ALL YOU NEED TO KNOW ABOUT GOODS AND SERVICE TAX (GST)

Goods & Service Tax is an indirect tax applicable throughout India which replaced multiple cascading taxes levied by the central and state government.  It is applied on services and goods at national level with purpose of achieving overall economic growth. So let’s see GST in detail.

It replaces

  1. State VAT
  2. Central Sales Tax
  3. Excise Duty
  4. Special Additional Custom Duty
  5. Service Tax
  6. Octroi
  7. Entry Tax
  8. Luxury Tax
  9. Entertainment Tax

However, following taxes will continue

  1. Basic Customs Duty
  2. Professional Tax
  3. Stamp Duty
  4. Motor Vehicle Tax
  5. Electricity Duty
  6. VAT on Petroleum Products
  7.  Toll Taxes

GST Council is the apex body created by Parliament for governance of this Act.  It includes Finance Secretaries of Central as well as various State Governments

GST Rates – 5%, 12%, 18% & 28%

GST Exempt goods / services – 0%

Old VAT / Excise TIN will go and new PAN based Registration Number for GST is essential.  Structure of this number is as under:

27AAAAA0000Azzi

Out of which first two digits are state code (in which Registration is taken) – ’27’ is for Maharashtra.Next 10 digits (AAAAA0000A) are PAN number of the assesse and last 3 digits are serial number

Incidence of GST is on following:

  1. Supply of Goods / Services
  2. Agreed to Supply Goods / Services for Consideration (either in cash or kind)
  1. ‘Destination based’ Tax is charged (If source & destination are in same state, it is Transaction within state, if Source & Destination are in different states, then it is Interstate Transaction)
  2. Branch Transfer / Stock Transfer will attract GST

GST Registration is MANDATORY if Annual Turnover of Goods or Services or both is Rs.20 Lacs or above.

Three types of GST are there:

  1. Central Goods & Service Tax (CGST)
  2. State Goods & Service Tax (SGST)
  3. Integrated Goods & Service Tax (IGST)

Rates under GST

  1. Rates of CGST & SGST shall be equal and will be 50% of the rates stipulated for those specific Goods or specific Services. g. if the goods under transaction attract 18%, then CGST for them is 9% and SGST for them is 9%.
  2. In case of Local Invoice or Within State Invoice, CGST and SGST both need to be charged SEPARATELY and to be mentioned in the Return accordingly.
  3. Rates of IGST are equal to sum of rate under CGST and rate under SGST. Thus in above example, rate under IGST is 18% (9 + 9).
  4. Tax Credit (or set-off, as was said in earlier days), shall be available for all these three taxes viz. CGST, SGST & IGST.
  5. Earlier, in spite of ‘C’ or ‘H’ or ‘F’ forms, 2% Tax was a cost to the assessee. Now since these forms are done away with, this 2% cost is avoided, since full set-off or ITC of all Interstate Transactions is allowed now.
  6. There will be GST chargeable on FREE Items such as Medical Samples, Buy 1 get 1 Free etc. Valuation of such Free Items will have to be made, at par with sale of these items.  Thus if your are giving 1 free for purchase of 10,  You will have to Invoice for 11, levy GST and then you may give credit for the basic value of 1 being Free Item.  Thus GST needs to be paid on all items, being delivered to the customer.
  7. Invoice is allowed to be cancelled ONLY by way of issuing Credit Note and that too within a period of 6 months from the dateuch invoice.

Composite Scheme:

  1. It is available for all assessees having Turnover < Rs.75 lacs
  2. Under this scheme, 2.5% tax is applicable for Manufacturing Companies and 1% tax is applicable for all others.
  3. No Set-off or Tax Credit shall be available under this scheme.
  4. This is optional
  5. Assessee has to apply for this and then GST Official’s permission is required to opt for this.
  6. If this scheme is availed, GST cannot be charged in the Invoices raised by the Assessee and thus the cost of GST has to be borned by the Seller / supplier of goods/service.
  7. If this is availed in one year and for next year you intend to do away with this, you can apply to GST officials and take permission for the same i.e. either to Opt-in or Opt-out of the scheme.

