How GST is Destination Based Tax

 How GST is Destination Based Tax

-Dr. Lalit Kumar Setia

The Goods and Services Tax Collection is more in the state where goods and services are consumed in more quantity and amount. Higher the consumption, higher the GST benefit to the State Government. How it is possible?

Illustration:

Suppose Mr. A, resident of Haryana purchased goods from M/s ABC Limited located in Haryana. The M/s ABC Limited will levy GST on goods and Mr. A will have to pay GST included in the MRP of the Goods. The collection of GST (i.e. CGST and SGST) will be paid to the Central Government and Haryana Government respectively. Take another example, suppose Mr. A is the resident of Delhi and M/s ABC Limited of Haryana supplied goods to Mr. A. Then M/s ABC Limited will levy IGST on goods and Mr. A will have to pay IGST included in the MRP of the goods. The Collection of IGST will be paid on the portal of GST by the M/s ABC Limited. In such case, the place of consumption will decide the State that will collect the tax. The IGST paid by M/s ABC Limited will be divided between Centre and Delhi. The Haryana which produces the goods will get nothing in the GST collection.

The GST is destination based Consumption based tax. Hence, the place of consumption will decide the State that will collect the tax. The State Governments which are promoting consumption with full billing without stealing of tax are getting maximum benefit from the GST.

Destination Based Tax on Consumption:

It is a destination based tax on consumption of goods and services. It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as setoff. In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer.

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Registration for Government Deductors in GST

 Registration for Government Deductors in GST

Before we proceed to be aware of the process of being registered for GST, let us have a look upon the course components of the workshop, "Tender Process, e-Tendering and Goods and Services Tax (GST) for Deductors".

Tender Process, e-Tendering and GST for Deductors:

About the Workshop

This workshop is primarily to build and enhance the capacities of officers in preparing Tender Document, using e-Tendering and ensuring Compliance of Goods and Services Tax (GST) Act in Procurement Procedures. It is very suitable for the Financial and Administrative Officers, Drawing and Disbursing Officers (DDOs), Accounts Officers, Section Officers, and Officer/officials in-charge of Financial Operations.

Expected Learning Outcomes

By the end of this course, participants will be able to:

•     Describe and apply the rules of Purchase in Tendering and e-Tendering processes.

•     Describe and use e-Tendering for purchases as per guidelines of Government.

•     Describe and ensure the Compliance of GST Act in Procurement.

Topics to be covered:

1.         Tendering and GST: An Overview

2.         Duties of Finance Officers and Drawing and Disbursing Officers (DDOs)

3.         Procurement Using Tendering Process

4.         Assignments on Tendering and GST for Government Officers

5.         e-Tendering: Preparing Tenders and Terms

6.         e-Tendering: Uploading and Opening of Tender

7.         Monitoring and Evaluating Performance of Contractors

8.         Goods and Services Tax (GST): An Introduction

9.         Assignments on e-Tendering and GST

10.         GST in Procurement of Goods and Services

11.         Practical Illustrations for Computing TDS on GST

12.         Right to Information (RTI) Act for Deductors

13.         Discussion on Assignments and FAQs on Tendering and GST

14.         Assessment, Feedback, Evaluation and Certificate Distribution

Kindly raise the queries if any.

I received a call to provide guidelines on registration of Government organizations for Goods and Services Tax Act today. I usually be invited to deliver sessions on this issue. In order to make a crispy and easy to understand process, an idea came in mind to let it note down in the shape of an article. I hope you will be benefited from this write-up.

GSTIN for Deductors in Government:

For all Government Departments and organization, it is not necessary to get register for Goods and Services Tax Identification Number (GSTIN). The seller’s GST registration is mandatory for persons with annual turnover of above Rs. 40 Lacs and the Deductor’s GST registration is mandatory if an organization is making payment in contract worth above Rs. 2.5 Lacs.

GST Registration:

Like PAN and TAN, the GST registration is also very easy. It comprises 15 digits number issued by the tax authorities to monitor the compliance of Goods and Services Tax Act. For GST registration, a lot of documents should be ready in hand firstly:

(a) Checklist of required documents:

For Sellers’ registration:

PAN Card, Aadhaar Card / Partnership Deed / Certificate of Incorporation of Company, Photograph of Owner/s, Banking Details, and Address Proofs. For banking details, a copy of cancelled cheque is required and for address proof, any document like property tax receipt / Municipal Tax Copy / Electricity Bill / Rent Agreement.

For Deductors’ Registration:

PAN Card, Aadhaar Card, Photograph of Drawing and Disbursing Officer / Head of Office, Banking Details, and Address Proof. For banking details, a copy of cancelled cheque is required and for address proof, any document like property tax receipt / Municipal Tax Copy / Electricity Bill / Rent Agreement.

