LIMITED LIABILITY PARTNERSHIP

By growbiz

A limited liability partnership (LLP) is a partnership in which some or all partners (depending on the jurisdiction) have limited liabilities. It therefore exhibits, elements of partnerships and corporations. In an LLP, each partner is not responsible or liable for another partner's misconduct or negligence.

ELIGIBILITY:

The procedure for formation of a LLP is very similar to that of a Private Limited Company incorporation procedure. A minimum of two Partners are required to start the LLP formation procedure and a registered office location is required within India. It is important to remember that FDI in LLP is allowed only with the prior approval of the Reserve Bank of India (RBI). Therefore, it is recommended that NRI’s and Foreign National promoters opt to incorporate a Private Limited Company, where 100% FDI is allowed under the automatic route

LLP Formation Documents Required

  • PAN Card of the Partners
  • Address Proof of the Partners
  • Utility Bill of the proposed Registered Office of the LLP
  • No-Objection Certificate from the Landlord
  • Rental Agreement Copy between the LLP and the Landlord (If any)

STEPS TO INCORPORATE LLP

Step 1: Obtain Digital Signature Certificate (DSC) for the Partners

For obtaining DIN (Director Identification Number or Designated Partner Identification Number) for the Partners of the LLP, a Digital Signature Certificate (DSC) is required.

REQUIRED DOCUMENTS TO APPLY FOR THE DSC

  • PASSPORT SIZE PHOTO
  • MOBILE NO
  • EMAIL ID
  • PAN CARD
  • AADHAAR CARD OR VOTER ID CARD OR DRIVING LICENSE OR PASSPORT
Step 2:Obtaining Director Identification Number for the Partners

Once, Digital Signatures are obtained for the Partners, application for Director Identification Number (DIN) can be made. Further, once a DIN is obtained, there are no renewals required and each person can have only one DIN.

Step 3: Obtaining Name Approval

Once two DIN’s are available, application for reservation of name in Form 1 can be made to the MCA. It is important for the promoters to keep in mind the LLP Naming Guidelines and suggest appropriate names for the LLP in the application, to ensure a speedy approval. The approved name shall be available for 3 Months

Step 4: Filing for Incorporation
  • After approval of name, Form 2 is filed with ROC to incorporate LLP
  • If the application for LLP Registration is acceptable, the Registrar would issue the incorporation certificate. Once, the incorporation certificate is issued, the LLP will be considered to be registered and application for PAN for the LLP can be made.
Step 5: LLP Agreement

The Partners of the LLP then have 30 days time to file the LLP Agreement in Form 3 of the LLP with the MCA. In case, the LLP Partnership Deed is not filed within 30 days, a fine will be applicable.

Your LLP is incorporated now and you can start Your Business.


Condonation of Delay Scheme (CODS), 2018

By growbiz

The MCA had struck off more than 2 lakh companies and disqualified 3 lakh directors of such companies that had failed to file financial statements or annual returns for continuous period of three financial years i.e. from 2013-16.

Aggrieved by disqualification, many disqualified Directors had made representations to MCA and also had approached National Company Law Tribunal (NCLT) and High Courts for stay order of disqualification. The Condonation of Delay Scheme has been introduced to provide a final opportunity for defaulting companies and bonafide Directors to regularize compliance within three-month.

ELIGIBILITY:

The benefits of the Scheme shall be available only for existing Defaulting Companies. The companies whose name is struck off by the ROC under section 248(5) of the Act are not eligible under this Scheme.

Effective Period:

This shall be in force effectively from 1st January 2018 up to 31st March 2018. Given this, the Defaulting Companies shall have make good all defaults within the said period of Three months.

Eligible Forms:

The Defaulting Companies can file only the following forms which are due for filing as on 30 June, 2017 under the Scheme:

  • Form 20B or Form MGT 7: Form for filing of Annual Return of the company having share capital;
  • Form 21A or Form MGT 7: Form for filing of Annual Return of the company not having share capital;
  • Form 23AC, ACA, AOC-4- XBRL, non- XBRL, CFS: Form for filing of Balance Sheet/ Financial Statement and Profit and Loss Account;
  • Form 66: Form for submission Compliance Certificate;
  • Form 23B or Form ADT-1: Form for intimation of appointment of statutory auditor.

Fee:

  • Late Filing Fees of all the Pending form i.e. (Actual + 12 times additional Fees) &
  • Fee of e-CODS 2018 i.e. Rs. 30,000/-

Relief:

The jurisdictional ROC shall withdraw the prosecution(s) pending if any before the concerned Court(s) for all documents filed under the scheme.

However, this scheme is without prejudice to action under section 167(2) of the Act or civil and criminal liabilities, if any, of such disqualified directors during the period they remained disqualified. Further, the DINs of Disqualified Directors continue to be active and their names shall be removed from the list of Disqualified Directors maintained by the MCA.

Effect of Non-Filing of Eligible Forms under the Scheme:

The Defaulting Companies which doesn’t file the necessary forms as prescribed under the Scheme shall continue to be considered as a defaulting under the respective provisions of the Act and the DINs of the disqualified directors associated with these companies shall be deactivated and appropriate actions would be taken against these directors.

