TDS under GST

TDS is be deducted @2% if contract value is more than 2.50 lakhs. The contract value is computedexcluding GST.
As per notification No.50/2018-Central Tax, dt. 13-09-2018 the TDS will be effective from 1.10.2018

TDS, Tax deducted at source is a means to collect tax for Government

TDS under GST law-Who is liable to deduct
Following are liable
a) Department or establishment of the Central or State Government, or

(b) Local authority, or

(c) Governmental agencies, or

(d) such persons or category of persons as may be notified, by the Central or a State Government on the recommendations of the Council.

GST Offences, Penalties and Appeals

Offences

There are 21 offenses under GST. We have mentioned a few here. For the entire list of 21 offenses please go to our main article on offenses.

The major offenses under GST are:

1. Not registering under GST, even though required by law. (Read our article for the list of those who have to register mandatorily under GST)
2. Supply of any goods/services without any invoice or issuing a false invoice.
3. The issue of invoices by a taxable person using the GSTIN of another bona fide taxpayer.
4. Submission of false information while registering under GST.
5. Submission of fake financial records/documents or files, or fake returns to evade tax.
6. Obtaining refunds by fraud.
7. Deliberate suppression of sales to evade tax.
8. Opting for composition scheme even though a taxpayer is ineligible.

GST penalties & Approvals

Penalty

If any of the offenses are committed then a penalty will have to be paid under GST. The principles on which these penalties are based are also mentioned by law.

For late filing

Late filing attracts penalty called late fee. The late fee is Rs. 100 per day per Act. So it is 100 under CGST & 100 under SGST. Total will be Rs. 200/day. The maximum is Rs. 5,000. There is no late fee on IGST in case of delayed filing.

Along with late fee, interest has to be paid at 18% per annum. It has to be calculated by the taxpayer on the tax to be paid. The time period will be from the next day of filing to the date of payment.

For not filing

If you don’t file any GST return then subsequent returns cannot be filed. For example, if GSTR-2 return of August is not filed then the next return GSTR-3 and subsequent returns of September cannot be filed. Hence, late filing of GST return will have a cascading effect leading to heavy fines and penalty (see below).

For the 21 offenses with no intention of fraud or tax evasion

An offender not paying tax or making short payments must pay a penalty of 10% of the tax amount due subject to a minimum of Rs. 10,000.

Consider — in case tax has not been paid or a short payment is made, a minimum penalty of Rs 10,000 has to be paid. The maximum penalty is 10% of the tax unpaid.

For the 21 offenses with the intention of fraud or tax evasion

An offender has to pay a penalty amount of tax evaded/short deducted etc., i.e., 100% penalty, subject to a minimum of Rs. 10,000.

Additional penalties as follows-

Tax amount involved 100-200 lakhs 200-500 lakhs Above 500 lakhs
Jail term Upto 1 year Upto 3 years Upto 5 year
Fine In all three cases

Cases of fraud also face penalties, prosecution, and arrest.

Inspection Under GST

The Joint Commissioner of SGST/CGST (or a higher officer) may have reasons to believe that in order to evade tax, a person has suppressed any transaction or claimed excess input tax credit etc. Then the Joint Commissioner can authorize any other officer of CGST/SGST (in writing) to inspect places of business of the suspected evader.

Search & Seizure Under GST

The Joint Commissioner of SGST/CGST can order for a search. He will order a search on the basis of results of inspection (or other reason) if he has reasons to believe –

There are goods which might be confiscated
Any documents or books or other things which are hidden somewhere. Such items can be useful during proceedings.
Such incriminating goods and documents can be seized.

Goods in Transit

The person in charge of a vehicle carrying goods exceeding Rs. 50,000 is required to carry the following documents:

Invoice or bill of supply or delivery challan
Copy of e-way bill (hard copy or via RFID)
The proper officer has the power to intercept goods in transit and inspect the goods and the documents.

If the goods are in contravention to the GST Act then the goods, related documents, and the vehicle carrying them will be seized. The goods will be released only on payment of tax and penalty.

Before confiscating the goods, the tax officer shall give an option of paying a fine instead of confiscation.

Compounding of Offences Under GST

Compounding of offenses is a shortcut method to avoid litigation. In case of prosecution for an offense in a criminal court, the accused has to appear before the Magistrate at every hearing through an advocate. This becomes expensive and time-consuming.

