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Inter State Transactions of Goods & Services in proposed GST Regime

 

(1) Basic Fundamental to discuss in IGST:

§  GST in India envisaged on destination/consumption principle.

§  Place of supply to determine the place where the supply of goods/services will take place and to determine whether supplies are interstate or intra state.

§  In Inter State transaction of Goods and Services, determining the place of supply is important as tax revenue accrues to the State where the supply occur or deemed to occur.

§  IGST model envisage levy of IGST by the Centre on all transactions during inter state taxable supplies.

§  Tax revenues accrue to the destination/importing State based on Place of Supply Rules.

 

(2) IGST is proposed to be levied on inter-State transaction of Goods and Services.

(3) The scope of IGST Model is that Centre would levy IGST which would be CGST plus SGST on all inter-State transactions of taxable goods and services with appropriate provision for consignment or stock transfer of goods and services.

(4)  IGST applicable to

§  Inter-State supplies of goods or services in India

§  Inter-state stock transfers of goods and services

§  Import of goods and services

(5) IGST model permits cross-utilization of credit of IGST, CGST & SGST for paying IGST unlike intra-State supply where the CGST/SGST credit can be utilized only for paying CGST/SGST respectively.

(6) IGST credit can be utilized for payment of IGST, CGST and SGST in sequence by importing dealer for supplies made by him.

(7) ITC availed by importing dealers

§  ITC of IGST to be used for payment of IGST, CGST & SGST in that order

§  ITC of CGST to be used for payment of CGST & IGST in that order

§  ITC of SGST to be used for payment of SGST & IGST in that order

§  It would basically meet the objective of providing seamless credit chain to taxpayer located across States

(8) Credit of SGST used for payment of IGST – to be transferred by Exporting State to the Centre

(9) Credit of IGST used for payment of SGST – to be transferred by Centre to Importing State

(10)        Inter-Governmental Transfers to take place at the end of Tax Period

(11)        Central Government to act as a clearing house and transfer the funds across States

(12)       Non CENVATABLE Additional Tax @ 1% may be charged on Inter State Taxable supply of Goods by State of Origin.

(13)       Cascading effect (Tax on Tax) will be removed to much extend, however it will not entirely eliminated due to Additional Tax of 1% and due to certain specified products have been kept out of the preview of the GST.

(14)       IGST Model envisages that the Centre will levy tax at a rate approximately equal to CGST+SGST rate on inter-State supply of goods & services.

(15)       Key Enablers for IGST

§  Uniform e-Registration

§  Common e-Return for CGST, SGST & IGST

§  Common periodicity of Returns for a class of dealers

§  Uniform cut-off date for filing of Returns

§  System based validations/consistency checks on the ITC availed, tax refunds

§  Effective fund settlement mechanism between the Centre and the States.

(16)       Illustrations of Intra State Transactions of Goods :-

a.      For eg. M/s A (Based in Haryana) purchase goods/services from M/s B (Based in Delhi) for basic sale price of Rs. 100/-.And further supply the same to M/S C (In U.P.) after adding Rs. 10/- as its profit. We presume that the IGST rate is 20%. 1% additional tax is applicable in Delhi.

 The tax liability of M/s A will be as follows :-

          

Particulars

Amount (in Rs.)

Transaction from M/s B to M/s A

 

 

 

Basic Sale of Goods from M/s B to M/s A

100.00

Add :- IGST @ 20%

20.00

Add :- Additional Tax (AT)@ 1%

1.00

Total Invoice Value

121.00

 

 

Here ITC of Rs. 20/- of IGST will be available to M/s A

 

 

 

Transaction from M/s A to Mr. C

 

 

 

Basic Sale of Goods from M/s A to M/s C (Cost = 100(BSP) + 1 (AT) + 10(profit))

111.00

Add :- IGST @ 20%

22.20

Total Invoice Value

133.20

 

 

M/s A will discharge its liability as follows :-

 

IGST Liability

22.20

By way of input of IGST

20.00

By way of direct payment to the Centre

2.20

 

b.     For eg. M/s A (Based in Haryana) purchase goods/services from M/s B (Based in Haryana) for basic sale price of Rs. 100/-.And further supply the same to M/S C (In U.P.) after adding Rs. 10/- as its profit. We presume that the IGST rate is 20%, CGST is 10% and SGST is 10%.

 

The tax liability of M/s A will be as follows :-

 

Particulars

Amount (in Rs.)

Transaction from M/s B to M/s A

 

 

 

Basic Sale of Goods from M/s B to M/s A

100.00

Add :- CGST @ 10%

10.00

Add :- SGST @ 10%

10.00

Total Invoice Value

120.00

 

 

SGST and CGST both to be charged on Basic Sale Value itself.

 

Here ITC of Rs. 10/- of SGST and Rs. 10/- Of CGST will be available to M/s A

 

 

 

Transaction from M/s A to Mr. C

 

 

 

Basic Sale of Goods from M/s A to M/s C (Cost = 100(BSP) + 10(profit))

110.00

Add :- IGST @ 20%

22.00

Total Invoice Value

132.00

 

 

 

 

M/s A will discharge its liability as follows :-

 

IGST Liability

22.00

By way of input of CGST ( Firstly to be utilised for Central levy)

10.00

By way of input of SGST

10.00

By way of direct payment to the State

2.00

 

c.      For eg. M/s A (Based in Haryana) purchase goods/services from M/s B (Based in Delhi) for basic sale price of Rs. 100/-.And further supply the same to M/S C (In Haryana) after adding Rs. 10/- as its profit. We presume that the IGST rate is 20%, CGST is 10% and SGST is 10%. 1% additional tax is applicable in Delhi & Haryana.

 

The tax liability of M/s A will be as follows :-

 

Particulars

Amount (in Rs.)

Transaction from M/s B to M/s A

 

 

 

Basic Sale of Goods from M/s B to M/s A

100.00

Add :- IGST @ 20%

20.00

Add :- Additional Tax (AT)@ 1% (Non Cenvatable)

1.00

Total Invoice Value

121.00

 

 

Here ITC of Rs. 20/- of IGST will be available to M/s A

 

 

 

Transaction from M/s A to Mr. C

 

 

 

Basic Sale of Goods from M/s A to M/s C (Cost = 100(BSP) + 1 (AT) + 10(profit))

111.00

Add :- CGST @ 10%

11.10

Add :- SGST @ 10%

11.10

Add :- Additional Tax (AT)@ 1%

1.11

Total Invoice Value

134.31

M/s A will discharge its liability as follows :-

 

 

 

CGST liability

11.10

By way of input of IGST

11.10

 

 

SGST liability

11.10

By way of input of SGST ( 20-11.10)

8.90

By way of direct payment to the State

2.20

 

 

Additional Tax liability

1.11

By way of direct payment to the State

1.11

 

Disclaimer: Though full efforts have been made to compile this article correctly, yet we are not responsible / liable for any loss or damage caused to anyone due to any mistake / error / omissions in the above and contrary views/ opinions are welcomed.