Category: Miscellaneous

GST Sectoral Series: FAQs on Textiles business

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FAQs on Textiles business


Question 1: As per Chapter 53 heading 5303 of the GST rate schedule, raw jute has been kept at the NIL rate slab. Thus, it is presumed that suppliers dealing only in raw jute are not required to register themselves under GST. But Jute Mills are asking their raw jute suppliers to mandatorily register themselves else their supplies would not be accepted. Please clarify whether raw jute suppliers are liable for registration?

Answer: Raw jute has been kept at NIL rate of GST i.e. there would be no tax on raw jute. Therefore, as per Section 23 (1) (a) of the CGST Act, 2017 the suppliers dealing only in raw jute are not required to register. Jute mills are not required to pay tax under Reverse Charge Mechanism (RCM) as mentioned under Section 9(4) of the CGST Act, 2017 because both the goods have been kept at NIL rate of duty. Similarly, Raw Silk has also been kept at NIL rate of GST i.e. there would be no tax on raw silk. Therefore, the suppliers dealing only in raw silk are also not required to register.


Question 2: Cotton under chapter heading 5201 and 5203 has been kept in 5% rate slab. Does this mean that cotton farmer is required to register under GST?

Answer: No. As per Section 23(1)(b) of the CGST Act, 2017 an agriculturist, to the extent of supply of produce out of cultivation of land is not liable to registration.

Question 3: Does the buyer of raw cotton (who is a registered person) from the farmer need to pay GST on Reverse Charge basis?

Answer: Yes. As the cotton under heading 5201 and 5203 has been placed under 5% rate and the cotton farmer is not liable to registration, the buyers of raw cotton (who are registered persons) from the farmers are required to pay tax on reverse charge basis as per Section 9 (4) of the CGST Act, 2017.

Question 4: In respect of goods classified under Chapters 61, 62 and 63, the rate of tax for goods of sale value not exceeding Rs.1000/- is 5% and for those exceeding Rs.1000/- is 12%. Is this value transaction value or MRP?

Answer: As per the rate schedule, all goods of sale value not exceeding Rs.1000/- per piece would be taxed at 5% and the goods of sale value exceeding Rs.1000/- per piece would be taxed at 12%. Therefore, it is the sale value i.e. the transaction value on which the tax has to be paid and not the MRP.

Question 5: No rates have been announced for Jute bags and Jute blended bags. It is feared that they may be placed under Chapter 42 for leather wherein the rate for leather bags is indicated as 28%. It is suggested that the Jute bags may be kept at zero % to promote production of green Jute Diversified products for combating pollution and safe guarding environment?

Answer: The bags made of jute are clearly specified in the rate schedule under heading 4202 22 30. The rates for Hand bags and shopping bags of jute is 18%.


Question 6: Man-made textile yarns have been kept at 18% while fabrics have been kept at 5%. If I buy yarn worth Rs. 100 by paying tax at 18% i.e. Rs. 18/- and I sell grey fabrics at Rs. 150/- considering 50% value addition by paying tax at 5% i.e. Rs. 7.50, what will be the treatment of remaining input credit of Rs. 11.50. Whether I would get refund of remaining credit and how much credit would I get?

Answer: You will be eligible for full ITC of Rs. 18/- paid on your inputs i.e. yarn but whatever credit remains unutilized will remain in your electronic credit ledger and no refund of the same will be allowed.

Question 7: We are a small saree manufacturer at Surat. We buy ready dyed fabrics and get job work, hand work, stitching etc. done to create designer sarees. Wholesalers and retailers from all over India buy these sarees on credit basis for 30 days to 240 days. I as a trader have some queries regarding implementation of GST from 1st July 2017:

(a) Whatever is sold, 15-30% is returned. What would be treatment of goods returned and how would I adjust my taxliability if the entire GST has already been paid?

Ans:

You can issue a credit note in respect of the goods returned and adjust your tax liability if the person returning the goods has reversed the credit availed by him at the time of original supply. Such credit note cannot be issued after September of the following year or filing of annual return whichever is earlier.

