GST Three Pillars (WWW)

#Pillars of GST

Four months have been spent in India in the GST driven atmosphere. Taxpayers have very professionally learnt quite a few things as they had an advantage of understanding the tax law from its birth. This type of reforms happens once in a long while that an altogether new law has been passed which takes under its ambit the almost all the businessmen out there in the country. A number of GST Acts, numerous notifications, several amendments, few additions – few deletions, circulars and press releases one after another and a lot to come. Even though the nation could not keep the hold on all of the updates but people have started to understand better than they did yesterday. Practising GST in the business would go a long way and slow but steady understanding would follow. Let us have a look at GST Three Pillars.

Today, through the medium of this article, we wish to travel to the basics of GST. As per our understanding, we would like you, being the taxpayer, to decode the fundamentals of the Good and Simple Tax in India. A lot has already been written on various portals and blogs, newspapers and magazines and shown on television and video channels available over the internet. We, however, would contribute a little more to this enormous details so that taxpayers keep abreast of the fundamentals of the GST along with the updates that follow regularly.

The GST, in our opinion, is standing on three pillars of WWW. Though this ‘Triple W’ could look familiar to us from the address bar above, but here we mean the three different W(s) of GST viz a viz What has to be taxed, Where has to be taxed and When it has to be taxed. These are GST Three Pillars.

Let us understand the following:-

#Contents

 1. What is GST?

Goods and Service Tax (GST) is the unified Indirect Tax on supplies of goods or services or both. The GST is deposited with the government on every stage where the value has been added. Here the following are the key features:-

  • GST is a single unified tax on supplies of goods and services.
  • Tax is levied on value of goods ‘Supplied’ and not ‘Sold’
  • GST is a destination based consumption tax levied only on value added to goods and services at each stage.

GST could further be classified as Central Goods and Service Tax, State Goods and Service Tax (or Union Territory Goods and Service Tax) and Integrated Goods and Service Tax. Here, the provisions pertaining to Place of Supply would be attracted to determine which GST is attracted (covered under the specific heading).

 

2. What is Supply and Why is it so important in GST?

Concept of supply is new and unique. Let us first understand the common meaning of supply. Commonly, supply would mean to pass on or to transfer from one place or person to another.

Now let us understand what does supply mean as per the GST law?

#Supply

Hence, supply has been determined in an inclusive manner which means that any activity of like nature wherein goods or services has been passed on to other person could be covered under the ambit of supply. Provided such activities are in the course of business and for a consideration.

Why is Supply so relevant in GST?

Supply is the most significant concept in GST because it is the taxable event in this tax regime. A taxable event means the event or occasion from where on the taxability is initiated. Earlier in India, there were several forms of taxable events such as:

#Taxable Event

Similarly, in GST framework, Supply of goods or service or both is the taxable event. This being said, it means unless supply does not takes place no GST applicable.

 

3. What to be taxed i.e., Value of Supply?

Just like the taxable event, it is equally important to understand what shall be the taxable value in order to reach to the GST amount. In the previous laws, we had different taxable values such as:

#Taxable Value

In the GST framework, the Transaction Value (Net of Discount) is to be treated as Taxable Value of Supply. Provided:

  • the customer or recipient of the supplies is unrelated person of the supplier; and
  • price is the sole consideration of such supplies.

Where the recipient is the *related person or a distinct person the taxable value shall be calculated as per below:

  • the open market value of such supplies shall be the taxable value;
  • if open market value is not determinable then value of supply of goods or services of like kind and quality shall be the taxable value;
  • if value is not determinable with the above options then taxable value shall be 110% of the cost of acquisition or processing.

Provided that where goods are intended for further supply as such by the recipient, the value shall, at the option of the supplier, be an amount equivalent to 90% of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person.

Provided further that where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of goods or services.

