As a multi-stage, comprehensive, destination-based indirect tax, Goods and Service Tax (GST) has revolutionized the Indian economy, since its implementation on July 1st, 2017. GST is here to streamline the process of collecting and imposing an indirect tax to make the taxation exercise transparent and accountable.
GST Council, headed by the Finance Minister is formed to regulate the tax rates across the country. There are 4 different tax rates under GST, depending on the type of goods and services – 5%, 12%, 18%, and 28%.
Bringing about a change in the way taxation works in the country is not an easy task. The GST Council had to bring in new taxation concepts, such as Central Goods and Services Tax (CGST), State GST (SGST), and Integrated GST (IGST) to protect the interests of both the centre and state government.
Goods and services sold or resold within a state are liable to pay CGST and SGST. IGST is charged on goods and services that are transacted inter-state.
- What are the types of payment that need to be made?
TDS – TDS refers to tax deducted at source. If the payment (salary) that a company or an employer pays to an employee exceeds a certain threshold, the company must deduct tax at source.
TCS – TCS is a type of tax collected by the seller at the time of purchase.
Reverse Charge – Reverse Charge is when the receiver of goods become liable to pay tax.
Below is a table to show the tax liability under different circumstances.
|Goods sold from Delhi to Bombay||NO||NO||YES|
|Goods sold within Bombay||YES||YES||NO|
|Goods sold from Bombay to Pune||YES||YES||NO|
- Who should make the payment?
- A registered dealer
- Composition dealers
- Those who need to pay under reverse charge, TDS, and TCS
- What is Electronic Cash ledger, Electronic Credit ledger?
Each registered person under GST must maintain electronic cash ledgers, electronic input tax credit ledger, and tax liability ledger.
You can record data of tax, interest, penalty, fees paid, and payment done under CGST, SGST, and IGST on your electronic cash ledger. On the electronic input tax credit ledger, you can get details of the input tax credit available under all heads. Tax liability ledger is also to be maintained electronically, for any outstanding liability arising out of the regular return, notices, and penalties.
There are many different ways to utilize credit available under the electronic input credit ledger such as by fulfilling liability arising due to regular return under GST, reversing credit due to a mismatch in invoice or amount of credit, and paying off any liability that arose due to receipt of demand notices.
- When can you claim a refund?
Under GST, a person should make an application within a period of 2 years from the relevant date using the Form GST-RFD-01 electronically.
- What is the process of claiming a refund?
The process of refund under GST is as follows:
- Taxpayer can claim a refund by filing the application form through the GSTN portal
- The applicant will then get an acknowledgement number via SMS or email, after the application is filled
- The next step is where the return and cash ledger is adjusted. This automatically reduces the “carry forward input tax credit”
- Within the next 30 days of filing of the refund application, refund application and documents submitted will be scrutinized
- Unjust enrichment would be examined for each refund applicatio. If it does not qualify, the refund will be transferred to CWF (consumer welfare fund)
- If the claimed refund exceeds the predetermined amount of refund, it will then go through a pre-audit process for sanctioning the refund
- Refund will then be credited electronically to the account of the applicant via ECS, RTGS, or NEFT
- Applicant can apply for a refund at the end of each quarter
- Minimum amount for a refund is Rs 1000. Anything below that amount will not be refunded
A registered person can file the return as per the dates mentioned under GST and claim the balance available in the electronic cash ledger.
GST is set to streamline this process and it would improve the system of calculation, application, and processing of the refund. Under GST, refunds would be calculated for each major head (CGST, SGST and IGST) separately. Claiming of refunds are made easy by just filling an application form on the GST portal, automating the calculation refunds, as all the data will be electronically uploaded.
GST Law states that, “If any tax ordered to be refunded under section 48 to any applicant is not refunded within sixty days from the date of receipt of application under sub-section (1) of that section, interest at such rate as may be specified in the notification issued by the Central or a State Government on the recommendation of the Council shall be payable in respect of such refund from the date immediately after the expiry of sixty days from the date of receipt of application under the said subsection till the date of refund of such tax”. Under GST Model Law, the processing time for a refund application is around 60 days, however, this could be made available in as early as 2 weeks.