Immovable Property is NOT Taxable under GST:

Thus, if the flat is booked before Completion Certificate, it is TAXABLE under GST, whereas, if the flat is purchased after Completion Certificate (Ready-possession flat), it is NOT Taxable under GST

GST is applicable on Advance from Customer, as and when it is received from the customer, before raising invoice for the same.  It needs to be declared in the Output GST Return (GSTR-1)

URD Purchases (Purchases from Unregistered Dealers / Suppliers)

If the Assessee has purchases from Unregistered Dealers, Assessee has to ACTUALLY pay GST on the same Reverse Charges).  Assessee can take set-off (credit) of the same in next month.

No Revised Return is allowed under GST

Input Tax Credit (ITC)  (similar to set-off under old system)

  1. Assessee has to be in possession of Tax Invoice, or Debit Note or Credit Note.
  2. Payment has to be made to the Supplier within 180 days. If the payment is not made to the supplier within this period the ITC has to be reversed by the Assessee.  It can later be availed, as and when actual payment of this is made to the Supplier.
  3. ITC for Reverse charges (GST paid on URD purchase or other specific services), can be availed in the next month, of the month of their actual payment

GST Rating:

  1. There will be GST Rating (just like CIBIL Credit Ratings) in respect of Assessee, in consideration of timely filing of Returns, timely GST payment and other discipline followed by the Assessee.
  2. This can be viewed by the Assessee, as also by others.
  3. Thus while selecting the Supplier, his GST Rating can be viewed beforehand.
  4. It will also be viewed by bankers, financial institutions while lending money to the Assessee.

 

Set-off (ITC) under GST

ITC under GST shall be available under GST in following order

INPUT CREDIT TAX              OUTPUT CREDIT LIABILITY

      CGST                                            1.CGST

                                                            2.SGST

                                                            3.IGST

 

   SGST                                               1.SGST

                                                            2.CGST

                                                                    3.IGST

 

           IGST                                               1.IGST

                                                                   2.CGST

                                                                   3.SGST

RETURN Filing Due Dates

  1. 10th of Next Month – Output GST (including Advance from Suppliers) i.e. Sale Return (GSTR-1)
  2. 11th to 15th – system will be closed / blocked for any entry, but entries can be viewed during this period, including Entries of your suppliers. View Supplier’s sales entries, and ensure if they match with your purchase entries in your books.
  3. 17th of Next Month – Input GST i.e. Purchase Return (GSTR-2) These entries HAVE TO MATCH with the entries made by your suppliers in their Sales Return.
  4. 21st if Next Month – Monthly Return in GSTR-3, alongwith payment. Liability of Payment shall be calculated by the System itself, after filing of GSTR-1 & 2 as mentioned above.
  5. 31st December of Next Financial Year – Annual Return (GSTR-9), alongwith Audit Report. Audit is compulsory for Assessees having Turnover of Rs.1 Crore and more.

If the Assessee is caarying out business at more than one places, he has to obtain GST Registration at each of such place and has to file Returns for each of such place of business.

Reverse Charges – GST to be paid on Self-Invoicing

  1. URD Purchases (with Names & Addresses of such suppliers)
  2. Services such as a. Goods Transport, b. Advocates Fees, c. Sponsorship, d. Rent a Cab.

TRANSITION PROVISIONS (For the period of switching over from present Tax System to GST)

  1. Transit-1 Return to be filed within 90 days. Set-off or ITC for these items shall be pending till this is filed.

2. June 29 – Reverse Charges to be paid

 

Income Tax Deductions F.Y. 2016-17

 

Section 80 C, 80CCC, 80CCD:-Maximum Deduction Rs.150000

The maximum tax exemption limit under this section is Rs.1.5 lakh only. This 1.5 lakh is aggregate amount. It means if the total of all investments is Rs. 2 Lakh the tax deduction would be available only on 1.5 lakhs. Both individuals and Hindu undivided families (HUF) eligible for these deductions. There are many instruments in which investments can be made are as follows.

