GST – input tax credit and registration

1. GST – input tax credit and registration By Bhupendra Agarwal

2. Content Set off under present tax regime Input Tax credit under GST Registration under GST

3. understanding VAT and set off under ‘gst’

4. Customs duties – Set off • Comprise of • Basic Customs Duty (‘BCD’); • Duty equivalent to Excise (‘AED’); and • Special Additional Duty equivalent to VAT (‘SAD’) • Cenvat credit granted to Manufacturer of excisable goods for AED and SAD paid on “inputs” and “capital goods” • Cenvat credit granted to provider of taxable services for AED paid on “inputs” and “capital goods” • Taxes paid to Central set off with taxes payable to Central

5. Excise duty (‘ED’) – Set off Presently basic rate – no education cess Cenvat credit granted to Manufacturer of excisable goods for ED paid on “inputs” and “capital goods” Cenvat credit granted to provider of taxable services for ED paid on “inputs” and “capital goods” Taxes paid to Central set off with taxes payable to Central

6. Value Added Tax (‘VAT’) Each state has its own VAT – APVAT, MVAT etc. Input Tax Credit (‘ITC’) granted to Manufacturer of taxable goods for Local VAT paid on goods including capital goods ITC granted to trader of goods for local VAT paid on purchase of goods Taxes paid to a State Govt. set off with taxes payable to a State (liability for VAT and CST) Reversal of ITC on Stock transfer etc.

7. Central Sales Tax Central Act – administered and collected by each State etc. No Input Tax Credit (‘ITC’) of CST to Manufacturer / Trader CST paid in one state can not be adjusted with CST CST paid to “origin” state “State Govt.” can not be set off with any other taxes (CST or VAT)

8. Service Tax (‘ST’) • Basic rate - no education cess • SBC :15th Nov’2015 – Not set off • KKC : 1st June’ 2016 – Set off only to service provider • Cenvat credit granted to Manufacturer of excisable goods for ST paid on “input services” • Cenvat credit granted to provider of taxable services for ST paid on “input services” • Taxes paid to Central set off with taxes payable to Central

9. Input Tax Credit - GST • Capital goods – Goods the value of which is capitalized in the books of accounts of the person claiming the credit and which are used in the course of furtherance of business • Input – any goods other than capital goods used in the course of furtherance of business • Input service means any service used in the course of furtherance of business • Input Service Distributor • Distribution of GST paid on input services to other offices • Input tax – CGST, SGST and IGST paid on any goods or services including import of goods

10. Input Tax Credit - GST Eligible Input tax credit as per GST Act CGST / SGST / IGST / UGST charged on any supply of goods and services and includes: IGST paid on import of goods CGST / IGST / SGST / UGST paid under Reverse charge on goods and services CGST / IGST /SGST / UGST paid under Reverse charge on supply of goods and services from unregistered person

11. Input Tax Credit - GST • Input tax credit as self assessed in the return of a registered person to be credited to his Electronic Credit Ledger • Conditions for availing Input Tax credit • Possession of tax invoice / Debit note issued by Regd. supplier • Receipt of goods / services • Tax is paid by the supplier • Return is filed by the recipient of goods / services • Amount towards supply of goods and services and tax thereon to be paid to supplier within 180 days from the date of invoice • Not eligible if depreciation on tax claimed under Income tax • Credit to be availed before the due date of filing return for September following the end of financial year or filing of annual return

12. Input Tax Credit - GST Input tax credit admissible only if engaged in taxable supplies Restriction on pipelines and telecommunication tower fixed to earth (to be availed over a period of time) Proportionate input tax credit if engaged in exempt supply FI/NBFC engaged in accepting deposits, extending loans / advances - Eligible to avail only 50% of total input credit for the month

13. Input Tax Credit - GST • Input tax credit not eligible on following:- • Motor vehicles and conveyances (only in specified cases eligible) • Food and beverages, outdoor catering • Beauty treatment, health services, cosmetic and plastic surgery • Membership of club, health and fitness centre etc. • Rent a cab, life insurance, health insurance • Eligible if obligatory for an employer under any law for the time being in force • Travel benefits extended to employees on vacation such as leave • Works contract services for construction of immovable property • Other than plant and machinery • Goods / services used for construction of immovable property • Other than plant & machinery

