GST Returns- 3 & 3B Story

Touted as Good and Simple Tax (GST) by our Hon’ble Prime Minster, we believed it so. But when we started finding HSN codes, setting up billing system, identifying place of supply, determining the dilemma of applying IGST or CGST & SGST, we came to know about the ground realities. Neverthless, we transcended the journey of supplying and procuring goods and services in GST regime in July. Now this Month of August is about payment of First GST liability coupled with Returns. When, we were served with 3 return namely, GSTR-1,2 &3, GSTR-3B took a wild card entry for July and August 2017. We thought a wild card entrant will substitute the other strong Opponent GSTR-3.  But time and again, we were proved wrong, when Due dates for GSTR-1,2,3 & 3B were announced.

Now a layman or for this matter even professionals are trying to find answers to 3 & 3B story. What is all about ? Would I file 4 returns for July & August. Through this write-up we would attempt to address the confusion. Let’s delve into returns one by one.

GSTR-1:  

In GSTR-1, you will report your outward supply (i.e. sale/service etc.) including exports, SEZ supplies etc. Details would be filled in either Invoice-wise or summary. Even details of Advance received, Debit Notes, Credit Notes, HSN wise-summary will also be submitted. The criteria for Invoice-wise or summary details is as under:

GSTR-2

GSTR-1 and 2 are twins and would always go together. GSTR-2 is Return for submitting details of Inward Supply (i.e. Purchase/ services received etc.) including import of goods/services. Most of the details in this Return would be auto-generated from GSTR-1 filed by your Supplier and received by you in GSTR-2A on GST Portal. You will verify details received in GSTR-2A and either accept it or modify it to file your GSTR-2. The idea of matching of input tax credit will be executed by GSTR-2 only.

GSTR-3

This is a summary return of outward supply, inward supply, tax liability, tax paid etc. Details in this return would be auto-generated from GSTR-1 & 2. You will pay taxes with filing of this return either by cash or utilization of Input tax credit or both.

Having discussed 3 basic returns, let’s now understand the role of GSTR-3B.

What is GSTR-3B. Is it a substitute of GSTR-3 ?

Firstly, GSTR-3B is not a substitute of any other return. The law mandates filing of GSTR-3B where due date of filing of GSTR-1 & 2 has been extended. Since, due dates have been extended, consequently, GSTR-3B is required to be filed as a provisional return for initial 2 months July and August. It means, GSTR-3 will still be filed for July and August. Yes. You heard it right, you would be filing 4 returns for July and August.

The sequence of returns filing for July and August, 2017 is as under:

Sequence	Remarks	July	August
GSTR-3B	Summary Details only	20th August	20th Sept.
GSTR-1	Should be matched with details submitted in 3B	1st- 5th September	16th- 20th Sept.
GSTR-2	Should be matched with details submitted in 3B	6th -10th September	21st-25th Sept.
GSTR-3	This will be auto-generated based on details furnished in 1,2 & 3B. You will have an option to modify the details in case there is any discrepancy in 3B filed earlier.	11th to 15th Sept	26th to 30th Sept.

Hence, the Government has actually imposed 4 returns, instead of providing an option that where GSTR-1 & 2 have been filed on time, you need not file GSTR-3B. But it doesn’t seem so since GSTR-3B is mandatorily required to be filed by virtue of Notification No. 21/2017-CGST, Rate dated 8^th August, 2017.

Happy Return Filing and Happy Independence Day !!

About Author:

CA. Nikhil M. Jhanwar is practicing Chartered Accountant in Delhi/NCR specialising in GST, Start-up Advisory, Corporate Finance. He is also a GST  Trainer and Faculty Member of ICAI. He has conducted various sessions on GST on different topics. He can be reached at nmjhanwar@gmail.com/+91-8860876960.

Ola losing Ground to Uber

There is a general perception that Foreign E-Commerce start-ups are disrupting and dislocating Indian Contemporaries on the power of money. But when you dwell deeply into the real fact, you will witness that this game is not just about money power. In fact it is the customer centric approach of these e-commerce giants which is actually making the difference.

How the ridiculous concept of OlaShare is losing ground to Uber ? To know, read on….

Incident #1

I switched to Ola some 15 days back amidst the exorbitant increase in fares by Uber for long distances. By the way, who uses Cabs for short distance..!.

One fine day, I booked an Ola Share @10.15 a.m. from Noida to visit Vasant Kunj for a meeting scheduled at 11.30 a.m.

My experience with Uber developed a conception that when you share a cab with other passengers, you share your ride with them on similar route. Unfortunately, I was wrong. Cab driver took 15 minutes to pick me up. The delay in my ride had already started and my conversation with Driver (Let’s call him ‘D’) during the ride was like this.

