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Accounts and Records under GST

All about Accounts and Records under GST

Every taxpayer registered under GST must maintain all records at his principal place of business.

  1. Accounts and Other Records

Every registered person is required to keep and maintain all records at his principal place of business.

Who must maintain accounts under GST?

It is the responsibility of the following persons to maintain specified records-

  • The owner
  • Operator of warehouse or godown or any other place used for storage of goods
  • Every transporter

Every registered person whose turnover during a financial year exceeds the prescribed limit (2 crore) will get his accounts audited by a chartered accountant or a cost accountant.

What records must be maintained under GST?

Every registered person must maintain records of-

  • Production or manufacture of goods
  • Inward and outward supply of goods or services or both
  • Stock of goods
  • Input tax credit availed
  • Output tax payable and paid and
  • Other particulars as may be prescribed

What are the accounts which must be maintained under GST?

In our article, we have listed the various accounts to be maintained that businesses need to keep under GST.

For example, under GST, a trader has to maintain the following a/cs (apart from accounts like purchase, sales, stock) –

  • Input CGST a/c
  • Output CGST a/c
  • Input SGST a/c
  • Output SGST a/c
  • Input IGST a/c
  • Output IGST a/c
  • Electronic Cash Ledger (to be maintained on Government GST portal to pay GST)
  1. Accounting entries under GST

In spite of initial transition challenges, GST will bring in clarity in many areas of business including accounting and bookkeeping.

While the number of accounts is more apparently under GST, once you go through the accounting entries you will find it is much easier for record keeping. One of the biggest advantages a trader will have is that he can set off his input tax on service with his output tax on the sale.

Read our discussions on the accounting treatment of various transactions under GST answering queries on how to record and pass entries for the inter-state sale of goods, how to record utilization of input tax credit etc.

  1. Electronic Cash and Credit Ledger

Every registered taxpayer will have 3 ledgers under GST which will be generated automatically at the time of registration and will be maintained electronically.

    • Electronic Cash Ledger- This ledger will serve as an electronic wallet.  The taxpayer will have to deposit money into his cash ledger (add money to the wallet). The money will be utilized to make the payment.
    • Electronic Credit Ledger- The input tax credit on purchases will be reflected here under three categories i.e IGST, CGST & SGST. The taxpayer will be able to utilize the balance shown in this account only for payment of tax (not for interest, penalty etc.)
    • E-Liability Ledger: This ledger will show the total tax liability of a taxpayer after netting off for the particular month. This ledger will be auto-populated.
  1. Period for Retention of Accounts under GST

As per the GST Act, every registered taxable person must maintain the accounts books and records for at least 72 months (6 years). The period will be counted from the last date of filing of Annual Return for that year.

The last date of filing the Annual return is 31st December of the following year.

For example:

For the year 2017-2018, the due date of filing the annual return is 31.12.2018. The books & records of 2017-2018 must be maintained for 6 years, i.e., 31.12.2023

If the taxpayer is a part of any proceedings before any authority (First Appellate) or is under investigation then he must maintain the books for 1 year after the order of such proceedings/appeal has been passed.

  1. Consequences of Not Maintaining Proper Records

If the taxpayer fails to maintain proper records in respect of goods/services, then the proper officer shall treat such unaccounted goods/services as if the taxpayer had supplied them. The officer will determine the tax liability on such unaccounted goods.

The taxable person will be required to pay the tax liability calculated along with penalty.

For More details about GST Click here Pearl GST

 

GST Registration for Recruitment Service Providers

GST registration would be mandatory for most recruitment service providers as they may become a taxable person under GST, Apart from the aggregate annual sales turnover criteria.

Inter-State Supply

If a business engages in inter-state, then GST registration would be required irrespective of annual aggregate turnover.

Casual Taxable Person

Casual taxable person means a person who occasionally undertakes transactions involving supply of goods or services or both in the course or furtherance of business, whether as principal, agent or in any other capacity, in a State or a Union territory where he has no fixed place of business. Most freelance professionals can be classified as a casual taxable person. Hence, GST registration would be mandatory for such persons.

