No GST on sale of old jewellery, cars by individuals

The Revenue Department today clarified that sale of old jewellery as well as old vehicles by individuals will not attract any GST as the sale is not for furthering any business.

Clarifying on Revenue Secretary Hasmukh Adhia's comments yesterday, the department issued a press statement saying it was informed at GST Master Class yesterday that "purchase of old gold jewellery by a jeweller from a consumer will be subject to GST at the rate of 3 per cent under reverse charge mechanism in terms of the provisions contained in Section 9(4) of the Central GST Act, 2017."

It then went on to state that the said section has to be read in conjunction with another section and "even though the sale of old gold by an individual is for a consideration, it cannot be said to be in the course or furtherance of his business (as selling old gold jewellery is not the business of the said individual), and hence does not qualify to be a supply per se."

"Accordingly, the sale of old jewellery by an individual to a jeweller will not attract the provisions of Section 9(4) and jeweller will not be liable to pay tax under reverse charge mechanism (RCM) on such purchases," it said.

Revenue department officials said the same principal will apply on sale of old cars or two-wheelers and no GST will be payable even though the supply would be for a consideration.

The statement said that Section 9(4) of the said Act mandates that tax on supply of taxable goods (gold in this case) by an unregistered supplier (an individual in this case) to a registered person (the jeweller in this case) will be paid by the registered person (the jeweller in this case) under reverse charge mechanism.

But since the sale is not in consideration for the furtherance of business no tax will apply.

It however said the tax would apply if an unregistered business sells gold ornaments to registered supplier.

"However, if an unregistered supplier of gold ornaments sells it to registered supplier, the tax under RCM will apply," it added.

A supplier is defined as the one who buys or sells in furtherance of his business.

Traders with turnover below Rs 20 lakh per annum will have to register for GST, says Centre

The Centre on Thursday announced that traders who have a turnover below Rs 20 lakh per annum will have to register for the Goods and Services Tax, reported ANI. Revenue Secretary Hasmukh Adhia said that such traders will have to apply for GST if they want to do business with other states.

The GST Council had in 2016 decided that businesses in the Northeastern and hill states with annual turnover below Rs 10 lakh would be out of the GST net, while the threshold for the exemption in the rest of India would be an annual turnover of Rs 20 lakh. “For GST, the exemption threshold is fixed at Rs 20 lakh,” Council Chairperson and Union Finance Minister Arun Jaitley had said.

Adhia had on Tuesday said the GST regime had been successfully implemented and that the price and supply situation was being closely monitored. A central monitoring panel will meet every Tuesday, the revenue secretary had said, adding that manufacturers will have to advertise the change in the prices of their products.

Adhia would also be holding “masterclasses” on GST for six days at the National Media Centre in New Delhi to clear any doubts about the new tax law. “The government is committed to make the GST an all-out success and not let the lack of any clarity or information act as a hurdle,” a senior government official said.

Govt. Notifies CGST/ IGST (Extension to J&K) Ordinance, 2017; GST Promulgated/ Applicable w.e.f. 8 July 2017 in J&K: CBEC

CBEC has issued a Press Release that Hon’ble President of India has promulgated two ordinances, namely, the CGST (Extension to Jammu and Kashmir) Ordinance, 2017 and the IGST (Extension to Jammu and Kashmir) Ordinance, 2017 making the CGST/ IGST applicable to the State of Jammu and Kashmir, w.e.f. 8 July, 2017, as under:

CBEC Press Release dt. 8 July 2017

Goods and Services Tax was launched in the country from the midnight of 1st July, 2017. However, because of the special provisions applicable to the State of Jammu and Kashmir extra steps had to be taken before the State could join the GST fold.

On 6th July 2017, the State of Jammu and Kashmir took the first step towards adopting the GST regime with the President of India giving assent to the Constitution (Application to Jammu and Kashmir) Amendment Order, 2017. Resultantly, the One Hundred and First Amendment Act, 2016 to the Constitution of India that paved the way for introduction of GST in the country, became applicable to the State of Jammu and Kashmir also. Following this, on 7th July, 2017 the Jammu and Kashmir Goods and Services Tax Bill, 2017 was passed by the State legislature, empowering the State to levy State GST on intra-state supplies with effect from 8th July, 2017.

