From Editor’s Desk: Understanding Place of Supply

About the Author
Swapnil Gorde
Domain Expert, GST
Swapnil is a tax expert having expertise in direct and indirect taxation for over 15 years. He has been speaking at ICAI conferences on E-governance and has post qualification expertise of more than 20 years. Currently, he is working with
numberz as GST consultant.

To understand the Place of Supply under GST, let us first understand Taxable Event of tax. It is important to know the taxable event under any law because it is the activity which attracts the tax levy. This enables the reader to know when he is liable to pay tax under various law concerned.

So, let us first understand various taxable events in the present tax structure.

Taxable events under current structure

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From above, you can make out that, for different, laws there are different taxable events and that makes it complicated for the user to understand law and their implication on his business.

Now under proposed GST structure, there is only one taxable event i.e. Supply of Goods or Services. It is very important, therefore, to understand the place of supply in determining the right charge of tax on supply. The model GST Law lays down the criteria to determine the place of supply. Based on these criteria, you can treat the supply of goods or services as either Intra-State (within the State) or Inter-State (Outside the State).

The location of Goods supplied or Service provider will decide which tax to levy. Based on place of supply, one will able to determine whether to charge CGST & SGST or IGST. So, it is very important for dealers to identify the place of supply.

There are two important components which determine the which tax to be charged for.

  1. Location of Supplier: Registered Place of Business
  2. Place of Supply: It is registered place of business of recipient.

Let’s now understand how a place of supply will change the taxability under GST with some examples.

M/s Alert Car Accessories & Components Pvt. Ltd., having registered office in Mumbai, Maharashtra, had supplied spare parts to M/s True Value Car Services Pvt. Ltd. having registered place of business in, Pune, Maharashtra.

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Let’s now consider another Scenario. M/s Alert Car Accessories & Components Pvt. Ltd., having registered office in Mumbai, Maharashtra, had supplied spare parts to M/s True Value Car Services Pvt. Ltd. Having registered place of business in, Hyderabad, Telangana State.

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Apart from the above example following are also treated as Inter State Supply under GST

  1. Import of goods or services
  2. Export of goods or services
  3. Supply of goods or services to or by a SEZ developer or SEZ unit, even if the supply is within the state.

Section 70 under Model GST Act, make it necessary for the Taxpayer to collect the right amount of Tax. If assessee fails to deduct correct tax, then there will be penalty which needs to be paid by dealers. The dealer must prove that the place of delivery mentioned is correct, so considering this, a dealer needs to maintain such records of place of delivery which enables the GST officer to verify the place of supply. Failing which dealer will be liable to pay tax as determined by the GST officer.

Impact of GST on service providers

GST Impact on Service Providers

The Goods and Services Tax is all set to be rolled out on July 1. Needless to say, both manufacturers and service providers are anxiously waiting for the same.

On one side, there are concerns about increased compliance burden, and on the other side, there are expectations of simplicity and excellent features such as input tax credits.  But how exactly will GST impact the service providers? Let’s find out.

The Good:

The following are some of the positive changes that GST will bring for the service providers:

Credits of CENVAT, Repairs, and Maintenance

In the current regime, VAT and CST paid on the inputs are added to the costs of the service provider and thus increase the cost of services for the end customers. However, under the GST regime, a service provider will be able to claim input tax credits as IGST and SGST/CGST. This will allow them to offer lower service rates to their customers.

Similarly, under the current regime, services providers can claim credits for only the input services. However, under GST they will be able to claim credits for the repair and maintenance costs of machinery and equipment as well.

Elimination of Double Taxation in Works Contract

A works contract is already complex in the current taxation system. In this, there is a transfer of goods as a part of the service contract, which means the invoice contains both the value of the services provided and the value of goods/materials used.

As a works contract involve both goods and services, it attracts VAT and Service Tax both which are levied on 70% of each (total becomes 140%). However, GST will consider both as just a supply of service, and thus a single tax will be levied.

Composition Scheme

Service providers that have a small annual turnover (less than 50 lakhs) will be able to enjoy small tax rates in the form of composition levy. This is to promote the growth of small businesses and services providers in the country.

