The award was presented by Mr. Ram Villas Paswan, Hon’ble
Union Minister for Consumer Affairs, Food and Public Distribution, to Ms.
Anupam Ban, General Manager/HRM, Ircon, at a function held in New Delhi on
23rd December 2016.
As per Dun & Bradstreet India’s Top PSUs 2016 Certificate released on 22nd
August 2016, Ircon ranks 93 on the basis of Total Income.
From Engineering Export Promotion Council, the company has won 18 Awards of
Excellence, including the All India Trophy for the Top Exporters in the category of
Merchant Exporters in recognition of the outstanding contribution to engineering
exports.
60
Subsidiaries companies
During the year, IrconISL had achieved an operating income of Rs. 40.98 crore,
and earned profit before tax of Rs. 20.81 crore and profit after tax of Rs. 12.36
crore.
61
62
Chandigarh Railway Station - proposal sent to Railway Board for taking up re-
development work on EPC mode, decision awaited;
(ii) Habibganj Railway Station - contract for redevelopment of this station has
been awarded, wherein the station will be modernized through commercial
development of land and maintained through retail and advertising revenues,
physical work has started;
Shivajinagar Railway Station - development is under approval by Pune Municipal
Corporation;
Bijwasan and Anand Vihar Railway Station - bidding process is in advance stage;
(v) Surat Railway Station - planned to be re-developed as a Multi Modal
Transportation Hub through a Joint Venture Company and pooling of land by the
Central, State, and Local Government;
SAS Nagar Mohali Railway Station - found to be unviable and has been proposed
for de-entrustment.
63
64
65
A joint venture company called ‘Chhattisgarh East the Railway Limited’ (CERL)
was incorporated on 12thMarch 2013, with equity participation by South Eastern
Coalfields Limited, Ircon, and Chhattisgarh State Industrial Development
Corporation Limited (nominee of Government of Chhattisgarh) in the ratio of
64:26:10 respectively, for development of coal connectivity corridor i.e. East
Corridor (length 180 Km) in the State of Chhattisgarh. CERL had obtained the
Certificate for Commencement of Business on 7thMay 2013.
The CERL has signed concession agreement on 12thJune 2015 with Ministry of
Railways, for Chhattisgarh East Railway Corridor - Phase I in the State of
Chhattisgarh (Total 104.157 km). Phase I of the project is being implemented for
Build, Own, Operate, and Transfer (BOOT) model for PPP projects. Detailed
Project rd Report (DPR) has been approved on 3rd May 2016 by Zonal Railways
viz. South Eastern Central Railway with inflated mileage proposed by the
Ministry of Railways.
66
land holders. So far only 67% disbursement has been completed by State Revenue
officials and balance as committed by State Government would be completed by
August 2017.
FINANCIALS OF CERL:
The authorized share capital of CERL is Rs. 400 crore and its subscribed and
paid-up share capital.
A joint venture company called ‘Mahanadi l is Rs. 306 crores (Ircon’s share being
Rs. 139.06 crore) as on 31stMarch 2017. CERL is yet to start commercial
operations.
67
submitted to ECoR on 18th July 2017 and forwarded to Railway Board on 20th
July 2017 for approval. Land acquisition process is in progress.
JCRL had signed project execution agreement with Ircon on 28th March
2016. Railway Board on 6th April 2016 has granted in-principle approval for
project transferring Broad Gauge Single Railway Line connecting Shivpur to
Kathautia from km 41.5 to km 90.7 in the State of Jharkhand, having a total
route length of 49.2 km and track length of 68.7 km to JCRL. The
construction of the project is expected to be started by March 2018 at an
estimated cost of Rs. 1400 crore. Orders for acquisition of private and
Government land acquisition have been issued and environmental clearances
are under process. Feasibility / initial viability estimation and Detailed
Project Report (DPR) are in the process of finalization.
68
FINANCIALS OF JCRL:
The authorized share capital of JCRL is Rs. 100 crore and its subscribed and paid-
up share capital is Rs. 50 crore as on 31st March 2017.
FINANCIALS OF MCRL:
The authorized, subscribed, and paid-up share capital of MCRL is Rs. 5 lakhs as on
31st March 2017.
69
CHAPTER– 3
INTRODUCTION OF TAXATION
70
Taxation
The term “Taxation” comes from the Latin word “Taxatio”. It means to determine
the payable quantum on estimate. According to Justice Holmes “The price paid to
the government for living in a civilized society is the tax. According to Taylor
“taxes are the compulsory payments to government without expectation of direct
benefit to the tax payer.
Taxation is a major instrument for the conduct of public policy. This is true
for both developed and developing countries . Taxation is known to
accomplish a number of objectives revenue generation for government,
economic stabilization and income re-distribution. Taxation as an instrument of
public policy is essentially concerned with the manipulation of financial operation
of both the government anti private sectors with a view of furthering certain
economic objectives.
71
CHARACTERISTICS OF TAX
72
Figure-2
PRINCIPLES OF A TAXATION
73
Certainity
Perdictability Equity
Simplicity Neutrality
Principles
Efficiency Adequacy
Compatibility
Figure-3
Principle of certainty: This principle states that the tax should be certain
and clear to everybody concerned; the amount to be paid and the manner of
payment should also be clear and plain to the tax payer.
74
Principle of equity: This principle states that tax should be paid based on
your abilities, it should be paid without causing undue hardship to the payers.
Principle of neutrality: this principle says that a good tax system should
not in any way interfere unnecessarily with the supply and demand for goods
and service. It studies the effect people’s ability to save, produce and their
willingness to work.
Broad Basing: taxes should be spread over as wide as possible section of the
population, or sectors of economy to minimize the individual tax burden.
75
Direct Tax
Indirect Tax
Figure-4
76
DIRECT TAX
Direct taxes are directly imposed on the tax payer. They depend on the income and
wealth of an individual or entity.
INCOME
TAX
This is one of the most well-known and least understood taxes. It is the tax that is
levied on your earning in a financial year. There are many facets to income tax,
such as the tax slabs, taxable income, tax deducted at source (TDS), reduction of
taxable income, etc. The tax is applicable to both individuals and companies. For
individuals, the tax that they have to pay depends on which tax bracket they fall in.
