Draft Rules – india-gst.in

GST tip – 170

Posted on April 5, 2017April 5, 2017 by CMA Bhogavalli Mallikarjuna Gupta

As per the revised Invoice Rules, Delivery challan can be issued in place of tax invoice during the transportation of goods for job work or for repairs of machinery or in the case of supply of liquefied gas or as may be notified by the GST Council from time to time.

Demystifying the Revised Invoice Rules

Posted on April 5, 2017April 5, 2017 by CMA Bhogavalli Mallikarjuna Gupta

Demystifying the Revised Invoice Rules

GST Rules released in the month of September 2016 have been revised basis of the feedback received from various stake holders for the rules specifically and also the changes made in the GST Laws. The 14th GST Council meeting held on 31st March have approved the GST Rules in principle and released the same.

The Revised GST Rules for Tax Invoice has undergone some changes with the respect to shipment of goods / supply of goods without the issue of the invoice, issue of a delivery challan etc. Other areas have not seen much changes.

Rule 1 – Tax Invoice

A tax invoice has to be issued by the supplier of goods or services based on section 31 of the CGST Law, “(1) A registered person supplying taxable goods shall, before or at the time of,—

(a) removal of goods for supply to the recipient, where the supply involves movement of goods; or

(b) delivery of goods or making available thereof to the recipient, in any other case,”

The major changes announced in the revised rules is, the tax invoice numbering can be in multiple series and also special characters are allowed. Since it is a computerized environment and matching is being done by the system it is recommended to avoid these special characters. The following information has to be shown on the tax invoice.

name, address and GSTIN of the supplier;
a consecutive serial number, in one or multiple series, containing alphabets or numerals or special characters hyphen or dash and slash symbolized as “-” and “/” respectively, and any combination thereof, unique for a financial year;
date of its issue;
name, address and GSTIN or UIN, if registered, of the recipient;
name and address of the recipient and the address of delivery, along with the name of State and its code, if such recipient is un-registered and where the value of taxable supply is fifty thousand rupees or more;
HSN code of goods or Accounting Code of services;
description of goods or services;
quantity in case of goods and unit or Unique Quantity Code thereof;
total value of supply of goods or services or both;
taxable value of supply of goods or services or both taking into account discount or abatement, if any;
rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
amount of tax charged in respect of taxable goods or services (central tax, State tax, integrated tax, Union territory tax or cess);
place of supply along with the name of State, in case of a supply in the course of inter-State trade or commerce;
address of delivery where the same is different from the place of supply;
whether the tax is payable on reverse charge basis; and
signature or digital signature of the supplier or his authorized representative

Exports under GST can be done by payment of IGST or through Bond and in such cases, the same should be printed on the tax invoice accordingly.

SUPPLY MEANT FOR EXPORT ON PAYMENT OF IGST”
SUPPLY MEANT FOR EXPORT UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT OF IGST

The export invoice under GST should contain the following information

name and address of the recipient;
address of delivery;

name of the country of destination; and

number and date of application for removal of goods for export:

As per Sub-section 2, section 31 of the CGST Act the tax invoice need not be issued in the following cases

(a) the recipient is not a registered person; and

(b) the recipient does not require such invoice,

Rule 2– Time limit for issuing tax invoice

The tax invoice referred in Rule 1 has to be issued within 30 days of the completion of service in case of supply of services under GST.

There is an exception for the said rule in the case of supply of services by a bank or an insurance company or financial institution or non-banking financial company, the same can be issued within 45 days and the document can be tax invoice or any other document in lieu of tax invoice.

The tax invoice has to be issued within the completion of the quarter during which the supply has been made to related parties as given in section 25 of the CGST Act.

Rule 3– Manner of issuing of tax invoice

Similar to the Central Excise provisions, the tax invoice under GST in case of supply of goods has to be issued in triplicate

(a) the original copy being marked as ORIGINAL FOR RECIPIENT;

(b) the duplicate copy being marked as DUPLICATE FOR TRANSPORTER; and

In case of supply of the goods, the same has to be issued in duplicate

(a) the original copy being marked as ORIGINAL FOR RECIPIENT; and

(b) the duplicate copy being marked as DUPLICATE FOR SUPPLIER.

The serial number of the tax invoice issues during the period i.e month has to be reported in the monthly return of outward supplies i.e GSTR – 1.

Rule 4– Bill of Supply

A bill of supply is to be issued by a registered taxable person in case of supply of exempted goods or services or registered under composition scheme as per the provisions of clause (c ) of sub-section 3 of section 31 of CGST Act.

The bill of supply should contain the following information

name, address and GSTIN of the supplier;
a consecutive serial number, in one or multiple series, containing alphabets or numerals or special characters -hyphen or dash and slash symbolised as “-” and “/”respectively, and any combination thereof, unique for a financial year;
date of its issue;
name, address and GSTIN or UIN, if registered, of the recipient;
HSN Code of goods or Accounting Code for services;
description of goods or services or both;
value of supply of goods or services or both taking into account discount or abatement, if any; and
signature or digital signature of the supplier or his authorized representative:

Rule 5– Receipt Voucher

A receipt voucher has to be issued as per the provision of clause d, sub-section 3 section 31 of the CGST Act in cases where the registered taxable person receives an advance payment from his customers.

A receipt voucher should contain the following information

name, address and GSTIN of the supplier;
a consecutive serial number containing alphabets or numerals or special characters -hyphen or dash and slash symbolised as “-” and “/”respectively, and any combination thereof, unique for a financial year
date of its issue;
name, address and GSTIN or UIN, if registered, of the recipient;
description of goods or services;
amount of advance taken;
rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
amount of tax charged in respect of taxable goods or services (central tax, State tax, integrated tax, Union territory tax or cess);
place of supply along with the name of State and its code, in case of a supply in the course of inter-State trade or commerce;
whether the tax is payable on reverse charge basis; and
signature or digital signature of the supplier or his authorized representative.

Though it is called as receipt voucher it contains all the information of the Tax Invoice and the number of receipt vouchers issued during the month is not required to be reported in GSTR – 1.

Rule 6 – Supplementary Tax Invoice or Debit Note or Credit Note

A debit note or credit note can be issued by the supplier of goods or service for the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient.

A revised tax invoice can also be issued by the supplier of goods or services.