(b) What would happen to my opening stock on 1st July 2017. Will I get input credit on it or do I just need to supply it after adding 5% GST on it?

Answer:

Full credit of the tax paid on the stock would be available if the documents evidencing tax payment are available. However, if only documents relating to procurement are available with no documents evidencing tax payment, deemed credit would be admissible in respect of textiles only if the goods were taxable under the Central Excise Act. Such credit would be available after the tax has been paid on supply of these goods. This facility is available for 6 months period only or till the date of sale of such stock whichever is earlier and is limited to 40% of the central tax paid by you.


(c) Is government assuring of payment within 180 days. There are rumours that the wholesaler/retailer has to pay within 180 days. Is it true?

Ans: 

As per the second proviso to Section 16(2)(d) of the CGST Act, 2017 if a recipient of the supply does not pay to its supplier the value of the supply along with the tax within 180 days from the date of issue of invoice by the supplier, the amount of ITC availed proportionate to the unpaid amount would be added to the output tax liability of the recipient of the supply along with the interest thereon.

The credit so reversed can be reclaimed when the value is paid to the supplier along with the tax thereon. Thus the government is not assuring payment within 180 days.


(d) How will I make my invoices if a buyer under the composition scheme come to buy our sarees?

Ans:
A normal invoice has to be issued irrespective of whether the buyer is under composition scheme or not. The difference would be only when you receive supplies from the person registered under the composition scheme.

(e) We are confused about GST implementation as there was no tax on us before. Will we get relaxation for the return filing?

Ans:
Relaxation in filing of returns for the month of July and August, 2017 has already been provided as per which for the first two months of GST implementation, the tax would be payable based on a simple return (Form GSTR- 3B) containing summary of outward and inward supplies which will be submitted before 20th of the succeeding month. However, the invoice-wise details in regular GSTR – 1 would have to be filed for the month of July and August, 2017 as per the timelines given below:

July, 2017 

GSTR – 3B:  By 20th August
GSTR – 1:  By 5th September
GSTR-2 (auto populated from GSTR-1):  6th – 10th September


August, 2017 

GSTR – 3B:  By 20th September
GSTR – 1:  By 20th September
GSTR-2 (auto populated from GSTR-1):  21st – 25th September



Question 8: I have a manufacturing unit of Cotton trouser where customer gives me fabric and I have to convert it into trouser. What would be the rate applicable on me 5 % or 18 %?

Answer: The services provided by you fall under the category of job work by virtue of the definition of job work provided under Section 2 (68) of the CGST Act, 2017. The rate for job work in relation to trouser, which is a wearing apparel, is 18%.

Question 9: We are manufacturing Floor Coverings falling under Chapter 57. As per GST Council meeting dated 11.06.2017, the rate on Coir mats, mattings and floor coverings falling under Chapter 57 have been reduced from 12% to 5%. Kindly clarify as to whether rate of 5% will be applicable on all types of mattings and floor coverings of Chapter 57 or only to those made of coir?

Answer: 5% rate will apply to only the specified items of coir.

Question 10: We are manufacturing laminated textile under chapter 59. Previously, our product was exempted under Notification no. 30/2004-CE. But in States we were paying 4% VAT. Also we are doing job work of textile lamination for some customers. Our invoice value is sum total of raw material used for job work, labour charges and profit. Under GST regime:

(a) Whether we will get input credit on material?

Answer: 

Yes. You would be eligible for credit of tax paid on material used for job work.

(b) How can we make invoice, which rate, or we have to make two different invoice, one for material used for lamination and other for service charges?

Answer: No. You are not required to raise two different invoices.You would be raising one invoice similar one to what you have been doing till now and GST at the applicable rate will be charged on the invoice value. You can pay your tax liability by using Input Tax Credit (ITC). However, invoice should carry all the details as required by the CGST Act, 2017 and the CGST Rules.