This bracket or slab determines the tax to be paid based on the annual income of
the assesse and ranges from no tax to 30% tax for the high income groups.
The government has fixed different taxes slabs for varied groups of individuals,
namely general taxpayers, senior citizens (people aged between 60 to 80, and very
senior citizens (people aged above 80).
In the Union Budget 2018, a standard deduction of Rs.40000 has been introduced
for salaried-employees for transport allowances and medical expense
77
reimbursement. This proposal will benefit about 2.5 crore salaried employees and
pensioners while costing Rs.8000 crore to the government.
To ease tax burden for senior citizens, there is an exemption of interest income of
up to Rs.50000 on Fixed Deposits, Recurring Deposits, and Post Office. There is
also a rise in limit for tax deduction on health insurance premium from Rs.30,000
to Rs.50,000 under Section 80D. There is no TDS required under Section 194A.
Income tax slab for individual tax payers & HUF (less than 60 years old) (both
men & women)
Table-6
78
INDIRECT TAX
Indirect taxes are those taxes that are levied on goods or services. They differ from
direct taxes because they are not levied on a person who pays them directly to the
government, they are instead levied on products and are collected by an
intermediary, the person selling the product. The most common examples of
indirect tax Indirect tax can be VAT (Value Added Tax), Taxes on Imported
Goods, Sales Tax, etc. These taxes are levied by adding them to the price of the
service or product which tends to push the cost of the product up.
79
Value
Securities Added
Custom
Service
Exice TaxTax
Transaction
duty
Duty Tax (STT)
Figure-5
VALUE ADDED TAX: VAT stands for Value Added Tax and is levied on the
sale of movable goods in India. VAT is a multi-point destination based system of
taxation, with tax being levied on value addition at each stage of transaction in the
production/ distribution chain. The term ‘value addition’ implies the increase in
value of goods and services at each stage of production or transfer of goods. VAT
is a tax on the final consumption of goods or services and is ultimately borne by
the consumer.
EXCISE DUTY: Excise Duty is an indirect tax levied on those goods which are
manufactured in India. The taxable event in this case is manufacture and the
liability of central excise duty arises as soon as the goods are manufactured. It is a
80
tax on manufacturing which is paid by the manufacturer, who passes its incidence
on to other customers and recovers the same from them.
SERVICE TAX: Service tax is applied generally at the rate of 12.36%, which
has been revised to 14% from April 2015. This type of indirect tax is levied by the
service tax provider and paid by the recipient of the services. However, in some
cases the liability for the tax is divided between the recipient as well as the
provider of service.
81
CHAPTER– 4
ABOUT THE GOODS AND
SERVICE TAX.
82
The Good and services tax (GST) is the biggest and substantial indirect tax reform
since 1947. The main idea of GST is to replace existing taxes like value-added tax,
excise duty, service tax and sales tax. GST as it is known is all set to be a game
changer for the Indian economy. India as world’s one of the biggest democratic
country follow the federal tax system for levy and collection of various taxes.
Different types of indirect taxes are levied and collected at different point in the
supply chain. The center and the states are empowered to levy respective taxes as
per the Constitution of India. The Value Added Tax (VAT) when introduced was
considered to be a major improvement over the pre-existing Central excise duty at
the national level and the sales tax system at the State level. Now the Goods and
Services Tax (GST) will be a further significant breakthrough - the next logical
step - towards a comprehensive indirect tax reform in the country.
Several countries have already established the Goods and Services Tax. In
Australia, the system was introduced in 2000 to replace the Federal Wholesale
Tax. GST was implemented in New Zealand in 1986. A hidden Manufacturer’s
Sales Tax was replaced by GST in Canada, in the year 1991. In Singapore, GST
was implemented in 1994. GST is a value-added tax in Malaysia that came into
effect in 2015.
83
2000: In India, the idea of adopting GST was first suggested by the Atal
Bihari Vajpayee Government in 2000. The state finance ministers formed an
Empowered Committee (EC) to create a structure for GST, based on their
experience in designing State VAT. Representatives from the Centre and states
were requested to examine various aspects of the GST proposal and create
reports on the thresholds, exemptions, taxation of inter-state supplies, and
taxation of services. The committee was headed by Asim Dasgupta, the finance
minister of West Bengal. Dasgupta chaired the committee till 2011.
2004: A task force that was headed by Vijay L. Kelkar the advisor to the
finance ministry, indicated that the existing tax structure had many issues that
would be mitigated by the GST system.
February 2005: The finance minister, P. Chidambaram, said that the
medium-to-long term goal of the government was to implement a uniform GST
structure across the country, covering the whole production-distribution chain.
This was discussed in the budget session for the financial year 2005-06.
February 2006: The finance minister set 1 April 2010 as the GST
introduction date.
November 2006: Parthasarthy Shome, the advisor to P. Chidambaram,
mentioned that states will have to prepare and make reforms for the upcoming
GST regime.
February 2007: The 1 April 2010 deadline for GST implementation was
retained in the union budget for 2007-08.
February 2008: At the union budget session for 2008-09, the finance
minister confirmed that considerable progress was being made in the preparation
of the roadmap for GST. The targeted timeline for the implementation was
confirmed to be 1 April 2010.
84
July 2009: Pranab Mukherjee, the new finance minister of India, announced
the basic skeleton of the GST system. The 1 April 2010 deadline was being
followed then as well.
November 2009: The EC that was headed by Asim Dasgupta put forth the
First Discussion Paper (FDP), describing the proposed GST regime. The paper
was expected to start a debate that would generate further inputs from
stakeholders.
February 2010: The government introduced the mission-mode project that
laid the foundation for GST. This project, with a budgetary outlay of Rs.1,133
crore, computerized commercial taxes in states. Following this, the
implementation of GST was pushed by one year.
March 2011: The government led by the Congress party puts forth the
Constitution (115th Amendment) Bill for the introduction of GST. Following
protest by the opposition party, the Bill was sent to a standing committee for a
detailed examination.
June 2012: The standing committee starts discussion on the Bill. Opposition
parties raise concerns over the 279B clause that offers additional powers to the
Centre over the GST dispute authority.
November 2012: P. Chidambaram and the finance ministers of states hold
meetings and set the deadline for resolution of issues as 31 December 2012.
