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GST – GOODS & SERVICE TAX

An Overview
GST – An Overview 2
 Single levy on goods and services
 Subsumes most of the Central and State level commodity taxes
 Distinction between Goods and Services no longer required
 Tax on ”Supply” of goods or services as against present concept of
manufacture or sale or provision of service*.
 Levied on value addition at each stage of supply
 Mitigate cascading or double taxation and pave way for common market
across India
 Rates of tax:
 Zero-rated – Exports
 5%
 12%
 18%
 28%

 Threshold limit of INR 20 lakh & INR 10 lakh(NE States) for Registration
GST – An Overview 3
 Dual GST Structure with Centre and State simultaneously levying tax on
common base.
• GST by Central Government -> Central Goods and Service Tax (CGST)
• GST by State Government -> State Goods and Service Tax (SGST)
• GST by Union Territories -> Union Territory Goods and Service Tax (UTGST)
 CGST, SGST and UTGST to be levied in intra-state / intra-union territory
transaction
 Interstate supply would attract Integrated Goods and Service Tax (IGST)
collected by the Central Government
 Imports (Goods and Services) deemed as Inter-State supply
 Electronic filing of returns on monthly basis – i.e Form GSTR-3B and Form
GSTR-1 notified.
 List of exempted services have been notified*
 System of GST Compliance Rating
Existing Indirect Tax Structure in India 4

 India has 2 tier federal power to collect tax:

• The Union / Central Government – Collecting Central Taxes
• The State Governments – Collecting State Taxes

Central taxes State taxes

► Excise Duty
► Countervailing Duty (CVD) in lieu
of Excise Duty
► Special Additional Duty (SAD) of
Customs
► Service tax
► Surcharges & Cesses (relating to
supply of goods & services)
► VAT
► Entry tax / Purchase Tax / Octroi
► Luxury tax
► Tax on entertainment and amusement,
lottery, betting and gambling
► Central Sales Tax (CST)
► State cesses & surcharges for goods
and services
What taxes will be subsumed by 5

GST?
 Central taxes to be subsumed:  State Taxes to be subsumed:
• Central Excise Duty • State VAT
• Additional Duties of Excise • Central Sales Tax
• Additional Duties of Customs • Purchase Tax*
• Special Additional Duty of • Luxury Tax
Customs
• Entry Tax
• Service Tax
• Entertainment Tax
• Cess and surcharges insofar as
• Taxes on Advertisement
they relate to supply of goods
Or services • Taxes on Luxury
• States Cess and Surcharges
GST
Tax Structure under GST vis-à-vis 6

Current Regime
Nature of Transaction Taxes Applicable under Taxes under GST Regime
Current Regime
Imports Basic Customs Duty + Basic Customs Duty +
Additional Duties of Excise + IGST
CVD / SAD + Cess + Entry
Tax
Manufacturer Excise Duty + VAT / CST + CGST + SGST OR IGST
Entry Tax*
Reseller Excise Duty* + VAT / CST + CGST + SGST OR IGST
Entry Tax*
Service Provider Service Tax + KKC + SBC CGST + SGST OR IGST
Works Contracts Service Tax + VAT CGST + SGST OR IGST
Benefits of GST: 7

 Simplification and Uniformity for Reductions in the multiplicity of taxes that

are at present governing our indirect tax system
 Simplified and automated procedures for various processes such as
registration, returns, refunds, tax payments through GSTN Portal
 Electronic matching of input tax-credits across India
 Effective fund flow management
 Elimination of cascading effect of taxes and seamless flow of ITC.

Benefits in procurement:
• Flexibility in vendor selection, location is no longer a constraint (Due to
seamless flow of credit of Input Tax)
• Reduction in procurement cost – Central Sales Tax, Entry Tax subsumed
and cascading effect removed for smooth flow of credit across the
supply chain
Understanding GST: 8

The GST includes 3 components of taxes, namely:

What is GSTN? 9

GSTIN is a 15 digit unique code which is will be assigned to each

taxpayer, which will be State-wise and PAN-based. The structure or
format of 15 digit GSTIN (Goods and Services Tax Identification
Number) will look like below.
What is GSTN? 10

 CPIN stands for Common Portal Identification

Number (CPIN) given at the time of generation of
challan. It is a 14-digit unique number to identify the
challan. the CPIN remains valid for a period of 15
days.
Concept of Input Tax Credit (ITC): 11

 ITC available in respect of taxes paid on any supply of goods or services

used or intended to be used in the course of business
 Conditions for taking ITC: [Sec. 16(2) of CGST Act]
1. Possession of Tax paying document*
2. Receipt of Goods or Services
3. Tax actually paid by the supplier to the government*
4. Claimant has declared the details in GSTR-2.
5. Claimant has furnished GSTR-3.
 Separate Electronic Ledger under GSTN for cash and credit
 Full ITC allowed on Capital Goods in the year of purchase
 50% ITC reversal for Banks. [Sec. 17(4) of CGST Act]
Concept of Input Tax Credit (ITC): 12