Non-Resident Taxable Persons

Non-resident taxable person means any person who occasionally undertakes transactions involving supply of goods or services or both, whether as principal or agent or in any other capacity, but who has no fixed place of business or residence in India. This clause would again require many freelance recruitment service providers to be in conformance with the GST portal.

GST Rate for Recruitment Services or HR Services

Employment services including personnel search/referral service & labour supply service are classified under a heading Group 99851 of the SAC code. The following SAC codes are listed under group 99851:

SAC Code 998511 – Executive/retained personnel search services.
SAC Code 998512 – Permanent placement services, other than executive search services.
SAC Code 998513 – Contract staffing services.
SAC Code 998514 – Temporary staffing services.
SAC Code 998515 – Long-term staffing (pay rolling) services.
SAC Code 998516 – Temporary staffing-to-permanent placement services.
SAC Code 998517 – Co-employment staffing services.
SAC Code 998519 – Other employment & labour supply services.

GST rate of 18% is applicable for all recruitment services and/or HR services. The above services are not mentioned under the list of services that are exempt from GST. The rates for the above services have also not been explicitly mentioned by the GST Council. Hence, the default GST rate for services of 18% would be applicable for the above services.

For More details about GST Click here Pearl GST

 

 

Items not covered under GST

This Article is to tell that Certain “Tax/Goods/services” impose by Government are Not Applicable for GST

Even after 01.07.2017 the day when GST is implemented, the following “Tax/Goods/services” will still be there. However, there is no GST on those

Following are some “Taxes” which are not subsumed under GST:

  • Toll Tax
  • Road Tax / Passenger Tax
  • Property Tax
  • Stamp Duty
  • Registration Fee
  • Electricity Duty
  • Custom Duty
  • Import / Export Duty

Following are some “Goods” which are not subsumed under GST:

  • Petroleum
  • Petrol
  • Diesel
  • Petrol crude
  • Aviation fuel
  • Natural gas
  • Alcohol
  • Power Sector

Following are some “Goods” which are not subsumed under GST:

These are classified under Schedule III of the GST Act as neither “Neither Good nor services”.

For More details about GST Click here Pearl GST

Impact of GST on Textile Industry

Let me explain the following major changes dealt with textile industries after implementation of GST

Manufacturing cost:

In the previous regime VAT, OCTORI Duty, Entry tax, Luxury tax are there,

But as of now Under GST no such cost there as everything subsumed under GST so this shows Reduction in manufacturing cost

Input tax credit:

Majority of Textiles are dealt with unorganized sectors and Persons under composition scheme, so GST would enable a smoother input credit system, which would shift the balance towards the organized sector.

Capital Goods:

Currently, the import cost of procuring the latest technology for manufacturing textile goods is expensive as the excise duty paid is not allowed as input tax credit. Whereas under GST, there will be input tax credit available for the tax paid on capital goods.

 

GST Rates & HSN Codes For Cotton Products like- Dhoti,Shirting, Casement, Viol, Sheeting, Suti, Cambric, Lawn, Latha, Lungi & furnishing fabrics, Saree, Zari Border Saree, Zari Border Dhoti

 

Cotton Composition HSN Code GST Tax Rate
Products with more than 85% cotton content & weight is less than 200 gm/sq mtr 5208 5%
Products with more than 85% cotton content & weight is greater than 200 gm/sq mtr 5209 5%
Products with less than 85% cotton content, mixed with additional fabrics & weight is less than 200 gm/sq mtr 5210 5%
Products with less than 85% cotton content, mixed with additional fabrics & weight is greater than 200 gm/sq mtr 5211 5%
Other Cotton Products 5212 5%

GST Rates & HSN Codes For Synthetic Filament Yarn Products like- Parachute Fabrics, Tent Fabrics, Nylon Furnishing, Umbrella cloth, Polyester Shooting, Polyester Shirting, Other polyester cloth, Nylon Brasso, Nylon jacket, Nylon saree, Terylene saree, Dacron saree, Rayon Crepe, Rayon jackets, Rayon saree, Rayon shirting & Rayon brocade.