Concomitantly, the President of India has promulgated two ordinances, namely, the Central Goods and Services Tax (Extension to Jammu and Kashmir) Ordinance, 2017 and the Integrated Goods and Services Tax (Extension to Jammu and Kashmir) Ordinance, 2017 extending the domain of Central GST Act and the Integrated GST Act to the State of Jammu and Kashmir, with effect from 8th July, 2017. With this, the State of Jammu and Kashmir has become part of the GST regime, making GST truly a “one nation, one tax” regime.

Valuation rules under GST

Value of Supply Every fiscal statue makes provision for the determination of value as tax which is normally payable on ad-valorem basis. In GST also, tax is payable on ad-valorem basis i.e. percentage of value of the supply of goods or services. Section 15 of the CGST Act and Determination of Value of Supply, CGST Rules, 2017 contain- provisions related to valuation of supply of goods or services made in different circumstances and to different persons.

Transaction Value Under GST law, taxable value is the transaction value i.e. price actually paid or payable, provided the supplier & the recipient are not related and price is the sole consideration. In most of the cases of regular normal trade, the invoice value will be the taxable value. However, to determine value of certain specific transactions, Determination of Value of Supply rules have been prescribed in CGST Rules, 2017.

Compulsory Inclusions

Any taxes, fees, charges levied under any law other than GST law, expenses incurred by the recipient on behalf of the supplier, incidental expenses like commission & packing incurred by the supplier, interest or late fees or penalty for delayed payment and direct subsidies (except government subsidies) are required to be added to the price (if not already added) to arrive at the taxable value.

Exclusion of discounts

Discounts like trade discount, quantity discount etc. are part of the normal trade and commerce. Therefore, pre-supply discounts i.e. discounts recorded in the invoice have been allowed to be excluded while determining the taxable value.

Discounts provided after the supply can also be excluded while determining the taxable value, provided two conditions are met, namely:

a. discount is established in terms of a pre supply agreement between the supplier & the recipient  and such discount is linked to relevant invoices

b. input tax credit attributable to the discounts is reversed by the recipient

Taxable value when consideration is not solely in money In some cases, where

Penalties for Not Registering Under GST

Offences and Penalties under GST

Goods and service tax GST will bring in “One nation one tax “to unite indirect taxes under one umbrella and facilitate Indian businesses to be globally competitive. The Indian GST is structured for efficient tax collection, reduction in corruption, easy inter-state movement of goods etc.

To prevent tax evasion and corruption, the GST Law lists the offences and penalties. There are  21 offences under GST, apart from the penalty for availing compounding by a taxable person who is not eligible for it.

Offences under GST 

When has anyone committed an offence under GST?

There are 21 offences under GST. For easy understanding, we have grouped them as-

Fake/wrong invoices

1. A taxable person supplies any goods/services without any invoice or issues a false invoice.
2. He issues any invoice or bill without supply of goods/services in violation of the provisions of GST
3. He issues invoices using the identification number of another bonafide taxable person

Fraud

4. He submits false information while registering under GST
5. He submits fake financial records/documents or files fake returns to evade tax
6. Does not provide information/gives false information during proceedings

Tax evasion

7. He collects any GST but does not submit it to the government within 3 months
8. Even if he collects any GST in contravention of provisions, he still has to deposit it to the government within 3 months. Failure to do so will be an offence under GST.
9. He obtains refund of any CGST/SGST by fraud.
10. He takes and/or utilizes input tax credit without actual receipt of goods and/or services
11. He deliberately suppresses his sales to evade tax

Supply/transport of goods

12. He transports goods without proper documents
13. Supplies/transports goods which he knows will be confiscated
14. Destroys/tampers goods which have been seized

Others

15. He has not registered under GST although he is required to by law
16. He does not deduct TDS or deducts less amount where applicable.
17. He does not collect TCS or collects less amount where applicable.
18. Being an Input Service Distributor, he takes or distributes input tax credit in violation of the rules
19. He obstructs the proper officer during his duty (for example, he hinders the officer during the audit by tax authorities)
20. He does not maintain all the books that he required to maintain by law
21. He destroys any evidence

He has opted for composition scheme even though he is not eligible

Offences under GST by Companies, LLPs, HUFs and others

For any offence committed by a company, both the officer in charge (such as director, manager, secretarty) as well as the company will be held liable.