The Bad:

Although GST is designed to provide as many benefits as possible to the service providers, there are potential drawbacks of the same as well:

High Rate of Taxes

The service tax in the current regime is 15%. However, in GST there will be four tax slabs- 5%, 12%, 18%, and 28% which is applicable to high-end restaurants, hotels, race club service providers etc. Thus, these service providers will have to pay a high rate of tax.

Returns Burden

Service providers will need to file as many as 37 returns every year from each of their service locations. This is a far cry from the current regime under which most providers have to file only 2 returns per year.

No Centralized Registration

There is no concept of centralized registration for business locations in different states. Thus, a service provider will need to get his business registered for every state they have a business facility in.

Anti-Profiteering Risks

GST comes with an “anti-profiteering” clause which empowers the tax inspectors to take measures against businesses who don’t pass on the benefit of input tax credits to their customers. However, it’s possible that the officers misuse the same and create a hindrance for the businesses instead.

Conclusion

GST is expected to make some things simpler, and some things complicated. However, it will certainly improve the system by eliminating the cascading effect, and several types of taxes (luxury tax, service tax, VAT) that create complications. If you are a service provider yourself, then you can certainly make the transition smoother by doing your homework in advance and start the preparations.

Records maintained by MSME under GST

What Are the Records That a MSME Needs to Maintain Under GST?

The GST Council has heavily emphasized on keeping an accurate record of all the accounts, invoices, and transactions for all the businesses that come under the GST regime.
The section 53 and 54 of the GST Model Law cover all the details of keeping accounts and records under the new regime. The important details regarding these that the MSMEs must be aware of are as follows:

Accounts and Other Records

1. A person who is registered under the GST regime must maintain the correct account of the following:

  •  Manufacture or production of the goods.
  • Outward and/or inward supply of goods and/or services.
  • The stock of the goods.
  • Output tax payable and paid.
  • Input Tax Credit availed.
  • Any other relevant records.

The records mentioned above must be kept at the business place concerned with them. However, in case the registered taxpayer has multiple places of business then each one will keep the account of the records that pertain to them individually. So, if a seller has one shop in Delhi and another in Bangalore, then he will need to make two separate accounts for these two places, the records of which will also be kept at the respective locations.

Note: All the records have to be created and maintained in the electronic form. Thus, the businesses must ensure they have required software and programs for the same.

Note: Under certain circumstances, a taxpayer may be exempted from keeping the records in electronic form. However, it is based on the Commissioner/ Chief Commissioner discretion. The reasons for such provision granted he approves in the first place, have also to be recorded in written form.

2. A Commissioner/Chief Commissioner may ask an MSME to maintain additional records other than the ones mentioned above.

3. If the annual turnover of a taxpayer exceeds the GST threshold of Rs. 1 crore then they have to get their accounts audited by a registered chartered accountant or a cost accountant and submit the copy of the audited statement of the accounts to the appropriate officer.

Note: A copy of audited annual accounts have to be submitted with a reconciliation statement via form GSTR-9B when filing the annual return via form GSTR-9.
Note: It is required that a chartered accountant or cost accountant certifies that the value of the supplies mentioned in the annual return reconciles with the annual financial statement that’s being audited. This is to be put in the reconciliation statement.

Retention of Accounts

The records and accounts that are specified above have to be kept by the taxpayer for a period of 60 months, i.e. 5 years, from the last date of filing their annual return.
For instance, the accounts and records of the financial year 2018-19 should be filed by 31 December 2019. However, the taxpayer must keep these accounts and records with them until 31 December 2019.

Conclusion

It is natural for the MSMEs that have been doing business for many years to face difficulties adapting to the changes in records maintenance, a major one of which is electronic format mandating. However, the transition can be made a lot easier and simpler through the use of appropriate GST support software and GST online services.
It is worth noting that given the benefits the GST regime is expected to give, the efforts made by you will certainly be worth it.

Goods and service tax impact on IT sector

Impact of GST on the IT Sector in India

The GST tax regime is to be implemented soon and will affect almost every industry in India.

Although the IT sector is quite different that other retail and manufacturing businesses, it will also be impacted by the GST bill.

The following are some of the ways how GST will have an impact on the IT sector:

Compliance

Compliance will become a major issue under the GST system, as the IT companies will have to file compliance reports at as many as 111 points. This is because you will need to get registration in as many as 37 jurisdictions- 29 states, 7 union territories, and the Centre itself.