Why to register for Goods and Services Tax (GST) in Government Organizations:

The Government Organizations including local authorities are liable to pay tax on supply of non-exempt services as per directions provided in Section 7 (2b) of GST Act. For example, on the supplies or contact worth more than Rs. 2.5 Lacs, it is required to deduct TDS on GST as per the provisions of reverse charge mechanism.

Constitutional Provisions for enforcing GST:

Article 154 of Indian Constitution states that the Governor of each State will exercise the Taxation in the State. The Section 3 of GST Act, the Governor will exercise the Act through the officers subordinate to him in accordance with the Constitution. The Finance Department of Haryana and other State Government took the responsibility of compliance of all provisions of GST Act in the State Government Departments in the name of Governor.

TDS on GST:

As per section 51 of the GST Act, 2017, the TDS on GST is deducted at the rate of one per cent on account of CGST and one percent on account of SGST from the payment made or credited to the supplier where the total value of the supply under a contract exceeds two lakh and fifty thousand rupees (excluding tax payable under the GST Acts). Further, the deductor shall remit the deducted amount to the Government and is also required to furnish a certificate to the deductee by mentioning the details of the amount deducted and payment of such deducted amount.

Process of Registration for GST for Deductors:

      (a) Go to https://gst.gov.in
(b) Use “New Registration” Command in Services è Registration.
(c) Select ‘Tax Deductor’ in the box “I am a”.
(d) Give your TAN number, no need to give PAN number of DDO.
(e) Enter the State, District, and Name of Deductor (DDO), email and mobile number to confirm, verify by the OTP received.
(f) TRN: 
(g) Now again go to Services èRegistration and Use ‘TRN’ to proceed.
(h) Give Business Details

After submitted OTPs, a Temporary Reference Number (TRN) will be provided and it is mandatory to submit the required documents in Part-B within 15 days of issue of the TRN.

 aAs desired by the portal i.e. Details of DDOs, Type of Government, PAN number, Aadhar Number (not mandatory), Residential Address of DDO, Photograph of DDO etc. Thereafter it will also ask to provide the office address details with uploading of address proof. Finally, it will ask to verify either through DSC or EVC.

·         (i) After giving all details, the application will be processed and 15 digit GSTIN will be generated.

Copyright © 2020 Dr. Lalit Kumar. All rights reserved.

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Duties of DDOs in Taxation Matters

Duties of DDOs in Taxation Matters  

 Introduction:

In the Financial Year 2020-21, the new regime of income tax rates be available as an option to the taxpayers. Why Government brought this new regime as an option? After analysing the data it was found that during last two decades due to a great number of deductions and exemptions available to the taxpayers, instead of 62% rise in the number of individuals filing income tax returns; there was only 22% rise in number of individuals paying income taxes. Rest 40% increased return filers were able to prove 'nil' tax liability.  It's easy to detect the wrong deductions and exemptions claimed by the salaried individuals because their incomes are credited in their bank accounts but in case of self-employed and businessmen, it is very difficult. Therefore, this option is provided to easily curb the wrong practices of non-salaried individuals.

In Government Departments, a Drawing and Disbursing Officer (DDO) is responsible to ensure the compliance of taxation laws and he is expected to not only submit the tax returns but also to guide and suggest other officers for taking care of various provisions of taxation. The DDO adopts participatory approach and include Accounts Section to enforce the taxation rules. The Government ensure the compliance of financial rules, taxation rules through DDOs. The workshops are generally organized on taxation issues. There are three types of major duties related with taxation matters:

(i) Income Tax Return (ITR):

Who should file Income Tax Return and How:

The DDOs are expected to guide the Government employees with regard to accurate procedure of filing Income Tax Return. Most of the Government employees are salaried individuals, in case their salaries and other incomes exceed Rs. 2,50,000 (Basic Exemption Limit); it becomes mandatory to file Income Tax Return by 31^st July of the Assessment Year. The Income Tax Return can easily be filed either is physically mode or electronic mode. The individuals with total income less than 5 Lacs can file their return in physical form by downloading the Income Tax Return Form from website of Income Tax Department i.e. incometaxindia.gov.in.

Filing of Income Tax Return:

Go to http://incometaxindia.gov.in/ and open the menu ‘Forms/Downloads’ and click upon ‘Income Tax Returns’. Thereafter, download Income Tax Return-1 and its instructions provided along with it. Even if the total income becomes equal or more than 5 Lacs, an individual should download this form and fill it as a preliminary work before filing Income Tax Return in electronic mode. Thereafter, in case of income less than Rs. 5 Lacs, the form may also be submitted in the Income Tax Department. For individuals with income more than Rs. 5 Lacs, it is required to fill the same details by accessing the website https://www.incometaxindiaefiling.gov.in/

Type of Income Tax Return Forms:

Every DDO should be equipped with the knowledge of various types of Income Tax Return Forms i.e. ITR-1, ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, and ITR-7.