For LLPs, HUFs, trust, the partner/karta/managing trustee will be held liable.

Penalties under GST

For fraud

An offender has to pay a penalty amount of tax evaded/short deducted etc., i.e., 100% penalty, subject to a minimum of Rs. 10,000.

Not only the taxable person but any person who-

• Helps any person to commit fraud under GST
• Acquires/receives any goods/services with full knowledge that it is in violation of GST rules
• Fails to appear before the tax authority on receiving a summons
• Fails to issue an invoice according to GST rules
• Fails to account/vouch any invoice appearing in the books

-Will have to pay a penalty extending upto Rs. 25,000

For cases of fraud, additional penalties as follows-

Tax amount involved	100-200 lakhs	200-500 lakhs	Above 500 lakhs
Jail term	Upto 1 year	Upto 3 years	Upto 5 year
Fine	In all three cases

For more details please read our article on prosecution.

For other cases (no intention of fraud or tax evasion)

An offender not paying tax or making short-payments has to pay a penalty of 10% of the tax amount due subject to a minimum of Rs.10,000.

[Note: In the earlier model law, the person was penalized if he made short payments “repeatedly”, i.e., in 3 returns out of 6 consecutive tax periods. This has been removed from the revised model law. So it stands, even first-time offenders may be liable to penalty.]

Therefore, the penalty will be high at 100% of the tax amount when the offender has evaded i.e., where there is a deliberate fraud.

For other genuine errors, the penalty is 10% of tax.

General Penalty

Any offense under GST for which penalty is not specifically mentioned will be liable to a penalty extending Rs. 25,000.

General rules regarding penalty

These rules of penalty are generally the same in all laws whether tax laws or contract or any other law.

• Every taxable person, on whom the penalty is imposed, will be served with a show cause notice first and will have a reasonable opportunity of being heard.
• The tax authority will give an explanation regarding the reason for penalty and the nature of offense
• When any person who voluntarily discloses a breach of law, the tax authority may use this fact to reduce the penalty

There will not be substantial penalties for minor breaches (tax amount is less than Rs.5000) or errors which are easily rectifiable and clearly made without any motive of fraud. The tax authority may issue a warning in such cases.

This will be beneficial to businesses, especially SMEs, who may make genuine mistakes especially in the first few months of GST implementation. Being penalized for genuine errors will be a hard blow to the SMEs who do not have as many resources as the larger organizations to adapt to GST.

GST Registration

What is GST Registration?

Every business carrying out a taxable supply of goods or services under GST regime and whose turnover exceeds the threshold limit of Rs. 20 lakh/ 10 Lakh as applicable will be required to register as a normal taxable person. This process is of registration is referred as GST registration.

Why is GST Registration Important?

GST registration is critical because it will enable you to avail various benefits that are available under the GST regime. One such benefit is to avail seamless input tax credit. Multiple taxes are being clubbed under GST and thus the cascading of taxes that is prevailing currently will no longer be the case.

Also, timely registration will help you avoid any kind of interface with tax authorities.

GSTIN

It is expected that 8 million taxpayers will be migrated from various platforms into GST. All of these businesses will be assigned a unique Goods and Services Tax Identification Number.

Casual Registration

A person who occasionally supplies goods and/or services in a territory where GST is applicable but he does not have a fixed place of business. Such a person will be treated as a casual taxable person as per GST.

Example: A person who has a place of business in Bangalore supplies taxable consulting services in Pune where he has no place of business would be treated as a casual taxable person in Pune.

Composition Dealer

This is an option available to small businesses and taxpayers having a turnover less than Rs. 75 lakhs. They can opt for Composition scheme where they will tax at a nominal rate of 1% or 2.50% (for manufacturers) CGST and SGST each (rates will be notified later).

They will be required to maintain much less detailed records and file only 1 quarterly return instead of three monthly returns. However, they cannot issue taxable invoices, i.e., collect tax from customers, but are required to pay the tax out of their own pocket. They cannot also claim any input tax credit.