14. Input Tax Credit - GST • Input tax credit not eligible on following:- • Taxes paid under composition scheme • Goods or services used for personal consumption • Goods lost, stolen, destroyed, written off or disposed by way of gift or free samples • Credit not eligible after the expiry of one year from the date of issue of tax invoice • only in specified cases eligible) • Food and beverages, outdoor catering • Beauty treatment, health services, cosmetic and plastic surgery • Membership of club, health and fitness centre etc. • Rent a cab, life insurance, health insurance • Eligible if obligatory for an employer under any law for the time being in force • Travel benefits extended to employees on vacation such as leave • Works contract services for construction of immovable property • Other than plant and machinery • Goods / services used for construction of immovable property • Other than plant & machinery

15. GST - Issues impacting Set off GSTN – Separate registration for each State Multiple registration within same state permissible Registration compulsory for continuing Credit chain

16. GST payable on “supply” CGST – Intra – State supply of “goods” / “services” SGST (State ‘A’) – Intra – State supply of “goods” / “services” IGST – Import of “goods” and “services” IGST – Inter – State supply of “goods” / “services”

17. Payment of GST • CGST to be utilized in the following order:- • First utilize towards payment of CGST • Second utilize towards payment of IGST • Not to be utilized towards payment of SGST • SGST (State A) to be utilized in the following order:- • First utilize towards payment of SGST (State A) • Second utilize towards payment of IGST • Not to be utilized towards payment of CGST • Settlement by Central Govt. of IGST utilized towards SGST

18. Payment of IGST • IGST to be utilized in the following order:- • First utilize towards payment of IGST • Second utilize towards payment of CGST • Third utilize towards payment of SGST

19. Are you liable to Register under GST GST – “Supply” of goods and / or services • Are you supplier of goods / services • Books of accounts • Bank Accounts • Audited financial statement • Income Tax return • Form 26AS • Excise / VAT / Service tax / Other Returns • Ask your Auditor

20. Are you liable to Register under GST Supply of Goods / Services – Excluded / Exempt Goods / Services outside the ambit of GST Excluded / fully Exempted under GST Below Threshold limit under GST Recipient liable under Reverse Charge Any other – as the case may be

21. They all are “Supplier” under GST • Manufacturer • Trader • Registered Import dealer • First Stage Dealer • Second Stage Dealer • Wholesaler, Stockiest, Retailer • Documents of title – High Seas / SICOI • Commission Agent • Developer / Builder, Contractor • Exporter / Deemed Exporter • Service provider / Job worker

22. Pre-requisite for Registration under GST • Permanent Account Number - “PAN” • Particular State - Place of business • From where goods / services are supplied • Warehouse, godown, other storage place • Place where books of accounts are maintained • Place of business of Agent • Branch office, Front office, Call centre etc. • Classification of Goods / Services • Authorised Signatory • Email / Mobile number • New or Migration from existing Registration

23. How many Registrations under GST • Permanent Account Number - “PAN” • Separate Registration for each State • Single Registration within one State • Option to register each “Business vertical” separately • Outward supply of goods / Services – Compulsory • Fixed Establishment / Place of supply for others • – Capable of Supply or to receive and use services • Input Service Distributor • Dual GST • No concept of centralized registration for Services

24. Registration Number - GST • Structure of registration number • Each taxpayer will be allotted a State wise PAN-based 15-digit Goods and Services Taxpayer Identification Number (GSTIN) • Various digits in GSTIN will denote the following: • State Code 1 2 • PAN 3 4 5 6 7 8 9 10 11 12 • Entity Code 13 • BLANK 14 • Check Digit 15

25. Migration of Existing Taxpayer under GST • Person registered under existing taxes subsumed in GST and having a valid PAN • Person registered under earlier laws to be issued Registration Certificate (‘RC’) on provisional basis • Migration of existing assessee to be handled by :- • Manufacturer – State Govt. (Dealers under VAT) • Trader – State Govt. (Dealers under VAT) • Service provider – Central Govt. (Service tax assessee) • Provisional RC to be valid for 6 months from the date of issue

26. Migration of Existing Taxpayer under GST Dealer to submit prescribed information to relevant authority Validity of provisional registration may be extended further by Govt. (Delay in transition) RC to be granted on final basis by Central/State Government on submission of information RC to be cancelled if dealer fails to furnish the information within prescribed period

27. Migration of Existing Taxpayer under GST • Person may submit application if not liable for registration under GST • Discontinuation of business • Threshold limit • Product / Service not taxable under GST • Relocation of business to another state • Reorganization of supply chain • Central / State Govt. had commenced the process of issuing registration under GST Section 166 of the Model GST Law

28. Thank You email: bhupendra.agarwal@karvy.com Mobile: 99597 30001