Question 11: We are in Furnishing Fabrics Industries for curtain and upholstery fabrics. We mainly deal in Woven, Knitted, Polyester and Coated fabrics. You are requested to help us to know the chapter number under which our fabrics as mentioned herein above are covered and GST rate applicable to us?

Answer: The woven fabrics are classifiable under the various headings depending upon their composition. The knitted or crocheted fabrics fall under Chapter 60. Polyester fabrics fall under Chapter 54 and 55 and Coated fabrics fall under Chapter 59.


Question 12: There is a gross confusion on the tax applicable for Embroidered Sarees and Fabric. Typically, principal manufacturers supply fabric/Sarees to Job workers and get various embroidery designs done on the fabric/sarees. We understand that the textile jobworker would charge an output supply GST of 5% on the composite jobwork supply. This embroidery fabric/ saree are then sold by the principal manufacturers to wholesale and retail sellers. What would be the output GST applicable on such embroidered fabric/sarees when the same is sold by the principal manufacturer?

Answer: The rate of 5% would be chargeable on the job process relating to the textile yarns (other than Man Made Fibre/ Filament) and fabrics. Sarees are treated as fabrics and a saree remains fabrics only as no new item emerges having distinct name, character and use. Stitching of two or more different kinds of fabrics also does not take away its classification.

Therefore, the sarees whether embroidered or not would be taxed at the same rate at which the fabric is taxed.


Question 13: Will the 5 % fabric GST be applied or 12% GST of embroidery strips/badges be applied?

Answer: Embroidery strips/ badges (narrow woven fabrics) are classified under heading 5810 and chargeable to tax at 12%.

Question 14: What is the difference between Fabric and Made-ups? Whether Shawl is a fabric or apparel or made-up. What is the rate on Shawls?

Answer: Shawls fall in the category of articles of apparel and clothing accessories and are classified under heading 61.17, if knitted or crocheted and under heading 62.14, if not knitted or crocheted. The rate of tax is 5% if the sale value of shawl does not exceed Rs.1000/- per piece and the rate is 12% if the sale value exceeds Rs.1000/- per piece.

Question 15: Dress material are sold by length. They can include upto 3 pieces. These can be plain or embroidered (value-addition or further worked upon). Where should dress material be classified?

Answer: Dress sets are classified under heading 6307 and the rate of tax on the dress materials/patterns is similar to the apparels i.e. for dress material of sale value not exceeding Rs.1000/-, tax at 5% would be charged and for dress material of sale value exceeding Rs.1000/-, tax at 12% would be charged.

Question 16: Please clarify the ITC (HS) of yarn made from worn clothing, the material composition of which varies from lot to lot. It is uncertain as the clothing may be of cotton/woollen/ man made fibre?

Answer: Under HSN, the classification of yarn is on predominance basis. So the yarn having predominance of wool would fall under Chapter 51. If all kinds are in equal proportion i.e. no fibre is predominant, it will get classified in the chapter covering the fibre last in the numerical order, so Chapter 54 or 55 in case MMF are present.

Question 17: What would be the GST rate on old cotton dhoti used for cleaning purpose? It is a used product recycled for cleaning purpose. Is there any GST on old dhoti because there is no VAT on old dhoti?

Answer: Dhoti is classifiable under Chapter 52 or Chapter 54 as fabrics. Old dhoti is classifiable under heading 63.09 as worn clothing. The tax for chapter 63 is similar to apparels and related to sale value whereas cotton fabrics/man-made fabrics, irrespective of value, are taxed at 5%. Whatever be the classification, as presumably the old cotton dhoti would be below the sale value of Rs.1000/- per piece, it would be taxed at 5%.

Question 18: We are small traders of textile dealing in Suiting, Shirting, Sarees, Dress Material, Blankets, Dhoti etc. We have some queries regarding implementation of GST from 1st July 2017:

(a) What will be the status of opening Stock of Textile items? Will 5% be added on closing stock as on 30th June 2017?

Ans: When you make supplies out of this stock after 1st July, 2017 you will be liable to pay tax as applicable to the goods sold by you.

