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Short term project report
TOPIC: OVERVIEW AND ANALYSIS
OF GST
Submitted By: Hannah
Gupta
Roll no.: 18DM
Section: D
Mentor Faculty: Dr. Girish Jain
INDEX
1. EXECUTIVE SUMMARY
2. INTRODUCTION TO THE COMPANY
3. ACKNOWLEDGEMENT
- History of GST
- What is GST
- Why it is needed
- Calculation of tax under GST
- Constitution of GST
- Tax rates
- (^) Who is liable to pay tax
- Composition scheme
- Penalties for non-compliance
This project was undertaken on 24 th^ October and was to be completed within the time period of 10 days. The project was completed on 5th^ November.
My first task was to get a brief theoretical knowledge about the working of the GST. To get updated about the rates under GST taxation system.
Next, I was briefed about the procedure to file the gst return. And was told to note down the steps so that I am able to do it on my own after that.
In this course I was briefed about the various returns filed under GST and what is their working and to what areas they are applicable.
In my project I mainly filed two returns first the GSTR-1 which is the quarterly return to be filed and second the GSTR 3-B which the monthly return to be filed.
In the course of my project I faced several practical problems regarding the filing of the GST return and learned how to tackle or solve them.
At the end of my project, I was able to fulfil the purpose of my project i.e. to be able to file GST return on my own and to be able to draw recommendations and conclusions.
INTRODUCTION TO THE COMPANY
CA Nipesh Garg and Associates is an Indian Chartered Accountant firm which is located in Bathinda, Punjab. They provide all sorts of services like accounting, auditing, law services, income tax, etc. They provide best possible solution and consultancy services to their clients in order to fulfil their requirements. They have a small team of CA’s and CS which provide the services to their clients.
With the best services of their professionals and their team they are able to meet and fulfil the requirements of their clients from the past 10 years.
ACKNOWLEDGEMENT
I hereby take the opportunity to express my gratitude and reverence to all those people who have helped me and encouraged me to complete my project successfully.
Firstly, I would like to express my gratitude to Birla Institute of Management Technology for providing me this great opportunity to help me to widen my horizons of knowledge and help me gain this wonderful experience.
I would like to thank my mentor Guide Dr. Girish Jain for his immense guidance and help.
I would like to thank my industry mentor CA Nipesh Garg for giving me his valuable time and allowing me to take the golden opportunity to work under him.
Any successful work requires the effort and guidance of many people and this work is not different. Behind this accomplishment is the blessing and guidance of many people. This small piece of acknowledgement may not be sufficient to show my feeling of gratitude and deep respect to all those people who helped me in completing my project.
After the launch of Gst, the Gst rates have been modified multiple times, recently being modified on 18th January 2018, where the panel of federal and state finance ministers decided to revise Gst rates on twenty nine product and fifty three services.
What is GST?
- GST is a tax levied on taxable supply of goods and services or both in India, except Jammu and Kashmir. Also upto 200 NM(nautical miles) inside sea is “India” for purpose of GST.
- For intra-state supplies within the state or union territory.
Central GST will be payable to the Central Govt.
State GST or union territory GST will be payable to the State or UT Govt. Area upto 12NM inside sea is a part of state or UT which is nearest.
- For Inter State Supplies, IGST will be payable to the Central Government. IGST is payable if supply is beyond 12NM but up to 200NM.
- In addition, GST compensation cess( around 12%) will be payable on pan masala, tobacco products, coal, aerated waters and motor car.
- Basic Custom Duty, Education cess and Secondary and Higher Education Cess of Customs, IGST and GST compensation Cess will be payable on import of goods.
Why GST was needed?
Before the introduction of GST, India followed a multi-point taxation system. India’s taxation powers are shared between the Union Government (Central Government) and the State Government. Both of them are empowered to levy taxes as per the Constitution of India. Both of them levied various taxes differently which were as follows Excise Duty, Service Tax, Central Sales Tax, Custom Duty, VAT(value added tax), etc. As we see there were multiple taxes levied and collected in a very inefficient and non-transparent manner. This was a very cumbersome system because people had to pay tax to central and state government differently.