Yarn Specification

 

HSN Code GST Tax Rate
Synthetic Mono filament of 67 Decitex or more and of which No cross sectional dimensions exceed 1 mm; strips & the Like of synthetic textile material of an apparent width not exceeding 5 mm. 5407 5%
Artificial Mono filament of 67 Decitex or more and of which No cross sectional dimensions exceed 1 mm; strips & the Like of synthetic textile material of an apparent width not exceeding 5 mm. 5408 5%

 

Export:

Currently, manufacturers/traders are not inclined towards exports due to the extensive procedure costs and delays made in the processing of duty drawback.

Under GST, the system of duty drawback will lose its significance. Input tax credit will be provided as a refund under GST instead of current duty drawback schemes. This would be a significant boost for promoting the export of textile products.

Export promotion capital goods scheme is available for all the cotton-based textile exporters. Under this scheme, exporters can claim the exemption for duty paid if they export six times the value of duty within a period of next six years. It is expected that this scheme would lose its significance under GST.

Conclusion:

There may be a few drawbacks for the textile industry due to the higher tax rate and removal of benefits under cotton value chain, but it is safe to say that GST will help this industry in the long run by getting more registered taxpayers under a well-regulated system. It can also be hoped that GST will help the textile industry to get more competitive in both the global and domestic markets and create opportunities for sustainable, long-term growth.

For More details about GST Click here Pearl GST

Impact of GST on Outdoor Catering

Outdoor caterer” means a caterer engaged in providing services in connection with catering at a place other than his own but including a place provided by way of tenancy or otherwise by the person receiving such services.

GST rate for Outdoor Catering:-

Supply of Food/drinks in outdoor catering GST Rate 18 %

Input Tax Credit: –

With Full Input tax Credit.

SAC Code for Outdoor Catering Service:-

  1. SAC Code – 996334

Catering Services in Exhibition halls, Events, Marriage Halls and other outdoor/indoor functions.

  1. SAC Code – 996335

Catering Services In Trains, Flights Etc.

  1. SAC Code – 9963

Supply, by way of or as part of any service or in any other manner whatsoever in outdoor catering wherein goods, being food or any other article for human consumption or any drink (whether or not alcoholic liquor for human consumption), as a part of such outdoor catering and such supply or service is for cash, deferred payment or other valuable consideration.

Place of Supply:-

Within the State means CGST and SGST will come.

Outside the State means IGST will come.

If you’re supplying in a commercial place where there is residential accommodation/lodging facility available at declared tariff of >=7500/day Then GST = 18% with full ITC Or else < 7500/- GST= 5% without ITC

For More details about GST Click here Pearl GST

Impact of GST on Tour operators

Small notes to tour operators

Tour Operators consists of customized tours, including travel, accommodation and sightseeing. Only outbound tour sold to a foreigner for visiting another foreign country and the payment is received by convertible foreign exchange is exempt from GST. All other tours (including inbound tours for foreigners) are taxable. GST paid on the purchase of tour packages from another tour operator can be claimed as ITC and only the difference of tax can be paid to the Government. A tour operator must keep accurate records to establish which part of the package relates to exempt supplies, zero rated supplies (travel to a place outside India sold to foreign citizen) and taxable supplies

GST on Hotels and lodges

Room Tariff GST ITC
Room tariff less than Rs 1000 NIL  (Exception) Not applicable
Rs1000 to Rs2,499 12% Applicable
Rs2500 to Rs4999 18% Applicable
Rs5000 or more 28% Applicable

 

The taxable supplies for the travel industry are as follows:

  • Inbound tour packages (domestic tour), whether sold to Indian resident or Foreign resident.
  • Outbound tour packages (international tour) sold to Indian resident.
  • Agency services.
  • Passenger Transportation services (Sea, Land and Air Transport).