In compounding, the accused is not required to appear personally and can be discharged on payment of compounding fee which cannot be more than the maximum fine as applicable under GST.

Compounding will save time and money. However, compounding under GST is not available for cases where the value involved exceeds 1 crore.

Prosecution Under GST

The prosecution is conducting of legal proceedings against someone in respect of a criminal charge.

A person committing an offense with the deliberate intention of fraud, becomes liable to prosecution under GST, i.e., face criminal charges. A few examples of these offenses are-

1. Issue of an invoice without supplying any goods/services- thus taking input credit or refund by fraud
2. Obtaining refund of any CGST/SGST by fraud.
3. Submitting fake financial records/documents or files, and fake returns to evade tax.
4. Helping another person to commit fraud under GST.

Arrest Under GST

If the Commissioner of CGST/SGST believes a person has committed a certain offense he can be arrested under GST by any authorized CGST/SGST officer (click here for the list of offenses for which one can be arrested).

The arrested person will be informed of the grounds for his arrest. He will appear before the magistrate within 24 hours in case of a cognizable offense (Cognizable offenses are those where the police can arrest a person without an arrest warrant. They are serious crimes like murder, robbery, counterfeiting).

Appeals

A person unhappy with any decision or order passed against him under GST can appeal against such decision.

The first appeal against an order by an adjudicating authority goes to the First Appellate Authority.

If the taxpayer is not happy with the decision of the First Appellate Authority they can appeal to the National Appellate Tribunal, then to the High Court, and finally to the Supreme Court.

gst-penalties-and-appeals

To avoid the long process of appeal and litigation, a taxpayer may request for the advance ruling under GST. The taxpayer asks for clarification from GST authorities on GST treatment before starting the proposed activity. The tax authority gives a written decision (called advance ruling) to the applicant on the query.

Treatment of Advance Received under GST

The rules for the time of supply under GST plays a very important role in determining when to pay tax for a transaction.

The general rule for time of supply for goods is earliest of the following –

1. Date of issue of invoice

2. Date of receipt of payment/advance

3. Date on which invoice should be issued

The second point above is receipt of advance. This means that if the advance is received before the issue of invoice the time of supply would be the date of receipt of advance.

Thus taxpayer receiving advance must pay GST on the money received.

What is a taxpayer supposed when an advance is received?

A taxpayer has to take the following actions on receipt of advance:

1. Issue a Receipt Voucher:

The supplier has to issue a receipt voucher to the person paying advance. The receipt voucher will contain details like amount of advance, the rate of tax applicable, description of goods or services, etc.

2. Calculate Tax on Advance Received:

You have to calculate tax on advance and pay tax while filing the return for the month.

The advance received should be grossed up. This means that advance received is considered inclusive of GST.

When the rate of tax cannot be determined during receipt of advance GST @ 18% has to be charged.

Also if the point of sale cannot be ascertained the advance is considered as interstate supply and IGST has to be paid.

Let us understand the treatment of advance under GST using an example:

Mr. A entered into a contract of supplying goods worth Rs 10,00,000 by 20th February.

The total invoice value along with GST @ 18% is Rs 11,80,000.

He received an advance of Rs 4,00,000 on 10th January and balance payment of Rs 7,80,000 on 20th February. The invoice was also raised on 20th February.
Here is how you will calculate tax:
advance received – part 1

It is very important to note here that the taxpayer paying advance is not eligible to claim ITC on advance paid. The taxpayer can claim ITC on advance paid only on receipt of goods or services.

This means that in the above example recipient will be eligible to claim ITC on an advance in February (goods are received on 20th February).

3. Incorporate advance received in GSTR 1


Any advance received by a taxpayer for which invoice is not issued should be mentioned in Pt.11A of GSTR 1.

Details of each advance need not be given, A cumulative figure of all the advances received has to be provided.

The advance should be first segregated into Interstate and intrastate advances.

The gross figure of advances received should be mentioned under Gross Advance Received/ Adjusted.

After this, the tax payable i.e. CGST and SGST in case of intrastate and IGST in case of interstate advances should be stated.

This tax on advance is added to the tax liability of the supplier.

GST impact on the infrastructure sector


The infrastructure sector is the backbone of the Indian economy. The government has been making efforts to boost the sector through various schemes and incentives.

