In this article on GST, we will explain who all are liable to pay GST.
As you would know, GST is a dual levy with the Centre and States simultaneously levying tax on a common tax base. GST levied by the Centre on intra-State supply of goods or services would be called the Central Tax, while GST levied by the States and Union Territories would be called the State Tax/UT Tax respectively.
In case a product of service is supplied within the State or Union Territory i.e. Intra-State supply, both the Central tax & State Tax/UT Tax would apply while in case of Inter-State supply, IGST (Integrated GST) will have to be paid which is equivalent to Central GST + State GST. However, there is no difference of rates. What does this mean? In simple terms, except for nomenclature, the total rate of tax shall remain the same whether a supply is made within or outside the State. This means that producers and suppliers of goods and services will pay the same tax for any supply of products and services anywhere in the country. This will remove the tax arbitrage (that is, taking advantage of different tax rates on the same goods and services in different parts of the country) and help make India one market.
The imported goods will also be charged integrated tax (IGST) in addition to Basic Customs Duty. IGST paid on imports will also be available as credit to the importer in further supplies. Besides, the Central Tax, State Tax/UT Tax and IGST, Compensation Cess under the GST (Compensation to States) Act, 2017 shall be levied on a few luxury goods,. The cess shall be available as credit for further payment of cess.
Now let us see who all are liable to pay GST. The following categories of persons will be liable to pay GST:
1. Persons registered under GST and making taxable supplies under GST.
2. Persons registered under GST required to make payment of tax under reverse charge mechanism.
3. E-Commerce operators registered under GST and through whom certain categories of notified supplies are made.
4. Persons registered under GST and required to deduct Tax (TDS)
5. E-Commerce Operators registered under GST and required to collect tax (TCS)
In general, the registered supplier of goods or services will need to pay GST. However, in specified cases like imports and other notified supplies, the liability will lie on the recipient under the reverse charge mechanism. “Reverse Charge” means the liability to pay tax on the recipient of taxable supplies instead of the supplier. Further, in some notified cases of intra-state supply of services, the liability to pay GST may be cast on e-commerce operators through which such services are supplied.
GST being a tax on the event of “supply”, every supplier making taxable supplies needs to get registered. However, small businesses having All India aggregate turnover below Rupees 20 lakh (Rs.10 lakhs in Assam, Arunachal Pradesh, Manipur, Mizoram, Sikkim, Meghalaya, Nagaland, Tripura, Uttrakhand and Himachal Pradesh) need not register under GST .
The question which arises now is how does GST define aggregate turnover? The aggregate turnover means the aggregate value of all the taxable supplies, including exempt supplies, export of goods or services or both and inter-state supplies of persons having the same PAN. It excludes the value of inward supplies on which tax is payable by a person on reverse charge basis and also excludes central tax, state tax, union territory tax, integrated tax and cess.
It must be noted that persons engaged exclusively in the business of non-taxable or exempt supplies or an agriculturist, to the extent of supply of produce out of cultivation of land are not liable to register under GST. A registered person who receives goods and services from an un-registered person will be liable to pay tax on reverse charge basis on receipt of such supply.
Small businesses having turnover below the threshold limit can, however, voluntarily opt to register, pay taxes and comply like a normal taxpayer. On doing so, the business shall be eligible for taking credit on all purchase made and shall also be able to pass on the credit of taxes paid by him to his customer.
Under GST, certain government establishments will be required to deduct tax (TDS) from the amounts paid by them to the suppliers. The tax would be deducted @2% of the payment made to the supplier (the deductee) of taxable goods or services or both, where the total value of such supply, under a contract, exceeds two lakhs and fifty thousand rupees. Thus, individual supplies may be less than Rs. 2,50,000/-, but if contract value is more, TDS will have to be deducted. It must be noted that vide notification no. 50/2018 – Central Tax dated 13th September, 2018 the CBIC has notified that from 1st October, 2018 the provisions of TDS (i.e. section 51) shall come into force.
The GST Act also places responsibility on the e-commerce operators to collect tax at source, where goods and services are supplied through them. The price/consideration for the product is collected by the Operator from the consumer and passed on to the seller after deducting his commission by the Operator. The Government has placed the responsibility on the Operator to collect the ‘tax’ at a rate of 1% from the seller. This shall be done by the Operator by paying the seller the price of the product, less the tax, calculated at the rate specified/notified by the Government. This tax will be the specified percentage of the net value of the goods/services sold. The e-commerce operators have to remit such tax collected at source with the Government. It must be noted here that vide notification no. 51/2018 – Central Tax dated 13th September, 2018 the CBIC has notified that from 1st October, 2018 the provisions of TCS (i.e. section 52) shall come into force.
We hope the liability issues under GST are clear to you.
(Republished With Amendments)