COMPREHENSIVE GST STUDY NOTES UNIT IV: PAYMENT OF TAX AND REFUND 1, ELECTRONIC CREDIT LEDGER Defi ion and Purpose * Electronic Credit Ledger (ECL) is a digital register maintained on the GST portal for each registered person * Itacts as a repository of Input Tax Credit (ITC) available for utilization against output tax liability. ‘© Maintained in FORM GST PMT-02 Key Features * Credits to ECL come from: * ITCas per GSTR-3B # ITC through TRAN-1 (transitional credit) * ITC received through ISD (Input Service Distributor) * ITC reversal due to mismatch reconciliation Debits to ECL © Utilization of ITC for payment of output tax liability * Reversal of ITC claimed erroneously # Reversal of ITC as per provisions of the Act ut ion Order of ITC 1. IGST credit: First utilize against IGST, then against CGST, finally against SGST/UTGST 2. CGST credit: First utilize against CGST, then against IGST 3. SGST/UTGST credit: First utilize against SGST/UTGST, then against IGST Important Restrictions * CGST credit cannot be utilized against SGST/UTGST liability © SGST/UTGST credit cannot be utilized against CGST liability * ITC cannot be utilized if returns for the previous tax period are not filed Practical Sig icance * Helps in maintaining transparency in ITC utilization # Allows real-time tracking of available credits © Prevents manual errors in credit utilization 2. INPUT TAX CREDIT (ITC)Definition ‘© Input Tax Credit is the credit of GST paid on purchases of goods or services used in the course or furtherance of business. Eligibility Criteria for ITC (Section 16) 1. Possession of tax invoice or debit note or other prescribed documents 2. Receipt of goods or services 3. Tax actually paid to the government by the supplier 4. Filing of return under section 39 5. For invoices/debit notes, ITC can be claimed within due date of September return of the following financial year or annual return, whichever is earlier Ineligible ITC (Section 17) 1. Motor vehicles and conveyances (except when used for specific business purposes) 2. Food and beverages, health services, cosmetic treatment (unless provided as obligatory service) 3, Membership of clubs, health and fitness centers 4, Rent-a-cab, life/health insurance (unless notified as obligatory) 5. Travel benefits to employees on vacation 6. Works contract services for construction of immovable property (except plant and machinery) 7. Goods or services used for personal consumption 8, Goods lost, stolen, destroyed, written off, or disposed of by way of gift or free samples Apportionment of ITC (Partial Eligibility) ‘© When goods or services are used partly for business and partly for non-business purposes: * ITC available only for the portion used for business purposes ‘* When goods or services are used partly for taxable supplies (including zero-rated) and partly for exempt supplies: ‘* ITC available only for the portion used for taxable supplies Formula for Apportionment ITC in Special Cases Job Work (Section 19) * Principal can send inputs/capital goods to job worker without payment of tax ‘Inputs must be received back within 1 year, capital goods within 3 years ‘* ITC can be claimed by principal even when goods are directly sent to job worker* Responsibility of proper accounting lies with principal New Registration (Section 18) * ITC available on inputs held in stock on the day immediately preceding the date of registration ‘© Must claim within 30 days from becoming eligible ‘* For composition scheme exit, ITC available on inputs, semi-finished goods, and finished goods held in stock Business Reorganization (Merger, Demerger, etc) ‘© Unutilized ITC can be transferred to the resulting entity * Specific provisions for transfer of liabilities also ‘Requires proper documentation and certification by a practicing CA or CMA Input Service Distributor (ISD) ‘Facility to distribute ITC of services to multiple business units Distribution based on turnover of the units ‘* Maintains separate GSTIN as ISD Issues ISD invoice for distribution of credit Time Limit for Av g ITC * Due date of September return following the financial year or © Date of filing annual return, whichever is earlier Reversal of ITC ‘Required when payment to supplier is not made within 180 days * Required for goods returned * Required when recipient fails to fulfil conditions for claiming ITC Required for exempt supplies, as per apportionment formula 3. REFUND PROVISIONS 1. Zero-rated supplies made without payment of tax (using LUT/Bond) 2. Inverted duty structure (tax rate on inputs higher than tax