With the passage of the GST bill in both the houses of Parliament, its implementation from 1 July 2017 is nearly certain.
The rollout of GST— touted as the biggest tax reform that the country has seen post-independence—will have a huge impact on our economic environment. However, GST still has many people in a fix about exactly how it will translate for them. Here we break down this new tax structure for you in seven easy-to-understand Q&As.
Does GST apply to you?
Being an indirect tax, it is applicable to businesses, professionals, freelancers and service providers. It does not apply to salaried individuals.
Do you have to register?
You MUST register if any one of the following applies to you:
- If your annual turnover (sales) exceeds ₹20 lakh (₹10 lakh if you are in the Northeastern states).
- You make inter-state sales i.e. you are based in one state and sell goods to a receiver in another state. For example, you are based in Mumbai and you sell to Delhi then it is considered an interstate sale.
- You sell online. You can sell through your website or through an operator like Flipkart or Amazon.
- You sell goods on behalf of another taxable person (i.e. you are an agent).
- You deal in goods/services on which reverse charge applies—where the buyer has to deposit tax instead of the seller.
For points 2-5, your annual sales are irrelevant. GST will apply to you even if your sales are less than ₹20 lakh (₹10 lakh for NE states) per year.
Who does GST NOT apply to?
- GST does not apply to agriculturists. If you grow your own flowers and sell them, for example, then GST does not apply to you.
- If you deal in exempted goods/services then GST does not apply to you.
What should you know about GST registration?
- You have to apply for registration in every state in which you will be conducting your business, within 30 days from the date on which you are liable for registration (For example, the day your annual sales crosses ₹20 lakhs).
- You must obtain a separate registration for each state, as registration under GST will be state-wise.
- Registration number in GST (GSTIN) will be PAN-based and hence, having PAN will be a prerequisite for obtaining registration.
- You can also opt to voluntarily register for GST even if your sales are less than ₹20 lakhs. This will help you to avoid restrictions like no interstate sales, no selling online.
What is a “casual taxable person?”
A person who occasionally supplies goods and/or services in a territory where GST is applicable but does not have a fixed place of business in the said state is treated as a casual taxable person. For example, a person who has a place of business in Bangalore gives consulting services in Pune (where he has no place of business), then he would be treated as a casual taxable person in Pune.
What is special registration for a casual taxable person?
A casual taxable person can obtain a temporary registration for a period of 90 days (extendable for additional 90 days).
If you obtain the above registration, you will have to deposit tax in advance (based on your estimated tax liability).
Who can collect GST?
Only a registered taxable person can collect GST. You must prominently show this amount on tax invoices.
What is Reverse Charge?
Reverse charge means the liability to pay tax is by the recipient of goods/services instead of the supplier.
Reverse charge is applicable for both services and goods.
What are the situations where reverse charge will apply?
1. An unregistered dealer selling to a registered dealer: In such a case, the registered dealer has to pay GST on the supply. If you are registered under GST and you are buying from an unregistered dealer then reverse charge will apply, i.e. you, the buyer, will have to pay the tax.
2. Services through an e-commerce operator: If an e-commerce operator supplies services then reverse charge will apply on the e-commerce operator. It will be liable to pay the tax.
For example, take a company that provides services of plumbers, electricians, teachers, beauticians etc. This company is liable to pay GST and collect it from the customers instead of the registered service providers.
Note that the Centre or State Government may notify other scenarios where reverse charge will apply.
This article has been published in Huffington Post.