A supplementary invoice or a debit note or a credit note should contain the following information

the word “Revised Invoice”, wherever applicable, indicated prominently;
name, address and GSTIN of the supplier;
nature of the document;
a consecutive serial number containing alphabets or numerals or special characters -hyphen or dash and slash symbolised as “-” and “/”respectively,, and any combination thereof, unique for a financial year;
date of issue of the document;
name, address and GSTIN or UIN, if registered, of the recipient;
name and address of the recipient and the address of delivery, along with the name of State and its code, if such recipient is un-registered;
serial number and date of the corresponding tax invoice or, as the case may be, bill of supply;
value of taxable supply of goods or services, rate of tax and the amount of the tax credited or, as the case may be, debited to the recipient; and
signature or digital signature of the supplier or his authorized representative:

A revised tax invoice can be issued by a taxable person for the supply of goods and services made by him prior the date of issue of the registration certificate, if the date of the registration certificate is prior to the date of issue of the registration certificate.

A registered person may issue a consolidated revised tax invoice in respect of all taxable supplies made to a recipient who is not registered under the Act during such period.

In the case of inter-State supplies, where the value of a supply does not exceed two lakh and fifty thousand rupees, a consolidated revised invoice may be issued separately in respect of all recipients located in a State, who are not registered under the Act.

In the normal course, the input tax credit is allowed on a tax invoice or a revised tax invoice or on a debit note or credit note. There are certain cases where the input tax credit is not allowed and in such cases, the tax invoice should be marked clearly “Input Tax Credit Not Allowed” on the tax invoice. The cases under which the input tax credit is not allowed is

Section 74 deals with Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any willful misstatement or suppression of facts.
Section 129 deals with Detention, seizure and release of goods and conveyances in transit.
Section 130 deals with Confiscation of goods or conveyances and levy of penalty.

Rule 7 – Issue of Tax Invoice in special cases

An Input Service Distributor may issue a tax invoice or credit note for transfer of input tax credit and in such a cases the tax invoice or credit note issued should contain the following information

name, address and GSTIN of the Input Service Distributor;
a consecutive serial number containing alphabets or numerals or special characters hyphen or dash and slash symbolised as , “-”, “/”, respectively, and any combination thereof, unique for a financial year;
date of its issue;
name, address and GSTIN of the recipient to whom the credit is distributed;
amount of the credit distributed; and
signature or digital signature of the Input Service Distributor or his authorized representative:

Name and address of the recipient may be contained on the tax invoice or not in the case of tax invoices issued by a banking or a financial company or non-banking financial company or an insurance company but it should have all other information and may be serially numbered or not.

In case if the tax invoice is being issued by a taxable person who is supplying services of transportation of the goods, in such cases additional information is required to be shown on the tax invoice apart from the information to be shown regularly like gross weight of the consignment, name of the consignor and the consignee, registration number of goods carriage in which the goods are transported, details of goods transported, details of place of origin and destination, GSTIN of the person liable for paying tax whether as consignor, consignee or goods transport agency.

There is also an exception available in case of services provided by a taxable person if it is related to transportation of passengers. A tax invoice shall include ticket in any form, by whatever name called, whether or not serially numbered, and whether or not containing the address of the recipient of service but containing other information.

Rule 8 – Transpiration of goods without issue of an invoice

There are certain cases under which a tax invoice need not be issued during the movement of goods but the same should be issued subsequently or any other document can be issued in cases where the movement of goods does not amount to supply of goods or services. In such a cases a delivery challan has to accompany the goods.

The case under which it is not required are

supply of liquid gas where the quantity at the time of removal from the place of business of the supplier is not known,
transportation of goods for job work,
transportation of goods for reasons other than by way of supply, or
such other supplies as may be notified by the Board,

In the first case, it refers to the petro chemical industry where the quantity being supplied is not known and this is part of the continuous supply of goods.

In case of transportation of goods for job work, is not a supply but for further processing and the challan under which it was being sent was known as 57 (f) 4 and now the same can be renamed as Job work challan and it is recommended to maintain a separate series for each location from where the goods are sent out for job work.

There will be certain cases where the machinery is to be sent out for repairs like winding or calibration and such cases does not amount to supply of goods and tax invoice is not required to be issued, for such cases also it is recommend to maintain a separate series of challan numbering for each location.

And a provision is also made for future where the government can notify other transactions in the business where the tax invoice is not required to be issued during the movement of goods.

The following information must be present on the delivery challan, which needs to be accompanied during the movement of the goods

date and number of the delivery challan,
name, address and GSTIN of the consigner, if registered,
name, address and GSTIN or UIN of the consignee, if registered,
HSN code and description of goods,
quantity (provisional, where the exact quantity being supplied is not known),
taxable value,
tax rate and tax amount – central tax, State tax, integrated tax, Union territory tax or cess, where the transportation is for supply to the consignee,
place of supply, in case of inter-State movement, and

Similar to the issue of tax invoice in triplicate, the delivery challan should also be issued in triplicate

(a) the original copy being marked as ORIGINAL FOR CONSIGNEE;

(b) the duplicate copy being marked as DUPLICATE FOR TRANSPORTER; and

Whenever tax invoice cannot be issued during the movement of goods, it should sent with a delivery challan and subsequently the tax invoice has to be issued in cases if the movement of goods involves supply.

The delivery challan issued in lieu of tax invoice shall be updated in the way bill i.e means forms are again going to be integral part of the taxation under GST.

The revised rules do not give any information in case of transfer of goods from one branch to another branch in the same state.

There is a specific provision in case of movement / shipment of goods in semi-knocked down or completely knocked down condition. The provisions are

the supplier shall issue the complete invoice before dispatch of the first consignment;
the supplier shall issue a delivery challan for each of the subsequent consignments, giving reference of the invoice;
each consignment shall be accompanied by copies of the corresponding delivery challan along with a duly certified copy of the invoice; and
the original copy of the invoice shall be sent along with the last consignment.

This provision is a welcome move but the only pre condition in such cases is that the shipment should happen within one year else the buyer cannot avail the input tax credit on the same. This may be useful in the erection or turnkey contracts but needs to be evaluated on case by case and then implemented else the input credit cannot be availed by the buyer.