  •  Life Insurance,ULIP,Pension Plan
  • Home Loan Principal,Stamp Duty & Registration charges for home purchase agreement
  • Employee Provident Fund/Public Provident Fund
  • Mutual Funds
  • Tuition Fees
  • Subscription in Any notified bonds in NABARD
  • Deposit in Senior Citizen Scheme
  • 5 year Time Deposit under post office
  • Fixed Deposit of 5 year
  • National Saving Certificate

Section 80 D : Deduction for Premium paid for Medical Insurance.

             Scenarios  

    Health Insurance Premium Paid

 

 

Total Deduction under Section 80D

Self, Spouse & Dependent Children   Parents (whether dependent or not)
Tax Payer & his family member has not attained 60 years of age  Up to Rs 25000    Up to Rs 25000  Rs.50000
The eldest member in family (yourself, spouse & Dependent children is less than 60 years & your parents are above 60 years of age     Up to Rs 25000      Up to Rs 30000 Rs.55000
The eldest member in family (yourself, spouse & Dependent children has attained  60 years & your parents are above 60 years of age Up to Rs 30000  Up to Rs 30000 Rs 60000

   Deduction U/s 80 U person with disability & severe disability

              Taxpayer       Dependents Maximum Amount of             Deduction
          Individual Less than 60 years                40000
          Individual Senior Citizens                60000
          Individual Very Senior Citizen                80000

Deduction U/s 80 U person with disability & severe disability

     Taxpayer         Disability Maximum Amount of       Deduction
     Individual Normal disability              75000
     Individual Severe disability            125000

Other Deductions

           Section Criteria/Conditions Maximum Deduction
        Section 24 (B ) Tax benefit on loan repayment of second house

Unclaimed loss if any will be carry forward to be set off against house property income of subsequent 8 years

      Rs.200000
        Section 80E Education Loan for higher secondary studies for you, spouse and children. Principal repayment cannot be claimed No limit on the amount of interest & deduction is available for maximum 8 years or till interest is paid whichever is earlier.
        Section 80G Contributions made to certain relief funds and charitable institutions .Only claim

When contribution has been made via cheque or draft.

 

 

Deduction is not applicable in case donations is done in form of cash for amount more than Rs.10000/-
        Section 80GG This section is applicable for those individuals who do not own residential house & do not receive HRA          Rs.60000
        Section 80TTA In respect of Saving Bank account interest         Rs.10000

 

WHICH ITR SHOULD I FILE FOR F.Y.2016-17

It is time to file your income tax return (ITR) & in move to make the tax filing process more convenient, The Central Board of Direct Taxes (CBDT) has redesigned the ITR forms for financial year 2016-17.

All ITR forms would have a dedicated column seeking details of any cash deposit exceeding Rs. 2 lakh during the demonetization drive between November 9, 2016 and December 30, 2016. For those claiming Home Loan interest deductions under Section 80EE, there is a new field added in all ITR forms under Schedule VI-A.

The government also mandated quoting of Aadhaar number while filing the tax return .

Here is all that you need to know to file your tax returns successfully.

ITR -1 – SAHAJ: FOR SALARIED INDIVIDUALS

This form can be used if you have

  • Salary or Pension Income having total income up to 50 lakh.
  • Income from One House Property (excluding cases where loss brought forward from previous year)
  • Agriculture income which is less than R.5000
  • Income from Other Sources like FD/Shares/NSC etc (excluding Winning form Lottery and Income From House Race)

One significant change this year is that the new ITR Sahaj form is compressed into a single page with dedicated sections for deductions under section 80C, 80D, 80G and 80TTA.

ITR- 2: FOR INDIVIDUALS AND HUF NOT HAVING INCOME FROM BUSINESS OR PROFESSION

The ITR 2, ITR 2-A and ITR-3 forms have all been converted into 1 single form and renumbered as ITR 2.

  • Salary or Pension Income
  • Income from Multiple Houses
  • Income from Capital Gains
  • Income from other sources (Including Winning from Lottery and Income form Race Horses.)
  • Income of a person as a partner in the firm.
  • An asset in foreign country or income from a source outside India.
  • Agriculture income which is more than Rs.5000.