According to the government, total infrastructure spending is expected to be about 10% of GDP (gross domestic product) during the 12th Five-Year Plan (2012–17), up from 7.6% during the previous Plan. A total of 6,604km has been constructed out of the 15,000km target set for national highways in 2016-17, says the ministry of road transport and highways. The Airports Authority of India plans to develop city-side infrastructure at 13 regional airports, with help from private entities for building of hotels, car parks and other facilities. Significant allocations have been made to power, urban development and inland waterways sectors. The above initiatives show the firm commitment of the government to infrastructure.

Given this, the recent introduction of the goods and services tax (GST) could have significant impact in terms of spending on infrastructure.

In the pre-GST era, there was dichotomy in the applicable indirect tax regime relevant to infrastructure. While Central laws provided exemptions and concessions, state VAT (value-added tax) and entry tax laws were applicable to goods procured. In addition, the cascading effect of Central and state indirect taxes was a concern, due to a high base for levy of respective taxes and a restrictive credit mechanism. There was also litigation at the Central and state levels on classification of contracts, valuation, jurisdiction of state on inter-state works contracts and other issues.

GST being a concurrent tax on supply of goods and services is expected to bring in predictability for infrastructure projects. There are some changes that would have an impact on indirect taxation—taxability of works contracts being one. As works contracts are limited to only immovable properties, turnkey contracts which do not result in immovable property would now be treated as composite supplies. Further, valuation of goods and services in works contracts, which has typically sparked differences between Central and state indirect tax authorities, would now be put to rest with the legislation laying down unambiguously that works contracts would be regarded as supply of services. Other contracts which do not result in immovable property could be regarded as composite supplies, and depending on the principal supply, tax liability would arise either as a supply of goods or services.

While there is apprehension that a flat GST rate of 18% would lead to increased incidence on infrastructure projects, availability of input tax credits would neutralize such concerns. Thus, contractors and suppliers could look forward to a simpler and efficient tax regime.

For project owners, the new legislation may not lead to a conducive future. Credit restrictions on works contracts resulting in an immovable property coupled with increase in GST rates could increase cost outlay. Already, exemptions and concessions to infrastructure have been completely withdrawn. This could also lead to increased working capital requirements. Project cost could rise due to increased burden of indirect taxes.

Power is an important component of infrastructure. Electricity being outside the purview of GST, power generation companies would continue to have indirect taxes as a significant cost factor. Further, an increase in rate of services and withdrawal of exemptions and concessions for power projects is expected to have an impact on power companies.

Similarly, withdrawal of exemptions for road, water supply and sewerage projects sponsored by government and local authorities is expected to increase government spend. However, availability of higher pool of input tax credit in the hands of the contractors could help neutralize such increases. So introduction of GST seems to be a mixed bag for the infra sector—predictability and efficiency being the key advantages, while non-inclusion of sub-sectors, higher rate and certain restrictions are negatives.

On direct taxes, the government intends to bring down the corporate tax rate in a phased manner and correspondingly phase out profit-linked tax incentives.

While most such tax incentives are phased out from 1 April, the industry is yet to witness an impactful reduction. So far, the reduction in the base corporate tax rate from 30% to 25% is for companies with revenue up to Rs50 crore in financial year 2015-16. Infrastructure requires considerable investment and it is likely that it may not be the beneficiary of reduced corporate tax rate. Also, as gestation is high, it is unlikely to generate enough profit in the initial years to absorb compulsory depreciation charge under the Income Tax Act. Consequently, there could be incidence of minimum alternate tax (MAT) of approximately 18.5%, on the book profit.

Industry has been demanding withdrawal of MAT, and the finance minister had acknowledged this demand, although there has been no relief so far. The only respite has been to allow set-off of MAT paid against future tax liability for 15 years as against 10 years. The intent and willingness of the current government to go the extra mile for overall growth, has been well received. With time, industry expects more clarity in GST and a reduction in corporate tax rate to make up for withdrawal of direct tax incentives. These measures will propel much-needed growth for India’s infrastructure.
Government has revised the GST rate from 18% to 12% on contracts to Govt vide notification CBEC No 20/2017 dt 22.08.2017.This rate is applicable for own going and new contracts.
1.Construction of building 18% (9+9)
2.Composite supply of works contractWorks contract 18% (9+9)
3.Do–to Govt/Local authority/authority 12% (6+6)

Link
Notification No. 20/2017-Central Tax (Rate), the 22nd August, 2017