GST: It is a destination based tax on consumption of goods and services. It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as setoff. In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer.
Aggregate Turnover: Means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess.
Reverse Charge U/s.9(4) & 9(3): A Registered person received a Taxable Goods or Services or both from a Unregistered person u/s.9(4) or Government Notified person u/s.9(3), he will be liable to pay tax on the Goods or Services or both to the Government as if he is the supplier of the Goods or Services or both and the entire CGST Act shall apply to him as if he is the supplier of the Goods or Services or both.
Debit Note: Where a tax invoice has been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to be less than the taxable value or tax payable in respect of such supply, the registered person, who has supplied such goods or services or both, shall issue to the recipient a debit note containing such particulars as may be prescribed.
Credit Note: Where a tax invoice has been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient a credit note containing such particulars as may be prescribed.
Nil Rate Supplies: Goods or services on which GST rate of 0% is applicable are called nil rated goods or services.
Exempt Supplies: By definition, exempt supply under GST is a broad term which includes nil rate supplies, non-taxable supplies and specific supplies which are notified as exempt from tax.
Supply: includes all forms of supply of goods and/or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business.
Value of Supply: The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.
Capital Goods U/s.2(19): Capital Goods means goods, the value of which is capitalized in the books of account of the person claiming the Input Tax Credit and which are used or intended to be used in the course or furtherance of business.
Input Tax Credit: We can take input tax credit on all inward supplies of Capital Goods, since the same are not covered under blocked credits prescribed u/s.17(5) of CGST Act.
Input Tax Credit on Capital Goods also allowed 100% in the year of acquisition under GST. If the Capital Goods are used for both exempted / personal use then proportionate credit need to be reversed. Otherwise full input tax credit can be claimed.
If a registered person has claimed depreciation on tax component under Income Tax Act, 1961 then no ITC of GST paid on such capital goods is allowed.
Job Work: Section 2(68) of the CGST Act, 2017 defines job-work as ‘any treatment or process undertaken by a person on goods belonging to another registered person’. The one who does the said job would be termed as ‘job worker’. The ownership of the goods does not transfer to the job-worker but it rests with the principal. The job worker is required to carry out the process specified by the principal on the goods.
ITC on goods sent for job work:
A Principal who is registered under GST can send his inputs (i.e raw materials/semi finished goods) or capital goods to the Job Worker without payment of GST. However, the inputs (after processing) or capital goods must be returned by the Job worker to the Principal within one year or three years , respectively, from the date of sending such goods to the job-worker. In case where the goods sent have not been received back within the period as mentioned above, such goods will be treated as supplied to the job worker by the principal and tax will be payable by the principal. Also, the goods sent must be accompanied with a challan.
Works Contract U/s.2(119): “Works Contract” means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any Immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract.
In simple words, any contract in relation to an Immovable property where services are provided along with transfer of goods is known as a “Works Contract”.
Analysis of the above definition: From the above definition, it is clear that contracts involving constructions of immovable properties are only kept within the purview of works contract under GST Law.
A contract in relation to movable property, however, would be treated as a ‘composite supply’ of goods or services depending on the principal supply.
Schedule II of the CGST Act, 2017: Entry number 5(b) and Entry number 6(a) of schedule II has made it clear that under GST, a works contract would be treated as a Supply of Service.
Input Tax Credit for Works Contract:
1. Input Tax Credit of GST paid on Works contract will be allowed if the output is also Works Contract, and;
2. When the Works Contract is for construction of Plant and Machinery.
Apart from the above two, no Input Tax Credit will be available for works contracts for construction of immovable property.
Composite Supply: Means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply.
For example: Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply.
Mixed Supply: Means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply.
For example: Chocolate, dry fruit, sweets supplied for a single price.