Further, in a case where the income of another person like one’s spouse, child, etc. is to be clubbed with the income of the assesses, this return form can be used where such income falls in any of the above categories.

ITR-2 A: FOR INDIVIDUALS AND HUF NOT HAVING INCOME FROM BUSINESS OR PROFESSION AND CAPITAL GAINS AND WHO DO NOT HOLD FORIGN ASSET

This tax return form has been discontinued in FY 2016-17.If you have filed ITR 2A in FY 2015-16, then you should file ITR 2 now for FY 2016-17.

 ITR- 3: FOR INDIVIDUALS AND HUF BEING PARTNERS IN FIRM BUT NOT CARRING BUSINESS UNDER PROPRIETIRSHIP.

The old ITR-4 tax form has been renamed ITR-3.

ITR – 4: FOR INDIVIDUALS AND HUFs HAVING INCOME FROM A PROPRIETORY BUSINESS OR PROFESSION.

The old ITR-4S tax form has been renamed ITR-4. If you’ve e-filed an ITR-4 for FY 2015-16, then you must file an ITR-3 now.

The current ITR 4 is applicable to individuals and HUFs having income from a business and profession and who have opted for the presumptive income scheme as per section 44AD, Sec 44ADA and Section 44E of income Tax Act. However, if turnover of business exceeds Rs 2Cr, the tax payer will have to file ITR 3

ITR- 4S (SUGAM) : FOR INDIVIDULAS /HUF/PARTNERSHIP FIRMS HAVING INCOME FROM PRESUMPTIVE BUSINESS

This tax return form has been discontinued in FY 2016-17.If you have filed ITR 4S in FY 2015-16, then you should file ITR 4 now for FY 2016-17.

ITR-5: FOR FIRMS, AOP’s, and BOI’s

This forms can be used by Firms, Co-operative Banks, Co-operative Societies, Limited Liabilities Partnership (LLP), Association of Persons (AOP), Body of Individuals (BOI), Artificial Judicial Persons.

Applicable for all sources of Incomes.

ITR-6:  FOR COMPANIES OTHER THAN COMPANIES CLAIMING EXEMPTION UNDER SECTION 11

Companies other than companies claiming exemption under section 11 are those whose income from property is held for charitable or religious purposes.

ITR -7: FOR PERSONS INCLUDING COMPAIES REQUIRED TO FURNISH RETURN UNDER SECTION 139(4A) 0R 139(4B) OR 139(4C) OR 139(4D) OR 139 (4E) 0R 139(4F)

139(4A) – To be filed by every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purpose.

139(4B)- To be filed by a political party it the total income without giving any effect to the provisions Section 139 A exceeds the maximum amount that is not chargeable to income tax.

139(4C) – To be filed by every scientific research association, news agency, association or institute referred to in Section 10(23A), Section 10 (23B).fund or institution or university or educational institution or any hospital or other medical institution

139(4D)- To be filed by every university, college or other institution, which is not required  to furnish return of income or loss under any other provision of this section.

 

 

WHICH ITR FORM (FOR F.Y.2015-16) SHOULD YOU SUBMIT ?

 

There are many ITR forms for filing a income tax return such as ITR-1 (Sahaj) , ITR-2, ITR-3 ,ITR -4 and ITR-4S (Sugam), ITR- 5 & ITR-6 and ITR-7.These forms are released every year by income tax department. To file Income tax returns one need to fill the appropriate Income tax return form. Which income tax return form a taxpayer should file depends on tax payer’s income and on the disclosure requirement to the tax payer, where he/she may be resident with foreign income or assets applicable.  So which form should you fill? Due to technical wording it is not easy for common man to select appropriate form. This article explains different kinds of income tax return form and which one to fill. However even after that reading this article any query/doubt is left, then please comment in comment box.

Let’s understand in detail who should file which income tax form forms.

