Under Service tax, Section 69(1) of the financial Act 1994 specifies that only persons who are liable to pay Service tax were liable to get themselves registered. under GST, The whole scenario has changed.
As per section 22 of CGST Act 2017 every supplier is liable to register if he makes “Taxable” supply of goods or services provided, his aggregate turnover in a year exceeds Rs.20L. While under Service tax, liability to pay tax is the criteria but under GST, effecting “taxable” supply is the criteria.
As per section 2(108) taxable supply means supply which is “leviable” under the Act.
Services of Advocates and Goods Transport agency (GTA) are “taxable” in the first instance. But both the services are subject to tax under reverse charge. This no way alters the situation that advocates/ GTA are effecting taxable supply within the meaning of section 22. Hence it may be necessary for the above categories of persons to register under GST, generate Tax invoice and file monthly return.
2. There appears to be no initial exemption provided in GST regime. Person who starts a business may project his sales to be less than Rs.20L. But once he crosses 20L, is he liable to pay GST from first rupee.
3. Both section 9(3) and 9(4) of CGST Act, can have very serious effect on business community, though it may not the intention of legislators.
As per section 9(4) a registered person who receives goods or services from unregistered person has to pay the applicable tax on such goods or services himself. This is called reverse Charge Mechanism (RCM).
This means Advocates and GTA or for that matter Individual traders, Individuals having rental income (who are registered) have to pay this tax apart from paying tax they have to raise self invoices for such inward supplies and upload the details in GSTR-1.
The said section does not contain the phrase “received in the course of or furtherance of business”. This means even goods or services received for personal use is covered under this section. We faced similar situation, when TDS rules were made applicable to Individuals covered under 44AB of IT Act. Later CBDT came out with clarification that no TDS need be done on expenses for personal use.
4. The effect of section 9(3) read with section 24 could be very damaging. Section 9(3) prescribes that certain services are liable for discharge of tax under RCM. Section 24 prescribes that such persons who are hit by section 9(3) have to compulsorily register.
Two situations emerge out of this compliance:
The person who gets himself registered under section 24 is treated as “Registered Person” for all purpose, section 2(94).
1) This means such registered person also has to comply with provisions of section 9(4) the effect of which we have discussed little earlier (Para 3).
2) The worst comes out of section 9(1), which reads that tax shall be levied on all intrastate supply and such tax shall be paid by ‘taxable person’.
The definition of taxable person as per section 2(102) is one who is registered or liable to be registered under section 22 or 24.
This means a small trader of “taxable supply” of less than Rs. 20L also have to pay tax on outward supply (of taxable Goods/ services), even though his turnover is less than 20L in a year.
5. Giving loan or deposit is supply of service. It is exempt only if the consideration is by way of interest. Every business will have fixed deposits with banks and various interest free deposits made in the courses of business.
The Related doubts are:
a) Interest earned on FD is exempted supply .Hence this results in partial dis allowances of input credit, since there is combination of both taxable and non taxable.
b) Whether notional income on other interest free security deposits given by the business entity will be brought to tax.
c) Tax ability of SB Interest is to be examined because SB Account is neither deposit nor loan.
6. The definition of “job work” refers to works done on goods belonging to another registered person. It is not clear how similar work done on goods belonging to unregistered person will be dealt with by under GST.
7. Invariably cars would have been registered in the name of partner in many firms Availing ITC is ruled out.
8. Schedule -I exempts gift to a employee not exceeding Rs.50,000/- in a year.
What will be the effect of this on bonus paid at higher Percentage under Bonus Act to eligible employees and exgratia paid to other employees.
9. Schedule-II as per this use of business asset for private use will be treated as supply.
How to determine the value for use of cars, Laptops and Mobiles by employees, partners and directors.
If any norms are prescribed for this purpose, it will automatically invite dis allowance in the Income tax Proceedings.
Sooner these issues are clarified, it will be better for business community