February 2013: The finance minister, during the budget session, announces
that the government will provide Rs.9,000 crore as compensation to states. He
also appeals to the state finance ministers to work in association with the
government for the implementation of the indirect tax reform.
August 2013: The report created by the standing committee is submitted to
the parliament. The panel approves the regulation with few amendments to the
provisions for the tax structure and the mechanism of resolution.
October 2013: The state of Gujarat opposes the Bill, as it would have to
bear a loss of Rs.14,000 crore per annum, owing to the destination-based
taxation rule.
May 2014: The Constitution Amendment Bill lapses. This is the same year
that Narendra Modi was voted into power at the Centre.
December 2014: India’s new finance minister, Arun Jaitley, submits the
Constitution (122nd Amendment) Bill, 2014 in the parliament. The opposition
demanded that the Bill be sent for discussion to the standing committee.
February 2015: Jaitley, in his budget speech, indicated that the government
is looking to implement the GST system by 1 April 2016.
85
May 2015: The Lok Sabha passes the Constitution Amendment Bill. Jaitley
also announced that petroleum would be kept out of the ambit of GST for the
time being.
August 2015: The Bill is not passed in the Rajya Sabha. Jaitley mentions
that the disruption had no specific cause.
Goods and Services Tax (GST) is an indirect tax which was launched at midnight
on 1 July 2017 by the President of India, Pranab Mukherjee and Prime Minister of
India, Narendra Modi. The launch was marked by a historic midnight (30 June-1
July) session of both houses of the Parliament convened at the Central Hall of the
Parliament. GST is applicable throughout India which will replace multiple
cascading taxes levied by the central and state governments. It was introduced as
The Constitution (One Hundred and First Amendment) Act 2017, following the
passage of Constitution 122nd Amendment Act Bill.
86
Destination-Based Consumption
Payment of GST
GST on Imports
Maintenance of Records
Administration of GST
87
Figure-6
4. Payment of GST: The CGST and SGST are to be paid to the accounts of the
central and states respectively.
6. GST on Imports: Centre will levy IGST on inter-State supply of goods and
services. Import of goods will be subject to basic customs duty and IGST.
88
etc. One-half of the total number of Members of the Council will constitute the
quorum of GST council.
GST MODEL
Integrated
Central GST State GST
GST
89
Figure-7
CGST means Central Goods and Service Tax. CGST is a part of goods and service
tax. It is covered under Central Goods and Service Tax Act 2016. Taxes collected
under Central Goods and Service tax will be the revenue for central Government.
Present Central taxes like Central excise duty, Additional Excise duty, Special
Excise Duty, Central Sales Tax, Service Tax etc. will be subsumed under Central
Goods And Service Tax.
90
S
S
p
p
ee
cc
ii
a
a
ll
cc
a
a
tt
ee
g
g
o
o
rr
y
y
o
o
ff E x e m p t e d ccategories a te g o r ie s – 0 %
Exempted – 0 %
G
G
S S t ta anndoda arC
Standard
Standard rdd
o m
GGoods
G omoo ooddns sl and
Commonly
Goods a
yand
anu
ndsd eServices
used SServices
S
de erGoods
Grv voi ci ocedes ss fall
f fall
fa alnl ldunder
and uunder
uServices
n
Sneddre evr ri c2nd
2 1st
1enssdt –
–slab
sSlab
Sl5la a%
5% bb –
––
– 12%
1 18%
12 8%%
o
o
o
d
d
ss
a
a
n
n
d
d
S
S
ee
rr
v
v
ii
cc
ee
ss
ii
n
n
cc
ll
u
u
d
d
ii
n
n
g
g
ll
u
u
x
x
u
u
rr
y
y
--
2
2
8
8
%
%
91
Figure-8
GST Council
It is set up by president under article 279-A. It is chaired by union finance
minister.
a. Taxes, surcharge, cess of central and states which will be integrated in GST.
g. Provision with respect to special category states specially north east states
92
Goods and Services Tax Network (GSTN) is a Section 8 (under new companies
Act, not for profit companies are governed under section 8), non-Government,
private limited company. It was incorporated on March 28, 2013. The Government
of India holds 24.5% equity in GSTN and all States of the Indian Union, including
NCT of Delhi and Pondicherry, and the Empowered Committee of State Finance
Ministers (EC), together hold another 24.5%. Balance 51% equity is with non-
Government financial institutions. The Company has been set up primarily to
provide IT infrastructure and services to the Central and State Governments, tax
payers and other stakeholders for implementation of the Goods and Services Tax
(GST). The Authorized Capital of the company is Rs. 10,00,00,000 (Rupees ten
crore only).
93
Structure of GSTN
94
being a destination based tax, the inter- state trade of goods and
services (IGST) would need a robust settlement mechanism amongst
the States and the Centre. This is possible only when there is a strong
IT Infrastructure and Service back bone which enables capture,
processing and exchange of information amongst the stakeholders
(including tax payers, States and Central Governments, Accounting
Offices, Banks and RBI).
Prior to this, the Union Ministry of Finance had set up the Technical
Advisory Group for Unique Projects (TAGUP) in March 2010 to
make recommendations on the roadmap to roll out five major
financial projects including GST. TAGUP recommended setting up of
National Information Utilities as private companies with a public
purpose for implementation of large and complex Government IT
projects including GST.
HDFC 10%
Table-7
In brief, the decision to structure GSTN in its current form was taken
after approval of the Empowered Committee of State Finance
Ministers and the Union Government after due deliberations over a
long period of time
GSTIN
96
1 2 3 4 5 6 7 8 9 1 1 1 1 1 1
0 1 2 3 4 5
State PAN Entity
code Code/
Check
digit
SWOT Analysis
Strengths
GST provides a comprehensive and a wider coverage of input credit set off service
tax credit could be used for the payment of tax on the sale of goods etc.
A single GST could be used instead of other indirect taxes at the state and
central level.
It helps in the reduction of prices of the goods and services to the consumer with
the reduction of tax.
97
Weaknesses
It doesn’t include alcohol and petroleum products which would lead to incurring
of huge losses.
Single GST rate would be high compared to individual indirect tax rate.
Opportunities
Reduction in tax burden will increase the competitiveness of Indian products in
the international market.
There would be a gradual increase in the revenues of state and the union.