Now, since there are three different tax points under the GST regime- central GST, state GST, and inter-state GST, so multiplying 37 by 3 becomes 111. That’s 111 total points you might need to file compliance reports at.

Tax Rate

At present, the service tax rate applicable on IT services is 15%. However, after GST implementation the neutral rate is expected to rise to 17% to 18%. Thus, IT services are likely to become more expensive, especially for the end-customers who won’t be claiming input tax credit like other businesses.

Another major impact of GST will be on VAT and service tax. Under the current taxation system, both VAT and service tax are levied on the sale of software at circa 5% and 15% respectively.  The former is directed to the state government, while the latter to the central government. However, sometimes excise duty is also levied, which is why the cumulative tax can be quite high.

GST will combine multiple taxes, and as a consequence, the total average tax rate will drop to 18% to 25% from the existing 25% to 35%.

Business Process

Since GST is a destination-based tax, which is collected at the final point where the goods are consumed by the end consumer, it will change how an IT business operates today.

Today, most IT companies are registered only with the Central State Tax authorities, and all the billing and accounting work is centralized. However, to be GST compliant these companies will need to get themselves registered with all the states they are operating in. They will also need to charge their customers based on their location of usage. So, a separate bill will be created for a user of your IT service who is based in Mumbai, and another bill for another user of the same service who is based in Surat.

Taxation Process

Under the current taxation system, selling software may attract VAT, Customs Duty, Service Tax, Excise Duty, etc. depending on nature of the transaction. It is also difficult to determine which taxes are applicable due to the complex nature of “software” as it could be treated as “goods” or “services” or both.

GST will eliminate the need for bifurcation as only two types of taxes will be levied on every sale of software- one by the state government and one by the central government.

The GST law holds a lot of promise for the consumers and businesses alike. Given the fact that the government is working hard towards creating a digital India, the IT industry can certainly expect a slew of welcoming reforms.

How goods and services can be supplied under GST

Supply of Goods and Services in GST Explained

There are many differences between the current taxation system and the new GST taxation system. One of these is the taxable events which call for tax imposing.

In the current tax regime, there are three main types of taxable events, which are:

Sale of Goods– on which VAT is levied.

Removal of Excisable Goods– on which Central Excise is levied.

Provision of Taxable Services– on which Service Tax is levied.

In GST, however, there is just one taxable event, which is the “Supply of Goods and Services”, and the current taxes, viz. VAT, Central Excise, and Service Tax are all subsumed under one single GST tax.

However, the “supply” can be further divided into sub-categories, some of which are:

Deemed Supply

Deemed supply is when no consideration is received for the supply of goods and/or services. Some examples of this are as follows:

  • Putting services to a non-business use
  • Transferring or disposing of business assets
  • Giving away free merchandise to customers
  • Dispensing shopping coupons to employees

Mixed Supply

Mixed supply is the supply of multiple goods, multiple services, or both of these. When multiple items are supplied as one item, then as per GST it will be considered as the supply of that item which has the highest tax rate.  For instance, if a package containing chips and aerated drinks is supplied, then since the tax on the latter is higher it will be considered a supply of aerated drinks.

Exempt Supply

Exempt supply is the supply of those goods and/or services that are not taxable under the GST regime. These could be either exempt from the payment of tax under section 10 of the GST Act or are specified in the Act otherwise.

Continuous Supply

Continuous supply is the supply of goods on a continuous or a recurrent basis for a period exceeding three months. Also, in this situation, an invoice has to be created within 30 days from the date when each event that requires the receiver to make a payment is completed.

To bring more clarity to the system, the Model GST Law has given a proper definition to what constitutes as a supply under the clause (a) to section 3(1). According to this, a supply must have the following aspects:

  • It should be made in the course or for the growth of a business
  • It should be made for consideration
  • It can be in any form- sale, exchange, barter, lease, rental, transfer, or disposal.

Time of “Supply”

The current regime levies tax at the point of taxation, which is the point in time when the deemed goods or services are supplied. However, GST will replace that with the time of “supply” of goods or services. The time of supply of goods/services is determined by either of the following (whichever is earlier):

  • The date when the invoice is issued or the last date by which it should have been issued
  • The date when payment is received

By eliminating the redundant elements from the current taxation system GST will certainly improve the efficiency of the business industry. However, the businesses must prepare accordingly and get a clear idea how the changes will be implemented.

