GST or Goods and Services Tax is an indirect tax that has replaced numerous indirect taxes in India like the excise duty, services tax, VAT, etc. The Goods and Service Tax Act was passed by the Parliament on 29th March 2017 and later on it came into effect on 1st July 2017.
Goods and Service Tax (GST) is levied on the source of services and goods. The GST Law in India is a detailed, multi-stage, destination-based tax which is levied on every worth transaction. LIterally, it is a single domestic indirect tax law for the whole country.
A product/service goes through several change-of-hands along its supply life cycle: Starting from manufacture until the purchase, it actually moves in various phases or stages.
Consider the following stages:
- Purchase of raw materials
- Manufacture or even production
- Warehousing of completed goods
- Offering to wholesalers
- Selling of the item to the retailers
- Offering the end product/service to customers
The Goods and Services Tax is levied on every one of these stages making it a multi-stage tax.
Components of GST
You will find 3 taxes applied under this particular system: CGST, IGST and SGST.
CGST: It’s the tax collected by the Central Government on an intrastate purchase (e.g., a transaction happening within Kerala)
SGST: It’s the tax collected by the State Government on an intrastate purchase (e.g., a transaction happening within Kerala)
IGST: It’s a tax collected by the Central Government for an interstate purchase (e.g., Kerala to Tamil Nadu)
In the majority of cases, the tax system according to the new regime will be as follows:
|Transaction||New Regime||Old Regime||Distribution|
|Sale within the State||CGST + SGST||VAT + Central Excise/Service tax||Revenue shared equally between the Centre and the State|
|Sale to another State||IGST||Central Sales Tax + Excise/Service Tax||There will only be one tax (central) in case of inter-state sales. The Centre shares the IGST revenue based on the destination of goods.|
In the earlier indirect tax regime, there were several indirect taxes levied by both the centre as well as the state. States mostly collected taxes in the form of Value Added Tax (VAT). Every state had a diverse range of regulations and rules regarding the tax collection and distribution.
Inter-state selling of goods was taxed by the centre. CST (Central State Tax) was appropriate in case of interstate sale of goods. The indirect taxes like the entertainment tax, local tax and octroi were levied together by centre and state. These led to a good deal of overlapping of taxes levied by both the centre as well as the state.
After the introduction of GST, many rules and regulations have emerged in the state as well as centre. The GST refund process is also a part of such emerging laws. A small delay in the refund process is going to make a big impact on the working capital and cash flow of the manufacturers and exporters.
The regulations regarding the GST refunds are quite strict. Because of this there exists a delay which actually extends for months. Many exporters are facing issues in claiming ITC (Input Tax Credit) as the national government made it compulsory to match GST Invoices for the claim. Industry experts state that the scenario is the outcome of late fees waiver for some types for suppliers and businesses. Under a few cases, exporters were not able to claim ITC as forms weren’t submitted. A corresponding invoice is usually to be published on the GST portal claiming ITC. All of the invoices must be mirrored in form GSTR 2A, a purchase-related tax return that is automatically rendered for each company by the GST portal.
Various Situations for Refund under GST
- Excessive tax payment accumulated due to misinterpretation or perhaps mistake in calculation.
- Export (also deemed export) of goods/services within the claim of Refund or rebate of collected input credit of duty/tax when goods/services are exported.
- Finalization of provisional assessment.
- Refund for Pre deposit for appeal filing assimilating refund which comes in pursuance of an appellate authority’s order.
- Payment of tax or duty during the investigation but no/ less liability arises in the event of finalization of adjudication.
- Refund of tax paid on purchases done by Embassies or perhaps UN bodies.
- Credit collection as a result of output being tax exempt or maybe nil rated Credit collection as a result of inverted duty structure i.e. due to tax rate differential between inputs and output.
- Year-end or perhaps volume-based incentives offered by the supplier through credit notes.
- Tax Refund for Foreign Tourists.
The Official Refund Process under the GST:
- An Application form to claim a refund may be filed through the GSTN portal.
- An acknowledgement number is going to be provided to the applicant by the means of email or maybe SMS whenever the application is submitted electronically.
- The modifications will be made to return and cash ledger and reduce the “carry forward input tax credit” automatically.
- Relevant documents and refund applications presented should be scrutinized and adhered appropriately within thirty days of filing the refund application.
- In the situation of non-qualification, the refund will be transferred to CWF (consumer welfare fund).
- If a refund amount stated crosses the predetermined length of a refund then the file will go through the pre-audit process for sanctioning the refund.
- Refunds will be credited electronically to the account of the applicant by ECS, NEFT or perhaps RTGS.
- Any amount under thousand isn’t qualified for the refund.
Delay in Refund and the Process
The Subramanian committee of GST suggested that together with the defined GST laws and regulations, the refund application must be done within ninety days and should be processed in the same period. If in virtually any situation the software couldn’t be processed to the given time framework, there’s a six percent of interest recommended together with the refund amount.