Threats
It is entirely dependent on the efficiency and effectiveness of the system
Beneficiaries of the system are uncertain. It could be either state or the Centre.
This would create a chaos while preparing budgets and financing polices
98
Lack of co-ordination between the Centre and the state might affect the system
and also the revenues generated.
IT
Currently IT sector is paying 14 percent of tax to the authority and subjected to 18-
20 percent after the imposition of GST. Also an important point to notice here, that
the long disputed issue of canned software taxation will also come to end as their
will no difference arise between goods and services after the GST. Overall impact
could be suggested here is neutral or slightly negative.
Telecom
In the current stage, the Telecom sector is paying 14 percent of tax to the
government body, but the scenario takes the shift after the imposition of GST. The
rate arises to 18 percent and the companies expect to pass the burden on the post-
99
paid customers. There is also a lower input tax credit in this sector's capex cost.
Overall, it seems that this regime will be negative to the industry and the sector
will also be in state where they can't pass the entire tax burden to the customers
especially their prepaid segment.
Automobiles
Currently, automobile sector pays around 30 to 47 percent tax to the Government
which is now expected to range between 20-22 per cent, after the implementation
of GST. And the overall cost cutting can be expected for the end user by around 10
per cent. Transportation time should also be reduced as the check points and octroi
is cleared hands before. Overall GST will bring a smile into the automobile sector.
Cement
In the current scenario, cement sector is presenting 27 to 32 per cent of their share
to the tax authority. After the rolling out of GST, this will improve the sector
growth in various terms, like transportation by 20-25 per cent and in the warehouse
scheme as the rationalization would be easy in terms of state wise fragmentation
and also in the transportation cost as reduced transit time.
Pharmacy
Here, the impact could be neutral as the sector only shares 6 per cent of his share
to the tax authority. The sector also avails the incentives in tax benefits of location
wise. There are various concessional benefits and exemptions held for this sector
and will extend till the expiry of the period. The implications of GST would also
try to reduce the logistics cost and would also try to see in to the matter of inverted
duty structure.
100
Result Analysis
Basic concept of GST:
How GST Work
Retailer to wholesaler
Gold 100000 100000
Sales Tax (14%) 14000 -
Duty (12.5%) 12500 -
Excise Duty (1%) 1000 -
CGST (18%) - 18000
Grand Total 127500 118000
Table-8
Wholesaler to retailers
101
Table-9
Effect on IT Industrial
M&G LTD.
102
Various tax barriers such as check posts and toll plazas lead to a lot of wastage
for perishable items being transported, a loss that translated into major costs
through higher need of buffer stocks and warehousing costs as well. A single
taxation system could eliminate this roadblock for them.
A single taxation on producers would also translate into a lower final selling
price for the consumer.
Also, there will be more transparency in the system as the customers would
know exactly how much taxes they are being charged and on what base.
GST provides credits for the taxes paid by producers earlier in the
goods/services chain. This would encourage these producers to buy raw material
103
from different registered dealers and would bring in more and more vendors and
suppliers under the purview of taxation.
GST also removes the custom duties applicable on exports. Our competitiveness
in foreign markets would increase on account of lower cost of transaction.
The proposed GST regime, which will subsume most central and state-level
taxes, is expected to have a single unified list of concessions/exemptions as against
the current mammoth exemptions and concessions available across goods and
services.
The introduction of Goods and Services Tax would be a very noteworthy step in
the field of indirect tax reforms in India. By amalgamating a large number of
Central and State taxes into a single tax, it would alleviate cascading or double
taxation in a major way and pave the way for a common national market.
GST REGISTRATION
A person is eligible to take registration if his aggregate turnover exceeds Rs.
20 lakhs and for person conducting business in North-East state are required
to take registration if their aggregate turnover exceeds Rs. 9 lakhs.
Aggregate Turnover means the aggregate value of all taxable supplies,
exempt supplies export of goods and/or services and inter-state supplies of a
person having the same PAN to be computed on all India basis.
A person has to take registration in the state from where taxable goods
and/or services are supplied.
Every person who is liable to be registered under Schedule III of this Act,
shall apply for registration in every such State in which he is liable within 30
days from the date of which he becomes liable to registration, in such
manner and subject to such conditions as may be prescribed.
Notwithstanding anything contained in sub-section (1), a person having
multiple business verticals in a State may obtain a separate registration for
each business vertical, subject to such conditions as may be prescribed.
A person, though not liable to be registered under Schedule III, may get
himself registered voluntary, and all provisions of this Act, as are applicable
to a registered taxable person, shall apply to such person.
104
Every person shall have a Permanent Account Number issued under the
Income Tax Act, 1961 (43 of 1961) in order to be eligible for grant of
registration under subsection (1), (2) or (3).
The registration or the Unique Identity Number, shall be granted or, as the
case may be, rejected after due verification in the manner and within such
periods as may be prescribed.
A registration or an Unique Identity Number shall be deemed to have been
granted after the period prescribed under sub-section (7), if no deficiency
has been communicated to the applicant by the proper officer within that
period.
The Central or State Government may, on the recommendation of the
Council, by notification, specify the category of persons who may be a
exempted from obtaining registration under this Act.
105
Figure-9
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
State PAN Entity
code Code/
Check digit
Amendment of Registration
106
Every registered taxable person shall inform the proper officer of any
changes in the information furnished at the time of registration, or
that furnished subsequently, in the manner and within such period as
may be prescribed
Figure-10
107
108
Tax Invoice:
taxable goods shall issue, at the time of supply, a tax invoice showing the
description, quantity and value of goods, the tax charged thereon and
such other particulars as may be prescribed;
taxable service shall issue a tax invoice, within the prescribed time,
showing the description, the tax charged thereon and such other
particulars as may be prescribed
Figure-11
109
GST RETURNS
Every registered taxable person shall, for every calendar month or part thereof,
furnish, in such form and in such manner as may be prescribed, a return,
electronically, of inward and outward supplies of goods or services, input tax credit
availed, tax payable, tax paid and other particulars as may be prescribed within 20
days after the end of such month:
Provided that a registered taxable person paying tax under the provisions of
Section 8 of this Act shall furnish a return for each quarter or part thereof,
electronically, in such form and in such manner as may be prescribed, within 18
days after the end of such quarter:
Every registered taxable person, who is required to furnish a return under sub-
section (1), shall pay to the credit of the appropriate Government the tax due as per
such return not later than the last date on which he is required to furnish such
return.