(b) What is the GST rate in Fabrics, as there are various types of fabrics like cotton, synthetics, man-made fabrics, acrylic, Mixture of cotton and other fabrics etc. Will there be flat rate of 5% on all fabrics or different rate?

Ans :GST rate on fabric is flat 5% irrespective of composition.

(c) Please provide clarification on HSN number. Is it mandatory to quote in invoice by B2C traders & B2B traders? Further there are various codes in one type of item, would it not create confusion among traders?

Ans: Upto Rs. 1.5 cr turnover, no HSN code is required to be mentioned. For those having turnover of Rs. 1.5 to 5 Cr, first 2 digits of the HSN code are required i.e. the chapter number. Only those who have turnover above Rs. 5 Cr are required to mention 4 digits of the HSN code. You will start getting the HSN code in your supplier’s invoice, so it would not cause any issues once the supplies under new regime take place.

(d) As per news in CNBC, input tax credit would not be allowed in textile for some period? Please clarify.

Ans: ITC would be admissible as per the Transitional provisions of GST Law.

(e) Is Rs 1000/- bracket for 18% rate applicable on Sarees and suit lengths or will it attract flat rate?

Rate of tax linked to the sale value applies only to garments and not for sarees and suilengths which are fabrics.

Bhagavad Gita: By spiritual strength conquer this insatiable enemy (Text 43, Ch 3, Karma Yoga)

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Evam buddheh param buddhva samstabhyatmanam
Jahi satrum maha-baho kama-rupam durasadam

(Text 43, Ch 3, Karma Yoga)

Meaning: Thus knowing oneself to be transcendental to the material senses, mind and intelligence, O mighty armed Arjuna, one should steady the mind by deliberate spiritual intelligence (divine consciousness) and thus by spiritual strength-conquer this insatiable enemy known as lust.

Bhagavad Gita : Soul is higher than intelligence (Text 42, Ch 3, Karma Yoga)

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Indriyani parany ahur indriyebhyah param manah
manasas tu para buddhir yo buddheh paratas tu sah

(Text 42, Ch 3, Karma Yoga)

Meaning:  The working senses are superior to dull matter; mind is higher than the senses; intelligence is still higher than the mind; and he (the soul) is even higher than the intelligence.

*** The senses are different outlets for the activities of lust. Lust is reserved within the body, but it is given vent through the senses. Therefore, the senses are superior to the body as a whole. These outlets are not in use when there is superior consciousness or divine consciousness. In divine consciousness the soul makes direct connection with the Supreme Personality of Godhead; therefore the hierarchy of bodily functions, as described here, ultimately ends in the Supreme soul.Bodily action means the functions of the senses, and stopping the senses means stopping all bodily actions. But since the mind is active, then even though the body may be silent and at rest, the mind will act-as it does during dreaming. But above the mind is the determination of the intelligence, and above the intelligence is the SOUL proper. If, therefore, the soul is directly engaged with the Supreme, naturally all other subordinates, namely, the intelligence, mind and senses, will be automatically engaged.

Bhagavad Gita: What impelled to sinful acts (Text 40, Ch 3, Karma Yoga)

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Indriyani mano buddhir asyadhisthanam ucyate
etair vimohayaty esa jnanam avrtya dehinam
(Text 40, Ch 3, Karma Yoga)

Meaning: The senses, the mind and the intelligence are the sitting places of this lust. Through them lust covers the real knowledge of the living entity and bewilders him.

*** Mind is the center of all the activities of the senses, and thus when we hear about sense objects the mind generally becomes a reservoir of all ideas of sense gratification; and as a result, the mind and the senses become the repositories of lust. Next, the intelligence department becomes the capital of such lustful propensities. Intelligence is the immediate next-door neighbor of the spirit soul. Lusty intelligence influences the spirit soul to acquire the false ego and identify itself with matter, and thus with the mind and senses. The spirit soul becomes addicted to enjoying the material senses and mistakes this as true happiness.