rate on output) 3. Accumulated ITC due to exports 4, Excess payment of tax 5. Tax paid on intra-state supply which is later held to be interstate supply or vice-versa 6. Finalization of provisional assessment 7. Refund to UN bodies, embassies, ete 8. Refund to casual/non-resident taxable person of unused ITC9, Tax paid on deemed exports Procedure for Claiming Refund 1. File application in FORM GST RFD-01 2. Application must be filed within 2 years from the relevant date 3. Acknowledgment in FORM GST RFD-02 if application is complete 4, Deficiency memo in FORM GST RFD-03 if application is deficient 5. Provisional refund (90%) for zero-rated supplies within 7 days in FORM GST RFD-04 6. Final order sanctioning refund in FORM GST RFD-06 7. Order for adjustment of refund against existing demand in FORM GST RFD-07 8. Notice for rejection of refund in FORM GST RFD-08 Documentary Evidence Required * For export of goods: Shipping bill/bill of export, export invoice * For export of services: BRC/FIRC, invoice, agreement for services * For inverted duty structure: Statement of invoices with calculation of refund amount * For excess payment: Evidence of payment, calculation of excess amount ions and Restrictions 1. No refund if amount is less than %1,000 2. No refund if tax has been collected from recipient but not paid to government 3. In case of inverted duty structure, refund of unutilized ITC is allowed up to the limit calculated bya prescribed formula 4, Refund to be credited to Consumer Welfare Fund if the incidence of tax has been passed on to others Timeframe for Refund Processing ‘* Provisional refund: 7 days from acknowledgment ‘Final refund: 60 days from application date © Interest @6% paa. if refund not granted within 60 days Refund of Integrated Tax (IGST) on Exports 1. For goods: Based on shipping bill itself, processed by Customs 2. For services: Application in FORM GST RFD-01 3, Requirement of LUT/Bond for export without payment of tax 4, Option to export under payment of IGST and claim refund later 4, PAYMENT OF TAXES Modes of Payment1. Internet Banking (NEFT/RTGS) 2, Credit/Debit Card 3, NEFT/RTGS from any bank 4, Over the Counter (OTC) for payments up to 210,000 per challan 5, IMPS (Immediate Payment Service) 6. UPI (Unified Payment Interface) Electronic Cash Ledger ‘* Maintained in FORM GST PMT-05. ‘* Deposit made through challan in FORM GST PMT-06 «Used for payment of tax, interest, penalty, fees, etc. * Balance in Electronic Cash Ledger can be claimed as refund Electron ity Register ‘* Maintained in FORM GST PMT-01 * Part |: For all liabilities except under Section 73 or 74 (normal liabilities) © Part I For liabilities under Section 73 or 74 (demands due to fraud, suppression, etc) ‘Reflects total tax liability, tax discharged, and balance liability Timeline for Payment of Tax * Due date for monthly return: 20th of the following month ‘+ Due date for quarterly return (composition scheme): 18th of the month following the quarter © Due date for annual return: 31st December of the following financial year Challan Identification Number (CIN) * Generated upon successful payment Used for tracking payment ‘+ Consists of 14-digit Common Portal Identification Number (CPIN) plus bank/treasury code Interest on Late Payment ‘+ For delayed payment: 18% per annum * For undue/excess claim of ITC or reduction in output tax liability: 24% per annum * Calculated from the day following due date till the date of payment, TDS (Tax Deducted at Source) ‘* Applicable to government departments, local authorities, etc # Rate: 2% (1% CGST + 1% SGST) or 2% IGST Threshold: 82.5 lakh for individual contracts ‘* To be deposited by 10th of the following month© Certificate to be issued within 5 days of deduction TCS (Tax Collected at Source) * Applicable to e-commerce operators # Rate: 1% (0.5% CGST + 0.5% SGST) or 1% 1GST * Tobe deposited by 10th of the following month Statement to be furnished electronically in FORM GSTR-8 UNIT V: FILING OF GST RETURNS. 