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BBA/BCOM 2 All right are reserved with CU-IDOL Basic Accounting Course Code: BBA/BCOM 101 Semester: First SLM Unit: 12 E-Lesson: 10 www.cuidol.in Unit 12(BBA/BCOM- 101)

Basic Accounting 33 OBJECTIVES INTRODUCTION To make students aware of the basic concepts of In this unit we are going to learn about the GST. GST and its concept of applicability. To develop an understanding of challenges & Under this you will learn and understand the implementation of GST and its relevance for registration procedure of GST. companies. In this unit you will learn the scope & To make students understand the rates of GST. compliance of GST. . www.cuidol.in Unit 12(BBBAA//BBCCOM- 101) INSTITUTE OF DISTAANllCEriAgNhtDaOreNrLeINseErLvEeAdRwNiItNhGCU-IDOL

Topics To Be Covered 4  Introduction of Tax Structure  Types of Taxation  Meaning of GST  Rates of GST  Challenges of GST  Implementation of GST  Importance of GST www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

5 https://www.google.com/imgres?imgurl=https%3A%2F%2Fwww.researchgate.net%2Fprofile%2FMiriam_George4%2 Fpublication%2F316174955%2Ffigure%2Ffig3%2FAS%3A495728619671552%401495202321346%2FGst-Tax- Structure-VIII-How-GST-Operates-In-India-Sale-In-One-State-Resale-In-The- Same.png&imgrefurl=https%3A%2F%2Fwww.researchgate.net%2Ffigure%2FGst-Tax-Structure-VIII-How-GST- Operates-In-India-Sale-In-One-State-Resale-In-The- Same_fig3_316174955&docid=ZbiJdSOmO031JM&tbnid=yzvUfoi_ptYwLM%3A&vet=1&w=850&h=464&itg=1&bih=62 5&biw=1366&ved=2ahUKEwjAio61go7pAhVZ7XMBHTyxDkQQxiAoA3oECAEQHw&iact=c&ictx=1 www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

Meaning & Features of GST 6 GST is a comprehensive, multi-stage, destination-based consumption tax on levied at every stage of value addition in the lifecycle of a product. 1. Comprehensive: GST will subsume all of the current indirect taxes. Plus, by bringing in a unified taxation system, across the country, it will ensure that there is no more arbitrariness in tax rates. 2. Multi-stage: GST is levied each stage in the supply chain, where a transaction takes place. Value-addition: This is the process of addition to the value of a product/ service at each stage of its production, exclusive of initial costs. Under GST, the tax is levied only on the value added. 3. Destination-based consumption: Unlike the current indirect taxes, GST will be collected at the point of consumption. The taxing authority with appropriate jurisdiction in the place where the goods/ services are finally consumed will collect the tax. For example: Let’s say that cotton garments are being shipped from Karnataka to Maharashtra. Karnataka is the producer state and Maharashtra is the consumer state. Tax revenue under GST www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

Meaning & Features of GST 7  For example: Let’s say that cotton garments are being shipped from Karnataka to Maharashtra. Karnataka is the producer state and Maharashtra is the consumer state. Tax revenue under GST.  The tax on imported goods will therefore be just the same as domestically-produced goods. Imports would be costlier because of additional custom duties. Thus, the export industry will become more competitive. Also, domestic goods will be protected by making imports at par with domestic goods. www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

Taxes that were Replaced by the 8 GST  The taxes that were replaced by the GST  The implementation of the Goods and Services Tax (GST) replaced a number of taxes of both the state and the centre. The levies that were replaced are listed below:  List of State taxes:  Value Added Tax (VAT)or Sales Tax  Octroi  Entertainment Tax  Tax on Lottery or Betting or Gambling  Purchase Tax  Luxury Tax  List of Central taxes:  Service Tax  Additional Excise Duty  Central Excise Duty and so on www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

Types of GST 9 As per the newly implemented tax system, there are 4 Different types of GST: 1. Integrated Goods and Services Tax (IGST) 2. State Goods and Services Tax (SGST) 3. Central Goods and Services Tax (CGST) 4. Union Territory Goods and Services Tax (UTGST) www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

Types of GST 10 1. Integrated Goods and Services Tax or IGST The Integrated Goods and Services Tax or IGST is a tax under the GST regime that is applied on the interstate (between 2 states) supply of goods and/or services as well as on imports and exports. The IGST is governed by the IGST Act. Under IGST, the body responsible for collecting the taxes is the Central Government. After the collection of taxes, it is further divided among the respective states by the Central Government. For instance, if a trader from West Bengal has sold goods to a customer in Karnataka worth Rs.5,000, then IGST will be applicable as the transaction is an interstate transaction. If the rate of GST charged on the goods is 18%, the trader will charge Rs.5,900 for the goods. The IGST collected is Rs.900, which will be going to the Central Government. www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