Effect of taxes change after implementation of GST

How Will the Taxes Change After GST Implementation?

There are no two ways about the fact that GST will change the course of the Indian economy. Not only it will make taxation a lot simpler and easier, it will also help prevent tax evasion. But how exactly will it change the current taxes regime? Let’s find out.

The Goods and Service Tax will follow a dual taxation system in which there will be just two kinds of taxes:

  1. SGST (State GST): Levied by the State Government
  2. CGST (Central GST): Levied by the Central Government

The Central GST will subsume the following taxes:

  1. Service Tax
  2. Central Excise Duty
  3. Additional Excise Duty
  4. Countervailing Duty (CVD)
  5. Additional duty of customs
  6. Education and Secondary/Higher Secondary cess, surcharge

The State GST will subsume the following taxes:

  1. Sales Tax/VAT
  2. Entertainment Tax
  3. Luxury Tax
  4. Lottery, betting, and gambling tax
  5. Purchase Tax
  6. State surcharge and cesses

GST 4-Tier Tax Structure-

Although GST is all about “One Country One Tax”, or in other words- it will ensure that the same tax is applied in every Indian state, it will follow a 4-tier tax structure.

There will be four different rates under GST viz. 5%, 12%, 18%, and 28%. The lower rates will be levied on essential everyday items, while the higher rates will be implemented on luxury items and demerit goods. In fact, the latter will also attract an additional cess, as decided by the GST council.

Zero Tax Rate:

Keeping affordability in mind, it has been decided that about half of the items belonging to the consumer price index basket like food items such as rice, wheat etc. will be levied a zero-rate tax.

5% GST:

The majority of mass consumption items such as tea, mustard oil, spices, etc. will be levied a 5% tax under GST.

12% and 18% GST:

The 12% and 18% slab will be more of a standard rate and cover the majority of items consumed by an average individual. Examples include toothpaste, soaps, electronics, etc.

28% GST:

The 28% tax slab is reserved for the luxury and non-essential items consumed by the people. These items will also attract an additional cess levied by the Central Government. Examples of some items that will be covered under it include luxury cars, tobacco products, gold, etc.

Taxes Under Composition Scheme

Small businesses whose annual turnover is less than Rs50,000 will be eligible for the composition scheme under GST. Under this scheme, they will have to pay smaller taxes- rates 2%, 1% and 5% for small manufacturers, small traders, and small restaurants, respectively. However, on the downside- they won’t be able to claim ITC (Input Tax Credit).

Taxing of Inter-State Transactions of Goods and Services

The Centre will levy and collect a special form of GST called the Integrated Goods and Services Tax (IGST) for inter-state transactions. This will be the sum of CGST and SGST. Thus:

ISGT= CGST+SGST

Taxing of Imported Goods Under GST

The taxes Special Additional Duty (SAD) and Countervailing Duties (CVDs) that are being applied on imported under the current regime will be subsumed under GST. Thus, instead, IGST will be levied on them. This will be beneficial for the importers in India as they will be able to claim their share of the IGST paid on the goods, as opposed to the current regime in which there is no such provision.

It goes without saying that there will be a slew of changes in the current taxation system once GST is implemented. However, by preparing in advance the businesses will be able to adjust with the transition easily.

Software can make GST transition easier for the businesses

How Can Technology Make GST-Transition Easier for the Businesses?

GST has become a buzzword today, as businesses anticipate its effect on their profits and the consumers wonder whether they will have to shell out more money for their purchases. However, the government is confident that the reforms will be beneficial to everyone.

Now, even though the general consensus is that GST will help curb tax evasion and make taxation system simpler, there is a lot of confusion. The government has tried its best to be transparent about the changes that business owners should expect with GST implementation. However, they have not succeeded so, at least apparently.

For instance, many business owners don’t know what a supply constitutes to? Or how will they file returns or use input tax credits? Well, much of this can only be cleared once GST is implemented and the gears start grinding. However, switching to GST-friendly software can certainly help with the transition, at least to some extent.