CONCLUSION:

At the conclusion of the Scheme, the Registrar shall take all necessary actions under the Companies Act, 1956 / 2013 against the companies who have not availed themselves of this Scheme and continue to be in default in filing the overdue documents.

So, if you want to avail this Scheme, do not wait for the last dates. Just complete your filings and file CODS form.


What is a GST Suvidha Kendra?

By growbiz

GST Suvidha Kendra are the GST Facilitation Centers appointed and Approved by GSPs, these centers will cater to Businesses either big or small and take care of their GST Compliance needs in a cost effective manner. Seasonal Businessmen and Casual Taxpayers can also take advantages of these centers and comply with GST very easily.

How to apply for GST Suvidha Kendra?

A GSK Operator has to make an application on our site, keeping in mind the eligibility criteria; we shall revert to every application.

What are the eligibility requirements for GST Suvidha Kendra?

  • GSK Operator should be a Graduate
  • Should have basic knowledge of Accounting
  • Should have good knowledge of Computers
  • Should have an Office space of at least 100 sq. ft.
  • Should be able to employ at least 2 people (1 Data Entry Operator and 1 Accountant)
  • Should have basic IT Infrastructure needed for GSK (2 Computers, 1 Printer, 2 Mbps Broadband connection)

What are the benefits in becoming a GST Suvidha Kendra with Growbiz Compliances?

  • Training given by Certified GST Trainers of GSP
  • Best and most user friendly cloud based software
  • Local support with State Level Coordinator or Regional Coordinator.
  • 24 x 7 Online Support

Goods and Services not eligible for ITC

By growbiz

One of the primary reasons why GST has been hailed as a game changer in the face of Indian economy is the elimination of cascading effect of taxes allowing for a more seamless flow of credit. This is to take effect by making available Input Tax Credit (ITC) to the purchasing dealer in respect of GST paid by the supplying dealer, which resultantly does away with layers of restrictions existing in the erstwhile CENVAT credit rules, thus, maintaining a seamless flow of credit in the credit chain and rendering the end goods and services cheaper as a result of this tax benefit availed.

In the present GST scheme, ITC can be utilized in the given order – Integrated Tax credits can be utilized for payment of Integrated, Central and State Taxes, or Union Territory tax, if applicable. Central Tax credits can be used for payment of Central Tax and Integrated Tax, whereas State Tax credits can be used for payment of State Taxes or Union Territory taxes and Integrated Tax. Under this system, tax paid on inputs or input services or capital goods used in the course or furtherance of business by the recipient shall be available as credit. This is certainly something to cheer about since it does away with multiple restrictions imposed in the erstwhile tax regime under various heads, some of those being – ‘use in factory’, ‘in or in relation to the manufacture’, ‘for use in manufacturing or processing of goods’, ‘for sale’ and the like.

While the word ‘furtherance’ opens up the tax ambit for new heads to businesses to fall under, there are still some goods and services against which ITC cannot be claimed. The list of items falling in this negative list have been placed under section 17 (5) of the CGST Act under the head ‘Blocked credits’, and have been discussed as below:

Goods/Services NOT ELIGIBLE for Input Tax Credit

a) Motor vehicles and conveyances (includes cars, buses, aircraft, trucks boats, etc), except when:

  • The taxpayer is involved in purchase and supply of such other vehicles or conveyances
  • These vehicles and conveyances are used for transportation of passengers, imparting training of taxable services such as driving, flying, navigating, and/or for transportation of goods.

Which essentially means that expenses related to regular use of motor vehicles for personal or office purposes cannot be claimed as input tax credit.

b) Food, beverages and outdoor catering services, except when: Inward and outward supply of goods/services or both fall under the same category or the component belongs to a mixed or composite supply under GST. As a result, most business expenses that include taking a prospective client or customer out for lunch/dinner would not qualify for credit.

c) Beauty treatment, Health Services & Cosmetic and Plastic Surgery, is not eligible for input tax credit, much like the category immediately preceding it, except when: inward supply of goods or services or both of the same category is used by a registered person for making an outward supply of goods/services of the same category or as an element/component of a composite or mixed supply. This is probably to the fact that these services are mostly rendered for personal consumption rather than core business activities, barring a few professions (such as the entertainment industry). If however, a beautician uses another beautician’s services or a caterer, another caterer’s services, this rule shall not apply since then such use would fall under the head of business consumption and not personal consumption by employees.

d) Membership of club, health and fitness centre would also not fall under this privilege bracket.

e) Life and Health Insurance (this includes expenses relating to rent-a-cab facilities as well). Consequently, businesses (especially IT companies functioning on 24/7 operations), where rent-a-cab services are an integral part of the entire system, will continue to take the hit as they did under CENVAT and not qualify for ITC. Similarly, for life insurance purchased voluntary, credit benefits shall not apply. The exception though, shall apply only when the Government mandates these services as obligatory and to be provided by an employer to its employees under the law in force – such as, when these services are provided for women’s safety of physically challenged persons or health insurance for factory workers as per statute. Additionally, this shall also apply if the inward and supply of goods/services fall under the same category or are part of a mixed or composite supply

f) Travel benefits for employees is also excluded from coming under the ambit of input tax credit. This includes benefits extended to employees on vacation, that being leave or home travel concession.