1. TAX INVOICE Defi ion * A document issued by a registered person supplying taxable goods or services, containing prescribed particulars Types of Invoices 1, Regular Tax Invoice: For 828 supplies 2. Bill of Supply: For exempted goods/services or composition dealers 3, Revised Invoice: Issued after registration but for supplies made during registration application period 4, Supplementary Invoice/Debit Note: For price increase, tax rate change, or quantity increase 5. Credit Note: For price decrease, tax rate decrease, return of goods, etc. Contents of Tax Invoice (Rule 46) 1. Name, address, and GSTIN of the supplier 2. Consecutive serial number unique for a financial year 3. Date of issue 4, Name, address, and GSTIN of the recipient (if registered) 5. HSN code of goods or SAC code of services 6. Description of goods or services 7. Quantity and unit 8. Total value of supply 9. Taxable value of supply 10. Tax rate (GST, SGST/UTGST, IGST, Cess) 11. Amount of tax charged 12. Place of supply if different from place of delivery 13. Address of delivery if different from registered place of business 14, Whether tax is payable on reverse charge basis15, Signature or digital signature of supplier or authorized representative Time Limit for Issue of Invoice * For goods: Before or at the time of removal of goods for supply * For services: Within 30 days from the date of supply of services * For continuous supply of services: Before or at the time of each successive statement of account or receipt of payment Special Provisions 1. E-lnvoice: Mandatory for businesses with aggregate turnover above prescribed threshold 2. QR Code: Mandatory for B2C invoices issued by businesses with aggregate tumover above prescribed threshold 3. IRN (Invoice Reference Number): Generated through IRP (Invoice Registration Portal) for e~ icance * Establishes the time of supply * Determines the place of supply Essential for claiming Input Tax Credit # Serves as evidence of transaction # Helps in determining tax liability 2. E-WAY BILL Definition * Electronic document generated on the GST portal for the movement of goods of value exceeding %50,000. d When Requi 1. For movement of goods in relation to supply 2, For movement of goods for reasons other than supply (job work, exhibition, etc) 3, For movement of goods due to inward supply from unregistered person Exemptions from E-Way Bill 1. Specified goods as mentioned in Annexure to Rule 138 2. Transport within notified areas 3. Goods transported by non-motorized conveyance 4, Goods moved from port, airport, air cargo complex, or land customs station to ICD or CFS for clearance 5. Movement under customs supervision6. Transit cargo from/to Nepal or Bhutan Validity of E-Way Bill * Distance up to 100 km: 1 day * For every additional 100 km or part thereof: 1 additional day * For Over Dimensional Cargo: Distance up to 20 km - 1 day; For every additional 20 km - 1 additional day Information Required for E-Way Bill 1. GSTIN of supplier and recipient 2. Place of delivery 3. Invoice/challan number and date 4, Value of goods 5, HSN code 6. Transport document number (LR/RR number) 7. Vehicle number ‘Types of E-Way Bills 1. Regular E-Way Bill: Generated by supplier, recipient, or transporter 2. Consolidated E-Way Bill: Generated by transporter for multiple consignments in one vehicle Cancellation of E-Way Bill * Within 24 hours of generation * If goods are not transported ‘+ Ifinformation provided is incorrect Consequences of Non-Compliance * Penalty equal to tax amount or $10,000, whichever is higher * Detention of goods and vehicle * Confiscation of goods in certain cases Practical Significance Prevents tax evasion * Enables real-time tracking of goods movement ‘Reduces border checkpoint delays * Creates a unified electronic system for tracking goods movement 3. RETURNS FILING Types of ReturnsGSTR-1 (Monthly/Quarterly Outward Supplies) * Details of outward supplies of goods or services * Due date: 11th of the following month (monthly), 13th of the month following the quarter (quarterly) * Contains section-wise details: # B2B invoices B2C (large) invoices * B2C (small) supplies * Debit/Credit notes * Export invoices * Advances received * Amendments to earlier returns GSTR-38 (Monthly/Quarterly Summary Return) * Summary retum of inward and outward supplies * Due date: 20th of the following month © Contains: Summary of outward supplies ‘© Summary of inward supplies eligible for ITC Summary of inward supplies ineligible for ITC * Values of exempt, nil-rated, and non-GST supplies * Tax payment details GSTR-4 (Annual Return for Composition Dealers) © Annual return for composition dealers * Due date: 30th April following the end of financial year © Contains: © Summary of outward and inward supplies * Tax payment details © Details of demand and refund GSTR-5 (Return for Non-Resident Taxable Persons) ‘* Monthly return for non-resident taxable persons * Due date: 20th of the following month © Contains details similar to GSTR-3B GSTR-6 (Return for Input Service Distributor) + Monthly return for Input Service Distributors‘* Due date: 13th of