GST - INTRODUCTION

GST India – Goods & Service Tax

Goods and Service Tax is being glorified as a system of taxation by which economy will take an upward swing and further it will ease the trade and industry with respect to the indirect tax system of the country. “Only one” indirect tax has to be paid by the trade and industry and all the other indirect taxes will be subsumed in GST.

What is GST ?

GST is a consumption based tax levied on sale, manufacture and consumption on goods & services at a national level. GST is an Indirect Tax which has replaced many Indirect Taxes in India. Exports and direct tax like income tax will not be affected by GST. GST apply to all goods other than crude petroleum, motor spirit, diesel, aviation turbine fuel and natural gas. It is applied to all services barring a few to be specified. With the increase of international trade, GST has become a global standard. GST tax system take the form of “dual GST” which is concurrently levied by central and state government. This will comprise of:

• Central GST (CGST) that will be levied by Center
• State GST (SGST) that will be levied by State
• Integrated GST (IGST) – that will be levied by Central Government on inter-State supply of goods and services.

Taxes which are subsumed under GST

Central Indirect Taxes & Levies Central Excise Duty Additional Excise Duties Excise Duty levied under the Medicinal Preparations (Excise Duties) Act, 1955 Service Tax Additional Customs Duty (CVD) Special Additional Duty of Customs Central Surcharge and Cess State Indirect Taxes & Levies VAT / Sales Tax Entertainment tax (other than the tax levied by local bodies) Central Sales Tax Octroi and Entry Tax Purchase Tax Luxury Tax Taxes on Lottery Betting and Gambling State Cesses and Surcharges

Who will pocket taxes?

Within State Transaction : In case of Intra State transactions, Seller collects both CGST & SGST from the buyer and CGST needs to be deposited with Central Govt. and SGST with State Govt.

For State to State Transactions : Integrated Goods and Service Tax (IGST) shall be levied on Inter State transactions of goods and services which are based on destination principle. Tax gets transferred to Importing state. More over it is proposed to levy an additional tax on supply of goods, not exceeding one percent, in the course of inter-state trade or commerce, to be collected by the Central Govt. for a period of two years, and assign to the States where the supply originates. Valuation of stock transfers to be determined. Exports and Supplies to SEZ units will be zero rated.

GST Example

take apparel manufacturing as an example and 5% as the GST applicable.

The manufacturer buys raw material worth INR 500 on which GST comes to INR 25 (5% of 500).

He then adds his own value of INR 100 to the materials during the manufacturing process. This brings the gross value of the product to INR 625 (Include GST INR. 25)

Now,  Manufacturer sells the apparel to wholesaler at INR 700. GST on sale would be INR 35, he can set some of his tax off as he has already paid it while purchasing the raw materials. Therefore, the final GST that the manufacturer is obliged to pay, will be of INR 10 (35-25) (total tax amount till now minus the tax he has already paid).

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How to become a Certified Public Accountant (CPA)

Demanding requirements

The CPA has some of the most demanding requirements of any accounting certification. In the U.S., the states grant the CPA license, so the state boards of accountancy determine the licensure requirements. Most state boards have settled on these three CPA requirements:

1. Pass the Uniform CPA Exam
2. Earn 150 credit hours of education
3. Acquire 1-2 years of accounting experience

Some state boards also expect candidates to meet an additional requirement by passing an ethics exam. While the general requirements are the same across the country, the specifics vary per jurisdiction. Therefore, you must contact the state board to which you would like to apply to find out exactly what it’s going to take to earn the CPA and if you’ve got it in you.

If you attended a college or University outside of the United States, you will have to check to see if your educational institute is accredited and recognized by the AICPA. If it isn’t, you will not be able to take the CPA exam. NASBA has created a resource to help identify approved educational institutes.

Low exam pass rates

The CPA Exam pass rates have a reputation for being fairly low. While the percentages rise and fall from quarter to quarter, the average CPA Exam pass rate is less than 50%. The exam’s purpose includes protecting the public interest, and as long as that’s the case, I expect the exam will always be quite tough. In order to better test the knowledge and abilities required of current CPAs, the AICPA regularly modifies the exam with changes like content updates, new question types, altered question totals, and testing time adjustments. However, you don’t need to be discouraged by the low pass rates. They don’t mean that you can’t pass; they just signify that passing the CPA Exam requires a lot of time, effort, and focus. If you’re ready to commit to that, you can pass it

Challenging exam 

The CPA Exam contains 4 sections that test your knowledge of various accounting topics through a significant number of questions. On top of that, the CPA Exam also uses over 600 tasks representing the work of a real CPA to assess your accounting skills.