g) Works contract services continue to remain untouched by GST, following roughly the same fate they did under the CENVAT rules. These services employed for construction of immoveable property (such as a building) shall be excluded from the ITC benefit. This also applies to persons renting out immoveable property who will not be receiving the benefit of ITC on the GST paid to the builder of the property. Input tax credit though, shall be available in cases where the input service is used for further work contract services (an example being – a works contractor receiving such works contract services from his subcontractor).

h) Construction of immovable property too has been prohibited from qualifying under the input tax credit head, which means no ITC shall be available on the goods or services or both supplied to a taxable person used in the construction of an immovable property on his own account or when used in the course or furtherance of business. This would include all kinds of construction activities such as re-construction, renovation, alterations, repairs, etc. Interestingly, this disqualification does not apply if such construction is for an immovable property in the nature of a plant or machinery. As per definition of the expression of ‘plant and machinery’ laid down in chapter V of the CGST Act, this includes “apparatus, equipment, and machinery fixed to the earth by foundation or structural support” but does not include – land, building or any other civil structures, telecommunication towers, pipelines laid outside factory premises. Consequently, input tax credit shall not be available on any of these exclusions.

i) Goods or services or both availed by a non-resident taxable person except where such goods have been imported by him, shall not qualify for ITC.

j) No ITC would be available to a person paying tax under the composition scheme of GST. So will tax paid as interest, penalty or fine remain outside this purview.

k) No ITC shall be made available for goods or services or both used for personal consumption.

l) Goods lost, stolen, destroyed or written off or disposed of by way of gifts or free samples will also not qualify for GST. This includes diaries, calendars and other gifts disposed of/distributed on occasions such as New Year’s Eve, etc.

m) ITC will also not be available against any tax paid due to non-payment or partial payment of tax, excessive or erroneous refund or input tax credit utilized or availed by way of fraud or willful misstatements or suppression of facts or confiscation of goods (basically any tax paid in accordance with the provisions of sections 74, 129, 130)


Complete Guide to Reverse Charge Mechanism

By growbiz

In a gigantic country like ours, which was and still is widely predominated by unorganized sectors, which were habituated for tax evading and other tax manipulations, the GST wave has send an electrifying tantrum among them.

To curb, control and eradicate such practices, GST embeds a mechanism of Reverse Charge, which leads to bring transparency and an adherence towards it.

Reverse Charge is not a GST born phenomenon. It is needed to note that the reverse charge as a mechanism has existed in service tax since a long time and several services were added to the list of services attracting reverse charge every year during the Union Budget. Similarly, the VAT legislation in many states had provisions dealing with purchases by registered dealers from unregistered dealers. The article aims to apprise you on everything about the reverse charge mechanism from its inception to after effects under the following broad categories:

  • What is reverse charge?
  • Why is reverse charge important?
  • Why was the reverse charge mechanism introduced?
  • Reverse charge under the pre-GST system
  • Where can the reverse charge be applied?
  • What does the time of supply mean in reverse charge?
  • How does Input Tax Credit work under the reverse charge?
  • Exemptions under reverse charge
  • Reverse charge miscellaneous pointers
  • Why should you care?

What is reverse charge?

Reverse Charge mechanism is a system to monitor and increase the tax coverage, compliance and synchronization and track ability amongst unorganized, partly organized and fully organized sectors.

Generally, the supplier of goods or services is liable to pay GST. However, in specified cases like imports and other notified supplies, the liability may be cast on the recipient under the reverse charge mechanism. Reverse charge means the liability to pay tax is on the recipient of supply of goods or services instead of the supplier of such goods or services in respect of notified categories of supply.

Machanism-Growbiz

There are two type of reverse charge scenarios provided in law. First is dependent on the nature of supply and/or nature of supplier. This scenario is covered by section 9 (3) of the CGST/ SGST (UTGST) Act and section 5 (3) of the IGST Act. Second scenario is covered by section 9 (4) of the CGST/SGST (UTGST) Act and section 5 (4) of the IGST Act where taxable supplies by any unregistered person to a registered person is covered.

Why is Reverse Charge important?

The self-policing mechanism of GST is a revolutionary measure in itself considering the pre GST era, where the monitoring and identifying the tax evaders was a real complex phenomenon. The government has injected enough and stringent clauses to address this evasion and simultaneously expand the tax network.

The 1st check is that, the input tax can only be availed seamlessly, when the suppliers of a business pay GST. Hence, the buyers will also have an obligation to ensure that their suppliers are paying GST, so that there is no issue while availing the input tax credit.

The 2nd check is the reverse charge. The buyer has to bear the tax, when the supplier fails to pay the GST.

A blend of these two checks is critical and of extreme importance in getting the absconding and shell business communities till now, into the mainstream.

Why was the reverse charge mechanism introduced?

The logic and need of introducing the Reverse Charge mechanism stems from the fact that, the unorganized business community which is pretty large was unable to pay taxes intentionally or unintentionally [illiteracy, residing in non-taxable territories etc.]. Hence a need of collecting the tax from the service recipient itself cropped up, which when properly formulated was termed as Reverse Charge.