the following month ‘* Contains details of input tax credit received and distributed GSTR-7 (Return for Tax Deduction at Source) ‘Monthly return for tax deducted at source * Due date: 10th of the following month * Contains details of tax deducted and deposited GSTR-8 (Return for Tax Collection at Source) ‘* Monthly return for e-commerce operators collecting tax at source ‘* Due date: 10th of the following month * Contains details of tax collected and deposited GSTR-9 (Annual Return) © Annual return for regular taxpayers * Due date: 31st December following the end of financial year © Consolidation of all monthly/quarterly returns * Contains reconciliation of ITC claimed and actual ITC eligible GSTR-10 (Final Return) * Filed by taxpayers whose registration has been cancelled/surrendered ‘© Due date: Within three months of the date of cancellation or date of cancellation order, whichever is later * Contains details of stock held, liabilities, assets, etc GSTR-11 (Return for UIN Holders) * Filed by persons having Unique Identity Number (UIN) * Contains details of inward supplies for claiming refund Late Fees for Delayed Filing ‘© 100 per day per Act (i.e, 7100 under CGST + 7100 under SGST), maximum %5,000 per Act * For nil returns: 820 per day per Act, maximum 85,000 per Act Revision of Returns ‘* No facility for revision of returns * Errors to be corrected in subsequent returns Amendment return facility available for specific fields *# Ensures regular flow of information to tax authorities* Enables matching of ITC claims with supplier's declarations Facilitates compliance monitoring © Provides data for risk assessment and audit selection ADDITIONAL IMPORTANT TOPICS 1, GST REGISTRATION Mandatory Registration (Section 22 & 23) 1. Aggregate tumover exceeding 20 lakh (#10 lakh for special category states) 2. Inter-state suppliers (regardless of turnover) 3. Casual taxable persons 4, Non-resident taxable persons 5, Persons liable to pay tax under reverse charge 6. Input Service Distributors 7. E-commerce operators and suppliers through e-commerce 8. TDS deductors 9. TCS collectors 10. Agents of taxable persons 11, Person supplying online information and database access or retrieval services from outside India to non-taxable person in India Voluntary Registration ‘Person not mandatorily required to register can apply voluntarily * Subject to all provisions as applicable to registered persons Registration Procedure 1. Apply in FORM GST REG-01 2. Verification of application by proper officer within 3 working days 3. If application is found deficient, notice in FORM GST REG-03 4, Applicant to respond within 7 working days in FORM GST REG-04 5. If satisfied, certificate of registration in FORM GST REG-06 within 7 working days 6. If not satisfied, rejection order in FORM GST REG-O5 Documents Required for Registration 1. PAN of the applicant 2. Identity and address proof of promoters/partners 3. Proof of principal place of business 4, Bank account details5, Authorization form for authorized signatory Amendment of Registration * Apply in FORM GST REG-14 within 15 days of change * Core fields (legal name, state, PAN) changes require fresh registration Cancellation of Registration 1. Voluntary: Apply in FORM GST REG-16 2. By proper officer: In specified circumstances like business discontinuation, non-filing of retums, etc 3, Suspension of registration pending completion of proceedings Practical Significance © Legal recognition under GST * Ability to collect tax from customers * Eligibility to claim input Tax Credit * Ability to pass on credit of taxes paid to customers 2. PLACE OF SUPPLY Importance * Determines whether a supply is intra-state (CGST+SGST applicable) or inter-state (GST applicable) * Critical for determining tax jurisdiction Place of Supply for Goods (Section 10, IGST Act) 1, Supply involves movement of goods: * Place of delivery where movement terminates 2, Supply does not involve movement * Location of goods at the time of delivery 3. Goods assembled or installed at site: * Place of installation or assembly 4, Goods supplied on board conveyance: * Location where goods are taken on board 5, Import of goods: * Location of importer 6, Export of goods: * Location outside India Place of Supply for Services (Section 12, IGST Act) - Within India1. General Rule: * Registered recipient: Location of recipient ‘Unregistered recipient: Location of recipient if address available, otherwise location of supplier 2. Services related to immovable property: ‘+ Location of immovable property 3. Performance-based