How Tax Computing is Done Today

Most of the competitive enterprises use an Enterprise Resource Planning (ERP) software which runs on a real-time basis and offers a suite of integrated applications that the enterprise can use for managing, recording, and updating the data obtained from all kinds of business activities. The software, being tailored for the country’s regulations and compliance standards, makes the calculation of taxes and expenses, and receiving payments from the clients easier and simpler.

How GST Will Impact ERPs

Enterprises that are using old ERPs won’t be able to adapt to the Goods and Services Tax regime as easily as those that are using GST-friendly business suites. This is because GST is not just not one reform or one tax, it’s a complete overhaul of the current taxation system.

Once GST is launched, there will be no VAT for goods or Service Tax for services. The taxes won’t vary from one Indian state to another, and all the goods and services will fall into only four tax slabs: 5%, 12%, 18%, and 28%. There are hundreds of categories, dozens of compliance requirements, invoice format changes, and more. Clearly, a traditional pen and paper based management system won’t survive one day under the new regime, especially because GST is a completely electronic system. The invoices have to be recorded in digital formats, and the returns have to be filed through the GST portal. All this can pose a number of difficulties unless you replace your resource planning system with one that’s GST-ready.

The following are some of the ways a GST-ready ERP Software can make the transition to the new regime smoother:

  1. Calculations Made Easier

One of the most important reasons to switch to a good ERP software is that it will make the calculation of sales and taxes easier. There are so many moving parts in the GST system that maintaining accuracy can easily become challenging, if not impossible. Even a seasoned accountant can’t expect to keep records without making an occasional mistake. However, since a single mistake can often result in a disaster, bringing in a GST-ready ERP software can be far more assuring than becoming fully dependent on manual calculations.

  1. Compliance

GST Bill was designed to curb tax evasion and increase transparency in the system through stern compliance standards and regulations. In fact, the government is going to monitor businesses’ activities closely which is why it has already notified about different kind of penalties for non-compliance. In some cases, a taxable person could face jail time too. A GST-ready ERP software will ensure that compliance standards are met, and minimize the risk of penalties or any other kind of legal action.

  1. Record Maintenance

As per the GST regime, a taxable person has to maintain and keep the appropriate records for 5 years from their last date of filing annual returns. These include ITC availed, the stock of the goods, the inward and outward supply of goods and services, etc. Even for a modest business, 5 years’ worth of records can be substantial. A GST-ready ERP system can make keeping records easily, help adapt to digital-only GST system, and also make searching individual entries in the database easier.

India is one of the fastest growing economies in the world, and a portion of the credit goes to the government’s push to digitization. GST is one of the movements for the same drive, and an enterprise can greatly benefit by putting a proper GST-friendly ERP software in place.

 

Place of supply under under GST

Place of Supply Under GST

To understand the Place of Supply under GST, let us first understand Taxable Event of tax. It is important to know the taxable event under any law, because it is the activity which attracts the tax levy. This enables reader to know when he is liable to pay tax under various law concerned. So, let us first understand various taxable events in present tax structure.

Taxable events under current structure

From the above you can make out that, for different, laws there are different taxable events and that makes it complicated for user to understand law and their implication on his business.

Now under proposed GST structure, there is only one taxable event i.e. Supply of goods or Services. It is very important, therefore, to understand the place of supply in determining the right charge of tax on supply. The model GST Law lays down the criteria to determine the place of supply. Based on these criteria, you can treat the supply of goods or services as either Intra-State (within the State) or Inter-State (Outside the State).

The location of Goods supplied or Service provide will decide which tax to levy. Based on place of supply, one will able to determine whether to charge CGST & SGST or IGST. So, it is very important for dealers to identify the place of supply.

There are two important components which determines the which tax to be charged for.

  1. Location of Supplier: Registered Place of Business
  2. Place of Supply: It is registered place of business of recipient.Let’s now understand how place of supply will change the taxability under GST with some examples.

M/s Alert Car Accessories & Components Pvt. Ltd., having registered office in Mumbai, Maharashtra, had supplied spare parts to M/s True Value Car Services Pvt. Ltd. Having registered place of business in, Pune, Maharashtra.