ITR -1 – SAHAJ: FOR SALARIED INDIVIDUALS

This form can be used if you have

  • Salary or Pension Income
  • Income from One House Property (excluding cases where loss brought forward from previous year)
  • Agriculture income which is less than R.5000
  • Income from Other Sources like FD/Shares/NSC etc (excluding Winning form Lottery and Income From House Race)

 

ITR- 2: FOR INDIVIDUALS AND HUF NOT HAVING INCOME FROM BUSINESS OR PROFESSION

This form can be use if you have

  • Salary or Pension Income
  • Income from Multiple Houses
  • Income from Capital Gains
  • An asset in foreign country or income from a source outside India.
  • Agriculture income which is more than Rs.5000
  • Income from lottery & horse racing

 

ITR-2 A: FOR INDIVIDUALS AND HUF NOT HAVING INCOME FROM BUSINESS OR PROFESSION AND CAPITAL GAINS AND WHO DO NOT HOLD FORIGN ASSET.

  • Salary or Pension Income
  • Income from Multiple House Properties
  • Income from Other Sources like FD/Shares/NSC etc.
  • Agriculture income of more than Rs. 5000
  • Income From lottery or house racing

 

ITR– 3: FOR INDIVIDUALS AND HUF BEING PARTNERS IN FIRM BUT NOT CARRING BUSINESS UNDER PROPRIETIRSHIP.

ITR 3 can be filed where taxable business income is only from the salary, interest, commission, remuneration, or bonus receivable from the firm as a partner

 

ITR – 4: FOR INDIVIDUALS AND HUFs HAVING INCOME FROM A PROPRIETARY BUSINESS OR PROFESSION.

ITR-4 form can be used by an assessee who has income form business & profession.(gross receipts 0f more than 60 laces a year) This form covers all kind of business & professions irrespective of any income limit. Assessee can also report income for salary, house property, lottery winnings, capital gains, speculative income i.e horse race in ITR 4 together with Business income.

 

ITR- 4S (SUGAM) : FOR INDIVIDUALS /HUF/PARTNERSHIP FIRMS HAVING INCOME FROM PRESUMPTIVE BUSINESS

ITR 4S form can be filed by an Individuals, HUF or Partnership firms. This form can be used if you have

  • Income from Salary or Pensions
  • Income From One House Property( excluding cases where loss is brought forward from previous year)
  • Income from Other Sources (excluding Winning from Lottery and Income from Race Horses)
  • Income From Business (for small businessman and professionals from business or profession and gross receipts up to 60 laces a year)
  • Agriculture income which is less than Rs.5000.

 

 

ITR-5: FOR FIRMS, AOP’s, and BOI’s

This forms can be used by Firms, Co-operative Banks, Co-operative Societies, Limited Liabilities Partnership (LLP), Association of Persons (AOP), Body of Individuals (BOI), Artificial Judicial Persons.

Applicable for all sources of Incomes.

 

ITR-6:  FOR COMPANIES OTHER THAN COMPANIES CLAIMING EXEMPTION UNDER SECTION 11

Companies other than companies claiming exemption under section 11 are those whose income from property is held for charitable or religious purposes.

 

ITR -7: FOR PERSONS INCLUDING COMPANIES REQUIRED TO FURNISH RETURN UNDER SECTION 139(4A) 0R 139(4B) OR 139(4C) OR 139(4D) OR 139 (4E) 0R 139(4F)

139(4A) – To be filed by every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purpose.

139(4B)– To be filed by a political party it the total income without giving any effect to the provisions Section 139 A exceeds the maximum amount that is not chargeable to income tax.

139(4C) – To be filed by every scientific research association, news agency, association or institute referred to in Section 10(23A), Section 10 (23B).fund or institution or university or educational institution or any hospital or other medical institution

139(4D)– To be filed by every university, college or other institution, which is not required  to furnish return of income or loss under any other provision of this section.

 

 

COMMON REASONS WHY YOU GET INCOME TAX NOTICE

In recent months, the tax department has stepped up efforts to ensure tax compliance. New rules have been introduced to plug tax leaks and officials are cracking down to evasion. The reason is improved monitoring due to stricter know your customer norms and online filing of returns , both of which have made data processing easier and faster. Many of taxpayers have already received tax notices.