But after the introduction of GST regime, all these taxes were subsumed under the unified tax system that is the GST. Under this people have to pay tax to the Government at one level only, through the GST website and the tax would be divided equally between the central and the state government.
In the previous taxation system, VAT was charged at different rates in different states which means regulations and rates for VAT were different in each state. And often the states were seen slashing these rates to attract investors in their state resulting in the loss of revenue for both the central as well as the state government. On the other hand GST brings in unified taxation laws across all the states. And here the tax would be divided between the central and the state government on the basis of pre-defined and pre-approved formula. And it would be easy to offer services and goods uniformly across the nation as there won’t be any additional state-levied tax.
In the previous taxation system, to avoid tax-on-tax and the cascading effect ‘MODVAT’ was used which was later termed as ‘CENVAT’ which allowed credit of tax paid on inputs and capital goods up to the manufacturing stage. In 1994, Service Tax was introduced by the
Centre. A decade later, input tax credit scheme was rationalised to permit the cross-flow of credit between the two taxes. In 2005-06, the states began a phase change over from multiple-point sales tax to a value-added tax(VAT) system. Despite the reforms, significant tax-cascading remains in place. For instance, Cenvat remains confined to the manufacturing stage and does not extend to the distribution chain and input tax credit of Cenvat or additional customs duty paid on goods is currently out there to service suppliers paying service tax, they're unable to set-off state VAT or different state taxes paid on their purchase of products.
Hence there was need to amend the Constitution to provide the central and state governments concurrent powers to make laws on the taxation of goods and services. There were many shortcomings in the previous taxation system due to which there was a need for tax reform. The shortcomings were as follows:
- Heavy Compliance Cost- VAT requires maintaining proper records, documentary proofs and detailed accounting of all transactions. Maintaining these records and managing the paper work is a very expensive task.
Under the Gst regime, there is no need of maintaining such heavy records and paper work as filing of return and payment of tax is done online, on a web portal named GSTN.
- No ITC for Inter-State purchases- The benefit of Input Tax Credit is only available to a trader who buys goods from within the states only, it does not allow the benefit to a trader on a inter-state purchasing.
Under the Gst regime, benefit of ITC is available to a trader at inter-state purchases also.
- Problem of Double taxation- The previous taxation system was very complex as both the central and the state government levied tax leading to double taxation.
Under the Gst regime, tax is collected by the central government only and later divided between the Centre and the State.
- Cascading effect- once after the levy of excise duty on the goods by the central government, the goods are again levied with sales tax. In other words, taxed goods are again taxed which is called the cascading effect.
Under the Gst regime, there is only one tax so the major problem of cascading effect is removed.
Calculation of tax under GST and previous taxation system
Under the previous taxation system, tax was calculated on the total value at each stage of production instead of value added at each stage. Which lead to double counting and payment of tax. For example: A sells goods to B, B sells it to C and C finally sells it to the final consumer. Assuming transactions are taking place in state Punjab and rate of tax is 10%.
and sells goods worth Rs. 100 to B who is also a dealer in Punjab. B sells goods to C who is a dealer in Andhra Pradesh worth Rs. 120. Assuming CGST = 10%, SGST = 10% and IGST = 20%.
A sells goods to be worth Rs. 100, so taxable value will be CGST @10%= 10 and SGST @10%= 10 because supply occurred in the same state. When goods are sold to C by B it is an inter-state supply, so the taxable value will be IGST @20%= 24.
Tax paid by B would be: IGST 24
Less: Credit on purchase
CGST @10% 10
SGST @10% 10
Net Tax payable by B 04
Constitution Of The GST Council
GST council has been constituted on 15-9-2016. Union Finance Minister Sh. Arun Jailtley is the Chairman of Council. Following are the members of the council:
- Union minister of State in-charge of Revenue or Finance and
- Minister in-charge of Finance or Taxation or any other Minister nominated by each State government.