Thought he revised Invoice rules tries to address most of the things missed in the first release, still we do not find any information on the transfer of spares from the principal to agent or from principal or agent to the end consumer in case of annual maintenance contracts. Normally in annual maintenance contracts or under warranty the price for the spares is already paid as part of the invoice and taxed accordingly but when the transfer happens is it required to pay tax again, does this not amount to double taxation? We need to have more information or clarity in these areas.

Any views or opinions represented above are personal and belong solely to the author and do not represent those of people, institutions or organizations that the owner may or may not be associated with in professional or personal capacity, unless explicitly stated. Any views or opinions are not intended to malign any religion, ethnic group, club, organization, company, or individual.

Demystifying Goods and Service Tax – Draft Payment Rules

Posted on October 3, 2016November 6, 2016 by CMA Bhogavalli Mallikarjuna Gupta

Under the Central Excise, the concept of maintaining the mandatory registers have been done any over a decade back still we are maintaining them in the same formats like RG 23 A /C – Part I / II expect for RG 1 (Production Register and RG 23 D (trading). When these records are replaced it did not mean that they are totally scrapped but private records can be maintained as long as the required information is present in the report any format but still the range officials even today insist for the reports in old formats only. Hopefully, this practice will go way once the GST is implemented.

In GST it is stated that the key record / reports maintained by the common portal as the taxpayer is expected to upload each and every transaction data on the common portal. The returns / reports to be maintained under GST on the common portal are

Electronic Tax Liability Register
Electronic Credit Ledger
Electronic Cash Ledger

Rule 1 – Electronic Tax Liability Register

An Electronic Tax Liability register will be maintained on the common portal as per Sub-Section 7 and section 35 of the Model GST Law in the FORM GST PMT-1 and it will contain all the amounts payable by the taxable person.

The Electronic Tax Liability Register will be debited with the following

amount of tax payable,
interest, late fee or
amount of tax payable along with interest on account of mismatch of credit based on provisions of Section 29 or Section 29A or section 43C.
any other amount payable by the tax payer or directed by the board on account of any proceeding’s carried out under the GST Act

The Electronic Tax Liability Register will be credited with the following

Amount deducted under Section 37 (Tax Deduction at Source)
Amount collected under Section 43 C (Tax Collection at Source)
Amount payable under Sub-section3 of Section 7 (tax payable under reverse charge)
Amount payable by the department against any interest, refund, penalty, late fee or any other amount determined under the proceedings under this Act

Rule 2- Electronic Credit Register

An Electronic Credit Ledger will be maintained on the common portal in FORM GST PMT-2 for the tax payer for the amount being claimed as input tax credit, will be credited to this ledger.

The Electronic Credit Register will be credited with the total amount of tax payable on account of liability, interest, late fee etc as determined under Section 35 of the Model GST Law.

The Electronic Credit Register will be debited with any amount of refund under provisional basis under Sub-Section 4A of section 38 of Model GST Law received or transfer of input tax credit under Section 37 of the Model GST Law.

In case if the refund is rejected, the amount debited under provisional basis under Sub-Section 4A of section 38 of Model GST Law will be debited through FORM GST PMT-2A.

Rule 3 – Electronic Cash Ledger

An Electronic Cash Ledger will be maintained on the common portal for every tax payer based on the provisions of Sub-Section 1of section 35 of Model GST Law in FORM GST PMT-3 towards the amount deposited by the tax payer towards discharge of his tax liability or interest or late fee or penalty any other amounts.

The payment will be done by the tax payer using the FORM GST PMT-4 on the common portal for the amount being paid for tax liability or interest or late fee or penalty any other amounts. The FORM GST PMT-4 generated on the common portal will be valid for a period of fifteen days.

The payment of tax liability or interest or late fee or penalty any other amounts under GST can be done using any of the following methods

Internet banking – authorized by the board
Through credit card or debit card
National Electronic Fund Transfer (NEFT) or Regal Time Gross Settlement (RTGS)
Over the counter (OTC) for amounts less than Rs 10,000 in cash or through cheque or demand draft

Usage of debit / credit card for payment of tax is a new feature added which is not existing under any of the acts currently in India.

If any payment is required to be made by non-taxable person, a temporary identification number will be generated by the concerned tax offer and payment has to be done in FORM GST PMT-5.

Where the payment is made by way of NeFT or RTGS mode from any bank, the mandate form shall be generated along with the challan and the same shall be submitted to the bank from where the payment is to be made.

A Challan Identification Number (CIN) will be generated when the amount is credited to the concerned tax account by the bank and the same will be mentioned in the Challan.

In case if the amount is not credited to the electronic cash ledger of the tax payer but the amount got debited from the taxpayer’s account FORM GST PMT-6 has to be filed with the bank or the payment gateway for the amount to be updated in his electronic cash ledger.

Electronic Cash Ledger will be credited under the following cases also

Amount deducted under Section 37 (Tax Deduction at Source)
Amount collected under Section 43 C (Tax Collection at Source)
Amount payable under Sub-section3 of Section 7 (tax payable under reverse charge
Amount payable by the department against any interest, refund, penalty, late fee or any other amount determined under the proceedings under this Act

Electronic Cash Ledger will be debited when a refund is rejected.

Rule 4 – Identification number for each transaction

A unique identification number will be generated by the common portal for every debit or credit to the Electronic Cash Ledger or Electronic Credit Register.

Demystifying Invoicing Under Model GST Law

Posted on October 1, 2016November 6, 2016 by CMA Bhogavalli Mallikarjuna Gupta

Invoice is a document between the buyer and seller which confirms the sale / purchase of goods or services along with the details like item or nature of service, cost per unit, if any applicable taxes on the transaction, any incidental charges like freight, packing charges, etc., apart from the buyer and seller details. Invoice is to be serially numbered for tracking and reference purpose. If the transaction is being taken for a taxable good or service, then the invoice becomes a tax invoice. The tax invoice apart from having the above-mentioned details, it will also have the tax registration number of the buyer and seller along with the address under which jurisdiction the buyer and seller falls.

In the current tax regime in India we have the following invoices which are considered as tax invoice from taxation perspective Excise Invoice, VAT Invoice & Service Tax Invoice. All these invoices are also required to be numbered serially and the tax payer has to inform the tax authorities the tax invoice numbering sequence being followed for the financial year.