If you have received the income tax notice then there is need to panic .A notice doesn’t essentially mean you have got committed against law and even minor error in legal document will invite a notice from tax department. This are certain measures you need to follow to minimize your chances of getting notice.  Hope you will find this information useful especially individuals who manage their taxes on their own will find it particularly helpful.

COMMON REASONS WHY YOU GET INCOME TAX NOTICE

  1. CHECK YOUR FORM 26 AS (Tax credit statement)

If there is mismatch between the TDS deposited by your employer and income     tax, you may get an income tax notice .26 AS gives the details of the TDS deposited on your behalf .You can view them through NSDL or Income Tax website, or even through your banks online portal

In case, TDS deducted by employer is not reflecting, in your 26 AS, it is better to contact your employer to rectify their TDS return. You should always check your tax credit statement (26AS) online before filing the return

 

  1. ALWAYS FILE YOUR RETURNS ON TIME AND CORRECTLY

A lot of Taxpayers don’t know if they have to file their return. Some believe they can skip filing if TDS has been paid .Others believe that since they don’t have a tax refund to claim ,they don’t need to file a return. Anybody with an income above basic exemption is liable to file his return .According to income tax law if your gross income is Rs.2.5 lakh per year for people below 60 Rs. 3 lakh for senior citizens above 60 and Rs 5 lakh for very senior citizens above 80. The rest of us including NRIs, have to comply.

Non filing returns not a very serious offence if all your taxes are paid. You will only get a notice asking you to do the needful. The tax laws allow taxpayers to file delayed returns even after due date has passed. But you have to pay interest as well as penalty up to Rs.5000.

 

  1. SUBMIT ITR V TO CENTRALIZED PROCESSING CENTER (CPC) BANGALORE

Some taxpayers who file their return online without digital signature think their work is done once the tax return uploaded. They don’t realized that if ITR V is not submitted within 120 days of uploading, the return will be deemed invalid. Please follow the dos and don’ts of sending ITR V to the CPC correctly

 

  1. HIDING A INTEREST INCOME

This is common mistake. Many people knowingly or unknowingly don’t include interest income from their saving account, recurring deposits & fixed deposits in their income .They believed that interest income of upto Rs.10000 is tax free. Actually, the tax exemption of Rs. 10000 a year under Sec 80TTA applies only to interest earned on balance in saving bank account while Interest income from recurring deposits, fixed deposits and infrastructure bonds is fully taxable. In case of fixed deposits & recurring deposits, a TDS will be deducted in case of interest income exceeds Rs.10000 in financial year. But whether the interest income taxable or not, you have to disclose all your interest income in your tax return.

  1. DECLARING EXEMPT (TAX FREE) INCOME

Even through few incomes (like all interest income including saving bank interest) are exempt from taxation, you steel need declare it while filing your returns. You can then claim exemption for the same. Similarly, dividend income has to be reported in the ITR even through it is tax free. This year’s budget has proposed a tax on dividend income if it exceeds Rs.10 Lakh.

  1. MISMATCH IN INCOME AND EXPENSES/INVESTMENTS

If there is mismatch between the income & your investments & expenditure, you are likely to get scrutiny notice. For example if your income in the year is Rs.10 lakh, and you invested Rs.25 lakh, you need to justify the source of funds, the same applies for expense also.

  1. AVOID HIGH VALUE TRANSACTIONS

Any high value transaction (With or without quoting PAN) that you thought you can get away with can invite a notice from income tax department. For e.g. in a year cash deposited Rs.10 lakh or more , investments in mutual funds of Rs.2 lakh or more, investments in share of company of Rs.1 lakh & more, credit card purchases Rs. 2 lakh or more ,or purchase of bonds and debentures worth Rs.5 lakh or more in a year, purchase or sale of property Rs.30lakh or more. To explain the source of income the taxman can you a notice & ask to file a return. So plan this transactions carefully & legally.