Composition levy is available to only small businesses. It is not available to interstate sellers, e-commerce traders, and operators.

Applicability

GST will apply when turnover of the business exceeds Rs 20 lakhs (Limit is Rs 10 lakhs for the North Eastern States). [Earlier the limit was Rs 10lakhs and Rs 5lakhs for NE states.]

Migration to GST

All existing Central Excise and Service Tax assessees and VAT dealers will be migrated to GST. To migrate to GST, assessees would be provided a Provisional ID and Password by CBEC/State Commercial Tax Departments.

Provisional IDs would be issued to only those assessees who have a valid PAN associated with their registration. An assessee may not be provided a Provisional ID in the following cases:

1. The PAN associated with the registration is not valid
2. The PAN is registered with a State Tax authority and Provisional ID has been supplied by the said State Tax authority.
3. There are multiple CE/ST registrations on the same PAN in a State. In this case, only 1 Provisional ID would be issued for the 1st registration in the alphabetical order provided any of the above 2 conditions are not met.

The assessees need to use this Provisional ID and Password to login to the GST Common Portal (https://www.gst.gov.in) where they would be required to fill and submit the Form 20 along with necessary supporting documents.

Penalties for Not Registering Under GST

An offender not paying tax or making short payments has to pay a penalty of 10% of the tax amount due subject to a minimum of Rs.10,000. The penalty will be high at 100% of the tax amount when the offender has evaded i.e., where there is a deliberate fraud.

However, for other genuine errors, the penalty is 10% of the tax due.

Multiple Registrations Under GST

A person with multiple business verticals in a state may obtain a separate registration for each business vertical.

PAN is mandatory to apply for GST registration (except for a non-resident person who can get GST registration on the basis of other documents).

A registration which has been rejected under CGST Act/SGST Act shall also stand rejected for the purpose of SGST/CGST act.

Taxable Person under GST

A ‘taxable person’ under GST, is a person who carries on any business at any place in India and who is registered or required to be registered under the GST Act. Any person who engages in economic activity including trade and commerce is treated as taxable person.

‘Person’ here includes individuals, HUF, company, firm, LLP, an AOP/BOI, any corporation or Government company, body corporate incorporated under laws of foreign country, co-operative society, local authority, government, trust, artificial juridical person.

Who is Liable to get Registered under GST?

GST registration is mandatory for-

• Any business whose turnover in a financial year exceeds Rs 20 lakhs (Rs 10 lakhs for North Eastern and hill states).

[Note: If your turnover is supply of only exempted  goods/services which are exempt under GST, this clause does not apply.]

• Every person who is registered under an earlier law (i.e., Excise, VAT, Service Tax etc.)  needs to register under GST, too.
• When a business which is registered has been transferred to someone/demerged, the transferee shall take registration with effect from the date of transfer.
• Anyone who drives inter-state supply of goods
• Casual taxable person (see below)
• Non-Resident taxable person (see below)
• Agents of a supplier
• Those paying tax under the reverse charge mechanism
• Input service distributor (see below)
• E-commerce operator or aggregator
• Person who supplies via e-commerce aggregator
• Person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered taxable person

Who is a Casual Taxable Person under GST?

A person who occasionally supplies goods and/or services in a territory where GST is applicable but he does not have a fixed place of business. Such a person will be treated as a casual taxable person as per GST.

Example: A person who has a place of business in Bangalore supplies taxable consulting services in Pune where he has no place of business would be treated as a casual taxable person in Pune.

Who is a Non-Resident Taxable person under GST?

When a non-resident occasionally supplies goods/services in a territory where GST applies, but he does not have a fixed place of business in India. As per GST, he will be treated as a non-resident taxable person. It is similar to above except the non-resident has no place of business in India.

Who is an Input Service Distributor?

‘Input Service Distributor’ means an office of the supplier of goods/services which receives tax invoices on receipt of input services and issues tax invoices for the purpose of distributing the credit of CGST/SGST/IGST paid on the said services to your branch with same PAN. (It must be a supplier of taxable goods /services having the same PAN as that of the office referred to above).

Thus, only credit on ‘input services’ can be distributed and not on input goods or capital goods.