Therefore, the basic aim behind introducing reverse charge is to ensure better administration and for the same, as per section 68(2) of the Finance act, 1994, government reserves a right to make not only the service receiver liable to pay service tax rather any other person which the government may notify can be made liable to pay service tax, within the constitutional boundaries.

How did the Reverse charge in the pre-GST era worked?

To understand the reverse charge module in the pre-GST, let’s start with knowing about the concept of normal charge mechanism, which says that the service provider would be liable to pay the service tax.

However, reverse charge mechanism is contrary to this and instead directs the service recipient to bear the service tax. Nutshell, the reverse charge in the pre GST era was similar to its post GST counterpart except for the element of the Input Tax Credit, which did not exist before 1st July’17 [GST launch date]

Where can the reverse charge be applied?

Below are the specific scenarios, which will attract reverse charge:

  • Unregistered dealer to a registered dealer
    • For such a supply, the registered dealer would be liable to pay the GST on reverse charge basis. However, it would not apply to the exempted supplies.
  • Registered dealer to an unregistered dealer. There are 12 services, wherein the service recipient will pay the GST.
    • Services of Insurance agents
    • Services of a director to a company
    • Non-resident service provider
    • Services of goods and transport agencies
    • Services of advocates / advocacy firms
    • Service of arbitral tribunal
    • Sponsorship services
    • Services of recovery agents / FIs / NBFCs
    • Services of transportation on import
    • Services of permitting use of copyright
    • Services of radio taxi’s
    • Specific services provided by government or local authority to business entity

What does the time of supply mean in reverse charge?

In case of supplies, where tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earliest of the following dates:

  • the date of the receipt of goods; or
  • the date of payment as entered in the books of account of the recipient; or
  • the date on which the payment is debited in his bank account, whichever is earlier; or
  • the date immediately following thirty days from the date of issue of invoice.

However, where it is not possible to determine the time of supply as above, the time of supply shall be the date of entry in the books of account of the recipient of supply. For example:

  • Date of receipt of goods – 15th March 17
  • Date of issue of Invoice by the supplier – 15th March 17
  • Date of Entry in books by recipient – 17th March 17
  • Date on which payment is debited in bank account – 19th March 17
  • Date immediately after following 30 days from the date of issuance of invoice by the supplier – 15th April
  • Time of Supply- 15 th March (Date of receipt of goods)

If the supplier is located outside India, then the time of supply shall be the earliest of – ‘When the amount is paid i.e. the date of payment’

Or

‘When the recipient records the payment in his books of account’.

How does Input Tax Credit work under the reverse charge?

A supply recipient can avail the input tax credit on reverse charge, only when the goods and / or/ services are used for / continuation / expansion of business. ITC cannot be used to pay output tax and the payment mode is only through cash under reverse charge.

Exemptions under reverse charge

There are some exceptions and exemptions to reverse charge for small miscellaneous transactions from unregistered suppliers with some conditions. The GST Council exempts supplies of goods or services or both received by an registered person from any supplier who is not registered from the whole of the central tax applicable thereon, under sub-section (4) of section 9 of the CGST Act provided the aggregate value of goods / services received by a registered person from any or all the unregistered suppliers do not exceed Rs. 5000/- per day.

So, the exemption to reverse charge applies when,

  • It should be an intra-state supply.
  • Applies to both goods and / or services.
  • The registered person should be the recipient of the supply
  • Only CGST and / or SGST are exempted and do not apply to a portion of the inter-state supply (i.e. IGST).
  • Only applies to RCM exemption from an unregistered dealer and not for any other RCM case. The scenarios, which attract RCM by the nature of the supply rather than the nature of the supplier does not fall into the exempted ones.
  • Exemption does not apply, if a single person receives a bunch bills totaling to Rs. 5000+ per day, irrespective of the number of persons, they have come from.

Reverse charge miscellaneous pointers

  • A composite dealer falling under the reverse charge mechanism can not avail the input tax credit. Additionally, the dealer is liable to pay tax at normal rates applicable to such supply and not the rate applicable for composition scheme.
  • Advance payments are liable to reverse charge mechanism.
  • The recipient is liable to pay 100% tax on the supply and not unlike the service tax, where there was a provision of partial reverse charge.

Why should you care?

Ensuring your suppliers are GST registered and compliant, is an element for your strict consideration. Because, if they are not, the taxes simply slide to your pockets.

Do not try to escape GST by misstating / under-stating your annual revenues to fall below the threshold limits. It would have repercussions and the order book would squeeze with reverse charge in picture and the companies would only like to shake hands with those who have a high GST compliance score.


Export Documents Under GST

By growbiz

This article is a ready reckoner for the successful facilitation of EXPORTS as many exporters have apprehensions about the requisite EXPORT DOCUMENTS under newly introduced Goods and Services Act, 2017.

Let us first understand what exactly is meant by EXPORTS under Goods and Services Act, 2017.