GST council will have statutory powers of recommendation only in following situations:
- When petroleum products should be brought in the GST net
- Apportionment of revenue of IGST and CGST among Union and States
- Compensation to states for loss of revenue for period up to five years.
Tax Rates
The GST council has proposed a four slab multi rate structure in a GST. The proposed four rates are 0% (zero rate), 5%, 12%, 18%, 28% with lower rates for essential goods and higher rates for luxury goods. Following are the examples of things under every tax rate:
Items exempted under GST or under 0% tax rate: Milk, Eggs, Curd, Vegetables and fruits, Salt, Kajal, Unbranded Besan, etc. All the items which are necessary for livelihood.
Items under 5% tax rate: Sugar, Tea, Roasted Coffee beans, Edible Oils, Skimmed Milk powder, Packed Paneer, Cashew Nuts, Raisins, etc.
Items under 12% tax rate: Butter, Ghee, Almonds, Fruit Juice, Packed coconut water, preparations of vegetables, Jam & Jelly, Umbrella, Mobiles, etc.
Items under 18% tax rate: Hair oil, Toothpaste, Soap, pasta, Cornflakes, Soups, Ice-cream, Computers, Printers, etc. (81% of items fall under or in 18% GST slab).
Items under 28% tax rate: These basically include small cars, consumer durables like Air conditioners and refrigerators, premium cars, high-end motorcycles, etc. These include all the luxury items.
When a person is liable to pay tax and register
Statutory provisions regarding registration are stated in section 22 to section 30 of CSGT/ SGST Act. Registration and payment of tax and related processes under GST are entirely online.
Taxable person: Under section 2(107) of CGST act, means a person who is registered or liable to be registered under section 22 or section 24 of CGST act.
Registered person: Under section 2(94) of CGST act, means a person who is registered u/s 25 of CGST act, but does not include a person having a Unique Identity Number.
Exempt supplies: The government has the power u/s 11 of the GST act to provide exemption from the payment of GST either partially or wholly, subject to such conditions as may be specified in the notification. The goods or services which are wholly exempt from payment of GST will be considered as an exempted supplies.
Person liable to pay tax:
- Whose aggregate turnover exceeds rs. 20 lakhs ( rs. 10 lakhs for some cases):
Every supplier shall be liable to get registered or pay tax in the state or UT (other than the special category states) from where he makes supply of goods or services or both, if his aggregate turnover in a financial year exceeds 20 lakhs.
In case of special category states, registration is required if his aggregate turnover in a financial year exceeds 10 lakhs.
These states are Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttrakhand.
- It is further provided that the aggregate turnover of person having Permanent Account Number (PAN) will be computed on all India basis. Thus, if a person has a branch in Jaipur and Ahmedabad in addition to Head Office in Mumbai, the aggregate turnover of all the three locations namely Mumbai, Ahmedabad, and Jaipur will be computed to determine the limit of 20 lakhs. The person shall have the same PAN number for the branches.
- Reverse Charge:“ The taxable person may also be liable to pay the tax on reverse charge basis. The aggregate turnover will not include the value of supply on which tax
- This limit is Rs. 50 lakh for the special category states.
- GST rate for composition: for trader-1%, For manufacturers-2%, For restaurants-5%.
- The suppliers who opt for this scheme have to file a quarterly return stating their turnover.
Penalty for non-compliance
There are several penalties imposed by the government for non-compliance of the laws of GST. The penalties are as follows:
- Penalty for delay in filing of GSTR: If a person gets delayed in filing the GST return then he/she is liable to pay the penalty, the penalty is Rs. 100 per day per act. This is 100 for CGST and 100 for SGST i.e. 200 per day starting from the next day of the due date to filr the return. Maximum penalty is Rs. 5000.
- Penalty for not filing GSTR: If a person fails to file the GSTR, then he is liable to pay penalty of 10% of tax due or Rs. 10000, whichever is higher.