 

Some of the related taxable purchases in the Travel Industry which are subject to GST are as follows:-

  • Hotel Accommodation;
  • Transportation/ hire of vehicles /car hire;
  • Tour package;
  • Restaurant meals and dining places;
  • Tickets for entry to exhibitions, entertainment venues;
  • Hospitality (spas and resort);
  • Agency commission;
  • Booking Fees;
  • Tourist Guide;
  • Tour Deposit;
  • Amendment Charges for Inbound/Outbound Tour Package and Domestic Air Ticket;
  • Travel Insurance;
  • Visa Service Fees; and
  • Other related tourism services.

Travel Insurance:

Supply of travel insurance services for an inbound/outbound tour is taxed at applicable rates and the premium charged is subject to GST at 18%. The arranging of travel insurance for inbound or outbound tour is taxed at applicable rates and the commission charged for such a supply is subject to GST at 18%.

AIR TICKETING SERVICE FEE

  • Profit mark-up/service fee charged for domestic flight is subject to GST at 18%
  • Profit mark-up/service fee charged for international flight dis-embarking from India, is subject to GST at 18%
  • If any service fee charged separately, then it is subject to GST @ 18%.
  • Any commission received from airline is subject to GST @ 18%.

TOUR PACKAGES

  • Supplies of Tour operator’s services are taxable at the rate of 5%. No input tax credit will be allowed when the rate of 5% is charged.
  • When supply is made to a registered person, GST of 5% will be charged depending upon the location of recipient of services i.e. Customer. Taxable invoice will be issued at the Customer’s registered address under GST.
  • When supply is made to an unregistered person, GST will be charged depending upon the location of Tour Operator. Bill of supply will be issued for the services rendered by Tour Operator.
  • The tour operator has to identify the nature of supply i.e. whether the tour package services are intra-state or inter-state, which in turn depends upon whether the recipient of service is registered or un-registered.

For More details about GST Click here Pearl GST

Revocation of cancellation on GST

What is revocation?

Revocation means the official cancellation of a decision or promise. Revocation of cancellation of registration means that the decision to cancel the registration has been reversed and the registration is still valid.

When revocation of cancellation is applicable?

Revocation is applicable only when the tax officer has cancelled the registration of a taxable person on his own motion. Such taxable person can apply to the officer for revocation of cancellation within thirty days from the date of the cancellation order

Procedure

  • A registered person can submit an application for revocation of cancellation, in FORM GST REG-21, if his registration has been cancelled suo-moto by the proper officer.
  • He must submit it within 30 days from the date of service of the cancellation order at the Common Portal.
  • If the proper officer is satisfied he can revoke the cancellation of registration by an order in FORM GST REG-22 within 30 days from the date of receipt of the application. Reasons for revocation of cancellation of registration must be recorded in writing.
  • The proper officer can reject the application for revocation by an order in FORM GST REG-05 and communicate the same to the applicant.
  • Before rejecting, the proper officer must issue a show cause notice in FORM GST REG–23 for the applicant to show why the application should not be rejected. The applicant must reply in FORM GST REG-24 within 7 working days from the date of the service of notice.
  • The proper officer will take decision within 30 days from the date of receipt of clarification from the applicant in FORM GST REG-24.

Note: Application for revocation cannot be filed if the registration has been cancelled because of the failure to file returns. Such returns must be furnished first along with payment of all dues amounts of tax, interest & penalty.

For More details about GST Click here Pearl GST

Cancellation of GST Registration:

Who can cancel the GST Registration?

  1. By the request of Tax payer incase
    • If His turnover is less than Rs 20lakhs,
    • Other cases–

-The business has been discontinued

-The business has been transferred fully, amalgamated, demerged or otherwise disposed —the transferee (or the new company from amalgamation/ demerger) has to get registered. The transferor will cancel its registration if it ceases to exist.