According to Section 16 of IGST:

  • (1) “zero rated supply” means any of the following supplies of goods or services or both, namely:–
    • (a) export of goods or services or both; or
    • (b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.
  • (2) A registered person making zero rated supply shall be eligible to claim refund under either of the following options:-
    • a) he may supply goods or services or both under bond or Letter of Undertaking, without payment of integrated tax and claim refund of unutilised input tax credit; or
    • (b) he may supply goods or services or both, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied.

Let’s understand above mentioned provisions:

Export can be made either:

  • on production of LUT / Bond ,or
  • with payment of GST,
  • In case of IGST payment,
  • the said payment can be claimed as Refund in the Return and
  • payment means after adjustment of INPUT TAX CREDIT

In case of Non GST payment, Production of LUT / Bond is mandatory.

WHO CAN OPT FOR LETTER OF UNDERTAKING (LUT) ?

LUT can be filed by an exporter who is :

  • either a status holder, or
  • has received convertible foreign exchange @ 10% of turnover or minimum of Rs. 1 crores in the preceding financial year

and has not contravened any provision of law which attracts evasion of tax of at least Rs. 2.5 crores

Remember that non-contravention of any provision of law which attracts evasion of tax of at least Rs. 2.5 crores. is a mandatory condition in order to opt LUT.

If an assessee do not fulfill the above conditions, then he can file Bond along with Bank Guarantee.

Now comes the documentation required for facilitation of EXPORTS:

Circular No. 4/4/2017-GST says that every registered person exporting goods or services without payment of integrated tax is required to furnish a bond or a Letter of Undertaking (LUT) in FORM GST RFD-11.

Therefore, As per Department Instruction , For filing LUT, the following should be filed:

  • (i) Request Letter on Letter Head,
  • (ii) GST RFD-11,
  • (iii) Letter of Undertaking on Letter Head,
  • (iv) Certificate of status holder or Bank Certificate mentioning the facts that the exporter has received the due foreign remittance amounting to 10% of turnover which would not be less than Rs. 1 crore
  • (v) Undertaking on Letter Head that the exporter had not been prosecuted for an offence where tax evaded exceeded Rs. 2.5 crores.
  • (vi) GST Registration (viii) Copy of return filed under DVAT• (vii) IEC Code •Certificate or Service tax for the preceding financial year
  • (ix) Exports Bill / invoices.

After filing of these documents, on scrutiny, deficiency shall be informed and after proper satisfaction, Letter of Acceptance shall be issued and that shall be used for each export subsequently.

As per Department Instruction , For filing Bond, the following should be filed:

  • (i) Request Letter on Letter Head,
  • (ii) GST RFD-11,
  • (iii) Bond on Rs. 100/- Stamp Paper
  • (iv) GST Registration Certificate
  • (v) IEC Code
  • (vi) Copy of return filed under DVAT or Service tax for the preceding financial year
  • (vii) Exports Bill / invoices.
  • (viii) Bank Guarantee of 15% of tax involved

Bond and Bank Guarantee should be in favor of Commissioner, State Tax, Department of Trade & Taxes, Govt. of NCT of Delhi.

After filing of these documents, on scrutiny, deficiency shall be informed and after proper satisfaction, Bond shall be issued and that shall be used for the facilitation of that export.

Now, here are some common points for LUT and Bond:

  • LUT / Bond would be filed by an exporter of an estimated tax liability which shall be valid for a particular financial year.
  • LUT / Bond would be a running document with debit and credit amount as per billing and clearing system.
  • If conditions of Exports are not fulfilled, then exporter would be liable for consequential Tax and interest and LUT / Bond would become in-operative and further be automatically active on payment of due tax and interest.
  • LUT / Bond amount can be up-graded at any time at the option of the exporter.
  • This LUT / Bond formalities has to be complied every year in the beginning for full financial year.
  • This LUT / Bond is to be filed annually on Common Portal but since the facility is not available on portal so presently it can be filed with jurisdictional commissioner.

Eagles Eye View of Export in GST

By growbiz

Zero Rated Supply:

GST is not applicable in India for exports. Hence, all export supplies of a taxpayer registered under GST would be classified as zero rated supply. According to Section 16 of the IGST Act, zero rated supply means any of the following supplies of goods or services:

  • Export of goods or services or both.
  • Supply of goods or services or both to a Special Economic Zone developer.
  • Supply of goods or services or both to a Special Economic Zone unit.

Both the ‘export of goods’ and ‘export of services are treated as zero rated supplies but not with ‘Nil’ rate of tax. There is a substantial difference between the two terms [Zero Rated Supply and NIL] which states that the credit is not available on inputs or input services used for supplies, taxable at nil rate.

While there is no considerable change in the laws relating to ’export of goods’, the ‘export of services’ do need a special mention, where the ‘place of supply’ clause is to be understood minutely.

Methods for export of goods / services / both:

  • By giving an letter of undertaking or bond without paying IGST and claim refund of unutilized input tax credit; or
  • After paying IGST and claim refund of such a tax.

