Important changes in GST notified by CBIC on 07th March 2019 including Optional 6% Tax for First 50 lacs w.e.f. 01-04-2019, Conditions for opting in the 6% GST Composition scheme, GST Registration Exemption up to 40 lacs w.e.f. 01-04-19, Composition Scheme limit enhanced to 1.5 cr w.e.f. 01-04-2019 and Clarification on Discounts/Credit Notes Free Samples, Buy One Get One Scheme, Volume/Staggered Discounts (Buy More save More) and Secondary Discounts (not Known at the time of supply).
Sections : 9,11 and 16,10, 2(83), 2(6), 2(47), 2(78)
1. First supplies of goods or services or both up to an aggregate turnover of fifty lakh rupees made on or after the 1st day of April in any financial year, by a registered person shall be taxable @ 6% e.f. 01-04-2019
2. For the purpose of determination of tax payable First supplies of goods or services or both shall not include the supplies from the first day of April of a financial year to the date from which he becomes liable for registration under the Act.
3. For the purposes of determining eligibility of a person to pay tax, First supplies of goods or services or both shall include the supplies from the first day of April of a financial year to the date from which he becomes liable for registration under the said Act. In computing aggregate turnover in order to determine eligibility of a registered person to pay central tax at the rate of three percent under this notification (6% in aggregate), value of supply of exempt services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, shall not be taken into account.
1. Hence for a person who is unregistered, need not pay tax on first 20 lacs and shall 6% tax from 20 lacs to 50 lacs i.e. Rs. 1.80 Lacs. Hence for persons in unregistered category effective tax rate comes to 3.6%
2. Since aggregate turnover includes exempt supplies also, hence exempt supplies shall also get taxed. Exclusion of interest on loans , deposits is for the purpose of determining eligibility only and not for the purpose of determination of tax payable. Hence :
i. Exempt supplies other than interest on deposit shall be taken into account for the purpose of calculation of first supplies of goods or services or both up to aggregate turnover of 50 lacs.
ii. 6% Tax shall be applicable on all exempt supplies including interest on deposits.
3. The notifications for the purpose of scheme have been issued u/s 9 and section 11 and section 16.
4. The conditions of the scheme are similar to composition scheme u/s 10
4. All registered persons under same PAN shall pay tax @ 6%
5. The rate of 6% is applicable notwithstanding anything contrary contained in rate notifications u/s 9 [1/2017 and 11/2017] or exemption notifications u/s 11 [2/2017 and 12/2017]
6. There is no relaxation from RCM u/s 9(3) and section 9(4)
7. No ITC shall be allowed.
1. After crossing turnover of 50 lacs, tax shall have to be paid at normal rates.
2. A registered person opting out of composition scheme is allowed credit of tax on stock and capital goods through ITC-01 but no such credit allowed under the scheme.
3. Also there is no provision for reversal of ITC through ITC-03 on opting in the scheme unlike section 18(4).
4. There is no bar on purchases from unregistered person or composition taxable person
8. Registered Person opting for the scheme :
9. Can not collect tax
10. Shall Issue bill of supply
11. shall mention the following words at the top of the bill of supply, namely: -‘taxable person paying tax in terms of notification No. 2/2019-Central Tax (Rate) dated 07.03.2019, not eligible to collect tax on supplies’.
a. Aggregate turnover in the preceding financial year was fifty lakh rupees or below.
|1. This condition shall not be applicable for person starting new business .|
|2. A person who was unregistered in preceding financial year and gets registered in next financial year may get covered.|
|3. Exempt Supplies and Non taxable supplies of preceding financial year shall also be covered for calculating the quantum|
b) Registered person is not eligible to pay tax under composition scheme
|1. A registered person whose supplies services exceeding Rs. 5 lacs or 10% of turnover in a state is only eligible to get covered by 6% scheme.|
|2. A registered person who makes supply of goods only, is eligible to get covered by composition scheme and hence may not opt for this 6% scheme.|
|3. Hence in order to satisfy this condition registered person must be supplier of both goods as well as services and supply of services should be more than 5 lacs or 10% of turnover in state, which ever is higher|
c) Registered person is not engaged in making any supply which is not leviable to tax under the said Act;
Exempt supplies are leviable to tax but non taxable supplies like alcohlic liquor , petroleum products, electricity are supplies not leviable to tax. Hence there is no bar placed on making exempt supplies excluding non taxable supplies.