Strict exam time limit

One final CPA Exam complication you must overcome is the rolling 18-month window in which you must pass the exam. This time period starts as soon as you pass your first section, so you technically have 18 months to pass the remaining 3 sections. If you don’t pass the rest of the exam in this time, you will lose credit for the first section you passed, and you must pass that section again as well as the other remaining sections in 18 months. The beginning of the 18 months will continue to move back, cutting off credit for your oldest passed section and shifting the start to the time you passed your second oldest section. This time limit may sound intimidating, but it is actually more time than you need, as passing the CPA Exam in a year or less is quite possible. You just need to establish a study schedule, stick to it, and keep moving forward with each exam section.

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Composition Scheme under GST

What is GST Composition Scheme?

Every tax system prescribes several actions which need to be taken by businesses to ensure compliance with statutory provisions. Things like periodic payment of taxes, filing timely returns and maintaining prescribed records are necessary steps in a tax system for corporate taxpayers. However, small business owners find it overwhelmingly challenging to deal with such requirements of the law due lack of knowledge and expertise.

To make compliance easier for small businesses, many state governments have provisions in their VAT system for payment of a composition levy by small businesses. This ensures greater compliance without the need for maintaining copious records. Although such a system is missing in Service Tax laws.

The One Nation One Tax Scheme (GST) which promises to club all the indirect taxes into one also boasts a composition scheme for small businesses. The GST Composition Scheme will make compliance with tax laws hassle free for eligible businesses opting for the scheme.

Here are some key features of the scheme:

• Eligibility – Not everyone is eligible to enroll under this scheme. It is meant for taxpayers whose aggregate turnover does not exceed Rs. 150 lakh threshold in a Financial Year.
• Not eligible for Input Tax Credit – As per section 16, those goods and services on which Composition Tax has been paid (under section 8) do not qualify for Input Tax Credit.
• Applies to Intra-state supplies – Local suppliers, i.e., those who supply within a state can only take advantage of this scheme. Inter-state suppliers will come under regular GST laws.
• Needs voluntary application – Taxpayers need to make voluntary registration every year for getting the benefits of GST Composition Scheme.
  However, if the taxpayer crosses the minimum turnover limit of Rs. 150 lakh then he will be transferred to regular scheme.
  Taxpayers who are already a part of VAT Composition Scheme also need to voluntarily register for this scheme.
• Quarterly returns – Instead of filing 3-4 returns monthly, taxpayers registered under this scheme will be required to file returns once every quarter.
• Bill of supply not tax invoice – Unlike regular scheme where a taxpayer needs to present tax invoice to the tax authorities, taxpayers registered under this scheme need to present bill of supply.
• Penalty – If a taxable person is found not eligible for this scheme then the tax authorities can impose a penalty equal to the amount of tax on such person along with his tax liability. So utmost care needs to be taken when opting for this scheme and paying taxes.

Registration under Composition Scheme

Any existing taxpayer not under Composition Scheme may choose to opt for it (subject to being qualified), only from the beginning of the next Financial Year. The application will have to be filed on or before 31st March of the Previous Year so that returns can be filed accordingly.

Dealers under Composition Scheme may be allowed to switch over to normal scheme even during the year if they want to. However, they cannot switch over to Composition Scheme again during the same Financial Year.

GST rate under composition scheme

Returns under Composition Scheme:

A registered taxable person paying tax under the provisions of Composite Scheme shall furnish a return for each quarter in prescribed form in prescribed manner within eighteen days after the end of relevant quarter.

GSTR-4 has to be filed by a dealer quarterly under Composition Scheme before 18th day of following month

Composition dealers need to furnish the first return for the period starting from the date on which they become a registered taxable entity till the end of the quarter in which the registration has been granted.

Impact on Input Tax Credit during transition between Regular Scheme and Composition Scheme

Transition from Composition Dealer to Normal Dealer

Section 16(3) of Model GST Law states that when a taxpayer ceases to pay composition tax and becomes liable to pay tax as a regular taxpayer under GST then he is eligible to take Input Tax Credit in respect of inputs held in stock and inputs contained in semi-finished and finished goods held in stock as on the day immediately preceding the day from which he becomes liable to pay tax under regular scheme.

Transition from Normal Dealer to Composition Dealer

As per section 16(12) of Model GST Law, when a taxpayer liable to pay tax as a regular taxable person switches over as a taxable person for paying tax under section 8 (GST Composition Scheme), then he needs to pay an amount by way of debiting in the electronic credit /cash ledger equivalent to Input Tax Credit in respect of inputs held in stock and inputs contained in semi- finished and finished goods held in stock as on the day immediately preceding the day of such switch over.

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