It was furthermore stated by Nirmala Sitharaman (finance minister) who cleared that the refund process is going to be done to the period of seven days, of course, if the task gets late for over two weeks then the refund is going to be provided together with the interest.
It’s speculated that the procedure of refund application is going to be smooth and hasslefree due to the digital dependability of it. Furthermore, the data will be published electronically which depicts that the verification as well as the comprehensive analysis of the refund application is going to be much faster than before.
New Compliances Under GST
Apart from internet filing of the GST returns, the GST regime has introduced several brand new systems along with it.
GST introduced a centralised system of waybills by the creation of E waybills. This particular process was launched on 1st April 2018 for inter-state movement of goods and on 15th April 2018 for intrastate movement of goods in a staggered way.
Under the e way bill system, manufacturers, transporters and traders can produce e waybills for the goods transported out of the origin of its to the destination on the same portal with ease. Tax authorities can also be gained as this particular method has decreased time at check posts and helps reduce tax evasion.
Lately, the e-invoicing system has been launched on a trial basis starting from January 2020 and relevant from October 2020. This particular process requires huge companies with an annual aggregate turnover of over Rs.100 crore to comply with a few requirements.
They have to get a distinctive invoice reference number for each business-to-business invoice by uploading on the GSTN’s portal known as the invoice registration portal. The portal verifies the correctness and genuineness of the invoice. Thereafter, it authorises making use of the digital signature in addition to a QR code.
E-invoicing allows interoperability of invoices as well as helps reduce data entry errors. It’s created to pass the invoice info straight from the IRP to the GST portal and the way costs portal. It’ll, consequently, get rid of the necessity for manual data entry while filing ANX 1/GST return shipping and also for the generation of part A of the e-way bills.
Upload of Invoices under the New GST Return System
Here are some of the terms created in the brand new return process, about the upload of invoices.
Whenever a supplier hasn’t uploaded an invoice or maybe a debit note, and a recipient claims ITC, it’ll be termed as a missing invoice. When ITC is availed on missing invoices by a recipient, and those missing invoices are not published by the supplier within the stipulated time frame, then the ITC availed concerning some debit notes/invoices will likely be recovered from the recipient.
Locking of invoices:
A recipient will have the choice to secure in an invoice, in case he agrees with the details reported in this invoice. When there’s an enormous volume of invoices, it might not be realistic to lock in specific invoices, and also in such cases, deemed locking of invoices will likely be done on those invoices uploaded that are neither rejected nor have been kept as pending by the recipient.
Unlocking of the invoices:
An invoice on which ITC was already availed by a recipient will be regarded as a locked invoice, and won’t be open for amendments. If an amendment has to be made to a specific invoice, the supplier is going to have to issue a debit or maybe a credit note. An incorrectly locked invoice can easily be unlocked by the recipient online, subject to a reversal of ITC claim made, and also an internet confirmation thereafter.
An invoice that has been published by a supplier, however, one of the following scenarios is true to that invoice:
- The recipient hasn’t gotten the supply
- The recipient is actually of the opinion that there’s a necessity for an amendment in the invoice
- The recipient is uncertain about availing ITC for the time being
An invoice in such cases will be marked pending by the recipient, and no ITC will be availed by a recipient on these pending voices.
If the recipient’s GSTIN is loaded incorrectly by the supplier, the invoice is going to be apparent for a taxpayer who’s not the receiver of such supplies. As ITC won’t be qualified to be taken on these invoices, the recipient will have to refuse these invoices. To come up with the process of rejecting invoices hassle-free, the matching IT tool will have the choice to produce a recipient/seller master list via which the proper GSTIN may be identified.
Input Tax Credit (ITC) Availing of ITC would depend on uploading of invoices or maybe debit notes by the supplier, within the stipulated time frame. An invoice published by the supplier to the 10th of the following month is going to be noticeable constantly for the recipient. The taxes payable thereafter which may be reported as ITC will be published in the ITC table of the recipient’s return before the 11th of the subsequent month. These invoices are going to be readily available for availing ITC in the return that is filed by the recipient. Invoices which are published by way of the supplier after the 10th of the following month will get published in the concerned field of the recipient’s return of the consequent month, nonetheless, the viewing facility is going to be on a consistent schedule.
Under the brand new return process, a taxpayer is permitted to file 2 amendment returns for every tax period. A taxpayer will additionally be permitted to make payment through an amendment return, which is going to help the taxpayer in saving on the interest liability. Just in case ITC can be purchased in the taxpayer’s electronic credit ledger (ECL), it could be utilised for paying the liability in the amendment return. The amendment of a missing invoice that is reported later by a supplier can be achieved through an amendment return of the concerned tax period to which the invoice belongs.
If a recipient has acknowledged and locked an invoice, amendment of that invoice won’t be permitted. To amend any certain value of a locked invoice, possibly a supplier is going to have to raise a debit/credit note, or maybe a supplier can find the assistance of the recipient in unlocking the invoice so that he’ll have the ability to come up with an amendment by filing an amendment return. Amendment of a GST invoice is permitted only if ITC hasn’t yet been availed by the recipient.