ser 8: * Location where performance takes place 4, Services of admission to events: © Place where event is held 5. Banking, financial, and intermediary ser es * Location of recipient if address available, otherwise location of supplier 6. Telecommunication services: * For post-paid: Billing address of recipient * For pre-paid: Place where payment is received or voucher sold * For services through internet: Location of recipient 7. Transportation of goods * Location of recipient if registered * Place where goods are handed over for transportation if recipient is unregistered 8, Passenger transportation: * Place where passenger embarks on the conveyance 9, Services on board conveyance: * First scheduled point of departure Place of Supply for Services (Section 13, IGST Act) - International 1. General Rule: * Location of recipient * Ifnot available, location of supplier 2, Services related to immovable property: * Location of immovable property 3, Performance-based services: ‘Place where services are actually performed 4, Services of admission to events: * Place where event is held 5. Banking, financial, and intermediary ser * Location of supplier 6, Transportation services:* Place of destination of goods 7. Passenger transportation: * Place where passenger embarks on the conveyance 8, Services on board conveyance: * First scheduled point of departure 9. Online information and database access services: * Location of recipient Practical Significance ‘Determines the type of tax applicable (CGST+SGST or IGST) Affects the revenue sharing between states * Critical for export/import determination (zero-rated or taxable) 3. VALUATION RULES Valuation Rule (Section 15) # Transaction value (price actually paid or payable) ‘* When parties are not related and price is the sole consideration Inclusions in Value of Supply 1. Any taxes, duties, fees, and charges levied under any other law (except GST) 2, Incidental expenses charged by the supplier 3. Interest, late fee, or penalty for delayed payment 4, Subsidies directly linked to the price (except government subsidies) 5, Amounts charged separately for anything done by the supplier in respect of the supply Exclusions from Value of Supply 1. Discounts given before or at the time of supply and recorded in the invoice 2. Post-supply discounts if established before supply and linked to specific invoices 3. GST (CGST, SGST/UTGST, IGST, Cess) Valuation Rules (When Transaction Value Cannot Be Used) Rule 27: Value of supply of goods or services where consideration is not wholly in money # Open market value Total monetary consideration plus money equivalent of non-monetary consideration Value of like kind and quality ‘Sum of consideration in money and notional value determined by applying Rules 30 or 31 Rule 28: Value of supply between distinct or related persons* Open market value * Value of like kind and quality * Value as determined by applying Rule 30 or 31 * Special provision: If recipient is eligible for full ITC, invoice value may be accepted Rule 29: Value of supply through agents © Open market value ‘© 90% of the price charged by recipient to his customer * Value determined by applying Rule 30 or 31 Rule 30: Value of supply based on cost '* 110% of the cost of production or acquisition or provision of service Rule 31: Residual method * Using reasonable means consistent with principles of Section 15 Rule 31: Value of supply in case of lottery, betting, gambling, and horse racing ‘© Specified percentages of face value or price Rule 32: Special provisions for specific supplies Currency exchange: 1% of gross amount or specified amounts * Airtravel agent: 5% of basic fare (domestic) or 10% (international) «Life insurance: Gross premium minus investment portion * Second-hand goods: Difference between selling and purchase price * Vouchers: Face value or redemption value * Notified services between distinct persons: NIL value if recipient is eligible for full TC Rule 33: Value of supply of services in case of pure agents Expenses incurred as pure agent can be excluded from value Rule 34; Rate of exchange of currency * As notified by CBIC for customs ‘As per generally accepted accounting principles on date of time of supply Rule 35: Value inclusive of taxes ‘Value shall be [Value inclusive of taxes + (100% + GST rate%)] x 100 Practical Significance Ensures uniform and fair valuation of supplies Prevents tax avoidance through undervaluation*# Provides certainty in tax calculation # Addresses complex valuation situations like related party transactions