GST Sectoral Series: FAQ on Drugs & Pharmaceuticals business

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FAQ: Drugs & Pharmaceuticals

Question 1: Whether formulations cleared have to be assessed to GST under transfer price mechanism or on the basis of MRP printed on them?

Answer: The assessment of drugs and formulations under GST would be on the basis of transaction value at each level of supply with end to end ITC chain for neutralizing the GST paid at the procurement level.

Question 2: What are the requirements for clearance of physician samples distributed free of cost?

Answer: In case of clearance of physician samples distributed free of cost, the ITC availed on the said samples has to be reversed in view of the provisions under Section 17(5)(h) of the CGST Act, 2017.No tax is payable on clearance of physician samples distributed free of cost as the value of supply is zero and no credit has been availed.

Question 3: What is the procedure for movement of time expired medicines from the retail outlets to the manufacturer for destruction?

Answer: In such cases, the manufacturer may issue a credit note within the time specified in sub-section (2) of section 34 of the CGST Act, 2017 subject to the condition that the person returning the expired medicines reduces his ITC. Subsequently, when the time expired goods are destroyed, the manufacturer has to reverse his ITC on account of goods being destroyed. Where the goods are returned after the time limit specified in section 34(2) of the CGST Act, 2017, the registered person returning the goods shall issue a tax invoice, as it is a supply within the meaning of Section 7 of the CGST Act, 2017.


Question 4: How loan and licensee units carry out their operations in GST regime?

Answer: GST law does not have any special provision for loan and licensee units. Where the contract are in the nature of performance of job-work, these units can opt to follow the procedure laid down in section 143 of the CGST Act, 2017 i.e. the principal can send any inputs etc. to such units without payment of tax and the principal can clear the goods from the premises of such units if the principal declares these units as his additional place of business or where such units are themselves registered under section 25 of CGST Act, 2017.
Question 5: What is the treatment of clearances effected to Special Economic Zones?

Answer: The clearances effected to the SEZ are zero rated supplies in terms of Section 16 of the IGST Act, 2017. Accordingly, the supplier can claim refund of IGST paid on such supplies or clear the same under bond/ letter of undertaking and claim refund of the unutilised ITC.

Question 6: Whether SEZ unit located in a State requires a separate registration under GST?

Answer: The SEZ unit located in a State is treated as a business vertical distinct from other units located in the State outside the SEZ [first proviso to Rule 8 of the CGST Rules, 2017 read with Section 25 of the CGST Act, 2017]. Hence, separate registration is required to be obtained for the unit located in SEZ. 

Question 7: Whether ISD registration is required to be obtained separately?

Answer: In terms of second proviso to Rule 8 of the CGST Rules, 2017 read with Section 25 of the GST Act, 2017, every person being an Input Service Distributor has to make a separate application for registration.

Question 8: What is the transitional credit that can be availed on the existing stocks held by a registered person under GST, who was not required to be registered under the existing law?

Answer: In terms of Rule 117(4) of the CGST Rules, 2017 (transitional provisions) read with Section 140(3) of the CGST Act, 2017, a registered person who was not registered under the existing law and who is not in possession of any document evidencing payment of central excise duty in respect of the goods held in stock, shall be allowed credit at the rate of sixty per cent on such goods which attract central tax at the rate of nine per cent or more and forty per cent for the other goods of the central tax applicable on supply of such goods after 01st July 2017 and the said amount shall be credited in the electronic credit ledger after the central tax payable on such supply has been paid. In case where integrated tax is paid, the amount of ITC would be at the rate of thirty per cent and twenty per cent respectively of integrtaed tax. This facility is available for a maximum period of 6 months from the appointed day (i.e. upto 31st December, 2017) or till the goods are sold out, whichever is earlier.

Question 9: Whether a manufacturer can avail deemed credit in respect of transitional stocks on the appointed day in respect of the stocks for which duty paying document is not available?

Answer: In terms of the proviso to Section 140(3) of the CGST Act, 2017, the manufacturer is not eligible to avail deemed credit in respect of transitional stocks, for which duty paying document is not available. Such credit is not available in case of SGST except where VAT was payable on the basis of MRP.


