Invoicing Under GST

Invoicing Under GST

As a GST registered dealer, you are required to provide GST Invoices, also known as bills to your clients.

What is a GST Invoice?

An invoice or a bill is a list of goods sent or services provided, along with the amount due for payment.

Who should issue GST Invoice?

If you are a GST registered business, you need to provide GST-complaint invoices to your clients for sale of good and/or services.

Your GST registered vendors will provide GST-compliant purchase invoices to you.

What are the mandatory fields a GST Invoice should have?

A tax invoice is generally issued to charge the tax and pass on the input tax credit. A GST Invoice must have the following mandatory fields:

Invoice number and date
Customer name
Shipping and billing address
Customer and taxpayer’s GSTIN (if registered)**
Place of supply
HSN code/ SAC code
Item details i.e. description, quantity (number), unit (meter, kg etc.), total value
Taxable value and discounts
Rate and amount of taxes i.e. CGST/ SGST/ IGST
Whether GST is payable on reverse charge basis
Signature of the supplier

**If the recipient is not registered AND the value is more than Rs. 50,000 then the invoice should carry:

name and address of the recipient,
address of delivery,

iii. state name and state code

By when should you issue invoices?

The GST Act has defined time limit to issue GST tax invoices, revised bills, debit notes, and credit note.

Following are the due dates for issuing an invoice to customers:

How to personalize GST Invoices?

You can personalize your invoice with your company’s logo.

What are other types of invoices?

6.A. Bill of Supply

A bill of supply is similar to a GST invoice except for that bill of supply does not contain any tax amount as the seller cannot charge GST to the buyer.

A bill of supply is issued in cases where tax cannot be charged:

Registered person is selling exempted goods/services,
Registered person has opted for composition scheme

Invoice-cum-bill of supply

As per Notification No. 45/2017 – Central Tax dated 13th October2017

If a registered person is supplying taxable as well as exempted goods/ services to an unregistered person, then he can issue a single “invoice-cum-bill of supply” for all such supplies.

6.B. Aggregate Invoice

If the value of multiple invoices is less than Rs. 200 and the buyer are unregistered, the seller can issue an aggregate or bulk invoice for the multiple invoices on a daily basis.

For example, you may have issued 3 invoices in a day of Rs.80, Rs.90 and Rs. 120. In such a case, you can issue a single invoice, totaling to Rs290, to be called an aggregate invoice.

6.C. Debit and credit note

A debit note is issued by the seller when the amount payable by the buyer to seller increases:

Tax invoice has a lower taxable value than the amount that should have been charged
Tax invoice has a lower tax value than the amount that should have been charged

A credit note is issued by the seller when the value of invoice decreases:

Tax invoice has a higher taxable value than the amount that should have been charged
Tax invoice has a higher tax value than the amount that should have been charged
Buyer refunds the goods to the supplier
Services are found to be deficient

Can you revise invoices issued before GST?

Yes. You can revise invoices issued before GST. Under the GST regime, all the dealers must apply for provisional registration before getting the permanent registration certificate.

Refer to this image below to understand the protocol of issuing a revised invoice:

This applies to all the invoices issued between the date of implementation of GST and the date your registration certificate has been issued.

As a dealer, you must issue a revised invoice against the invoices already issued. The revised invoice has to be issued within 1 monthfrom the date of issue of the registration certificate.

How many copies of Invoices should be issued?

For goods– 3 copies
For services– 2 copies

GST Invoicing under Special Cases?

In some cases, like banking, passenger transport, etc., the government has provided relaxations on the invoice format issued by the supplier.

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Input Tax Credit

Input Tax Credit In Gst.

One of the fundamental features of GST is the seamless flow of input credit across the chain (from the manufacture of goods till it is consumed) and across the country.

What is input tax credit?

Input credit means at the time of paying tax on output, you can reduce the tax you have already paid on inputs and pay the balance amount.

Here’s how-

When you buy a product/service from a registered dealer you pay taxes on the purchase. On selling, you collect the tax. You adjust the taxes paid at the time of purchase with the amount of output tax (tax on sales) and balance liability of tax (tax on sales minus tax on purchase) has to be paid to the government. This mechanism is called utilization of input tax credit.