Types of GST 11 2. State Goods and Services Tax or SGST The State Goods and Services Tax or SGST is a tax under the GST regime which is applicable on intrastate (within the same state) transactions. In case of intrastate supply of goods and/or services, both State GST and Central GST are levied. However, the State GST or SGST is levied by the state on the goods and/or services that are purchased or sold within the state. It is governed by the SGST Act. The revenue earned through SGST is solely claimed by the respective state government. For instance, if a trader from West Bengal has sold goods to a customer in West Bengal worth Rs.5,000, then the GST applicable on the transaction will be partly CGST and partly SGST. If the rate of GST charged is 18%, it will be divided equally in the form of 9% CGST and 9% SGST. The total amount to be charged by the trader, in this case, will be Rs.5,900. Out of the revenue earned from GST under the head of SGST, i.e. Rs.450, will go to the West Bengal state government in the form of SGST. www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

Types of GST 12 3. Central Goods and Services Tax or CGST Just like State GST, the Central Goods and Services Tax of CGST is a tax under the GST regime which is applicable on intrastate (within the same state) transactions. The CGST is governed by the CGST Act. The revenue earned from CGST is collected by the Central Government. As mentioned in the above instance, if a trader from West Bengal has sold goods to a customer in West Bengal worth Rs.5,000, then the GST applicable on the transaction will be partly CGST and partly SGST. If the rate of GST charged is 18%, it will be divided equally in the form of 9% CGST and 9% SGST. The total amount to be charged by the trader, in this case, will be Rs.5,900. Out of the revenue earned from GST under the head of CGST, i.e. Rs.450, will go to the Central Government in the form of CGST. www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

Types of GST 13 4. Union Territory Goods and Services Tax or UTGST The Union Territory Goods and Services Tax or UTGST is the counterpart of State Goods and Services Tax (SGST) which is levied on the supply of goods and/or services in the Union Territories (UTs) of India. The UTGST is applicable on the supply of goods and/or services in Andaman and Nicobar Islands, Chandigarh, Daman Diu, Dadra and Nagar Haveli, and Lakshadweep. The UTGST is governed by the UTGST Act. The revenue earned from UTGST is collected by the Union Territory government. The UTGST is a replacement for the SGST in Union Territories. Thus, the UTGST will be levied in addition to the CGST in Union Territories. www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

WHAT IS SGST, CGST, AND IGST? 14  Suppose goods worth INR 10,000 are sold by manufacturer A in Maharashtra to Dealer B in Maharashtra. B resells them to trader C in Rajasthan for INR 17,500. Trader C finally sells to End User D in Rajasthan for INR 30,000.  Suppose CGST= 9%, SGST=9%. Then, IGST= 9+9=18% Since A is selling this to B in Maharashtra itself, it is an intra-state sale and both CGST and SGST will apply, at the rate of 9% each.  B (Maharashtra) is selling to C (Rajasthan). Since it is an interstate sale, IGST at the rate of 18% will apply.  C (Rajasthan) is selling to D also in Rajasthan. Once again it is an intra-state sale and both CGST and SGST will apply, at the rate of 9% each. www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

WHAT IS SGST, CGST, AND IGST? 15  *** Any IGST credit will first be applied to set off IGST then CGST. Balance will be applied to setoff SGST. Since, GST is a consumption based tax, i.e., the state where the goods were consumed will collect GST. By that logic, Maharashtra (where goods were sold) should not get any taxes. Rajasthan and Central both should have got (30,000 * 9%) = 2,700 each instead of only 2,250.  Maharashtra (exporting state) will transfer to the Centre the credit of SGST of INR 900 used in payment of IGST. The Centre will transfer to Rajasthan (importing state) INR 450 as IGST credit used. **Do note, .that custom duties are not part of this tax structure www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

GST RATES 16  The four GST slab 5%,12%,18% and 28%.Thefifth rate of gold and precious metals , which was earlier proposed at 4% will be decided later but likely to be lower.  Basic food such as milk ,food grain ,vegetables , will be exempt under the GST.  Other essential items such as edible oil ,tea ,spices , packaged food item etc. the GST rate may likely be 5%.  Two standard rate of 12% and18% will cover almost every goods and services.  Luxury cars, tobacco and aerated drinks would also be levied with an additional cess on top of highest tax rate. www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

OBJECTIVES OF GST 17 1. To bring all taxpayers into one system. 2. To reduce error digitalization of the whole process. 3. To save taxpayers from paying taxes on taxes. 4. To identify the actual no. Of tax payers. 5. Transparency in the total indirect tax system. www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