A return furnish under the sub-section (1) by a registered taxable person without
payment of full tax due as per such return shall not be treated as a valid return for
allowing input tax credit in respect of supplies made by such person. Every
registered taxable person shall furnish a return for every tax period under sub-
section (1), whether or not any supplies of goods or services have been effected
during such tax period.
Note: Subject to the provisions of Section 25 and 26, if any taxable person after
furnishing a return discovers any omission or incorrect particulars therein, other
than as a result of scrutiny, audit, inspection or enforcement activity by the tax
authorities, he shall rectify such omission in the return to be filed for the month or
quarter, as the case may be, during which such omission are noticed, subject to the
payment of interest, where applicable and as specified in the Act:
110
GSTR-1
GSTR-2
GSTR-3
GSTR-4
TY PES
GSTR-5
GSTR-6
GSTR-7
GSTR-8
GSTR-9
111
Figure-12
GSTR-1 Registration
Figure-13
112
File GSTR-1
The Suppliers need to log in to the GSTN portal with the given User ID
and Password, following these steps:
Search for "Services" and then click on Returns, followed by
Returns Dashboard.
In the Dashboard, the dealer has to enter the financial year and the
month for which the return needs to be filed. Click on Search after
that.
All returns relating to this period will be displayed on the screen.
Dealer has to select the tile containing GSTR-1
After this, he will have the option either to prepare online or to
upload the return.
The dealer will now Add invoices or upload all invoices directly.
Once the entire form is filled up, the dealer shall then Click on
Submit and validate the data filled up
With the data validated, dealer will now click on FILE GSTR-1
and proceed to either E-Sign or digitally sign the form.
Another confirmation pop-up will be displayed on the screen with
a yes or no option to file the return.
Once Yes is selected, an Acknowledgement Reference Number
(ARN) is generated.
113
Figure-14
114
GSTR-2
It is mandatory to file a GST Return for each and every entity registered
under the GST Act. Even in case where there are no inward supplies during
the tax period, NIL return for that period is required to be filed. In case of
failure to file the return within due period, the tax payer is penalized with
the late fees of INR 100 per day up to a maximum limit of INR 5,000/-
115
116
Figure-15
GSTR-3
GSTR-3 is a return to be filed on monthly basis (compounding and ISD
taxpayers are exceptions). GSTR-3 is more like a pooled version of GSTR-
1 and GSTR-2. The form captures the information of outward and inward
supply information at aggregate level which will be auto populated through
GSTR-1, GSTR-1A and GSTR-2.It will comprise of the entire turnover
related details, including, local sales turnover, export sales turnover,
exempted local sales turnover, turnover except GST and taxable turnover. A
taxpayer just has to validate this prefilled information and make
modifications if required.
117
Figure-16
GSTR-4
118
Figure-17
GSTR-5
Non –Resident Taxpayers would have to file GSTR-1, GSTR-2 and GSTR-3
returns for the period for which they have obtained registration. The registration
of Non–Resident taxpayers will be done in the same manner as that of Regular
taxpayers. Non-Resident Taxpayers would be required to file GSTR-5 return for
the period for which they have obtained registration within a period of seven days
after the date of expiry of registration. In case registration period is for more than
119
one month, monthly return(s) would be filed and thereafter return for remaining
period would be filed within a period of seven days as stated earlier.
Figure-18
GSTR 6
GSTR 6 is a monthly return that has to be filed by an Input Service Distributor.
It contains details of ITC received by an Input Service Distributor and distribution
of ITC.
120
Figure-19
GSTR-7
GSTR 7 is a return to be filed by the persons who is required to deduct TDS (Tax
deducted at source) under GST. GSTR 7 contains the details of TDS deducted,
TDS liability payable and paid, TDS refund claimed if any etc.
121
Figure-20
GSTR-8
GSTR-8 is a return to be filed by the e-commerce operators who are
required to deduct TCS (Tax collected at source) under GST. GSTR-8
contains the details of supplies effected through e-commerce platform
and amount of TCS collected on such supplies.
122
Figure-21
GSTR-9
GSTR 9 is an annual return to be filed once in a year by the registered taxpayers
under GST including those registered under composition levy scheme. It consists
of details regarding the supplies made and received during the year under different
123
tax heads i.e. CGST, SGST and IGST. It consolidates the information furnished in
the monthly/quarterly returns during the year.
Figure-22
Annual Return
Every registered taxable person, other than an input service distributor, a deductors
under Section 37, a casual taxable person and a non-resident taxable person, shall
124
furnish an annual return for every financial year electronically in such form and in
such manner as may be prescribed on or before the thirty first day of December
following the end of such financial year. Every taxable person who is required to
get his accounts audited under sub- section (4) of section 42 shall furnish,
electronically the annual return along with the audited copy of the annual accounts
and a reconciliation statement, reconciling the value of supplies declared in the
return furnished for the year with audited annual financial statement, and such
other particulars as may be prescribed.
VAT GST
125
Return filing
Invoice Matching
Input Credit
126
Time of
Supply
Place of
Supply
Value of
Supply
Figure-23
127
1. Time of Supply
As per Section 13 Time of supply means the point in time when goods/services are
considered supplied’. When the seller knows the ‘time’, it helps him identify due
date for payment of taxes.
CGST/SGST or IGST must be paid at the time of supply. Goods and services have
a separate basis to identify their time of supply.
Section 31(1) of the CGST Act provides that a registered person supplying taxable
goods shall, before or at the time of,
128
Time of
Supply of
Goods
Figure-24
129
For example:
Mr. X sold goods to Mr. Y worth Rs 1,00,000. The invoice was issued on 15th
January. The payment was received on 31st January. The goods were supplied on
20th January.
*Note: GST is not applicable to advances under GST. GST in Advance is payable
at the time of issue of the invoice. Notification No. 66/2017 – Central Tax issued
on 15.11.2017
2. Last date on which invoice should have been issued = 20th January
What will happen if, in the same example an advance of Rs 50,000 is received by
Mr. X on 1st January?
130
The time of supply for the advance of Rs. 50,000 will be 1st January (since the
date of receipt of advance is before the invoice is issued). For the balance Rs.