Question 10: Whether deemed credit is available in respect of goods purchased from tax free zones?

Answer: The deemed credit in terms of Rule 117(4) of the CGST Rules, 2017 (transitional provisions) read with Section 140(3) of the CGST Act, 2017 would be available in respect of the goods, which were not unconditionally exempt from the whole of the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985 or were not nil rated in the said Schedule. As the goods purchased from tax free zones were exempted from duty payment under a Notification issued under Section 5 of the Central Excise Act, 1944 and not Nil rated in the First Schedule to the Central Excise Tariff Act, 1985, the deemed credit would be available in respect of such goods held in stock on the appointed day.

Question 11: What is the obligation cast on the Registered Person in case of purchases from Unregistered Person?

Answer: In terms of Section 9(4) of the CGST Act, 2017 read with Section 31(3) ibid, the Registered Person procuring the taxable supplies from an Unregistered Supplier has to raise invoice and pay GST on reverse charge basis in respect of such supplies.


Question 12: What is the treatment of supplies made from erstwhile tax free zones?

Answer: Since GST is a destination based consumption tax with seamless transfer of ITC credit, no exemptions are accorded to supplies made by erstwhile tax free zones. Accordingly, the goods cleared from erstwhile tax free zones would be subjected to GST from the appointed day (01st July, 2017).

Question 13: What is the effect of non-payment of consideration in respect of taxable supplies received by the recipient?

Answer: If the recipient fails to pay to the supplier the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, the amount of input tax credit availed proportionate to the amount of consideration not paid would be added to his output tax liability along with interest thereon. The ITC so reversed can be reclaimed by the recipient after payment of consideration along with tax payable there on subsequently. This provision is not applicable in respect of deemed supplies made without consideration in terms of Schedule I to the CGST Act, 2017.

Question 14: Whether separate sequence numbers can be maintained for invoices issued by the Registered Person in respect of supplies made under GST?

Answer: In terms of Rule 46(b) of the CGST Rules, 2017 single or multiple series of invoices can be raised by the Registered Person for the supplies made under GST as long as such invoice numbers are unique for a financial year.

Question 15: Which is the document required to be issued by the Registered Person for supply of goods from one premises to another premises under the same registration number?

Answer: In terms of Rule 55(1)(c) of the CGST Rules, 2017 such movements have to be effected under the cover of a delivery challan along with any other document that may be prescribed in lieu of the e-way bill.

Question 16: Whether discounts can be claimed as an abatement from the price for assessing GST?

Answer: In terms of Section 15(3) of the CGST Act, 2017, the value of supply for charging GST shall not include any discount which is given before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply. The value of supply shall also not include any discount which is given after the supply has been effected, if such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices and ITC attributable to such discount has been reversed by the recipient of the supply.


Question 17: What are the relevant provisions for movement of transitional goods lying at the premises of contract manufacturer on or after appointed day?

Answer: The procedure for movement of transitional goods lying at the premises of Contract Manufacturers/Loan Licencee is governed by the provisions under Section 141(1), (2) & (3) of the CGST Act, 2017.

Bhagavad Gita : What impelled to sinful acts?(Text 39, Ch 3, Karma Yoga)

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Avrtam jnanam etena jnanino nitya-vairina
kama rupena kaunteya duspurenanalena ca

(Text 39, Ch 3, Karma Yoga)

Meaning: Thus wise living entity’s pure Consciousness becomes covered by his eternal enemy in the form of lust, which is never satisfied and which burns like fire.

***According to Manu-smrti, lust cannot be satisfied by any amount of sense enjoyment, just as fire is never extinguished by a constant supply of fuel.
Advancement of material civilization on the basis of sense gratification means increasing the duration of the material existence of a living entity.Therefore lust is the symbol of ignorance by which the living entity is kept within the material world.

