Levy and Collection of GST

Levy and Collection of GST

The Section 9(1) of the GST Act, 2017, states that the GST shall be levied on supply of all goods and services on inter-state and intrastate level. The rates of GST are decided by the GST Council’s recommendation and shall be levied in a prescribed manner according to the Act provisions.

Any person who carries out a business at any place throughout India, who is already registered or needs to get registered under the GST Act can be called a taxable person. Additionally, a person who is engaged in any kind of economic activity, involving in trade and commerce will also be considered a taxable person.

The ‘person’ in the GST act may include any of the following:

• Individuals
• Hindu Undivided Family or HUF
• Company or Firm
• Limited Liability Partnership
• Association of Persons or Body of Individuals
• Corporation or Government company
• Body incorporated under any foreign country’s laws
• Co-operative Society
• Local Authority
• Government
• Trust
• Artificial Juridical Person

Exemption From GST

On the basis of the kind of goods or services supplied by a person, there are some exemptions for some people from GST registration. The persons who are exempted from GST registration are:

• Agriculturists
• Persons falling under Threshold Exemption Limit
• Persons supplying goods or services that are covered under NilRated/Exempted category
• Persons supplying goods or services that are Non-Taxable/ NonGST
• Persons involved in activities other than supply of goods or services
• Persons supplying goods or services that are covered under the reverse charge

Supply of Goods

Any activity that falls under the taxable category as per GST rules is called a supply. The government considers an activity as a supply if it meets any of the following criteria:

• Supply of goods or services
• Any taxable supply
• A taxable person making the supply
• Supply that is made in a territory and is taxable
• Supply made in exchange for cash or reward
• Supply made during business course or for growing business

The supply of goods and services that fall under GST can be divided into two categories, namely Taxable supplies and Non-taxable supplies. Further, classification of these supplies can be divided into different categories on the basis of the nature of the supply.

The classifications are as follows:

• Taxable supplies: These supplies refer to the taxable goods and services under GST. Taxpayers who are registered are eligible for ITC, i.e., they can claim for refunds on the tax paid by them during their purchases. The taxable supplies are further divided into the following:
  
  
  • Regular taxable supplies: The goods or services whose GST rate is greater than 0% fall under the category of regular taxable supply.
    
    
  • Nil-rated supplies: The goods and services whose GST rate is by default 0% fall under this category.
    
    
  • Zero-rated supplies: The supply of goods or services to a SEZ unit or exports is taken to be deemed. Whenever anything is exported, the GST rate associated with them becomes Zero. However, the GST rate for such items is greater than 0%, when supplied in India.
    
    
• Non-taxable supplies: These supplies refer to the goods and services that are not taxable under GST. Further, they can be divided into the following:
  
  
  • Exempt supplies: There is no GST for the supply of goods or services even being in the purview of GST. A taxpayer who is registered cannot claim for refunds for such supplies.
    
    
  • Non-GST supplies: These are the supplies of goods and services that do not fall under the purview of the GST.

There are three components based on which the GST tax owed by a person is calculated for a transaction. These components are described as follows:

• Place of supply: The determination of the type of transaction, whether it is an inter-state, intra-state or an external trade is done through this component. It will determine the GST type associated with it.
  
  
• Value of supply: The value that is taxable for the supply is determined through this component. It also determines the tax amount to be paid.
  
  
• Time of supply: The date on which the taxes associated and the returns for GST are due is determined by this component.

To determine the right amount of tax that needs to be charged on the transaction of goods and services, one needs to understand the concept of ‘place of supply’. The place from where the goods are delivered becomes the place of supply. It is the place where the ownership of the goods are changed. In case, the goods are not moved from one place to another, the location of goods at the time of delivery becomes the place of supply.

In case of services, the location of the person who receives the service becomes the place of supply. If the services are provided to any unregistered dealer and the location information is not available, then the service provider’s location will become the place of supply.

The provisions specially provided to determine the place of supply are as follows:

• Services related to immovable property
• Restaurant services
• Admission to events
• Transportation of goods and passengers
• Telecom services
• Banking, financial and insurance services

If the services are associated with immovable property, then the property location becomes the place of supply. The amount of money that the seller collects for the goods and services that he supplies is considered as the value of supply.

Additionally, the amount of money that a seller collects from the buyer is also considered as value of supply. In cases, when both parties are related and the value that is reasonable may not be charged, or the transaction occurs as an exchange, the GST must be charged on the transactional value of the supplies.

The value of supply enables the parties, which are unrelated, to make transactions in the normal business course. It is responsible to ensure that GST is properly charged and collected, irrespective of the full payment of the value. The time when goods and services are supplied is considered to be the time of supply. The time of supply helps the seller to determine the due date for the tax payment. At the time of the supply of goods and services, the GST must be paid. The time of supply is identified on the basis of goods and services.

For goods, the time of supply shall be the earliest of the following dates:

• Invoice issue date
• Last invoice issuing date
• Advance or payment receipt date

For services, the time of supply shall be the earliest of the following dates:

• Invoice issue date
• Advance or payment receipt date
• The services provision date (in case the invoice is not issued within a stipulated time)