50,000, the time of supply will be 15th January.
3. Date of provision of services (if invoice is not issued within prescribed period)
Example:
Mr. A provides services worth Rs 20000 to Mr. B on 1st January. The invoice was
issued on 20th January and the payment for the same was received on 1st February.
In the present case, we need to 1st check if the invoice was issued within the
prescribed time. The prescribed time is 30 days from the date of supply i.e. 31st
January. The invoice was issued on 20th January. This means that the invoice was
issued within a prescribed time limit.
This means that the time of supply of services will be 20th January.
131
1. Date of payment*
2. 30 days from date of issue of invoice for goods (60 days for services)
*w.e.f. 15.11.2017 ‘Date of Payment’ is not applicable for goods and applies only
to services. Notification No. 66/2017 – Central Tax
For example:
M/s ABC Pvt. Ltd undertook service of a director Mr. X worth Rs. 50,000 on 15th
January. The invoice was raised on 1st February. M/s ABC Pvt. Ltd made the
payment on 1st May.
132
2. Place of supply
It is very important to understand the term ‘place of supply’ for determining the
right tax to be charged on the invoice.
Here is an example:
Table-12
133
So, the place of supply of goods is the place where the ownership of goods
changes.
What if there is no movement of goods. In this case, the place of supply is the
location of goods at the time of delivery to the recipient.
134
Table-13
For example:
Place of supply in cases where goods that are assembled and installed will be the
location where the installation is done
The place of supply is Nagpur in Maharashtra. Since it is the same state CGST &
SGST will be charged.
135
For example –
Anand in Lucknow buys goods from Mr. Raj in Mumbai (Maharashtra). The buyer
requests the seller to send the goods to Nagpur (Maharashtra)
In this case, it will be assumed that the buyer in Lucknow has received the goods &
IGST will be charged.
GST: IGST
Figure-25
No Movement of Goods
136
Table-14
There is no movement of goods (work stations), so the place of supply will be the
location of such goods at the time of delivery (handing over) to the receiver
137
Table-15
GST: IGST
GST: Exempted
Generally, the place of supply of services is the location of the service recipient.
138
In cases where the services are provided to an unregistered dealer and their
location is not available the location of service provider will be the place of
provision of service.
Special provisions have been made to determine the place of supply for the
following services:
Example 1:
Mr. Anil from Delhi provides interior designing services to Mr. Ajay (Mumbai).
The property is located in Ooty (Tamil Nadu).
In this case, place of supply will be the location of the immovable property i.e.
Ooty, Tamil Nadu.
139
GST is destination based tax i.e. consumption tax, which means tax will be levied
where goods and services are consumed and will accrue to that state.
Under GST, there are three levels of Tax, IGST, CGST & SGST and based on the
‘’place of supply’’ so determined, the respective tax will be levied. IGST is levied
where transaction is inter-state, and CGST & SGST are levied where the
transaction is intra-state. For understanding Place of Supply for Services the
following two concepts are very important namely:
The two concepts in detail as they will form the base for determining the place of
supply in case of supply of services are:
140
Table-16
141
Table-17
142
Domestic
Transactions
International
Transactions
Figure-26
Domestic Transactions;
These are the transactions where both the parties i.e. the supplier as well as
recipient of service are in India. Domestic transactions can be further categorized
as below:
143
General Rule
In general, the place of supply for services will be the location of the service
recipient (the recipient needs to be a registered person). In cases, where service is
provided to an unregistered person, the place of supply will be the:
International Transactions
These are the transactions where either of the service recipient or the provider is
outside India. Transactions in which both the recipient as well as provider are
outside India are not covered here.
General Rule
The Place of Supply for services treated as international transactions shall be:
144
The amount collected by the seller from the buyer is the value of supply.
But where parties are related and a reasonable value may not be charged, or
transaction may take place as a barter or exchange; the GST law prescribes that the
value on which GST is charged must be its ‘transactional value’.
This is the value at which unrelated parties would transact in the normal course of
business. It makes sure GST is charged and collected properly, even though the full
value may not have been paid.
The taxation laws on Works Contracts have changed since the implementation
of GST. Any Immovable property wherein transfer of property in goods
(whether as goods or in some other form) is involved in the execution of such
contract.
145
146
Building,
construction
Improvement, Fabrication
modification,
Repair,
Maintenance, Completion
Renovation,
Fitting out
Figure-27
147
Table-17
148
VAT being a state tax, different States had different VAT rates
Different VAT composition schemes in every state
Different abatement rates for new works contract and repair works
contract in service tax
Maintenance of large amount of VAT documentation
Current law
Works Contracts consists of three kinds of taxable activities as per the current law.
It involves supply of goods as well as supply of services. If a new product is
created during the works contract, then such manufacture becomes a taxable event.
Currently, the supply of goods is taxable in the form of VAT and the service is
taxable under service tax.
So, different aspects of one a single activity are taxed by different laws. This
causes a lot of confusion regarding treatment and taxability which is why there are
so many legal disputes in related to works contracts.
149
A simpler treatment has been introduced for Works Contract under GST. Schedule
II clearly states that Works Contract amounts to supply of services, hence the
confusion whether it will be categorized as supply of service or goods has been
done away with. A single rate has been fixed for services provided under Works
contract and the entire amount shall be taxed at this rate without any bifurcation
between goods and services.
Under the GST regime the scope of works contract has been restricted to any
activity undertaken in relation to Immovable property only, unlike the previous
regime where works contract for movable properties was also considered.
For example: Any composite supply of paint job done in an automotive body
shop will not fall within the definition of term works contract per se under GST.
Such contracts would continue to remain composite supplies, but will not be
treated as a Works Contract for the purposes of GST.
Separate Works Contract Account
150
As per the rules laid down under CGST Act, every person whose aggregate
turnover crosses the threshold limit of Rs.20 lakh and Rs 10 lakh in Special
Category States) must compulsory take registration. This applies to provider of
Works Contract as well. Thus, every state where a works contractor has a project
office, he will need to obtain a registration.
Composition Scheme
Abatement
No abatement has been prescribed for works contract under the GST law. Hence it
may lead to significant increase in tax burden, especially if such works contract is
taxed at Standard GST rate (which is 18%) and even if subjected to lower tax rate
(12%).