*Related Person under the GST shall include:-

 

#Related Persons

4. Where to tax i.e., Place of Supply?

As we have read in the above instances that GST has been categorized as CGST, SGST / UTGST and IGST. It is imperative to know what is the place of supply for any particular supply in order to tax it with the respective GST type.

The table below shows how to tax a supply:-

#Place of supply

Now how to determine the place of supply?

The rules to determine the place of supply have been specified under Chapter V of IGST Act 2017 separately for goods and services.

I. For goods the place of supply shall be:

#Place of supply – Goods

II. For services the place of supply shall be:

General rule – Place of supply in case of supply:

  • to registered person shall be location of such person;
  • to unregistered person but his address exists in the records of the supplier, then Place of Supply shall be the address of the unregistered person as exists;
  • if no record of the address of such unregistered person then Place of Supply shall be the location of the registered supplier

Except for specified services as shown below:

# Place of supply – services

Time

5. When to tax i.e., Time of Supply?

This brings us to our third pillar of GST which is time of supply. The concept of time of supply is used to determine the point of taxation i.e., at which point of time the liability arises. Time of supply also contributes in determining the rate of GST when rates undergo any changes.

Point of taxation means the point in time when goods have been deemed to be supplied or services have been deemed to be provided. The point of taxation enables us to determine the rate of tax, value, and due dates for payment of taxes. Under GST the point of taxation, ie., the liability to pay CGST / SGST or IGST, will arise at the time of supply as determined for goods and services.

Like Place of Supply, Time of Supply of goods and services has also been specified separately in the GST law.

Time of Supply of Goods shall be earliest of the following:

  • Date of Invoice or last date on which the invoice is to be issued as per law; or
  • Date of Receipt of Payment.

Time of Supply of Services shall be earliest of the following:

  • Date of Invoice or last date on which the invoice is to be issued as per law; or
  • Date of Receipt of Payment.

However, for services covered under Reverse Charge, the time of supply shall be earliest of:

  • Date of payment; or
  • Date immediately following the 60 days from the date of invoice.

Whenever the Time of Supply has been established, the GST payment shall be made on the 20th day of its subsequent month as per the current provisions.

We hope that after reading this write up, the readers should be able to understand the fundamental yet critical aspects involved with respect to supply under GST. Three pillars as discussed above form the roots of GST and thus the total modus operandi can be understood if clarity of these fundamental provisions is there.


For any query or assistance, you may please write to us.

Thanks & Regards

Tax Team, Get Set Business Solutions

B 217, Pacific Business Park, Site IV, Sahibabad Industrial Area,

Ghaziabad, UP, New Delhi – NCR area, India, 201010

Tel: +91 120 402 6320 | Mail: info@getsetbusiness.com | Website: www.getsetbusiness.com |


Disclaimer: The contents of this document are solely for informational purpose. It does not constitute any professional advice or recommendation of the firm. Neither the authors nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this document nor for any actions taken in reliance thereon. Readers are advised to consult the professional for understanding applicability of this article in the respective scenarios. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. No part of this document should be distributed or copied (except for personal, non-commercial use) without our written permission.

Leave a Reply

Your email address will not be published. Required fields are marked *

* WE PROVIDE TAXATION REGULATORY, BUSINESS ADVISORY AND BUSINESS PROCESS OUTSOURCING SERVICES TO SIMPLIFY YOUR BUSINESS * * WE PROVIDE TAXATION REGULATORY, BUSINESS ADVISORY AND BUSINESS PROCESS OUTSOURCING SERVICES TO SIMPLIFY YOUR BUSINESS * * WE PROVIDE TAXATION REGULATORY, BUSINESS ADVISORY AND BUSINESS PROCESS OUTSOURCING SERVICES TO SIMPLIFY YOUR BUSINESS * * WE PROVIDE TAXATION REGULATORY, BUSINESS ADVISORY AND BUSINESS PROCESS OUTSOURCING SERVICES TO SIMPLIFY YOUR BUSINESS *