CHALLENGES FOR GST 18  It is difficult to estimate accurately gain for States from service tax and loss on account of removal of cascading effects, payment of input tax credit and phasing out of CST.  Estimate for Compensation to states on A/c of loss of Purchase Tax .  How to tackle existing Multiple rate structure.  Clear cut list of service to be taxed  IT infrastructure  Co-operation among the states (b2c transaction)  Clearance of pending cases of assessment & other under CENVAT/sales tax/VAT  It may face opposition from local dealer as they have to pay CGST in addition to SGST directly. www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

Advantages of GST 19  Mitigation of Cascading effect : Under the GST administration, the final tax would be paid by the consumer for the goods and services purchased. However, there would be an input tax credit structure in place to ensure that there is no slumping of taxes. GST is levied only on the value of the good or service.  Abolition of Multiple Layers of Taxation : One of the advantages of GST is that it integrated different tax lines such as Central Excise, Service Tax, Sales Tax, Luxury Tax, Special Additional Duty of Customs, etc. into one consolidated tax. It prevents multiple tax layers imposed on goods and services.  Resourceful Administration by Government : Previously, the management of indirect taxes was a complicated task for the Government. However, under the GST establishment, the integrated tax rate, simple input of tax credit mechanism and a merged GST Network, where information is available, and administration of resources are well-organised and straightforward for the Government.  Enhanced Productivity of Logistics: the restriction on inter statement movement of goods has reduced. Earlier logistic companies had to maintain multiple warehouses across the country to avoid state entry taxed on interstate movements.  Creation of a Common National Market: GST gave a boost to India’s tax to Gross Domestic Product ratio that aids in promoting economic efficiency and sustainable long – term growth. It led to a uniform tax law among different sectors concerning indirect taxes. It facilitates in eliminating economic distortion and forms a common national market. www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

Advantages of GST  Ease of Doing Business: with the implementation of GST, the difficulties in indirect tax compliance have been 20 reduced. Earlier companies faced significant problems concerning registration of VAT, excise customs, dealing with tax authorities, etc. The benefits of GST has aided companies to carry out their business with ease.  Regulation of the Unorganized Sector under GST: it has created provisions to bring unregulated and unorganized sectors such as the textile and construction industries to name a few under regulation with continuous accountability.  Reduction of Litigation: GST aids in reducing litigation as it establishes clarity towards the jurisdiction of taxation between the Central and State Governments.GST provides a smooth assessment of tax.  Tackling Corruption and Tax Leakages: with the GST online network portal, the taxpayer can directly register, file returns and make payments of the taxes without having to interact with tax authorities. A mechanism has been devised to match the invoices of the supplier and buyer. This will not only keep a check on tax frauds and evasion but also bring in more businesses into the formal economy. www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

Shortcoming of GST 21 1. IT Infrastructure: since GST is an IT-driven law, it cannot be sure whether all the states in India are currently equipped with infrastructure and workforce availability to embrace this law. Only a few states have implemented this E- Governance model. Even today some states use the manual VAT returns system. 2. Higher Tax Burden of SME’s: earlier the small and medium enterprises had to pay excise duty only on a turnover that exceeded Rs. 1.5 crore every financial year. However, under the GST administration, businesses whose turnover exceeds Rs 40 lacs are liable to pay GST. 3. Increase Burden of Compliance: The GST administration states that companies are required to register in all the states they operate in. This increases the burden on the business for excessive paperwork and compliance. 4. Petroleum Products don’t fall under the GST Slab: petrol and petroleum products have not been included in the scope of GST until now. States levy their taxes on this sector. Tax credit for inputs will not be available to these industries or those related industries. 5. Coaching of Tax Officers: there is inadequate training that is provided to the Government officers for practical usage and implementation of such systems since the GST administration heavily banks on information technology. www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

IMPLEMENTATION OF 22 GST Amendments in providing GOOD AND the constitution legislative SERVICES TAX framework for GST COUNCIL REDEFINING THE Good and service ROLE OF CBEC tax network www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

Registration procedure 23 Application for REGISTRATION TO Suo motu registration NON RESIDENT registration TAXABLE PERSON Verification of the Registration to Unique identity application and person required for certain special approval to TDS OR TCS entities Issue of GST Effective date of Amendent of registration registration registration certificate Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL www.cuidol.in

GST –RATES WORLD WIDE 24 No. Of countries -17% -10% China -10% Indonesia -17.5% Philippines -10% UK -25% Australia Denmark www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

Levy and Collection of tax 25  Levy and collection of tax depends on taxable event and to understand levy and collection can be divided into following two parts  Levy of tax : levy of tax means imposition of taxes as well as assessment of tax but does not include collection  Collection : collection means payment of tax www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

Levy and collection under CGST 26 (sec. 9) Normal or forward charges Supply of Levy and Reverse petroleum collection charges product www.cuidol.in Un- All right are reserved with CU-IDOL registered person Unit 12(BBA/BCOM- 101)