I asked, ‘Where the other passenger is heading to ?’

‘Sir, Noida Sector-2’.

I surprisingly said, ‘What ? But I have to go to Delhi, you are taking me to a totally opposite direction. Then what's the logic in sharing cabs ?’

‘Sir, you didn't tell me that you have to go to Delhi ? And it’s not in my hand, I have to accept the rides which the system shows’.

I shockingly replied, I suppose it’s your cab, you have an option to accept or reject the rides and I even mentioned my drop location.’

Post 5 minutes, I again argued, ‘Why are you moving backwards now ?

‘Sir, I have got another booking, I have to pick him up. We can go 5 Kms forward or backward from ongoing ride route.’

I said, ‘Are you kidding me ? Atleast you should drop the passengers cchronologically as per their booking. Otherwise how long distance passenger will ever reach ?

‘Sir, This is an issue. Even yesterday, one passenger from Noida reached Gurgaon in 4 hours.’

I bashed out, ‘That's ridiculous, you drop me right now and cancel my ride and refund my Rs. 314/-. I will take Uber now.’

‘Sorry sir, It’s not possible to cancel an ongoing ride. Even if you de-board here, you will not get any refund. You may speak to Customer Care.’

I was running late, I immediately de-boarded the cab and called Customer Care and shouted at them for their dictating policies. Even after such a lengthy argument, the Customer Care executive couldn't resolve my issue and denied to give any refund since it was pre-paid.

I hung the call with these words,

‘Listen, I am shocked and dismayed at the policy of your company on Ola Share. What is the purpose of taking OlaShare if it takes me twice the time to reach my destination. Being Indian, I really want Ola to grow but with this attitude wherein I am at loss on all fronts, pathetic service, excessive delay, no refund. Let me tell you sir, if that been Uber, they would have refunded me the money uprightly. I am sorry, you are losing valuable customers to your competitor. I will not use Ola anymore.’

Only answer he had was ‘Apology for the inconvenience caused’.

I booked UberGo and reached somehow at my destination with double hit on my pockets.

Incident#2.

I booked a cab for one of our guests from Noida to Delhi. The payment option was selected through PayTM. However, the Driver fraudulently collected cash also from our guest. This I came to know 15 days later when I met my guest again.  I was shocked. I immediately took up this matter to Uber and in no time I got refund of fare paid twice. This shows the value of customers for Uber. For them customer comes first and then everything else.

Before Parting.....

These incidents show the approach of both the companies. P.S. Being an Indian, I would like Ola, Indian grown Start-up to outshine Uber and grow relentlessly. For this they need serious overhaul of their system, otherwise Ola will lose ground to Uber in the coming times completely.

Editing Credits: Supriya

GST Simplified Series # 2: Levy, Supply & Rates

GST Simplified Series#2

We are back with next GST Simplified Series. If you have missed any of our previous write-ups you can discover them here GST Simplified.

Series#2 explains aspects of Levy, Rates & Supply under GST.

Update: CGST, IGST, UTGST Bills have been passed in Lok Sabha on 29.03.2017. Any reference of sections and provisions in this write-up relates to CGST Bill as passed in Lok Sabha.

Levy under GST (Section 9)

Every tax law has a charging section which provides for levy of tax on certain premise. Section 9 provides as under:

·         GST shall be levied on intra-state supply of goods or services or both

·         GST shall apply on value as determined as per law.

·         Rates to be notified, Maximum rate capped at 20%

·         Supplier shall collect and pay the tax to the Government.

·         Alcoholic liquor for human consumption is kept out of levy.

·         Enabling provision to levy GST on Petroleum Products (5 items) on later date.

In normal course, Supplier shall collect and pay GST, however, there is enabling provision of applying reverse charge mechanism i.e. where Recipient of supply is liable to pay tax under following situations:

·         Specified categories of supplies (in line with current Service tax law)

·         Supply is made by unregistered person to registered person (in line with current VAT laws)

Each and every underlined item is relevant to effectuate levy of GST. Intra-State as already discussed in Series#1 is supply where location of supplier and place of supply is in same State. Let’s discuss other terms.

What is ‘Supply’ (Section- 7)

Currently, taxable event for Service tax, Central Excise and VAT is provision of service, manufacture of goods and sale of goods respectively. With GST coming in, this phenomenon will change completely and ‘Supply’ will trigger levy of GST. CGST bill defines ‘Supply’ to its widest extent in following 4 parts:

A.   If made for consideration in course or furtherance of business

B.   If made without consideration as per Schedule-I

C.   Deemed supply of Goods  as per Schedule-II

D.  Deemed supply of services as per Schedule-II

Thread-bare of aforesaid points:

Apart from above, Import of service shall be treated as ‘supply’ in following cases:

·         for a consideration whether or not in course or furtherance of business.