GST Notification-08/08/2017_Extension of time period/due date for July/Aug 2017 Return ( GSTR-1, GSTR-2, GSTR-3, GSTR-3B)

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1.      Seeks to extend time period for filing of details of outward supplies in FORM GSTR-1 for months of July and August.(18/2017-Central Tax,dt. 08-08-2017)

Sl. No.
Month
Time period for filing of details of outward supplies in FORM GSTR-1
(1)
(2)
(3)
1
July, 2017
1st   to 5th  September, 2017
2
August, 2017
16th  to 20th  September, 2017.
2.      Seeks to extend time period for filing of details of inward supplies in FORM GSTR-2 for months of July and August.(19/2017-Central Tax,dt. 08-08-2017)

Sl. No.
Month
Time period for filing of details of outward supplies in FORM GSTR-2
(1)
(2)
(3)
1
July, 2017
6th to 10th   September, 2017
2
August, 2017
21st to 25th September, 2017.
3.      Seeks to extend time period for filing of details in FORM GSTR-3 for months of July and August (20/2017-Central Tax,dt. 08-08-2017)

Sl. No.
Month
Time period for filing of details of outward supplies in FORM GSTR-3
(1)
(2)
(3)
1
July, 2017
11th  to 15th  September, 2017
2
August, 2017
26th to 30th  September, 2017.
4.      Seeks to introduce date for filing of GSTR-3B for months of July and August (21/2017-Central Tax,dt. 08-08-2017)

Sl. No.
Month
Time period for filing of details of outward supplies in FORM GSTR-3B
(1)
(2)
(3)
1
July, 2017
20th  August, 2017
2
August, 2017
20th September, 2017.

GST: Aggregate Turnover & Margin Scheme in GST (CBEC explains concept of aggregate turnover and margin Scheme under GST)

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CBEC explains concept of aggregate turnover and margin Scheme under GST

Aggregate Turnover in GST

1. Turnover, in common parlance, is the total volume of a business.

The term ‘aggregate turnover’ has been defined in GST law as under:

“Aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess.

2. The aggregate turnover is a crucial parameter for deciding the eligibility of a supplier to avail the benefit of exemption threshold of Rs. 20 Lakhs [Rs. 10 Lakhs in case of special category States except J & K] and for determining the threshold limit for composition levy. Let us dissect the definition in small parts to understand the meaning clearly. There are certain terms used in the definition which need a bit of elaboration.


3. It may be noted that the inward supplies on which the recipient is required to pay tax under Reverse Charge Mechanism (RCM) does not form part of the ‘aggregate turnover’. The law stipulates certain supplies like, Goods Transport Agency services, services received from outside India, to name a few, where the recipient of service is made to pay the tax. The value of such supplies on which tax is paid, would not form part of the ‘aggregate turnover’ of recipient of such supplies. However, the value of such supplies would continue to be part of the ‘aggregate turnover’ of the supplier of such supplies.

4. The second element of value which would not be included in the ‘aggregate turnover’ is the element of central tax, state tax, union territory tax and integrated tax and compensation cess.

5. The value of exported goods/services, exempted goods/ services, inter-state supplies between distinct persons having same PAN would be added to ‘aggregate turnover’.

6. Last but not the least, such turnover is to be calculated by taking together the value in respect of the activities carried out on all-India basis.

7.The aggregate turnover is different from turnover in a State. The former is used for determining the threshold limit for registration as well as eligibility for Composition Scheme. However, the composition levy would be calculated on the basis of turnover in the State.

Margin Scheme in GST


Normally GST is charged on the transaction value of the goods. However, in respect of second hand goods, a person dealing is such goods may be allowed to pay tax on the margin i.e. the difference between the value at which the goods are supplied and the price at which the goods are purchased. If there is no margin, no GST is charged for such supply. The purpose of the scheme is to avoid double taxation as the goods, having once borne the incidence of tax, re-enter the supply and the economic supply chain.