Bond or LUT with the shipping bill is needed:

As per the Rule 96A of CGST Rule 2017 Any registered person availing the option to supply goods or services for export without payment of integrated tax shall furnish, prior to export, a bond or a letter of undertaking in FORM GST RFD-11 to the jurisdictional commissioner, binding himself to pay the tax due along with the interest specified under sub-section (1) of section 50 within a period of-

  • 15 days after expiry of 3 months from the date of issue of the invoice for export, if the goods are not exported out of India; or
  • 15 days after the expiry of 1 year, or such further period as may be allowed by commissioner, from the date of issue of the invoice for export, if the payment of such services is not received by the exporter in convertible foreign exchange.

The CGST 2017 rule 96 A directs any unregistered person exporting goods, without paying the IGST, to provide a bond or a LOU [Letter of Undertaking] in the form GST RFD-11.

The following category of persons can submit a LOU instead of a bond:

  • a status holder as specified in the Foreign Trade Policy 2015-2020; or
  • Someone who has received the due foreign inward remittances amounting to a minimum of 10% of the export turnover and less than one crore rupees in the previous final year. The person should also have not been found guilty and accused for any offence falling under CGST Act 2017 or any previous case of tax evasion exceeding 2.5 crore rupees.

The validity of a LUT is for a year and should the exporter fail to comply with the conditions of LUT, he may also be asked to submit a bond.

Deemed Exports:

As per Section 147 of CGST Act, 2017, the supply of goods falling under the ‘deemed category’ are:

  • When the goods supplied do not leave India.
  • When such goods have been manufactured in India.
  • When the payment for such supplies is received in INR or convertible foreign exchange.

The definition of ‘deemed exports’ under GST is in tune with the definition of ‘deemed exports’ under Foreign Trade Policy 2015-2020.

‘Deemed Exports’ under FTP 2015-20 include:

  • Supply of goods made to STP/EHTP/EOU/BTP.
  • Supply of capital goods against EPCG authorization.
  • Supply of goods to projects financed by multilateral or bilateral agencies/funds as notified by Department of Economic affairs, Ministry of Finance, where legal agreements provide for tender evaluation without including custom duty.
  • Supply and installation of goods and equipment to projects financed by multilateral or bilateral agreements/funds as notified by Department of Economic Affairs for which bids have been invited and evaluated on the basis of delivered duty prices for goods manufactured abroad.
  • Against international competitive bidding
  • Supply of marine freight containers by 100% EOU (Domestic freight containers-manufacturers ) provided said containers are exported out of India within 6 Months or such further period as permitted by customs)
  • Supply to projects enjoying zero custom duty
  • Supply of goods for nuclear projects subject to the condition that:
    • Such goods are required as specified in the List 33 at Sl. No. 511 of notification number 12/2012- customs, dated 17.03.2012 as amended from time to time.
    • The Project should have a capacity of 440 MW or more.
    • A certificate to the effect is required to be issued by an officer not below the rank of Joint Secretary to Government of India, in Department of Atomic Energy.
  • Supplies to UN agencies or international organization for their official use or supplied to the projects financed by the said organization approved by government of India etc.

While the scope of ‘deemed exports’ under the GST is restricted to the grant of refund of taxes on supply of goods. So, an exception has been mentioned in the GST Act to notify certain transactions as ‘deemed exports’ to avoid situations where the person might opt to claim refund of taxes on ‘deemed exports’ according to the FTP 2015-20.

The GST Council is yet to announce the list of supplies to be considered as ‘deemed exports’

Details needed for Exports:

If the export products attract GST for domestic clearance, quoting of GSTIN is mandatory.

If the exporter exclusively deals with GST exempted products or products out of GST net, just quoting the PAN number would suffice, which individually is approved by DGFT, to be considered as the IEC [Import Export Code].

Refund of Input Tax Credit for goods exported:

Following scenarios exist when the refund of ITC in case of export of goods is applied for:

  • The zero rated supplies made without payment of tax will be permissible for refund of ITC against provision (i) of the Section 54(3) of CGST Act.
  • Unutilized ITC shall not be refunded except the exports which include zero rated supplies or where the credit has accumulated because of the tax rate on inputs being higher than the rate of tax on the output supplies, except nil rated or fully exempt supplies under provision (ii) of the Section 54(3) of the CGST Act.
  • Refund of unutilized ITC is not allowed in cases where the goods exported are subject to export duty against provision (ii) of the section 54(3) of the CGST Act.
  • Refund of unutilized ITC is not allowed in cases where the supplier has availed the duty drawback of Central taxes or has claimed refund of IGST under provision (i) of the Section 2(42) of the CGST Act.
  • Drawback: ‘Drawback’ in connection with any goods manufactured in India and exported refers to the rebate of duty, tax or cess chargeable on any imported inputs or on any domestic inputs or input services used in the manufacture of such goods under the Section 2(42) of the CGST Act.

    Supplies made out of India, which do not fall under export of goods / services:

    Such supplies constitute the following:

    • When the supply of service is in India for a person located outside India – An Indian agent servicing an Australian exporter to trade in Japan, Delhi based farm house leased to an African national.

    Services supplied where consideration is received in Indian Currency or a currency other than convertible currency – Indian firm supplying services to an international firm and the Indian branch of the overseas company pays in INR


GSTR-3B Late Fees still shown as Rs.100? Why? How to correct it to Rs.25?