This will be a new concept for assessees who are currently not registered as input service distributor. However, this facility is optional in nature.

GST Registration by Type of Taxable Person

• Every person has to apply for registration in every State in which he is liable, within thirty daysfrom the date on which he becomes liable to registration.
• Casual/ non-residents should apply at least five days before their commencement of business.
• Registration number in GST will be PAN based and hence, having PAN would be a prerequisite for obtaining registration.
• The assessee must obtain separate registration for each State, as registration under GST will be State-wise,
• The assessee has an option to obtain a separate registration for each of the ‘business vertical’ in the same State.

Special registration for casual taxable person and non-resident taxable person (section 24)

A casual taxable person or a non-resident taxable person shall apply for registration at least five days prior to the commencement of business. Section 24 provides for special provisions relating to casual taxable person and non-resident under GST.

Casual/non-resident taxable person may obtain a temporary registration for a period of 90 days (extendable for additional 90 days).

A person who obtains registration u/s 24, will be required to make advance deposit of GST (based on his estimated tax liability).

Collecting GST

Only a registered taxable person can collect GST. The taxable person must prominently indicate the GST amount on tax invoices.

Returns

A normal taxpayer will be required to furnish three returns monthly and one annual return. There are separate returns for a taxpayer registered under the composition scheme, Input Service Distributor, a person liable to deduct or collect the tax (TDS/TCS).

GST Act : Major Amendments

What is the GST Bill?

A bill is a draft of a proposed law presented to the Parliament for discussion. Once it is passed by the Parliament, it becomes an act. So GST Bill has now become GST Act.

Are There Any Changes to the GST Act?

The Model GST law was first drafted in June 2016 and later revised in November 2016. Lok Sabha has passed the 4 bills with certain amendments. Here is a list of the major changes proposed in GST bill:

Applicability of GST Law in the State of Jammu and Kashmir

J&K Finance Minister Haseeb Drabu has confirmed that J&K will apply GST. However, since J&K has a separate constitution and has special provisions regarding legislature, CGST & IGST will be passed separately. SGST will be passed separately, similar to the other states.

Employer’s Gifts to Employee Will No Longer be Taxed under GST

Earlier the supply of goods or services between related persons (made during the course of business) was treated as ‘supply’ even when there is no consideration. Employer and Employee were covered in the definition of related person. So, it stood that any supply of goods or services by employer to his employees (even if free of cost) would have been covered under the scope of GST.

Proposed change to the Act provides that GST will not apply on gifts upto Rs. 50,000 by an employer to a particular employee. However, gifts above Rs. 50,000 will attract GST.

GST not Applicable on Sale of Land/Building

Earlier, the term ‘goods’ included all movable property including actionable claims. Only money and securities were excluded. “Services” had a vague definition of “anything other than goods”.

Thus, there was an apprehension that the Government may levy GST on supply of immovable property (land/building) apart from levy of Stamp duty.

Now, the government has clearly mentioned in Schedule III that sale of land and/or building will neither be treated as a supply of goods nor a supply of services, i.e., GST will not be applicable on this.

So currently it stands that:

• GST will apply on renting, leasing of land and/or building
• GST will NOT apply on sale of land/building (Stamp duty will continue to apply)
• GST will apply on works contract, i.e., constructing a building
• GST will apply on sale of an under-construction building

However, there are discussions of bringing in sale of land and/or building under GST within 1 year from GST implementation date.

Fixing the Upper limits of GST rates- CGST- 20% & IGST- 40%

Earlier, the upper cap fixed was 14% and 25% respectively in both the laws. Now, the upper cap has been fixed at 20% and 40% respectively under CGST and IGST Law to keep a flexibility for rates increase in future. However, the GST slabs remain the same – 5%, 12%, 18% and 28%.

Petroleum Products Will Come under GST

The petroleum products (crude oil, high speed diesel, petrol, natural gas and aviation turbine fuel/ATF) have now been brought under GST.

This will be highly beneficial to Indian businesses as businesses now can take input credit on petrol products purchased. Many industries like the plastic and chemical industries have petroleum products as inputs for manufacture. Besides, machinery, vehicles use petrol/ATF to run. Availability of input credit will help to reduce prices of goods.