- Penalty for committing a fraud: If a person commits a fraud under the GST law, he/ she has to pay penalty of 100% of tax due or Rs. 10000, whichever is higher.
- Penalty for not issuing a invoice: If a person fails to issue an invoice then he/she is liable to pay a penalty of 100% of tax due or Rs. 10000, whichever is higher.
- Penalty for not registering under GST: If a person is liable to get registered under GST and is not Registered then he/she is liable to pay a penalty of 100% of tax due or Rs. 10000, whichever is higher.
- Penalty for incorrect invoicing: If a person issues an incorrect invoice then he/she is liable to pay a penalty of Rs. 25000.
Filing of GSTR
Every registered person has to file return under GST. GST is payable by taxable person on the basis of self-assessment of tax liability. The Government has published the goods and services tax return rules along with the formats. The GST common portal will compute the tax payable by the taxable person on the basis of information as furnished by the taxable person in his returns.
A person can file the GST return annually, quarterly and monthly. Every taxable person shall file the annual return for every financial year electronically on or before the 31 st^ December following the end of such financial year in Form GSTR-9.
Every taxable person has to file quarterly return for every quarter electronically in the Form GSTR-1. Every taxable person has to file monthly return for every month electronically in the form GSTR-3B.
The procedure for filing monthly return GSTR-3B is as follows:
- There is a software called Compubell, in which the data to be filed in the GSTR return is stored. To file the GSTR first you have to fill the data of 3-B on the software and then import it. You can also fill the data manually on the GSTN portal.
- After filling the data you have to generate the summary as shown in the picture. After generating the summary you have to save it at the GSTN portal.
- After we have saved the data at the GSTN portal, we will go to the filing 3-B option and generate summary, the portal will automatically update all the data appropriately and in the relevant boxes.
- After we have saved the data, we can see the relevant details in the portal. They are as follows:
- After we have filed the return, the next step is to pay the tax i.e. to make the payment. For that first you have to create the challan.
- When the challan is successfully generated it would look like the below picture.
- After creating the challan, you have to proceed to make payment there are 2- options available from which you can choose one and make the payment. When you have made the payment the below screen will be show up notifying that the payment was successfully made.
- You can also use the credit claim in your electronic cash ledger and offset the amount to that extent. Once you opt for that option a warning screen will be shown.
- The screen will be asking you that it is going to deduct the amount in your electronic cash ledger and will be taking your consent on that by asking yes or no. when you click on yes the offset will be made.
- After making the payment the user has to file the tax return either through EVC or through digital Signature. If you opt for the EVC it will ask for OTP which will be sent to the registered mobile number of the user.
- Once the summary is generated you need to match the details of GSTR-1 with the GSTR 3-B, so that the amount is same. Once the amount matches then you can submit the return. Once you submit the return you can change the return again.
- After you submit the report you can file the return after sometime when the summary of the submitted report is generated.
- When you file the return, you can do it with either EVC option or digital signature option. As shown in the picture. When you choose the EVC option it will ask for OTP which had been sent on the registered mobile no.
- When the OTP is entered, the return filed successfully is shown.
Conclusion:
- It can be said that GST will bring more revenue to the Government as each and every person has to file the return and pay the tax online. GST cannot be filed manually, and as the chances of corruption is more in the manual filing, electronically filing the return is likely to decrease the tax evasion and non-filing of GST.
- The major problem is that most of the people face problem in filing the return online as before the implementation of GST return was filed manually, so many people don’t understand how to use the software and the GSTN portal. And the GSTN site is not a user-friendly site as it takes a lot of time to file one return and if one thing goes wrong than the person has to do it from the beginning. Most of the times the site or the server gets so heavy that the person is not able to file the return or use the site in any manner.
- In all it can be said that GST will boost up the economy in the long run as India is a collective economy where each state has its own tax and rules which makes the growth slow. So implementing a unified taxation system will boost the economy.
BIBLIOGRAPHY
- www.wikipedia.org
- www.gstindia.com
- www.pezzottaitejournals.net