Under GST also there is a requirement to issue tax invoice as per section 23 of the Model GST Law at the time of supply of goods or services as per Section 12 and Section 13 of the Model GST Law. Section 23 of the Model GST Law prescribes the information to be shown on the tax invoice in case of supply of goods

Description of the goods
Quantity of the goods being sold
Value of the goods being sold
CGST / SGST or IGST levied on the goods
And any other information as requested

The following information is to be shown in case of supply of services

Description of the service
Value of the service
CGST / SGST or IGST levied on the goods
And any other information as requested

If we dissect the Section 15 of the model GST Law (value of taxable supply) it says that all the amounts being collected or reimbursed from the buyer has to be included in the valuation of the taxable supply of goods / services. This means that all charges related to the transaction directly or indirectly have to be shown on the tax invoice. The charges or reimbursable expenditure on which the tax have to be levied are freight, insurance, packing charges, loading charges, unloading charges, special / specific charges being levied, subsidies if any, royalties or any other incidental charges have to be included in the tax base and these amounts are being paid by the buyer to the seller or being reimbursed by the buyer to pay to third parties.

THE JOINT COMMITTEE ON BUSINESS PROCESS FOR GST on Returns has given the tentative formats of the Returns to be filed under GST Regime once rolled out. If we review the GSTR 1 Report, monthly outward supplies report to be filed by the tax payer has the following information

GSTIN / UIN
Invoice – Number, Date, Value, HSN/SAC, Taxable Value
Tax Rate and Amounts – CGST / SGST / IGST
State of the buyer
Reverse Charge applicable for the transaction

Though the reports to be filed under GST are not yet notified, on interpreting the information given in the Model GST Law and the Business Process Reports for Returns we can conclude that the following information is to be shown on the tax invoice else reporting will become complex

Description of the goods / service
Quantity of the goods being sold – applicable only in case of supply of goods
Value of the goods / services
CGST / SGST or IGST levied on the goods
GSTIN / UIN
Invoice – Number, Date, Value, HSN/SAC, Taxable Value
Tax Rate and Amounts – CGST / SGST / IGST
State of the buyer
Reverse Charge applicable for the transaction
Free goods if any issued

We can also conclude that if goods or services being supplied are applicable or eligible under reverse charge, the same needs to be shown on the tax invoice stating that tax applicable is under the reverse charge and the tax amount should not be included in the invoice total. This is similar to the existing service tax provision for invoicing under reverse charge.

As per the valuation rules, if goods are being issued as sample or freebie on the purchase of any other goods, then GST has to be levied on such free good or freebie. It will be a business decision to collect the tax from the customer or absorb it as business expenditure. This is not applicable under VAT currently not it is getting extend to SGST or IGST under the new tax regime.

As per the Model GST Law, post to issue of a tax invoice for supply of goods or services, if there is any change in the price of goods / service or tax rates, a debit memo or credit memo can be issued for such cases and the debit / credit memo should have the reference of the original tax invoice. In GSTR – 1, the debit / credit memos have to be reported under table / section 8.

In case if the tax payer is supplying both taxable goods / services along with non-taxable goods / services, a separate bill has to be issued. This is similar to the existing VAT provisions where a non-vatable invoice has to be issued for sale of non-vatable goods. Now the same is getting extend to CGST and IGST under GST regime.

As in the current excise or VAT requirements there will not be likely a format being suggested by the GST Council and the tax payers can issue tax invoice based on their business need but have to ensure that all the required information is shown / printed on the tax invoice being issued under section 23 of the Model GST Law.

Malaysia which has implemented GST from 1^st April 2015 have suggested some invoice formats also. It has also recommended that simplified tax invoice can be issued and on which input tax credit can be availed if the tax amount is not exceeding RM 30. As per Malaysian GST, under specific conditions simplified tax invoice can be issued and such invoices need not show the buyer details like in the case of regular tax invoice. In India, we do not see any such provisions as the Model GST Law has made it clear that input tax credit can be availed on supplier payment of GST Liability.

Some of the common issues which the trade and industry may face with rollout of GST on the Tax invoice front are

Free Samples – as per the Model GST Law, the tax has to be levied on free samples also, this may impact the pharmaceutical industry where samples are given to Physicians for promotion. Now going forward GST has to be paid before the issue of samples. The pharmaceutical industry may have to absorb the same that means it impact their profitability. Same in case of consumer goods also where freebies are given on merchandise.
Loading Charges – will there be a separate Service Accounting Code for loading and unloading charges, which are collected from the buyer. This is applicable in case of commodities like iron, steel, aluminum etc
Insurance Charges – in some case where the goods are transported are high value, insurance is also part of such contracts / sales. The insurance charges may be collected from the recipient or the tax payer may pay himself. Whatever may be the case, does the tax payer has to levy GST on the insurance premium and also mention in his registration form “Insurance” also as his business?
Packing charges – in some cases, the customers may ask for special packing based on their business requirements, in such cases also GST is to be levied on packing charges. As such packing charges may not be having a separate HSN code in few cases like material being shipped in gunny bags / jute bags, in such cases what will be the HSN code?

Another change from the existing business process

In the case of purchase of goods or services from non-registred tax payers, the reverse charge is applicable and basing on the rules provided in Model GST Law, the time of supply for the reverse charge is either accounting or creation of receipt or payment of supplier whichever is earlier. At this point, a tax invoice is also required to be issued. Currently the same is not required in the Service Tax.
In the draft rules it is clearly mentioned that separate invoice has to be issued for non-gst supply of goods or services individually if the transaction amount is less than Rs 100 or at the end of the month a consolidated document to be issued called bill of supply for all the transactions where bill of supply has been not issued during the day.
The existing invoice number series has to be modified as the draft rules talks about only invoice series being alphabetical or numeric
There is also a requirement to print the reference number generated from the common portal on the tax invoice
There is no concept of tax invoice being cancelled under GST once issued, in case if there is a need for such a case, then taxpayer has to issue a debit or credit memo.

At this point of time we may not have the full information on the Tax Invoice under GST, but we have an overview of the same based on that we need to do critical analysis of the business and come out of open issues where clarity is required and make representations to the concerned authorities to avoid last minute surprises, which may impact the continuity of business when GST is rolled out.

From the Model GST Law and the Business Process Reports on Returns, it is clear that government wants to track each and every transaction and avoid possible revenue leakages. A silver lining for the trade and industry is that the Model GST Law has clearly stated that input tax credit can be claimed on the debit / credit memos also.