Unregistered Seller and registered Buyer – GST is Applicable on Reverse Charge Basis

An unregistered supplier cannot charge GST on sales. The Model law did not mention the tax treatment if an unregistered dealer sold to a registered buyer.

The Act now provides that when a registered buyer buys from an unregistered dealer, then reverse charge is applicable, i.e. the buyer (recipient of  goods/services) is liable to pay GST. This is similar to the current purchase tax on purchase of goods from an unregistered dealer applicable in many states.

Reduction in Composition Rates

Particulars	Earlier Composition Scheme	Now in GST Act
Trader	1%	0.5%
Manufacturer	2.5%	1%
Restaurant	N/A	2.5%
Service provider	N/A	N/A

Reduction in composition rates is a welcome move for the MSME sector. Composition scheme has many restrictions such as non-availability of ITC, not eligible for inter-state transactions. Reduction in composition rates will attract more taxpayers to register.

However, service providers are still not eligible for composition scheme thus burdening the various professionals and freelancers.

No Permission Required for Composition Scheme

Now a taxpayer, whose turnover was less than 50 lakhs in the last financial year, can OPT to pay under composition scheme. He does not have wait for the permission of the proper officer. He can directly register himself under composition scheme.

Change in the Provision Time of Supply of Services

Model GST law contained that the time of supply of services (i.e., the point of taxation when liability to pay tax arises) would be the earlier of:

• Date of issue of invoice, OR
• The last date on which the invoice should have been issue, OR
• Date of receipt of payment by the supplier.

Now in the Act, as passed in the parliament, the provisions for determining time of supply for services have been changed. Thus, the time of supply of services shall be earlier of the following dates:

If the invoice is issued within time prescribed:

• Invoice issue date,OR
• Date of receipt of payment

—whichever is earlier

If the invoice is not issued within time:

• The date of providing of services,OR
• The date of receipt of payment

—whichever is earlier

If clauses (a) & (b) are not applicable then:

The date on which the recipient shows the receipt of services in his books of accounts.

Change in Conditions for Disallowing ITC

According to the earlier provisions of GST Law, if the recipient/buyer failed to pay the service provider within 3 months, then the input credit tax (ITC) availed by the buyer would be disallowed. He would be required to pay the amount of ITC availed along with interest. This was only for services. There were no provisions of re-allowing the ITC if the buyer paid after 3 months.

Now, in the amended act, this provision includes goods also. Further, the time period for payment is extended to 180 days instead of 3 months before ITC is disallowed. Now, if payment is made even after 180 days then the ITC will be re-allowed.

Credit of Rent-a-cab, Life Insurance and Health Insurance Allowed if used Against Sale of Same Category

Earlier rent-a-cab, life insurance, and health insurance businesses were not eligible to take input tax credit. Only those services, as notified by the government, which are mandated to be provided to an employee by the employer will enjoy input tax credit.

The earlier provision of denial of credit would have had many consequences. For example, a life insurance company, in case of reinsurance of life insurance, will not be eligible to take credit of GST paid on reinsurance amount.

To reduce the taxpayer’s burden, input tax credit will be allowed for the above services subject to the following condition:

Credit must be adjusted only against outward supply (sale) of the same category of service. It can also be a part of mixed or composite supply.

GST will apply on petrol on a date and at a rate notified by the Government on the recommendations of the Council.

Non-Applicability of GST on Actionable Claims

The Model GST law included “Actionable claims” in the definition of “Goods”, i.e., GST would apply on actionable claims. The Lok Sabha amendments to the GST act in Schedule III clarify that actionable claims, other than lottery, betting and gambling will neither be treated as a supply of goods and not as a supply of services. Thus, GST will be applicable on lottery, betting, gambling but not on other actionable claims.

‘Actionable Claims’ means claims which can be enforced only by a legal action or a suit, example a book debt, bill of exchange, promissory note. A book debt (debtor) is not goods because it can be transferred as per Transfer of Property Act but cannot be sold. Bill of exchange, promissory note can be transferred under Negotiable Instruments Act by delivery or endorsement but cannot be sold. 

Conclusion

These changes show that the government is trying its best to make GST litigation free.