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CS Executive Indirect Tax Summary Notes

CS Executive Indirect Tax Summary Notes Applicable for 2019 Exams and Onward.


Basics of Goods and Services Tax

  • GST does away with the cascading effects of taxation, by providing a comprehensive and continuous chain of tax credits, end to end and taxing only the value-add at every stage
  • India has adopted a dual GST model, i.e., where the tax is imposed concurrently by the Centre and the States. For an intra-state sale, the GST is equally divided between the Centre and the State (CGST + SGST), and for inter-state sales, the GST is collected by the Centre (IGST)
  • The exemptions from GST are those that have been kept out of scope and have been notified separately
  • The taxable event is supply of goods / services for a consideration, during the course of business / for furtherance of business by a taxable person, and exceptions to this have been set out in the separate schedules
  • Key differences between a composite & mixed supply are that the supplies within a composite supply are naturally bundled whereas within a mixed supply are deliberately bundled and that in the composite supply, the principal supply is discernible, whereas that isn’t the case in a mixed supply

Concept of Time, Value and Place of Taxable Supply

  • When the location of supplier and the place of supply is within the same state, it is an Intra-State
    Supply, and if these are in different states, then that is Inter-State supply
  • To conform with international standards, IGST paid on goods taken out of India by a foreign tourist will be refunded under IGST Act, 2017
  • Place of supply is important to determine the nature of sale (inter-state, intra-state, import or export) and the State where state component of GST will accrue
  • Point of taxation means the point in time when goods have been deemed to be supplied or services have been deemed to be provided
  • Vouchers are instruments that can be exchanged as payment for goods / services, of the designated value therein
  • Section 31 mandates that the time limit for issue of invoice is that the invoice must be issued either before the provision of service, or within 30 days from the date of supply of service (45 days for BFSI companies & NBFCs)
  • Section 15 of the CGST Act, 2017 when read in conjunction with Determination of Value of Supply of the CGST rules, states that the value of taxable supply under GST is the transaction value
  • The term “person” also includes legal persons and persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire, howsoever described, of the other, shall be deemed to be related.

Input Tax Credit and Computation of GST Liability

  • Taxes paid on inward supply of inputs, capital goods and services are called input taxes which include Integrated GST, Central GST, State GST or Union Territory GST
  • The credit of these taxes is called input tax credit
  • Under GST, a seamless flow of credit throughout the value chain is available removing the cascading effect of taxes
  • The office of the company which distributes the credit the beneficiary units on the basis of their previous year turnover is called input service distributor
  • Input tax credit (ITC) is a provision of reducing the tax already paid on inputs, to avoid the cascading effect of taxes
  • It is one of the cutting edge features available under the GST Law, unavailable in previous regime of indirect taxation
  • Certain conditions need to be fulfilled in order to avail the Input Tax Credit
  • Basic condition for availing Input Tax Credit amounts to payment of GST by the supplier
  • When another person (job worker) undertakes the work of a manufacturer, to whom the goods belong (Principal), is known as job work
  • GST law lays down the conditions for ITC in the case of a job worker
  • There is no offset of ITC available between the CGST and the SGST.
  • General exemption is granted by notification and is available to all persons which may be absolute or conditional and may be total or partial.
  • Specific, also known as ad hoc exemption is granted to persons under circumstances of an exceptional nature by a special order communicated to the party seeking exemption.

Procedural Compliance Under GST

  • Under GST, return filing is linked to the payment of tax
  • Without filing pending returns, current returns cannot be filed
  • E Way Bill system has been introduced under GST
  • Requirements and exemptions from Registration under GST have been provided in the law
  • A registered person is required to maintain prescribed Books of Accounts
  • Any transaction under GST is vouched by various kinds of documents including Debit / Credit Notes, Tax Invoice, Bill of Supply and Delivery Challans
  • Various monthly, quarterly and annual returns are filed under GST
  • Payment options available under GST include NEFT, RTGS, net banking, debit/credit card
  • Audit under GST is of two types- General and Special

Basic overview on IGST, UTGST, and GST Compensation to States Act

  • President on 13th April, 2017, gave assent to the following four Acts:
    • Central Goods & Services Tax Act,2017
    • Integrated Goods & Services Tax Act,2017
    • Union Territory Goods & Services Tax Act,2017
    • Goods & Services Tax (Compensation to States) Act,2017
  • Federal structure of the Constitution is continued under the GST regime of indirect taxes
  • IGST is levied and collected by the Centre on inter-state supply of goods and services including imports into India and supplies made outside India along with supplies to/from SEZs
  • Owing to shortcomings in previous regime like cascading effect under Central Sales Tax regime, IGST came into being
  • Union Territory Goods and Services Tax Act, 2017 would be applicable in the Union Territories except Delhi and Puducherry
  • Various provisions of the Central Goods and Services Tax Act, 2017 as contained in Act shall apply to Union Territories.
  • The GST (Compensation to States) Act, 2017 provides for ascertaining the amount of compensation that shall be payable to states during the transition period of five years by the Centre on account of revenue loss attributable to levy of Goods and Services Tax
  • The Act provides for calculation and ascertainment of base year, projected growth rate, compensation to be paid and the like.
  • There shall be levied a cess and collected on the recommendations of the Council, for the purposes of providing compensation to the States for loss of revenue

Overview of Customs Law

  • The CBEC is the authority to appoint and designate establishments under the Act
  • The types of Customs Duties are Basic Customs Duty (BCD). Countervailing duty (CVD) and Special Additional Duty (CVD) are now subsumed under GST
  • There are other types of duties, which are protective duties, intended to safeguard the interests of the indigenous goods / industry
  • Goods become liable for duty when they are imported in to / exported out of India
  • The rates of customs duty are specified under the Customs Tariff Act
  • BCD is calculated on Assessable Value (AV). Education Cess (EC) & Secondary Higher EducationCess (SHEC) is calculated on BCD. IGST is calculated on the entire amount (AV plus all Customs Duties). GST Compensation Cess, like IGST is calculated on (AV plus all Duties)
  • Warehouses allow goods to be stored and deferment of duty. The goods are to be released from the warehouse, subject to “clearance”; i.e.; post assessment and payment of Duty
  • The Duty Drawback is a facility that enables the Exporter to obtain a refund of the Import Duties (Customs Duty) paid on inputs, which are processed for manufacture of goods to be exported
  • In transit, the goods remain in the same vessel and consequently reach the port of clearance. In transhipment, however, the vessel after reaching an intermediate port, transfers the goods to another vessel and the second vessel into which the goods are transferred (loaded) from the first vessel, carries the goods to the destination port
  • The Act and the Rules provide well defined procedures for import / export and the roles and responsibilities of the parties involved, including the Importer, the Exporter, the Custodian, the Customs and the Carrier
  • Varied types of assessments could take place pre-post clearances and there could be circumstances that could allow the refund of the import / the export duty, subject to timelines and conditions being fulfilled
  • The Act provides and enunciates circumstances wherein the goods can be confiscated or fines and penalties can be levied in lieu of the confiscation
  • Offences under the Act could attract civil or criminal liabilities or both
  • Advance Ruling refers to the determination, by the authority, of a question of law / fact specified in the application, regarding the liability to pay duty in relation to an activity proposed to be undertaken by an applicant
  • The Central Government may if it deems necessary to do so in the general interest of the public, exempt goods generally or specifically.

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