By growbiz

Although Government has waived the late fee over and above the Rs.25 each vide (notification no 64/2017 dt 15-11-2017) but still while filling the GSTR 3B for the month of October after due date i.e. 20th Oct 2017 , the Portal is automatically generating late fees of Rs 100 each instead of Rs.25 each.

This problem of GSTN Computing 100 Rs. as Late Fee can be resolved by *clearing the cache of your browser*.

Follow the below steps to clear the cache of your browser:-

1 .Go to settings of the web browser.


2. Go to advanced settings.

3. Go to privacy and security.


4. Clear browsing data to delete the caches and cookies from the beginning of the time.


5. Go to settings again AND Type cookies


6. All cookies will appear, type “GST” on search.

7. Remove all GST related cookies.



Anti-Profiteering Under GST: Meaning, Authority and Issues

By growbiz

The GST law contains a unique provision on anti-profiteering measure as a deterrent for trade and industry to enjoy unjust enrichment in terms of profit arising out of implementation of Goods and Services Tax in India. That is the anti-profiteering measure would obligate businesses to pass on the cost benefit arising out of GST implementation to their customers.

Meaning of Anti-Profiteering

As the name suggests, these rules prevent entities from making excessive profits due to the GST. Since the GST, along with the input tax credit, is eventually expected to bring down prices.

This is a new concept being tried out for the first time. The intention is to make it sure that whatever tax benefits are allowed, the benefit of that reaches the ultimate customers and is not pocketed by trade.

That experience suggests that GST may bring in general inflation in the introductory phase. The Government wants that GST should not lead to general inflation and for this; it becomes necessary to ensure that benefits arising out of GST implementation must be transferred to customers so that it may not lead to inflation.

For this, anti-profiteering measures will help check price rise and also put a legal obligation on businesses to pass on the benefit. This will also help in instilling confidence in citizens.

As per Section 171 of the CGST/SGST Act, any reduction in tax rate on any supply of goods or services, or any benefit of ‘input tax credit’, must be passed on to the recipient (for example, customer) by the registered person (e.g., trader) through a commensurate reduction in prices.

Thus, if a trader is paying, say, Rs 100 less in the new tax rate on a certain item, he has to compulsorily sell that item for Rs 100 cheaper, so the customer benefits proportionally. Failure to do so would mean the trader is indulging in ‘profiteering’.

However, if GST has a negative impact on the cost, then prices can be increased. For example: If the output supply was zero-rated in previous regime and also remains zero-rated in GST regime, the business will not get any input tax credit.

If the tax rates are increased, tax under reverse charge imposed etc. then prices will increase. For example, domestic LPG was exempt from tax under earlier regime. Now they fall under 5% GST. This will result in an increase in the prices of cooking gas.

However it has been the experience of many countries that when GST was introduced there has been a marked increase in inflation and the prices of the commodities. This happened in spite of the availability of the tax credit right from the production stage to the final consumption stage which should have actually reduced the final prices. This was obviously happening because the supplier was not passing on the benefit to the consumer and thereby indulging in illegal profiteering.

So, Central Government constitute National Anti-Profiteering Authority to examine that whether input tax credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him.

Constitution of Authority

  • There shall be 5 member Committee including a Chairman who holds or has held a post equivalent in rank to a Secretary to the Government of India
  • 4 Technical members who have been commissioners of state tax or central tax or have held an equivalent post under Existing laws.
  • Additional Director General of CBEC shall be Secretary to the Authority.
  • Maximum time for which authority will work is 2 years from the date when chairman hold his office until any further notification will be recommended by Council.

Problems in Anti-Profiteering Measures

  • No way is defined as how one will pass-on benefit to ultimate consumer. The word “Commensurate Reduction” is used but meaning and how such reduction will be done is not defined under Anti-Profiteering Rules. So it is a subjective matter and depends on person to person
  • How will businesses compute the benefit resulting from increased credits and reduction in rates? Will it be calculated at a company level or product level?
  • Can I add additional expenses which I am required to incur due to GST while computing the cost and then arrive at the benefit?
Let’s say there is a company called Hindustan Supplies (fictitious name) which has its roots in all products of FMCG and is also into Beverage and Health Drinks involving Aerated Water. Now post GST, Hindustan Supplies. will have a much lower burden on Toothpastes by 8-9% however on its Coconut flavored low-fat Aerated Water Drink, the effective tax on this Drink has increased much higher than before. So now should the Company pass on the benefit on a Product to Product level and pass on the 8-9% of value of Toothpaste and bear the losses on the Healthy Drink business. Or it should see at its Income statement and if everything remains constant then only it should pass the benefit to the Consumer.
  • How many layers of Price Reduction do we need to monitor and then to be passed? i.e. whether Input supplier will also pass on benefit to output supplier or only output supplier is liable to pass on benefit to ultimate consumer.

Conclusion

If a super-market you frequent is selling you grocery at a higher price stating that it is due to GST, you can file a complaint to the anti-profiteering authority. Similarly if you are aware that the cost of your toothpaste has moved lower, but your grocery-wala tries to pull a fast one on you by selling it to you at the old price, you know whom to complain to.