Let’s now consider another Scenario. M/s Alert Car Accessories & Components Pvt. Ltd., having registered office in Mumbai, Maharashtra, had supplied spare parts to M/s True Value Car Services Pvt. Ltd. Having registered place of business in, Hyderabad, Telangana State.

Apart from the above example following are also treated as Inter State Supply under GST

  1. Import of goods or services
  2. Export of goods or services
  3. Supply of goods or services to or by a SEZ developer or SEZ unit, even if the supply is within the state.

Section 70 under Model GST Act, make it necessary for the Taxpayer to collect right amount of Tax. If assesse fails to deduct correct tax, then there will be penalty which needs to be paid by dealers. Dealer must prove that, the place of delivery mentioned is correct, so considering this, a dealer needs to maintain such records of place of delivery which enables the GST officer to verify the place of supply. Failing which dealer will be liable to pay tax as determined by the GST officer.

 

 

 

 

 

Time of supply under GST

Time of Supply Under GST

Goods and Service Tax commonly known as GST is basically charged on Supply of Goods and Services. In earlier Indirect Taxes taxable event use to be Sales, Removal, or Provision of Services. However, in GST Taxable event in Supply of Goods or Services. Hence, it is must & Important to understand, when is the supply made by dealer. This is the event which triggers liability of GST payment.

Relevant provisions for Time of Supply has been prescribed under section 12,13 &14 of GST Act. Considering the matter is very complicated to understand, I will try and put the same in very simple layman words. However, the wordings are to make you understand concept of Time of Supply under GST and not the legal purpose.

As we are dealing here with two categories are being supplied by any dealers, Goods and Services so let us discuss both the supplies differently.

Time of Supply in Case of Goods (Section 12)

The time of Supply in case goods is determined earlier of following dates:

  1. Date of Issue of Invoice by Supplier OR
  2. Date of Receipt of Payment against supplies

The liberty has been provided for small dealers whose supply value is less than Rs. 1000/-. They have been provided an option to choose any date we have discussed in (1) and (2) earlier.

The section also explains how one should determine date of receipt of payment by the supplier. Such receipt date should be earlier of following:

  1. Date on which the payment is entered in his books of accounts OR
  2. The date on which the payment is credited to his bank account

Time of Supply where Reverse Charge is applicable

In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earliest of the following dates, namely—

  1. the date of the receipt of goods
  2. the date on which the payment is made
  3. the date immediately following thirty days from the date of issue of invoice by the supplier
  4. date of entry in the books of account of the recipient of supply

Supply by way of Voucher

When supply is made by way of coupons, Redemption voucher to any person, GST is also applicable on the same. The time of supply in such case is earlier of the following:

  1. the date of issue of voucher
  2. the date of redemption of voucher

Overriding provision for all above cases where it is impossible to determine the date of supply by above method date of supply shall be:

  1. In a case where a periodical return has to be filed, be the date on which such return is to be filed
  2. in any other case, be the date on which the CGST/SGST is paid.

To simplify the above, please refer to below diagram to understand the complicated provisions of time of supply.

Time of Supply of Services (Section 13)

Now let’s talk about time of supply of services determined by GST law. The time of supply of services shall be the earlier of the following dates,

  1. the date of issue of invoice by the supplier
  2. the last date on which he is required, under section 28
  3. the date on which the supplier receives the payment

The liberty has been provided for small dealers whose supply value is less than Rs. 1000/-. They have been provided an option to choose any date we have discussed in (1) and (2) earlier.

The section also explains how one should determine date of receipt of payment by the supplier. Such receipt date should be earlier of following:

  1. Date on which the payment is entered in his books of accounts OR
  2. The date on which the payment is credited to his bank account

Time of Supply where Reverse Charge is applicable

In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earliest of the following dates, namely—

  1. the date of the receipt of Services
  2. the date on which the payment is made
  3. the date immediately following Sixty days from the date of issue of invoice by the supplier
  4. date of entry in the books of account of the recipient of supply

Supply by way of Voucher

When service supply is made by way of coupons, Redemption voucher to any person, GST is also applicable on the same. The time of supply in such case is earlier of the following:

  1. the date of issue of voucher
  2. the date of redemption of voucher

Overriding provision for all above cases where it is impossible to determine the date of supply by above method date of supply shall be:

  1. In a case where a periodical return has to be filed, be the date on which such return is to be filed
  2. in any other case, be the date on which the CGST/SGST is paid.