Demystifying Goods and Service Tax – Draft Registration Rules

Posted on September 30, 2016November 6, 2016 by CMA Bhogavalli Mallikarjuna Gupta

For the first time under any act, rules have been framed for registration along with other rules for the invoice, payment, refund and returns. These rules are in public domain and feedback or comments can be given by 28^th of Sep 2017.

The Draft Goods and Service Tax Registration Rules is similar to the provisions given in the Model GST law in various sections including the transactional provisions. Here it additionally provides the forms under which the applicant has to file for registration or providing further information or form to be used by the department for communicating to the applicant.

There are 17 Rules for Registration under GST based on the Draft Rules

Rule 1 – Application for registration

Rule 2 – Verification of the application

Rule 3 – Issue of registration certificate

Rule 4 – Separate Registrations for multiple business verticals within a State

Rule 5 – Grant of Registration to persons required to deduct tax at source or collect tax at source

Rule 6 – Assignment of unique identity number to certain special entities

Rule 7 – Display of registration certificate and GSTIN in name board

Rule 8 – Grant of registration to non-resident taxable person

Rule 9 – Amendment to Registration

Rule 10 – Suo moto registration

Rule 11 – Application for cancellation of registration

Rule 12 – Cancellation of registration

Rule 13 – Revocation of cancellation of registration

Rule 14 – Migration of persons registered under Earlier Law

Rule 15 – Method of authentication

Rule 16 – Extension in period of operation by casual taxable person and non-resident taxable person

Rule 17 – Physical verification of business premises in certain cases

Rule 1 – Application for registration

This rule lays down provisions for a person applying for registration for the first time directly under GST. The rule defines an applicant under Sub-Rule 1 as a “Every person, other than a non-resident taxable person, a person required to deduct tax at source under section 37 and a person required to collect tax at source under section 43C, who is liable to be registered under sub-section (1) of section 19 and every person seeking registration under sub-section (3) of section 19”.

The applicant has to provide PAN Number, Mobile Number and email id. All these three will be authenticated by one-time password (OTP) and all the further communication with the department will be through email and mobile through SMS.

Once all the three are authenticated, the applicant has to submit / enter data online for registration and also submit a self-attested copy of Part B of FORM GST REG-01.

Once the documents are received, an acknowledgement is issued in FORM GST REG-02 electronically.

A person applying for registration as a casual tax person will be given a temporary identification number by the common portal for depositing tax under Section 19 (A) of Model GST Law. The amount of tax to be deposited is based on estimated tax liability for the business intended to be carried under this registration for the given period.

Rule 2 – Verification of the application

Once the application is filed, it is forwarded to the concerned officer and if he is satisfied with the information provided, the registration will be accepted and issued within a period of 3 working days from the date of submission of the application.

In case if there is any discrepancy observed by the concerned officer, the applicant will be intimated about the same in FORM GST REG-03 and the applicant is required to provide the feedback within 7 working days from the receipt of the intimation in FORM GST REG-04. The clarification to be provided can also include modification of PAN, Mobile or Email id.

If the concerned office is satisfied with the information provided by the applicant, the registration may be granted within 7 working days’ receipt of intimation. In case if the office is not satisfied, the application may be rejected and same will be informed to the applicant in writing in FORM GST REG-05 electronically.

The application is deemed to be accepted and registration is deemed to be granted in case if the concerned officer does not raise any question

Within 3 working days from filing of the application
Within 7 working days from the date of filing / providing additional information.

Rule 3 – Issue of registration certificate

Based on the provision of sub-section 11 of Section 19 of the Model GST Law, if the application is accepted and registration is granted under Rule 2, certificate of registration is issued in FORM GST REG-06 for the principal place of business and for the additional place of business based on the information provided in the common portal.

The registration shall be effective from the date on which the person becomes liable to registration where the application for registration has been submitted within thirty days from such date.

Where an application for registration has been submitted by the applicant after thirty days from the date of his becoming liable to registration, the effective date of registration shall be the date of grant of registration under sub-rules (1), (4) or (6) of rule 2.

Rule 4 – Separate Registrations for multiple business verticals within a State

Any person willing or desiring to take registration based on their business verticals can obtain the same based on the provisions provided in Sub-Section 2 of Section 19 of Model GST Law.

The registration will be issued for each business vertical and the taxes have to be paid for each vertical for the supplies made in the respective verticals.

In case if the person is willing to have registration based on business vertical a separate application has to be filed in FORM GST REG-01 for each business vertical.

The provisions of Rule 1, 2 and 3 will also apply for the registrations under each business vertical.

Rule 5 – Grant of Registration to persons required to deduct tax at source or collect tax at source

GST Registration is required to be obtained if the person is required to deduct tax under GST based on the provisions of sub-section 1 of section 37 or required to recover tax under the provision of Section 43C. The applicant has to file FORM GST REG-07 for obtaining registration either on the common portal or facilitation centers.

The concerned officer may grant registration after due verification within 3 working days in FORM GST REG-06 on submission of application.

The certificate of registration issued can be cancelled subsequently if the concerned officer or any other officer feels that the applicant is no longer required to recover tax under section 37 (tax deducted at source) or section 43 C (tax collection at source) intimating it in FORM GST REG-08. The concerned officer has to provide an opportunity for the applicant to be heard before cancelling the registration.

Rule 6 – Assignment of unique identity number to certain special entities

Entities falling under Sub-Section 6 of Section 19 of the Model GST Law, as given below are required to take

any specialized agency of the United Nations Organization or
any Multilateral Financial Institution and Organization notified under the United Nations (Privileges and Immunities) Act, 1947 (46 of 1947),
Consulate or Embassy of foreign countries and any other person or class of persons as
may be notified by the Board / Commissioner

to take registration under GST by filing of FORM GST REG-06, the concerned officer on receipt of the same, if satisfied will issue the unique identification number within 3 working days from the date of receipt of application.

Rule 7 – Display of registration certificate and GSTIN in name board

For every taxable person to whom registration certificate is issued under GST is required to display the registration certificate in a prominent location at the principal place of business and additional place of business’s registered under GST.

GSTIN is also required to be displayed on the name board exhibited at the entry of the principal place of business and additional place of business.

