6 years and finally a consensus has arrived between various political parties with regard to the Goods & Service tax (GST) which had been tabled & passed by parliament on 03rd August 2016. This new tax regime shall play a very crucial role in progress and development of economy and is expected to bring an immediate impact of 1.50% – 2.00% in GDP of country. It shall simplify and bring equality in the taxation system across various states. The new taxation system shall merge 17 indirect taxes levied into one single Tax.
With India being rated in the top 5 startup destination in the world and a special support being given by the ruling government to “STARTUPS”, the bill has tried to adequately cover the taxation aspect for this segment and has put in a separate Chapter – XIB in the Proposed GST law covering “Electronic Commerce”. The bill clearly mentions out entire process starting from registration to return filling for Startups.
Our effort is to stress upon the important areas which shall have immediate impact on all e-commerce companies as well as e -commerce operators.
On the appointed day i.e. day from which GST become effective, every person registered under any of the earlier law shall be issued a certificate of registration on a provisional basis which shall be valid for first 6 months.
Every registered person shall submit the documents as required by appropriate authority on or before six month from the appointed date so as to obtain the final registration under GST laws.
With regard to credit for various existing taxes, such as Excise, Service Tax, VAT and others, the same shall be allowed as input tax credit under GST subject to certain condition as specified in GST laws.
Schedule III of Model GST law makes it compulsory for Electronic Commerce Operators as well as persons who supply goods and/or services, other than branded services, through Electronic commerce operator to obtain registration under GST laws irrespective of any threshold limit on turnover of the Assessee.
By the above schedule it shall be mandatory for every Assessee dealing in/through E-commerce to get himself registered under Goods & Service Tax laws even if there Turnover is Rs.1/-.
Section 43B has clearly defined the words “aggregator”, “Brand Name”, “branded Service”, “electronic Commerce” and “Electronic Commerce Operator”.
Filling of Return for E-Commerce Companies and E-Commerce Operator:
Every Assessee registered under the GST law other than those covered under section 8 (Composite Scheme) is required to file Monthly Return of Purchase , Sales , Input Credit taken , Output Tax paid and Other specific information as required by appropriate authority. The Return shall be filled within 20 days after the end of Month.
Assessee Covered under Composite Scheme i.e. having annual turnover of less than 50 lacs is required to file quarterly return within 18 days from the end of such Quarter.
All these returns have to be valid return providing the adequate information as required and shall be filled electronically by the respective Assessee.
Annual Return: Section 30 requires every taxable person other than input service distributor, casual taxable person and non-resident taxable person, to file annual return on or before 31st December of the end of such financial Year.
PAYMENT OF TAX, INTEREST, PENALTY AND OTHER AMOUNTS
Every registered Assessee is required to pay to the credit of appropriate government, the net tax payable by him on or before filling of return for the respective period.
Section 35 has added an explanation on date of deposit of tax by taxpayer “The date of Credit to the account of the appropriate Government in the authorized bank shall be deemed to be the date of deposit”.
In case the person liable to pay tax in accordance with the provisions of the act or rules made hereunder fails to pay tax or any part thereof to the account of the central or state government he shall, on his own, pay the interest at the rate as decided.
COLLECTION OF TAX AT SOURCE
To widen the ambit of tax and cover maximum Assessee, the GST law has brought in the concept of Tax collection at source for E-Commerce Assessee and E-commerce operator covered under Section 43C.
Section 43C clearly states that notwithstanding anything to the contrary contained in the act or in any contract, arrangement or memorandum of understanding, every Electronic Commerce operator shall, at the time of Credit of any amount to the supplier and/or service, representing consideration towards the supply and/or services, calculate & collect tax at the rate as specified.
The tax so collected shall be paid to the credit of appropriate government by the operator within 10 days after the end of the month in which such collection is made.
Every operator shall also submit a statement, electronically, of the entire amount collected in such month within 10 days from end of such calendar month.
Any person who fails to furnish the information as required shall be liable to penalty which may extend to rupee twenty five thousand.
The Tax so collected shall be allowed as credit to the supplier of goods and/or Services.
INPUT TAX CREDIT
GST shall be divided into three parts i.e. Central Goods & Service Tax (CGST), State Good & Service Tax (SGST) and Intermediate Good & Service Tax (IGST).
The credit for CGST paid shall be first utilized for payment of CGST and if any remaining, It can be utilized for payment of IGST.
Likewise the credit for SGST paid shall be first utilized for payment of SGST and if any remaining, It can be utilized for payment of IGST
Even in case of IGST, amount paid can be utilized for payment of IGST and remaining should be utilized for payment of CGST/SGST respectively.
The credit of various category of tax paid under GST shall be taken as input on self assessment basis.
ACCOUNTS & RECORDS
Every registered person shall keep and maintain , at his principal place of business , as mentioned in the certificate of registration , a true & correct account of production or manufacture of goods, of Inward or outward supply of goods and /or services, of stock of goods, of input tax credit availed and output tax paid, if any.
Provided if the registered person has more than one place of business than the books of account for the respective place shall be kept at such places of business concerned.
Every taxable person whose turnover during the financial year exceeds the limit prescribed shall get his accounts audited from a Chartered Accountant / Cost Accountant and submit the same to principal officer.
Now finally that the bill is through in Rajya Sabha, the real success will be achieved with its timely implementation in a hassle free manner. It would be very important to see the final rate of tax which the Government prescribes. The Government has to now ensure that a platform for necessary support is provided so as to ensure that Bill is able to achieve the main purpose of removing all difficulty among the taxpayers as well as departmental officers.
Current & prospective taxpayers need to prepare themselves and get ready to work with the biggest tax reform of the independent India.
The Author of the Article has taken necessary support from the Model GST law published by Government of India, through “Empowered Committee of state finance ministers”.
Gopal Krishna Lodha is a Chartered Accountant and Company Secretary by profession and is associated with various startups in Eastern India, helping them in managing their legal compliance under Income Tax, VAT, Service Tax and other relevant laws. He can be reached out at firstname.lastname@example.org.