Composition levy scheme under 27 GST  Composition scheme is simple and easy scheme under GST for taxpayers . the basic principal underlying the composition  scheme is to minimize the burden of compliance for small tax payer www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

Key features of the composition 28 scheme  Eligibility  Tax rates  Not eligible for input tax credit  Apply to intra state supplies  Need for voluntary application  Transfer to regular scheme quarterly return  Bill of supply not tax invoice  Quarterly returns www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

Rate of tax under composition levy 29 scheme  1 manufacturers, other than manufacturers of such good as may be notified by the government. 2%(one percent CGST+ one percent SGST)  2 suppliers making supplies referred to in clause(b)of paragraph 6 of schedule2 i.e .resturant sector 5%(two &half %CGST+ two& half percent SGST)  3 Any other suppliers eligible for composition levy 1% (half percent CGST+ half percent SGSTS)  Service provider: cannot opt composition levy scheme under GST www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

Condition and restrictions for 30 composition levy  Neither casual nor non-resident taxable person  Stock not purchased from outside  Stock not purchased from unregistered person  Pay tax under section9(3)or section 9(4)  Not engaged in the manufacture of notified goods  Mentioning the words on bill of supply  Mentioning the words on every notice or signboard  Composition dealer cannot enter into credit chain  Applicability of scheme in case taxable person having same PAN www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

Procedure under composition 31 scheme Intimation for Effective date for Validity of composition composition composition levy scheme levy www.cuidol.in Cancellation of Withdrawal from option of composition scheme composition levy All right are reserved with CU-IDOL Unit 12(BBA/BCOM- 101)

Non applicability of composition 32 scheme sec.10(2) 1. supply of services 2. Non taxable supply of good 3. Making intra state outward supplies of good 4. Supply good through 5. Manufacturer of notified good www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

Summary  GST, or Goods and Services Tax, is a tax that customers have to bear when they buy any goods or 33 services, such as food, clothes, electronics, items of daily needs, transportation, travel, etc. The concept of GST is that it is an “Indirect Tax”, ie, this tax is not directly paid by customers to the government, but is rather levied on the manufacturer or seller goods and the providers of services.  Central GST (CGST): GST paid on each transaction is divided into two equal parts: the part for the Centre is termed as CGST.  State GST (SGST): The part of a state’s share of GST, when a transaction takes place within the state, is called SGST.  Union territory GST (UGST): When a transaction takes place within a union territory (UT) without a legislature, the part of GST that the UT gets is called UGST.  Integrated GST (IGST): When a transaction takes place between two states/UTs or between a state/UT and any foreign territory, IGST is levied without any bifurcation on the applicable GST rate. www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

Multiple Choice Questions 1.Which of the following tax is not subsumed in GST 34 A.VAT C. Entry Tax B. Stamp Duty 2. What is date of receipt of payment? D. Entertainment Tax A. Date of entry in the books C. Earlier of (a) and (b) B. Date of payment credited into bank account 3. When does the liability to pay tax on goods arise? D. Date of filing of return A. At the time of supply C. At the time of preparing invoice B. At the time when goods reach supplier Answers: 1.B. 2. C. 3.A. D. None of the above www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

Multiple Choice Questions 35 4. Tax is paid on which value? B. Manufacturing value plus profit A. Transaction value D. Notional value C. Manufacturing value 5. IGST deals with B. Time of supply A. Composition scheme D. All of the above C. Service tax on imported services Answers: 4. A. 5.C. www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

Frequently Asked Questions 36 1.What do you understand by the remission of tax/duty? A .It means relieving the tax payer from the obligation to pay tax on goods when they are lost or destroyed due to any natural causes. Remission is subject to conditions prescribed under the law and rules made there under. 2. What are the taxes that GST replaces? A. Numerous different indirect taxes, have been replaced by GST: Central Excise Duty,Service Tax,Countervailing Duty,Special Countervailing Duty,Value Added Tax (VAT),Central Sales Tax (CST),Octroi,Entertainment Tax,Entry Tax,Purchase Tax,Luxury Tax,Advertisement taxes,Taxes applicable to the lotteries. 3.What is GST Credit? A. If the input GST is more than the Output GST, then its the GST Credit. While the It calculated differently for different types of GST. 4. What is GST Payable? Output GST- Input GST = GST Payable. www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

REFERENCES 37 1. Gupta, R.L., Radhaswamy,M.(2012). Advanced Accountancy. New Delhi: Sultan Chand&Sons. 2. Maheswari S.N.,(2018). Introduction to Accounting.New Delhi: Vikas Publishing House. 3. Shukla, M.C.,Grewal, T.S.,Gupta S.C.(2007). Advanced Accounts.New Delhi:S.Chandand Company Ltd. www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL

38 THANK YOU For queries Email: [email protected] www.cuidol.in Unit 12(BBA/BCOM- 101) All right are reserved with CU-IDOL