Rule 8 – Grant of registration to non-resident taxable person

Every person carrying on business in India is required to have a registration under GST based on the provisions specified in Section 19 of the Model GST Law, the same is applicable in the case of non-resident person also. A non-resident tax payer is also required to be registered under GST by filing in FORM GST REG-10. The FORM GST REG-10, has to be filed by the non-resident tax payers at least before 5 days of commencement of business.

The non-resident person will be given a temporary identification number and based on that the tax has to be deposited by him, the amount of tax to be deposited is based on the estimated turnover of his business during the said period in India.

The issue of registration certificate process under GST for the non-resident tax payer is also same as specified in Rule 1 and Rule 2

Rule 9 – Amendment to Registration

This rule provides provisions for amendment to registration obtained under GST. The amendment to registration can be for one of the following reasons

Where the change relates to
the Name of Business,
Principal Place of Business,
and details of partners or directors, karta, Managing Committee, Board of Trustees, Chief Executive Officer or equivalent, responsible for day to day
for any other reasons not mentioned above

in all such cases, the tax payer has to file in FORM GST REG-11 within fifteen days from the change.

The concerned officer within 15 days of the receipt of FORM GST REG-11, if satisfied will issue the FORM GST REG-12 electronically for change of details. The date for change of the details will be from the date requested in the form.

If there is a requirement to change the mobile number or email id, then the process given in Rule 1 will be followed.

In the case of change of the constitution of the business, which results in the change of PAN Number, then a fresh application for registration has to be filed in FORM GST REG-01.

The concerned officer on receipt of FORM GST REG-11 is not satisfied for the request for change within 15 working days shall issue Form GST REG-03 asking for further information for change of the details.

The taxable person within 7 working days on receipt of the Form GST REG-03 has to file FORM GST REG-04 submit his reply.

The certificate of registration is deemed to be amended in the following conditions

If the concerned officer does not take any action within 15 working days from the receipt of the FORM GST REG-11
If the concerned officer does not take any action within 7 working days from the receipt of the GST REG-04

Rule 10 – Suo moto registration

If an officer during the course of any survey, inspection, search, inquiry or any other proceedings under the act finds that a person is liable for registration but has not obtained registration under GST shall issue a temporary registration number based on the order in FORM GST REG 13.

The date of registration is valid from the day on which the order is issued.

Every person to whom temporary registration issued under Sub-Rule 1 of Rule 10 shall file for registration under Rule 1 within 30 days from the date of issue of temporary registration. Alternatively, the person can also file an appeal against the temporary registration number within 30 days.

The provisions of Rule 2 and 3 will be applicable for issue of certificate.

Rule 11 – Application for cancellation of registration

There is a provision for cancellation of registration under GST in Model law vide sub-section 1 of section 21. In case if a taxable person wants to apply for cancellation of registration, he has to file FORM GST REG-14 including the details of the closing stock along with liability on it along with other required documents.

The application for cancellation will be considered only after one year of issue of registration under GST on a voluntarily basis and the same condition is not applicable in the case of migration of registration from VAT / Excise / Service Tax.

Every taxable person, other than a person paying tax under section 8, seeking cancellation of registration under sub-rule (1) shall furnish a final return under rule Return.19.

Rule 12 – Cancellation of registration

The concerned officer on receipt of FORM GST REG-14 for cancellation of registration can issue a notice calling for why the registration has to be cancelled within a 15 days on receipt of the FORM GST REG-14.

The taxable person within 7 days of receipt of FORM GST REG-15 has to file a reply and if the officer is satisfied, will issue an order for cancellation of registration FORM GST REG-16 within 30 days. The officer will also direct the taxpayer to pay all the arrears of tax, penalty, interest if any liable to paid to the department.

Rule 13 – Revocation of cancellation of registration

A taxable person who has voluntarily cancelled his registration can apply for revocation of cancellation of registration by filing FORM GST REG-17 within 30 days of the issue of the cancellation order by the concerned officer.

The officer if satisfied with the reasons for revocation of cancellation of registration within 30 days of receipt of FORM GST REG-17, shall revoke the cancellation of registration by issue of an order in FORM GST REG-18 and communicate the same to the applicant.

The officer can also reject the FORM GST REG-17 for revocation of cancellation of registration if he is not satisfied with reasons given by the tax payer will be communicated in FORM GST REG- 05.

In case if the officer wants additional information from the tax payer then FORM GST REG–03 will be issued and the tax payer has to file his reply in within 7 working days in FORM GST REG-04.

The officer on receipt of FORM GST REG-04 will dispose of the same based on provisions of Rule 2.

Provided that the application shall not be rejected without affording the applicant an opportunity of being heard by issue of a notice in FORM GST REG-19 within thirty days from the date of receipt of such application.

Rule 14 – Migration of persons registered under Earlier Law

All the tax payers registered under the earlier law and are having a valid PAN number issued under Income Tax Act, 1961 (Act 43 of 1961) shall be issued a provisional registration for GST and issued GSTIN wide FORM GST REG- 21.

As per the transition provisions provided under Model GST Act under section 142, all the required additional information has to be submitted by the tax payer within 6 months from the date of issue of provisional registration number or if the officer is satisfied for some reason can grant an extension of additional two months for submission of additional information.

The additional information has to be filed in FORM GST REG–20 and submitted duly signed by the tax payer.

If the information provided by the tax payer is correct, the concerned officer may issue final registration certificate of registration under FORM GST REG-06.

The provisional certificate issued can be cancelled if the tax payer has not provided additional information or the tax payer has not provided correct information. The same will be communicated in FORM GST REG-23.

The provisional certificate will be cancelled if the information provided is not correct or incomplete and the same will be communicated wide FORM GST REG-22.

In case if a tax payer who is migrated from the existing tax registration can have an option to cancel the provisional registration under GST by filing GST REG-24. The concerned officer if satisfied on the hearing can issue the order for cancellation of provisional registration issued to him.

Rule 15 – Method of authentication

All applications, replies, additional information, notices, appeals submitted online have to be authenticated by the tax payer or his authorized representative. The authentication can be done through a digital signature or through e-signature as specified under Information Technology Act, 2000 (21 of 2000) or through any other mode of signature notified by the Board/Commissioner in this behalf.

The documents filed online will also have to be signed manually and submitted by the tax payer or by his representative.