Income Tax Return Form No. ITR-1:

This form is suitable only for individuals being a resident (other than not ordinarily resident) having total income up to Rs. 50 lacs, having Income from Salaries, one house property, other sources (Interest etc.), and agricultural income up to Rs.5 thousand. The Government employees who have ownership of more than one house property or who have ownership of agricultural land with agriculture income more than Rs. 5000 should not file Income Tax Return Form No. 1. They should file Income Tax Return Form No. 2.

Income Tax Return Form No. ITR-2:

The ITR Form No. 2 is for Individuals and HUFs not having income from profits and gains of business or profession. This form is used only if an individual’s sources of incomes are only Salary but also house property or capital gains. In case, the individual is also earning from business or profession, then he should file Income Tax Return Form No. 3.

Income Tax Return Form No. ITR-3:

The ITR Form No. 3 is for individuals and HUFs having income from profits and gains of business or profession.

Income Tax Return Form No. ITR-4:

This form is suitable only for Individuals, HUFs and Firms (other than LLP) being a resident having total income up to Rs.50 lacs and having income from business and profession which is computed under sections 44AD, 44ADA or 44AE

Income Tax Return Form No. ITR-5:

This form is not filed by individuals. It is suitable for persons other than, - (i) individual, (ii) HUF, (iii) company and (iv) person filing Form ITR-7.

Income Tax Return Form No. ITR-6:

This form is suitable for Companies other than companies claiming exemption under section 11.

Income Tax Return Form No. ITR-7:

This form is suitable only for persons including companies required to furnish return under sections 139(4A) or 139(4B) or 139(4C) or 139(4D) only.

(ii) Tax Deduction at Source:

A Drawing and Disbursing Officer is also ‘Tax Deductor’ on behalf of Income Tax Department and he is also required to take Tax Deductor’s Account Number (TAN) from the Income Tax Department. Thereafter, he should register on https://tdscpc.gov.in/ with the TAN Number by clicking upon ‘Register as a new user’.

As per the provisions of Income Tax Act, 1961, the DDOs are responsible for tax deduction at source on specified types of payments made by the Government offices. The tax deducted at source should not be less than its requirement and it should be deposited in the Income Tax Department through using appropriate form and thereafter the details of the same should be submitted within the prescribed time. Apart from DDOs, the electronic TDS (e-TDS) return is also required to be filed by Companies, Persons required to get their accounts audited u/s 44AB of the Income Tax Act, 1961; and the deductors reporting more than 20 deductee records for any quarter of the financial year. The Government of India prepared and operate an integrated platform for providing various services to deductors known as TRACES (TDS Reconciliation Analysis and Correction Enabling System). The DDOs and Deductors can easily view the status of challans and TDS-TCS credit for a PAN on this portal. They can also download Conso File, Form 16 / 16A and Justification Report from this portal.

(iii) Goods and ServicesTax:

Every Drawing and Disbursing Officer should be aware of Section 51 of Goods and Services Tax Act 2017 and get registered as a deductor under the Act. Whenever a payment is made or credited to a supplier of taxable goods or/and services it is required to deduct Tax Deduction at Source on GST.

TDS on GST:

As per section 24(vi) of GST Act, a DDO will register himself by using TAN Number at the portal of GST i.e. www.gst.gov.in, and in case, he enters into a contract for purchase of goods or/and services with total value of taxable supply (excluding GST) more than Rs. 2.5 Lacs; he will deduct TDS on GST @2%. After deducting the TDS on GST, the same will be paid to the Government within 10 days after the end of the month in which deduction was made. Thereafter, he will also submit return in the Form GSTR-7 and furnish system generated TDS certificate in Form GSTR-7A to the deductee within 5 days of crediting payment of TDS to the Government (i.e. date of furnishing GSTR-7).

Penalties may be levied upon DDOs under GST:

In case, a DDO fails to make payment of deducted tax within prescribed time limits, he will have to pay the same along with interest imposed by the GST portal at the time of depositing payment of deducted tax with delay.

In case he failed to furnish Form GSTR-7 within 10 days after the end of the month in which deduction was made; late fees will be payable under section 47(1) i.e. Rs. 100 + Rs. 100 per day (maximum up to Rs. 5000) under each CGST and SGST means upto Rs. 10000.

In case he failed to furnish Form GSTR-7A; late fees will be payable under section 51(4) i.e. Rs. 100 + Rs. 100 per day (maximum up to Rs. 5000) under each CGST and SGST means upto Rs. 10000.

Further, in case, an excess payment of GST is deducted by mistake; a refund may be claimed by the DDO or Deductee as the case may be. However, in case excess tax gets credited to the deductee then the DDOs shall not be granted the refund.

*Copyright © 2019 Dr. Lalit Kumar. All rights reserved.

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