-There is a change in the constitution of the business   (For example- Private limited company has changed to a public limited company)

  1. Cancellation by tax officer

The registration can be cancelled, if the taxpayer-

  • Does not conduct any business from the declared place of business OR
  • Issues invoice or bill without supply of goods/services (i.e., in violation of the provisions) OR
  • Violates the anti-profiteering provisions (for example, not passing on benefit of ITC to customers)
  1. Legal Heirs in case of death of tax payer

Procedure for GST Cancellation

When turnover is less than Rs20Lakh

Submit Electronic FORM GST REG-29 at the common portal, the proper officer shall, after conducting an enquiry as required will cancel the registration.

Note: Taxpayers who have not issued tax invoice can avail above service. If the taxpayer has issued any tax invoice then FORM GST REG-16 needs to be filed.

In Other Cases

All other cases must file an application for cancellation in FORM GST REG 16.

The legal heirs of the deceased taxpayer will follow the same procedure as below.

  • Application for cancellation has to be made in FORM GST REG 16.
  • The following details must be included in FORM GST REG 16-
  • Details of inputs, semi-finished, finished goods held in stock on the date on which cancellation of registration is applied
  • Liability thereon
  • Details of the payment
  • The proper officer has to issue an order for cancellation in FORM GST REG-19 within 30 days from date of application. The cancellation will be effective from a date determined by the officer and he will notify the taxable person

Cancellation by tax officer

  • If the proper officer has reasons to cancel the registration of a person then he will send a show cause notice to such person in FORM GST REG-17.
  • The person must reply in FORM REG–18 within 7 days from date of service of notice why his registration should not be cancelled.
  • If the reply is found to be satisfactory, the proper officer will drop the proceedings and pass an order in FORM GST REG –20.
  • If the registration is liable to be cancelled, the proper officer will issue an order in FORM GST REG-19. The order will be sent within 30 days from the date of reply to the show cause.

Here is a list of forms required for GST cancellation process:

Name of Form Purpose of Form
Form GST REG 16 Cancellation of registration by registered person
Form GST REG 17 For GST Officer to issue show cause notice for cancelling registration
Form GST REG 18 For registered person to reply to show cause notice by registered person
Form GST REG 19 For GST Officer to pass order for cancellation of GST registration by
Form GST REG 20 For registered person to stop the cancellation proceedings based on explaination from Form GST REG 18
Form GST REG 21 For registered person to apply for revocation of cancellation
Form GST REG 22 For GST Officer to pass order for revoking cancellation of GST registration

REFER NEXT ARTICLES FOR REVOCATION OF GST CANCELLATION

For More details about GST Click here Pearl GST

Legal Services

Legal service means any service provided in relation to advice, consultancy or assistance in any branch of law, in any manner and includes representational services before any court, tribunal or authority”.

GST on Legal Services

Applicability of Reverse charge basis for the following services:

  1. A partnership firm of advocates or an individual as an advocate, other than a senior advocate, by way of legal services to –
  • An advocate or partnership firm of advocates providing legal services;
  • Any person other than a business entity;
  • A business entity with an aggregate turnover up to INR 20,00,000/- (INR 10,00,000 in case of special category states) in the preceding financial year.

 

  1. A senior advocate by way of legal services to:
  • Any person other than a business entity;
  • A business entity with an aggregate turnover up to INR 20,00,000/- (INR 10,00,000 in case of special category states) in the preceding financial year.
  • In the above context, the meaning of term ‘advocate’, ‘senior advocate’ and ‘business entity’ are important:

Advocate

“Advocate means an advocate entered in any roll under the provisions of this Act”.

Senior Advocate

  • The definition of Senior Advocate states:There shall be two classes of advocates, namely,
  • senior advocates and other advocates. An advocate may, with his consent, be designated as senior advocate if the Supreme Court or a High Court is of opinion that by virtue of his ability standing at the Bar or special knowledge or experience in law he is deserving of such distinction.
  • Senior advocates shall, in the matter of their practice, be subject to such restrictions as the Bar Council of India may, in the interest of the legal profession, prescribe.
  • An advocate of the Supreme Court who was a senior advocate of that Court immediately before the appointed day shall, for the purposes of this section, be deemed to be a senior advocate.