(a) in the case of an individual, by the individual himself or by some person duly authorized by him in this behalf and where the individual is mentally incapacitated from attending to his affairs, by his guardian or by any other person competent to act on his behalf;

(b) in the case of a Hindu Undivided Family, by a Karta and where the Karta is absent from India or is mentally incapacitated from attending to his affairs, by any other adult member of such family or by the authorized signatory of such Karta;

(d) in the case of a Government or any Governmental agency or local authority, by an officer authorized in this behalf;

(e) in the case of a firm, by any partner thereof, not being a minor or authorized signatory;

(f) in the case of any other association, by any member of the association or persons or authorized signatory;

(g) in the case of a trust, by the trustee or any trustee or authorized signatory; and

(h) in the case of any other person, by some person competent to act on his behalf.

All the orders / notices issued by the officers electronically will be digitally signed.

Rule 16 – Extension in period of operation by casual taxable person and non-resident taxable person

A non-resident taxable person who has taken registration under Rule 8 can seek for extension of validation of the registration period by filing of Form GST REG-25. It will be filed before the end of the registration period granted to him.

The application under sub-rule (1) shall be acknowledged only on payment of the amount specified in sub-section (2) of section 19A.

Rule 17 – Physical verification of business premises in certain cases

Physical verification of the place of business can be carried on by the concerned officer only after the issue of the registration certificate. If the concerned officer who is satisfied on the verification of the place of business of the tax payer will upload Form GST REG-26 along with the date of verification and other documents if any.

Items which need clarification

It is a known rule that for a tax payer there will be one registration number per state. As per the rules, it is clear that all places of business should be registered at the time of registration. In case if the tax payer does not register one place of his business and does transfer of material to that place of business, will tax invoice has to be issued for such transactions?
In Form GST REG-24, Provisional ID is mentioned, does it mean it is a temporary registration number till the GSTIN is issued? If yes, there is no mention of the same in the GSTR Return Formats, there it talks about only GSTIN. What is the usage of this provisional ID, does it needs to be printed as GSTIN on the tax invoice and other documents till GSTIN is issued?
Only 3 working days is provided in case of queries raised for fresh application but in the case of cancellation, revocation of cancellation or updating any other information 7 working days is provided. What is the rationale for such a differentiation ?

Registration Forms under GST

registration-forms-1

registration-forms-2

Demystifying Draft Invoice Rules for Goods and Service Tax

Posted on September 27, 2016April 7, 2017 by CMA Bhogavalli Mallikarjuna Gupta

The Model GST Law was placed in the public domain on 14^th June 2016 and thereafter we could see a lot of moment on the implementation of GST like, passage of the Constitutional Amendment Bill the Rajya Sabha on 3^rd August 2016 and the same being ratified in the Lok Sabha on 8^th August 2016. Majority of the states have also adopted the same in their state assemblies in a very short span of time paving the way for the President to give the assent on the Constitutional Amendment Bill and thereafter the Central Government has constituted the Goods and Service Tax Council, key body for the rollout of GST in India. The GST Council had its first meeting on 22^nd and 23^rd of this month.

The GST Council in its first meeting has taken the following decisions

Increase the threshold limit from Rs 10 Lacs to Rs 20 Lacs for all states except for the north eastern states
Increase the threshold limit from Rs 5 Lacs to Rs 10 Lacs in case of north eastern states
The jurisdiction of the taxpayers will be with the state governments on the tax payers whose turnover is less than Rs 150 Lacs in case of supply of goods and in case of Service, the same will be with the central government as the state tax officials do not have the complete knowledge and expertise on the assessment of service tax. The same will be passed on to state governments once they have the expertise on the same down the line.

The government has issued the Draft Rules and these rules play a key role in the adoption of the GST by the trade and industry and also provide information on the do’s under GST. The Draft Rules are issued for the following areas

Draft Registration Rules
Draft Registration formats
Draft Payment Rules
Draft Payment formats
Draft Invoice Rules
Draft Invoice formats

Draft Invoice Rules

The information given in the Draft Invoice Rules is in addition to the information provided under Section 23 of the Model GST Law. It lists out all the elements to be shown on different documents likes the Tax Invoice, Bill of Supply, Supplementary Tax Invoice and Debit or Credit Notes and issue of tax invoice in special cases along with the Manner of Issue of Tax Invoice.

One of the important or major change is the same tax invoice is applicable for the Central as well as state taxes which is not the case in the current tax requirements.

The Manner of issue of tax invoice is similar to the provisions given in Central Excise with

(a) the original copy being marked as ORIGINAL FOR RECIPIENT;

(b) the duplicate copy being marked as DUPLICATE FOR TRANSPORTER; and

From the above, it is clear that goods have to be accompanied with the tax invoice, as the point b says duplicate for the transporter. There is an interpretation that under GST, tax invoice need not accompany the goods.

The usage of the word gives room for one more taught in case of branch transfers, the FAQ’s released by the department says that in case of branch transfer there is no need to issue tax invoice, if it is within the state, but when the goods are being shipped with what document the same should be sent. Do we have a concept of Challan or some other document? We need to wait for some more time on clarity on such transactions.

The information to be shown on the Tax Invoice

(a) name, address and GSTIN of the supplier;

(b) a consecutive serial number containing only alphabets and/or numerals, unique for a financial year;

(d) name, address and GSTIN/ Unique ID Number, if registered, of the recipient;

(e) name and address of the recipient and the address of delivery, along with the name of State and its code, if such recipient is unregistered and where the taxable value of supply is fifty thousand rupees or more;

(f) HSN code of goods or Accounting Code of services;

(g) description of goods or services;

(h) quantity in case of goods and unit or Unique Quantity Code thereof;

(i) total value of goods or services;

(j) taxable value of goods or services taking into account discount or abatement, if any;

(k) rate of tax (CGST, SGST or IGST);

(l) amount of tax charged in respect of taxable goods or services (CGST, SGST or IGST);

(m) place of supply along with the name of State, in the case of a supply in the course of inter-State trade or commerce;

(n) place of delivery where the same is different from the place of supply;

(o) whether the tax is payable on reverse charge;

(p) the word “Revised Invoice” or “Supplementary Invoice”, as the case may be, indicated prominently, where applicable along with the date and invoice number of the original invoice; and

(q) signature or digital signature of the supplier or his authorized representative.