·         Import by taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business.

On-going through the detailed definition of supply, it is undisputable that scope of ‘Supply’ is quite wide to cover under its ambit various transactions. This is in line with agenda of Government to widen the tax base.

CGST Bill also contains the negative List of activities which will not be treated as supply and hence, not liable to GST, briefed as under:

ü  Gifts by an employer to an employee upto Rs. 50,000/- in a financial year

ü  Services by an employee to employer in course of or in relation to employment

ü  Services by Court or Tribunal

ü  Any Services related to deceased viz. funeral, crematorium etc.

ü  Functions performed by a person in sovereign capacity- M.P., M.L.A., Constitutional post

ü  Specific activities undertaken by Government, Local Authority engaged as public authorities.

ü  Sale of land & building

ü  Actionable claims, other than lottery, betting and gambling

Analysis

Once GST is in place, the impact of expanded scope of ‘supply’ as taxable event in GST vis-à-vis current laws is explained herebelow:

     i.        Stock Transfer: As you are aware that registration in GST shall be State-wise with provision of more than one registration in a State based on different business verticals. Registration in each state shall be treated as distinct person for GST. Under current tax scenario, inter-state or intra-state stock transfers are subjected to levy of Excise Duty on removal of Goods. The same is not subject to VAT/ CST. In GST, Stock transfers will be treated as Supply and liable to GST. Although, input tax credit can be availed by Stock Transferee but it will block the working capital of business. Plus, there would be issues on value on which GST will be applicable.

   ii.        Renting of land & Residential space: Currently renting of only commercial space is liable to service tax, while renting of land and residential space is negative list items. As per CGST bill passed in Loksabha, both these activities will now be treated as deemed supply and exigible to GST. This will have denting impact on real estate & logistics sectors.

  iii.        Currently exempted but GST Law silent: There are various services like provided by RBI, Foreign Diplomatic mission, toll fees, space selling in print media, interest on loans/deposits, health care services, advocates, educational institutions and charitable activities which are currently exempted from service tax. However, CGST Bill is silent on their taxability.

There may be possibility of these being exempted by way of Notification. Interestingly, Services by foreign diplomatic mission was covered under negative list in Revised GST Law but it has been removed in CGST Bill.

  iv.        Works Contract & Food Supply: As of now, assessee pays both VAT as well as service tax on these transactions, leading to overlapping of tax levy on same value. Treating Works contract and food supply as composite supply and deeming them as supply of service in GST, litigation on its classification of these activities as goods or services or both has been put on rest. But the vital question here is – Works contract and food supply are treated as Deemed sale of goods by Article 366(29A) of Constitution of India. So, treating these items as deemed service in GST will not render them contradictory to the Constitution of India ?

    v.        Supply of Tangible Goods: This is another transaction wherein classification of it under ‘goods’ or under ‘services’ haunts industry. Transfer of right to use goods is leviable to VAT whereas, transfer of goods without transferring right is leviable to service tax. In GST, the entire transaction is treated as deemed service obviating need to classify as ‘goods’ or ‘services’.

  vi.        GST on Cross-border Transaction: Recently the Government has widened its tax base by making B2C Cross border ‘Online Information & Data base retrieval service’ liable to service tax. Whereas other B2C transactions of import of Service remains exempted. However, GST has travelled one step further to tax all B2C transactions of import of service if made with consideration. Possibly Reverse charge will apply on it and this will surely impact overseas service providers. Further, related party cross border transactions have also been made taxable.

Composition Levy (Section 10)

This is quite well known concept wherein Small scale industries taxpayers are provided an option to simply pay certain % of total turnover with minimal record keeping and compliance. The scheme under GST is outlined as under:

Rates under GST

This is most interesting issue wherein everyone is keeping their eyes on. What will be the Rates under GST ? Which Product will be taxable under which category ?. As of now following 4 Slabs have been zeroed in meeting of GST Council:

Rates	Expected Category
5%	Common use items
12%	Standard rates
18%	Services to be taxed under this slab
28%	Luxury/Sin Goods

Additionally, GST Compensation Cess will be imposed on luxury cars, aerated drinks, pan masala and tobacco products to compensate States for loss of revenue post implementation of GST. However, Finance Minister has many a times assured that rate categorization will more or less be similar to existing structure to avoid any high disruption atleast at initial stage.

Before parting………

There has been a deliberation on how GST is ‘One Nation One Tax’ amid various tax slabs. In my opinion, in country as diversified like India, one rate cannot apply on all items. Otherwise this will severely impact the entire economy. Even 4 Slab structure + Zero-rated structure is commendable provided all States do minimum deviations in their rate structure to roam towards Dream GST.

To be continued…….