151
As per section 17(5) of CGST Act, Input tax credit shall not be available in respect
of works contract services availed by a person for constructing an immovable
property (other than Plant and Machinery). ITC for works contract can be availed
only by those who are in the same line of business and is using such services
received for further supply of works contract service (e.g. ITC in respect of bill
raised by sub-contractor is allowed to the main contractor). Plant and Machinery in
certain cases, when affixed permanently to the earth, would constitute immovable
property. Thus, where a works contract is for the construction of plant and
machinery, the ITC of the tax paid to the works contractor would be available to
the recipient.
152
Two GST rates have been prescribed for services provided under Works contract
i.e. 18% and 12%.
GST @ 18%
Construction of complex, building, civil structure or a part thereof, including a
complex or building intended for sale to a buyer, wholly or partly, except where
the entire consideration has been received after issuance of completion certificate
Composite supply of works contract
GST @ 12%
Composite supply of Works contract to the Government, local authority or a
governmental authority by way of construction, erection, commissioning,
installation , completion, fitting out, repair, maintenance, renovation, or alteration
of:
Historical monument, archaeological site or remains of national importance
Canal, dam or other irrigation works
Pipeline conduit or plant for
o Water treatment
o Water supply
o Sewerage treatment/disposal
a civil structure or any other original works meant predominantly for use
other than for commerce, industry, or any other business or profession
a structure meant predominantly for use as
o an educational
o a clinical
o an art or cultural establishment
o a residential complex predominantly meant for self-use or the use of their
employees
Composite supply of works contract supplied by way of construction, erection,
commissioning, installation, completion, fitting out, repair, maintenance,
renovation, or alteration of:
153
a road, bridge, tunnel, or terminal for road transportation for use by general
public.
a civil structure or any other original works pertaining to a scheme under
Jawaharlal Nehru National Urban Renewal Mission or Rajiv Awaas Yojana
a pollution control or effluent treatment plant, except located as a part of a
factory
a structure meant for funeral, burial or cremation of deceased
railways, excluding monorail and metro
a single residential unit otherwise than as a part of a residential complex
low-cost houses up to a carpet area of 60 square meters per house in a
housing project approved by competent authority empowered under the
‘Scheme of Affordable Housing in Partnership’ framed by the Ministry of
Housing and Urban Poverty Alleviation, Government of India
post-harvest storage infrastructure for agricultural produce including a cold
storage for such purposes
mechanised food grain handling system, machinery or equipment for units
processing agricultural produce as food stuff excluding alcoholic beverages
A works contract is treated as supply of services under GST. Under the previous
regime, there were issues in tax treatment of works contract. Both the Central
Government (on the services component of a works contract) & the State
Governments (on the sale of goods portion involved in the execution of a works
contract) used to levy tax. Thus, the same contract was subject to taxation by both
Central and State Government. GST aims to put at rest the controversy by defining
what will constitute a works contract (applicable for immovable property only), by
stating that a works contract will constitute a supply of service and specifying a
uniform rate of tax applicable on same value across India. Thus, under GST,
taxation of works contract will be simpler and easier to administer.
154
155
AUDIT
Audit by tax authorities
156
Supplies any goods or services without issue of any invoice or issue any
false invoice with regard to any such supply ;
Issue any invoice or bill without supply of goods or services in violation of
the provisions of this Act ;
Collects any amount as tax but fails to pay the same to the credit of the
appropriate Government beyond a period of three months from the date on
which such payment becomes due ;
Fails to deduct the tax in terms of sub-section (1) of section 37, or deduct
the amount which is less than the amount required to be collected ;
Fraudulently obtains refund of any CGST/SGST under this Act ;
Is liable to be registered under this Act but fails to obtain registration ;
Transport any taxable goods without the cover of documents ;
Fails to keep, maintain or retain books of account ;
Issues any invoice by using the identification number of another taxable
person ;
Destroys any material evidence ;
Supplies, transports or stores any goods which he has reason to believe are
liable to confiscation under this Act;
Any person who contravenes any of the provisions of this Act or rules made
there under for which no penalty is separately provided for in this Act, shall
be liable to a penalty which may extend to Rs. 25,000/-
157
Conclusion
It can be concluded from the above discussion that GST will provide relief to
producers and consumers by providing wide and comprehensive coverage of input
tax credit set-off, service tax set off and subsuming the several taxes. Efficient
formulation of GST will lead to resource and revenue gain for both Centre and
States majorly through widening of tax base and improvement in tax compliance. It
can be further concluded that GST have a positive impact on various sectors and
industry. Centre has decided to review the existing exemptions from Central
Excise Duty so that list of goods exempt from CGST and SGST list and 99 items
exempted from VAT are taken off from both the components of GST. VAT has to
some extent reduced tax-evasion and frauds. It is encouraging to note that most of
the traders and general public are aware of VAT. GST, the major reforms on
indirect taxes, will reduce tax burden due to cascading effect. The efficiency in tax
administration will be improved, indirect tax revenue will be increased
considerably due to inclusion of more goods and services, and at last the cost of
compliance will be reduced for the dealers. The implementation of GST will be in
favor of free flow of trade and commerce throughout the country. This single most
important tax reform initiative by the Government of India since independence
provides a significant fillip to the investment and growth of our country’s
economy. To get the desired result, it should be assured that the benefit of input
credit is ultimately enjoyed by final consumers. Although implementation of GST
requires concentrated efforts of all stake holders namely, Central and State
Government, trade and industry. GST effect the indirect taxation systems and help
reduce the burden on tax payer. GST help to reduce the burden of record make and
158
file maintain. Because GST cover 10-12 Tax. GST reduce the price of various
goods and increase the sale. After the implementation of GST indirect taxation
Systems will remove and it easy to all tax payer to pay the tax to government.
Efficient formulation of GST will lead to resource and revenue gain for both
Centre and States majorly through widening of tax base and improvement in tax
compliance. It can be further concluded that GST have a positive impact on
various sectors and industry. Although implementation of GST requires
concentrated efforts of all stake holders namely, Central and State Government,
trade and industry.