Valuation of Second Hand Goods:

As per Rule 32(5) of the CGST Rules, 2017, where a taxable supply is provided by a person dealing in buying and selling of second hand goods i.e., used goods as such or after such minor processing which does not change the nature of the goods and where no input tax credit has been availed on the purchase of such goods, the value of supply shall be the difference between the selling price and the purchase price and where the value of such supply is negative, it shall be ignored.

The proviso to the above rule further provides that in case of the purchase value of goods repossessed from a unregistered defaulting borrower, for the purpose of recovery of a loan or debt shall be deemed to be the purchase price of such goods by the defaulting borrower reduced by five percentage points for every quarter or part thereof, between the date of purchase and the date of disposal by the person making such repossession.

In this regard, Notification No.10/2017-Central Tax (Rate) New Delhi, dated 28th June, 2017 exempts intra-State supplies of second hand goods received by a registered person, dealing in buying and selling of second hand goods and who pays the central tax on the value of outward supply of such second hand goods as determined under sub-rule (5) of rule 32 of the CGST Rules, 2017, from any unregistered supplier, from the whole of the central tax levied under the CGST Act, 2017. Similar exemptions are also there in respective SGST Acts.

Illustration:

For instance, a company say M/s FirstSource Ltd, which deals in buying and selling of second hand cars, purchases a second hand Maruti Celerio Car of March, 2014 make (Original price Rs. 5 lakhs) for Rs. 3 lakhs from an unregistered person and sells the same after minor furbishing in July, 2017 for Rs. 3,50,000/-. The supply of the car to the company for Rs. 3 lakhs shall be exempted and the supply of the same by the company to its customer for Rs. 3.5 lakhs shall be taxed and GST shall be levied. The value for GST purpose shall be Rs. 50000/-, i.e.the difference between the selling and the purchase price of the company.

In case any other value is added by way of repair, refurbishing, reconditioning etc., the same shall also be added to the value of goods and be part of the margin.

If margin scheme is opted for a transaction of second hand goods, the person selling the car to the company shall not issue any taxable invoice and the company purchasing the car shall not claim any ITC.




Bhagavad Gita : What impelled to sinful acts (Text 36, 37, 38 Ch 3, Karma Yoga)

Posted on by Business So Simple in Miscellaneous

Arjuna uvaca:
Atha kena prayukto yam papam carati purusah
anicchann api varsneya balad iva niyojitah
(Text 36, Ch 3, Karma Yoga)

Meaning: Arjuna said: O descendant of Vrsni(divine), by what is one impelled to sinful acts, even unwillingly, as if engaged by force?

*** A living entity, as part and parcel of the Supreme, is originally spiritual, pure, and free from all material contaminations. Therefore, by nature he is not subject to the sins of the material world. But when he is in contact with the material nature, he acts in many sinful ways without hesitation, and sometimes even against his will.

Kama esa kridha esa rajo-guna-samudbhavah
mahasano maha-papma viddhy enam iha vairinam
(Text 37, Ch 3, Karma Yoga)

Meaning:
The Supreme Personality of Godhead said:
It is lust only, Arjuna, which is born of contact with the material mode of passion and later transformed into wrath, and which is the all -devouring sinful enemy of this world.

*** When a living entity comes in contact with the material creation, his eternal love for divine is transformed into lust, in association with the mode of passion. Then again, when lust is unsatisfied, it turns into wrath; wrath is transformed into illusion, and illusion continues the material existence.

The origin of everything is the supreme Brahman. Therefore the origin of lust is also in the Supreme. If therefore, lust is transformed into love for the Supreme, or transformed into divine consciousness-desiring everything for divine-then both lust and wrath can be spiritualized.

Dhumenavriyate vahnir yathadarso malena ca
Yatholbenavrto garbhas tatha tenedam avrtam
(Text 38, Ch 3, Karma Yoga)

Meaning: As fire is covered by smoke, as a mirror is covered by dust, or as the embryo is covered by the womb, the living entity is similarly covered by different degrees of this lust.

***Human form of life is a chance for the living entity to escape the entanglement of material existence. In the human form of life, one can conquer the enemy, lust, by cultivation of divine consciousness.