 ITC for a period can be availed earliest by:

• 1 year from the date of invoice; OR
• 20th October of FY following the FY to which the invoice for supply pertains; OR
• Date of furnishing the Annual Return if furnished prior to 20th Oct.
 ITC to be confirmed only after online matching of supplier’s and recipient’s invoice.
ITC to be reversed in case of mismatch.
 Proportionate credits in case inputs partially used for personal purpose and taxable
supplies including “Zero Rated” or “Exempted” outward supplies.
What ITC are in-eligible? [Sec. 17(5) of 13
CGST Act
 ITC on Motor vehicles and other conveyances except under specified
circumstances.
 ITC on Food and beverages, outdoor catering, beauty treatment, health
services, cosmetic and plastic surgery, except under specified circumstances;
 ITC on Membership of a club, health and fitness centre;
 Rent-a-cab, life insurance, health insurance except where it is obligatory for an
employer under any law;
 ITC on Works contract services received [with respect to Immovable property].
 ITC of goods or services received for construction of Immovable Property on
own account;
 Goods and/or services on which tax has been paid under composition scheme;
 Goods and/or services used for private or personal consumption, to the extent
they are so consumed;
 Goods lost, stolen, destroyed, written off, gifted, or free samples
 Any tax paid on assessment.
Reverse Charge Mechanism: 14

Under the GST Law, there are certain transaction in respect of which,
the liability to remit the GST has been shifted on to the recipient rather
than the supplier.

The list of services on which GST shall be payable by the bank as

recipient of service are as under:
(a) Services received from Recovery Agent
(b) Services received from Goods Transport Agency.
(c) Legal Services
(d) Services received from Arbitral Tribunal
(e) Payment of sponsorships
(f) Services from Independent Director
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1. Reversal of Interest on NPA 16

account:

Interest on Loans and Advances are exempt from Levy of GST as per Entry
No. 27 of Notification No. 12/2017 - Central Tax [Rate] dated 28th June
2017. Accordingly, reversal of such interest shall also not have any
consequence under the GST Law.
2. Applicability of GST on Rent: 17

GST is applicable on Renting of Commercial Property. The bank must

ensure that the landlord issues a Tax Invoice indicating their own and
bank’s GSTIN for the rent charged.

Under the GST Law, exemption has been given renting of residential
dwelling. Accordingly, rent paid for residential accommodation of bank
staff shall not be chargeable to GST.
3. What is B2B/B2C? 18

B2B- This is a type of transaction wherein, the service recipient as well as service
provider are persons registered under GST Law. This however, does not include
Persons registered under GST Law, but as per Composition Scheme.

B2B Transaction involves movement of Input Tax Credit among the persons involved
in the Transaction.

B2C, on the other hand, includes all transactions other than B2B Transactions. (One of
the parties to transaction would not be registered under GST Law).
In other words, B2C transactions do not involve movement of Input Tax Credit (since
one of the parties to transaction would be unregistered, hence ineligible for Input
Credit).
4. GST Number is not updated in Bank 19
records/Menu, now the customer wants to claims
the input credit for previous invoices

The Customer shall be eligible to claims GST Input Credit only after the Bank
has treated him under “B2B” and uploaded the GST Invoice with such GSTIN of
the customer.

Otherwise, the Customer would be treated as a “B2C” Customer and the GST
would not appear against customer’s GSTIN.

Therefore, since the GSTIN of the customer is not updated in the Bank records,
he will be treated as a B2C Customer and hence he cannot claim Input Tax
Credit.

The bank is advised to update the Customer Masters with GSTIN in all
applicable cases to avoid these kind of problems going forward.
5. Tender approved in VAT Regime, work 20
completed in GST regime, whether the
Branch/Office has to pay GST to vendor?

Since, as per the query, only approval of the tender has taken place in
VAT Regime, and execution of the same is post implementation of the GST,
GST Laws shall be effective for the Contract.
6. GST on CIBIL/CRIF/Highmark/Experian/CERSAI 21
charges collected from the customer:

The CIBIL / CRIF / CERSAI and such other similar charges collected by the
Bank from its customers are liable to GST at 18%.
7. What are the relaxations given to a Banking 22
Company towards issuance of Invoices?

(a) Banks can issue invoice to its customers within 45 days from the date of
supply of service.
(b) Banks have been given an option to issue consolidated invoice on a
quarterly basis for transactions done with each customer.
(c) The invoice need not be serially numbered
(d) The banks also have an option to merely indicate the charges and GST
thereon in the Bank Statement, which shall be deemed as an invoice.
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