Time of Supply in case of Tax rate changes (Section14)

Considering Normal Scenarios here, for Time of supply, let us now consider situation of Tax rate change. It seems that, law maker has learned a lot from previous history of law. Hence, at the inception itself, they have provided for such situations and how to deal with tax in such circumstances. Following Table will provide you god insight for the same.

PARTICULARS GOODS OR SERVICES SUPPLIED BEFORE RATE CHANGE GOODS OR SERVICES SUPPLIED BEFORE RATE CHANGE
Invoice Issued After Rate Change Before Rate Change After Rate Change Before Rate Change Before Rate Change After Rate Change
Payment Received After Rate Change After Rate Change Before Rate Change After Rate Change Before Rate Change Before Rate Change
Time Of Supply Earlier Of Above Date Of Invoice Date Of Receipt Date Of Receipt Earlier Of Above Date Of Invoice
Applicable Tax Rate Old Tax Rate Old Tax Rate Old Tax Rate New Tax Rate Old Tax Rate New Tax Rate

 

Preparing Tax Invoices Under the GST System

Preparing Tax Invoices Under the GST System

Invoices have always been an important part of business operations. However, as the GST regime is going to be implemented from July 1, the government has laid down new rules and formats for issuing GST-compliant invoices.

By following the correct procedure for the GST invoices, a taxpayer will be able to claim Input Tax Credits, which is one of the biggest reforms in the regime.

Under the GST system there can be two types of invoices, which are:

  1. Tax Invoices

Every businessperson who is registered under GST as a standard taxpayer is required to issue tax invoices for their supply of goods and/or services.

The following is a sample invoice format for the GST tax invoices:

The typical entries that have to be filled in a GST tax invoice are:

  • Your name, address, and the GSTIN number.
  • A consecutive serial number that doesn’t contain any special symbols (alphabets and numbers only) and is different for every financial year. For instance, for the financial year 2017-2018, you can use 2017NameOfCompany.
  • Issuing date.
  • The total value of the goods and services.
  • The rate of tax levied (CGST, SGST, or IGST).
  • Place of supply and state name, in case supplied to someone in another state.
  • Description of the goods and services.

Every invoice for the supply of goods has to be issued when:

  • The goods are removed from your place (if the goods are supplied to some other place)
  • The goods are given to the buyer (if the goods are sold at the same place)

Every invoice for the supply of services has to be issued when:

  • Within 30 days from the date, you have supplied the service.
  • Within 45 days from the date, you have supplied the service (if you are a bank or NBFC).

Copies of Invoices

If you are supplying goods then you will have to make two copies of the original invoice:

  • Duplicate- for the transporter of your goods.
  • Triplicate- for yourself.

Of course, the original invoice will be issued to the buyer/recipient. If you are supplying services then you will have to make only one copy for yourself, and the original one will be issued to the buyer/recipient.

  1. Bill of Supply

If you are not liable for GST registration but have opted for the GST composition scheme, then you have to issue a bill of supply instead of a tax invoice. The same is also to be issued when you are supplying exempted goods and/or services. The typical entries that have to be filled in a GST bill of supply are:

  • Your name, address, and the GSTIN number.
  • A consecutive serial number that doesn’t contain any special symbols (alphabets and numbers only) and is different for every financial year. For instance, for the financial year 2017-2018 you can use 2017NameOfCompany.
  • Issuing date.
  • The total value of the goods and services.
  • Accounting code (in the case of services) or HSN code (in the case of goods).
  • Place of supply and state name, in case supplied to someone in another state.
  • Description of the goods and services.

How to Fix Mistakes in Issued Invoices?

You are allowed to rectify errors in the invoices issued by you through credit and debit notes. You can provide the tax and value details of the concerned goods and/or services through these notes which are already given in GSTR-1 and GSTR-2.

While a debit note has to be issued when a short tax is charged (smaller than the applicable tax), a credit note is issued when an excess tax is charged.

Understanding the new invoice formats and regulations is important for every business to become GST-ready. If you haven’t learned about these yet, then it’s best to familiarize yourself as soon as possible.