Business Entity

The notification states that business entity means any person carrying out business.

Applicability of GST on Legal Services

Provisions of reverse charge mechanism under legal services, The provisions are as under

Supply of services supplier Recipient
Services provided by an
individual advocate including a senior advocate or firm of
advocates by way of legal
services, directly or indirectly
Explanation – “legal service”
means any service provided in relation to advice, consultancy or
assistance in any branch of law, in any manner and includes representational service before any court, tribunal or authority”
An individual advocate
including a senior advocate
or firm of advocate
Any business entity
located in the taxable
territory

Above provisions clearly states that when legal services are provided by an individual advocate (including senior advocate) or firm of advocates to a business entity, than in such case, under reverse charge mechanism, GST is payable by business entity on such
transaction.

 

Finally, the applicability of GST on legal services can be summarized as under:

Service Providers Service Recipient Taxability
Firm or individual
advocates providing
legal service
Firm or individual advocates providing legal
service
Exempted vide notification
no. 12/2017
Firm or individual
advocates providing
legal service
Any person other than business entities Exempted vide notification
no. 12/2017
Firm or individual
advocates providing
legal service
Business entities having turnover up to INR
20,00,000 (or INR
10,00,000 in some case)
Exempted vide notification
no. 12/2017
Firm or individual
advocates providing
legal service
Business entities having
turnover above INR 20,00,000 (or INR
10,00,000 in some case)
Tax payable under Reverse Charge Mechanism
 Senior advocate
providing legal
service
Any person other than business entities Exempted vide notification
no. 12/2017
 Senior advocate
providing legal
service
Business entities having turnover up to INR 20,00,000 (or INR
10,00,000 in some case)
Exempted vide notification
no. 12/2017
 Senior advocate
providing legal
service
Business entities having turnover above INR 20,00,000 (or INR
10,00,000 in some case)
Tax payable under Reverse Charge Mechanism

 

In case GST is applicable, the GST rate applicable on legal services would be 18%

 

Conclusion:

However, services provided or agreed to be provided by an individual advocate or firm of advocates by way of legal services, directly or indirectly is liable for REVERSE CHARGE MECHANISM, where the service recipient i.e. business entity is liable to pay 100% tax at 18% rate in GST.

For More details about GST Click here Pearl GST

GST on Telecom Services

GST on Telecom Services

Overview

Telecommunication services presently attract service tax of 14% along with Swachh Bharat Cess (SBC) of 0.5% and Krishi Kalyan Cess (KKC) of 0.5%. While service tax is a pure value added tax, the above mentioned cesses are not. This is for the reason that while no ITC (input tax credit) of SBC is available, the ITC of KKC is allowed to be set off only against KKC. Therefore, both the cesses are turnover tax.

Impact of GST

As against the above, the telecommunication services will attract GST of 18% in the GST regime, which is a pure value added tax because full ITC of inputs and input services used in the course or furtherance of business by the telecommunication service provider would be available.

Input tax credit (ITC)

Moreover, presently telecom service providers are neither eligible for credit of VAT paid on goods nor of special additional duty (SAD) paid on imported goods/equipment. However, under GST, telecom service providers would avail credit of IGST paid on domestically procured goods as also imported goods. As per some estimates, this additional input tax credit would be as much as 2% of the turnover of the telecom industry. Further, ITC of service tax paid on assignment of spectrum by the Government in 2016 is presently allowed to be availed of by the telcos over a period of 3 years. In the GST regime, the entire credit can be taken in the same year. Resultantly, the balance two-thirds credit of the previous year would be admissible in the current financial year itself. All of these would reduce the telcos liability to pay GST through cash to about 87% of what they paid in the last fiscal.

Conclusion

Thus, the telcos are required to re-work their costing and credits availability and re-jig their prices and ensure that the increased availability of credits is passed on to the customers by lowering their costs.

For More details about GST Click here Pearl GST