Changes in the tax slabs: - Taxes on over 200 items have been squeezed and a
whopping 88% of the items from the highest slab of 28% have been switched to
18%. Out of the 228 items in the 28% category, only 50 have been retained and the
rest 178 have been slid downwards to different tax brackets. 2 items saw a dip
from 28% to 12%, 6 items from 18% to 5%, 8 items from 12% to 5% and 6 items
from 5% to nil.
Late fine for not submitting the GSTR-3B within due dates for the month
of July, August and September 2017 has been waived off.
GSTR-3B along with payment of tax will now need to filed by 20th of the next
month till March 2018.
- Taxpayers divided into two categories for filing GSTR-1 till March 2018.
Businesses with an annual aggregate turnover of upto 1.5 crores will file
GSTR-1 quarterly.
Table-18
160
Business with an annual aggregate turnover of above 1.5 crore will file GSTR-
1 monthly.
Table-19
161
ANNEXURE
162
QUESTIONNAIRE
You are being invited to take part in this research because your experience with
taxation and the financial services industry coupled with your knowledge of the
proposed GST will greatly expand my understanding of the overall experience of
GST as part of my academic study.
The data from this study will be used in the completion of my Summer Training,
and it may be included in my doctoral thesis, journal articles, and presented at
conferences. Your response will be anonymous, and so anyone who takes part in
the research will not be identified.
This survey will take about 5 – 10 minutes. Most questions are multiple choice and
we ask that you simply provide us with your best answer.
163
□ 0-5
□ 6-10
□ More than 10
4. Whether separate indirect tax team?
□ Yes
□ No
□ Not Applicable
□ 0-5
□ More than 5
□ Not Applicable
164
6. % of indirect tax paid to total tax paid by the business – By the business/by
clients
7. Does the department apply the existing service tax laws fairly?
□ Yes
□ No
8. Have you faced practical difficulties in compliances under the current service
tax requirements? If yes, give examples
□ Yes
□ No
165
Examples - ____________________________________________________
______________________________________________________________
9. Have you ever encountered technical problems with the tax (eg, uncertainty as
to whether the service tax applied to a transaction you were involved with/your
client was involved with).
□ Yes
□ No
Examples - ____________________________________________________
______________________________________________________________
______________________________________________________________
□ Yes - Satisfactory
□ No – Need more clarity
11. Can you comment on the following in relation to the existing provisions of
service taxes impacting the financial services industry:
166
Whether the banking services as included in the negative list is satisfactory or not?
Whether the definition can be amended to reduce litigation? (Discount income to
be specifically included – currently addressed only in the education guide)
□ Yes satisfactory
□ No – Needs to be amended for more clarity
□ Yes satisfactory
□ No – Needs to be amended for more clarity
□ Yes satisfactory
□ No – Needs to be amended for more clarity
Whether the existing definition of banking services as included in the negative list
is very clear? – (Eg to add Income on securities and services provided to RBI)
167
Whether it is clear that Rule 3 of place of supply rules applies to financial services?
□ Yes clear
□ No not clear
□ Yes
□ No
12. Are you aware of the taxing provisions for financial services under GST
regime globally? Can you suggest any provision which could be incorporate into
the Indian scenario?
168
□ Yes
□ No
Comments -
__________________________________________________________
_______________________________________________________________
_______________________________________________________________
13. The taxability of the interstate transaction under the proposed GST is based on
the following:
Central GST ‘CGST’/ State GST – ‘SGST’ and Integrated GST – ‘IGST’ C-VAT
model for interstate transactions
□ IGST
□ C-VAT
14. Do the existing POPS need to be more clear and precise for taxability of
interstate transactions?
□ Yes
169
□ No
15. Have you /your clients been subject to audits (CERA/EA 2000/VAT etc.) from
the department in relation to service taxes? If yes, were the issues raised resolved
in an appropriate manner?
□ Yes
□ No
Issues Resolved
□ Yes
□ No
□ Not Applicable
16. Do you use the services of external consultants for current service tax matters
□ Yes
□ No
□ Not Applicable
17. Do you see a rise in the demand for your services by clients?
□ Yes
□ No
170
□ Not Applicable
18. If yes what is the nature of services desired – Advisory or compliance i.e.
special advice or routine work? Which would you rate as more dependent on the
external consultants?
19. How much time do you currently spend on service tax compliances? Do you
think this will increase or reduce in the long term with the introduction of GST?
20. Do you think that the current service tax compliances are easier than the direct
tax compliances
171
21. Do you think the existing Cenvat Credit rules are fair? Are the exclusions
valid?
22. Do you think the reversal mandated for the financial service industry is fair?
□ Yes
□ No
□ Yes
□ No
24. Do you foresee any issues arising out of the amendment to export rules
whereby export to branches is not construed as exports?
□ Yes
□ No
172
Issues -
_____________________________________________________________
_______________________________________________________________
25. Do you think the current exemptions provided under the existing laws are too
many or too less? Any suggestions to be incorporated in relation to the same in the
proposed GST?
□ Not Enough
□ Just Right
□ Too many
Suggestions -
_________________________________________________________
_______________________________________________________________
□ Correct
□ Too Low
□ Too High
□ No comments
27. Do you think that the provisions in relation to valuation of services are
unambiguous? Specifically in relation to reimbursements of costs, financial leases
and credit card transactions?
□ Yes
173
□ No
□ Easier
□ Difficult
□ Don’t know
29. Do you think under GST regime Centralized registration with one return for
state and one for centre will work or do you envisage multiple state registrations
and compliances under the proposed GST regime?
3.. Does your business have a policy/plan in place specifically to cope with the
proposed GST?
□ Yes
□ No
31. Is your current software system equipped to handle the proposed GST?
□ Yes
□ No
□ Not Applicable
174
32. Do you have any software solutions for your client to handle the proposed
GST?
□ Yes
□ No
□ Yes
□ No
□ Too Low
□ Too High
□ Just Right
35. Would you rate the current service tax administration as better as or worse than
the direct tax administration?
175
36. Do you feel that as a taxpayer you have an opportunity to raise your voice in
indirect – service tax matters?
□ Yes
□ No
37. Do you think that the proposed GST is a predominantly compliance tax or a
technically oriented tax?
_______________________________________________________________
Reference
www.gst.gov.in
www.gstn.org
www.gstcouncil.gov.in
www.cbec.gov.in
176
www.financialexpress.com
www.wikipedia.com
www.cleartax.com
177