This is a tool that the Centre needs to wield effectively to keep prices under check and ensure that businesses do not pocket all the gains.

Profit is fine, profiteering is not. So, don’t let someone profiteer at your own expense.


Filed Wrong GSTR-3B. How should I correct this?

By growbiz

GSTR Form-3B has been made the soul of the GST Act, 2017 vide Notification No.56/2017-Central Tax, dt. 15-11-2017 that seeks to mandate the furnishing of return in FORM GSTR-3B till March, 2018. So, it becomes very important to correctly file GSTR Form-3B.

Vide Circular No. 07/2017 dated 01-09-2017 the detailed procedure for reconciliation of information furnished in FORM GSTR-3 and FORM GSTR-3B was explained.

After the registered person has filed his return in FORM GSTR-3B and the statement of outward supplies in FORM GSTR-1, the inward supplies shall be auto drafted for all registered persons and made available to them in FORM GSTR-2A. Based on the details communicated in FORM GSTR-2A, the registered person shall prepare the statement of inward supplies in FORM GSTR-2.

If the registered person intends to amend any details furnished in FORM GSTR- 3B, it may be done in the FORM GSTR-1 or FORM GSTR-2.

After the registered person has furnished the statement of inward supplies in FORM GSTR-2 by the extended date, the common portal shall auto-draft Part-A of the return in FORM GSTR-3 for the said month based on the information furnished in FORM GSTR-1 and FORM GSTR-2. Based on the revised figures of output tax liability and eligible input tax credit, Table 12 of Part B of FORM GSTR-3 shall be made available. The common portal would populate the correct figures of tax payable in column (2) of Table 12 of FORM GSTR- 3, based on the information furnished in FORM GSTR-1 and FORM GSTR-2.

The tax paid through the electronic cash ledger and electronic credit ledger in the return in FORM GSTR- 3B shall be displayed by the system in column (3) to (7) of the Table 12 of Part B of FORM GSTR-3. Where there is no difference between the details of output tax liability and eligible input tax credit furnished in FORM GSTR-3B and the details furnished in FORM GSTR-1 and FORM GSTR-2, the amount of tax payable and tax paid shall be the same in FORM GSTR-3B and FORM GSTR-3. The person can sign and submit FORM GSTR-3 without any additional payment of tax.

Where the tax payable by a registered person as per FORM GSTR-3 is more than what has been paid as per FORM GSTR-3B, the common portal would show another instance of Table 12 for making additional payment of taxes which can be paid by debiting the electronic cash or credit ledger along with applicable interest on delayed payment of tax starting from 26th day of August, 2017 till the date of debit in the electronic cash or credit ledger.

If the eligible ITC claimed by the person in FORM GSTR-2 is less than the ITC claimed and utilised by the registered person in FORM GSTR-3B, the same would be added to his output tax liability and shall have to be paid by him along with interest by debiting the electronic cash or credit ledger the transitional credit as declared in FORM GST TRAN-1 is credited to the electronic credit ledger, the same can be utilised for the payment of the said additional tax liability. Where the eligible ITC claimed by the taxpayer in FORM GSTR-3B is less that the ITC eligible as per the details furnished in FORM GSTR-2, the additional amount of ITC shall be credited to the electronic credit ledger of the registered person when he submits the return in FORM GSTR-3.

Where the output tax liability of the registered person as per the details furnished in FORM GSTR-1 and FORM GSTR-2 is less than the output tax liability as per the details furnished in the FORM GSTR-3B and the same is not offset by a corresponding reduction in the input tax credit to which he is entitled, the excess shall be carried forward to the next month’s return to be offset against the output liability of the next month by the taxpayer when he signs and submits the return in FORM GSTR-3.

However, simultaneously, if there is a decrease in the eligible input tax credit, the same will be adjusted against the above mentioned reduction in output tax liability and the balance, if any, of the reduction in output tax liability shall be carried forward to the next month’s return to be offset against the output liability of the next month. But will not be liable to pay any late fee provided the requisite return in FORM GSTR-3B was submitted on or before the due date. The return shall be considered to be a valid return when the tax payable as per FORM GSTR-3 has been paid in full after which the return shall be taken up for matching.

For the very first month of GST Regime i.e. July 2017, only “SAVE GSTR3B” button and “Submit” button was available on the GST Portal where we could edit and “Save GSTR-3B” any number of times, but once we “SUBMIT”, the input details got freezed.

gstr3b
There was no way to revise GSTR-3B, once it has been submitted. As many taxpayers as we as professionals faced hardships due to this freezing of the figures after clicking on the “Submit” button, Govt. consequently from August 2017. brought out with another option to “Preview and Submit GSTR 3B” to provide ease to the taxpayers wherein we can preview the data input by us and then “Confirm and Submit”.
gstr3b
gstr3b

So, in the nutshell we conclude that though till now there is not revision facility available for GSTR-3B and the only possible resolution to correct it is via GSTR-1 and GSTR-2 in case the figures got wrongly input by us while submitting the GSTR-3B. However, it is expected by GST Network to operationalize editing facility for GSTR-3B returns by 21st November.