Provided that the Board/Commissioner may, by notification, specify –

(i) the number of digits of HSN code for goods or, as the case may be, the Accounting Code for services, that a class of taxable persons shall be required to mention, for such period as may be specified in the said notification, and

(ii) the class of taxable persons that would not be required to mention the HSN code for goods or, as the case may be, the Accounting Code for services, for such period as may be specified in the said notification:

The above information to be provided on the Tax Invoice is similar to that of the information we provide on the excise invoice expect for not showing the range and divisional details of the central excise.

The following are the notable differences under GST on comparing with the existing tax invoice

HSN code to be shown mandatorily on the tax invoice for all the taxes
Service Tax accounting code to be shown, which is not there currently
In case of supply of goods, the reverse charge details have to be shown on the tax invoice, this is similar to the current provision for services
There is a restriction on the invoice number format, it says it has to be either numerical or alphabetic only. The reason for this could be upload of invoices and matching as a string can cause problems in some of the system checks
Rule 1 (j) talks about abatement to be shown on the tax invoice, but if we see the format of the tax invoice there is no specific provision where we can show the same. Probably the tax rate to shown is net of abatement. If such is the case, the validation in the common portal should be built accordingly.
Sub-Rule 4 of Rule 2 talks about the Invoice Reference Number, which needs to be shown on the tax invoice and this number can be obtained only after uploading the same on the common portal. Does that mean, the tax invoice has to be printed only after obtaining this number? The same is given clearly in the format of the tax invoice given by the department.This means that before every shipment goes out, the tax invoice has to be uploaded on the common portal and reference number is to be derived and then printed on the tax invoice. It also means that internet connection is mandatory now and it will be challenge in case of plants located in remote locations.
No longer required to maintain two different series of tax invoices for domestic and exports as in central excise today. It will be an organizational call.

There are some special cases under which a Tax Invoice can be issued like for exports on payment of duty or export under bond. Another interesting to be noted is that, it talks about the printing of the ARE -1 number on the tax invoice, does this mean that we will still have the concept of deemed exports under GST, where goods can be purchased under existing process only. This is contrary to the views expressed by the trade and industry and tax consultants.

In the above cases, the invoice has to be endorsed clearly under which the exports are under which the supply is taking place “SUPPLY MEANT FOR EXPORT ON PAYMENT OF IGST” or “SUPPLY MEANT FOR EXPORT UNDER BOND WITHOUT PAYMENT OF IGST”. In such cases the information shown in Clause (e) has to be replaced with the following information

name and address of the recipient;
address of delivery;
name of the country of destination; and
number and date of application for removal of goods for export [ARE-1].

In case of services, the existing provisions of issue of service tax invoice to be issued within 30 days on completion of service is retained under GST also.

There is also a provision for issue of supplementary invoices or debit or credit notes in line with section 23 of the Model GST Law. The Model GST Law or the Invoice rules does not talk about the provision of issue of debit or credit notes in case of shortage or rejections or transit loss on quantity. This remains an open question.

Rule 4, does not talk about the above requirements but asks for showing the following information on these documents

(a) name, address and GSTIN of the supplier;

(b) nature of the document;

(c) a consecutive serial number containing only alphabets and/or numerals, unique for a financial year; (d) date of issue of the document;

(e) name, address and GSTIN/ Unique ID Number, if registered, of the recipient;

(f) name and address of the recipient and the address of delivery, along with the name of State and its code, if such recipient is unregistered;

(g) serial number and date of the corresponding tax invoice or, as the case may be, bill of supply;

(h) taxable value of goods or services, rate of tax and the amount of the tax credited or, as the case may be, debited to the recipient; and

(i) signature or digital signature of the supplier or his authorized representative.

The rules also give a provision to issue a consolidated revision documents for non-registered taxable supplies, in case if the need arises. There is also a provision to issue a consolidated revised document in case of interstate supplies also if the amount is less than Rs 2.50 Lacs

Rule 5 details about the provision on the issue of tax invoices in special cases like by input service distributor or a banking company or a transport operator.

The tax invoice to be issued by the input service distributor should contain the following information

(a) name, address and GSTIN of the Input Service Distributor;

(b) a consecutive serial number containing only alphabets and/or numerals, unique for a financial year;

(d) name, address and GSTIN of the supprovies plier of services, the credit in respect of which is being distributed

and the serial number and date of invoice issued by such supplier;

(e) name, address and GSTIN of the recipient to whom the credit is distributed;

(f) amount of the credit distributed; and

(g) signature or digital signature of the supplier or his authorized representative:

In the case of banking company or non-banking company or a financial institution, should show the information mentioned in Sub-Rule 1 of Rule 5 by calling the document in whatsoever name even though it is not serially numbered.

Not sure how will the common portal handle such cases as there is serial number for these transactions and also will there be a provision to upload the documents without serial number i.e invoice number? There can be cases where the banking charges are more than Rs 2.50 Lacs especially in case of Letter of Credit or bill discounting etc.

In case of goods transport agency, the information given in the sub-rule 1 of Rule 5 should be contained along with the gross weight, net weight, name of the consignor and the consignee, registration number of goods carriage in which the goods are transported, details of goods transported, details of place of origin and destination, GSTIN of the person liable for paying tax whether as consignor, consignee or goods transport agency, and also contains other information as prescribed under rule 1.

Bill of Supply

Rule 3 is in line with the provisions of Section 23 of the Model GST Law, where in the tax payer deals with exempted supplies, he can issue a bill of supply in lieu of tax invoice and it should contain the following information

(a) name, address and GSTIN of the supplier;

(b) a consecutive serial number containing only alphabets and/or numerals, unique for a financial year;

(d) name, address and GSTIN/ Unique ID Number, if registered, of the recipient;

(e) HSN Code of goods or Accounting Code for services;

(f) description of goods or services;

(g) value of goods or services taking into account discount or abatement, if any; and

(h) signature or digital signature of the supplier or his authorized representative:

The taxpayer need not issue a bill of supply if the transaction value is less than Rs 100 unless asked by the buyer.

The taxpayer has to issue a consolidated bill of supply end the day for all the cases where he has not issued a bill of supply during the day. This provision is again to keep track of all such transactions which are not being tracked directly.

From the invoice formats it is clear that in case of costs like freight, insurance, packing charges should be part of the taxable value of the goods.

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