d) Registered person is not engaged in making any inter-State outward supply;
1. Inter state inward supplies have not been barred. Inter state supply of goods as well as services has been barred.
2. As per definition of outward supplies in S.2(83) , outward supplies cover only sale, transfer, barter, exchange, license, rental, lease or disposal. Any inter state supply which is outside the ambit of these 8 items have not been stipulated to be barred.
3. Notification 10/2017-IGST dated 13-10-2017 authorizes inter-State supplies of taxable services up to 20 lacs for the purpose of registration. Since the condition here in above is with reference to registered person, unregistered person availing the benefit of said notification till 20 lacs may continue to enjoy the benefit of 6% scheme also.
4. Since outward supplies cover exempt supplies also, hence inter state exempt supplies also may get barred (S.24(i), however applies only to inter state taxable supply.)
e) Registered person is neither a casual taxable person nor a non-resident taxable person;
A person who opts for this scheme shall pay tax @ 6% even in respect of state where he occasionally transacts business. However for carrying out occasional transactions purchases shall have to be made inthat very state only and stock transfer shall not be possible because of the bar on inter state outward supply.
f) Registered person is not engaged in making any supply through an electronic commerce operator who is required to collect tax at source under section 52
Supplies u/s 9(5) like housekeeping, hotels, radio cab etc are not prohibited though made through electronic commerce operator
g) Registered person is not engaged in supply of :
Exemption form obtaining registration granted to person:
1. who is engaged in exclusive supply of goods and
|In case of composite supply of goods and services, exemption from registration may not be applicable. E.g. where freight charge is also collected along with goods it may not be a case of exclusive supply of goods.|
2. whose aggregate turnover in the financial year does not exceed forty lakh rupees
1. Exempt supplies shall also get covered to calculate 40 lacs.
2. Turnover in preceding financial year is not relevant for exemption
Persons not eligible for exemption:
(a) persons required to take compulsory registration under section 24 of the said Act
1. Since person making inter state taxable supplies has to take compulsory registration u/s 24 hence such person can not avail the exemption from registration
2. Following further persons not eligible for exemption
a. Person liable to tax under RCM
b. Casual Taxable person or Non resident Taxable Person
c. Person making supplies through e commerce operator
d. E commerce operator or Tax Deductor or Supplier of OIDAR or ISD
(b) Person engaged in supply of :
(c) Persons engaged in making intra-State supplies in the States of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura, Uttarakhand
(d) Person opting voluntary registration u/s 25(3)
(e) Registered persons who intend to continue with their registration
1. Before GST Amendment Act Composition Scheme Limit was 1 crore.
3. In GST Amendment Act effective from 01-02-2019, maximum limit for composition scheme was enhanced to 1.5 crore.
5. In respect of following states limit enhanced was enhanced from 50 lacs to 75 lacs vide notification 46/2017 and has been retained at 75 lacs vide 14/2019 also.
(i) Arunachal Pradesh,
6. For Himachal Pradesh limit has been enhanced to 1.5 crores as under :
Section : 15(3)/34
|Free Samples||1. Not to be treated Supply
2. ITC not to be allowed u/s 17(5) on inputs, input services and capital goods used in relation to free samples
|Distribution of Gifts||1. Not Supply
2. ITC not to be allowed u/s 17(5) on inputs, input services and capital goods used in relation to gifts
However Where free sample or gift is given to
And is therefore treated supply under Schedule I, ITC shall be available
Circular is silent on whether financial credit note issued by the supplier can be considered as supply in the hands of buyer.