For example- you are a manufacturer:

Tax payable on output (FINAL PRODUCT) is Rs 450
Tax paid on input (PURCHASES) is Rs 300
You can claim INPUT CREDIT of Rs 300 and you only need to deposit Rs 150 in taxes.

Who can claim ITC?

ITC can be claimed by a person registered under GST only if he fulfills ALL the conditions as prescribed.

The dealer should be in possession of tax invoice
The said goods/services have been received
Returns have been filed.
The tax charged has been paid to the government by the supplier.
When goods are received in installments ITC can be claimed only when the last lot is received.
No ITC will be allowed if depreciation has been claimed on tax component of a capital good

A person registered under composition scheme in GST cannot claim ITC.

What can be claimed as ITC?

ITC can be claimed only for business purposes.

ITC will not be available for goods or services exclusively used for:

Personal use
Exempt supplies
Supplies for which ITC is specifically not available

Reversal of Input Tax Credit

ITC can be availed only on goods and services for business purposes. If they are used for non-business (personal) purposes, or for making exempt supplies ITC cannot be claimed. Apart from these, there are certain other situations where ITC will be reversed.

ITC will be reversed in the following cases-

1) Non-payment of invoices in 180 days– ITC will be reversed for invoices which were not paid within 180 days of issue.

2) Credit note issued to ISD by seller– This is for ISD. If a credit note was issued by the seller to the HO then the ITC subsequently reduced will be reversed.

3) Inputs partly for business purpose and partly for exempted supplies or for personal use – This is for businesses which use inputs for both business and non-business (personal) purpose. ITC used in the portion of input goods/services used for the personal purpose must be reversed proportionately.

4) Capital goods partly for business and partly for exempted supplies or for personal use – This is similar to above except that it concerns capital goods.

5) ITC reversed is less than required- This is calculated after the annual return is furnished. If total ITC on inputs of exempted/non-business purpose is more than the ITC actually reversed during the year then the difference amount will be added to output liability. Interest will be applicable.

Reconciliation of ITC

ITC claimed by the person has to match with the details specified by his supplier in his GST return. In case of any mismatch, the supplier and recipient would be communicated regarding discrepancies after the filling of GSTR 3. Please read our article on the detailed explanation of the reasons for mismatch of ITC and procedure to be followed to apply for re-claim of ITC.

Documents Required for Claiming ITC

The following documents are required for claiming ITC:

Invoice issued by the supplier of goods/services
The debit note issued by the supplier to the recipient (if any)
Bill of entry
An invoice issued under certain circumstances like the bill of supply issued instead of tax invoice if the amount is less than Rs 200 or in situations where the reverse charge is applicable as per GST law.
An invoice or credit note issued by the Input Service Distributor(ISD) as per the invoice rules under GST.
A bill of supply issued by the supplier of goods and services or both.

All these documents are to furnished at the time of filing form GSTR-2.

Special cases of ITC

ITC for Capital Goods

ITC is available for capital goods under GST.

However, ITC is not available for-
i. Capital Goods used exclusively for making exempted goods

Capital Goods used exclusively for non-business (personal) purposes

Note: No ITC will be allowed if depreciation has been claimed on tax component of capital goods.

ITC on Job Work

A principal manufacturer may send goods for further processing to a job worker. For example, a shoe manufacturing company sends half-made shoes (upper part) to job workers who will fit the soles. In such a situation the principal manufacturer will be allowed to take credit of tax paid on the purchase of such goods sent on job work.

ITC will be allowed when goods are sent to job worker in both the cases:

From principal’s place of business
Directly from the place of supply of the supplier of such goods

However, to enjoy ITC, the goods sent must be received back by the principal within 1 year (3 years for capital goods).

ITC Provided by Input Service Distributor (ISD)

An input service distributor (ISD) can be the head office (mostly) or a branch office or registered office of the registered person under GST. ISD collects the input tax credit on all the purchases made and distribute it to all the recipients (branches) under different heads like CGST, SGST/UTGST, IGST or cess.

ITC on Transfer of Business

This applies in cases of amalgamations/mergers/transfer of business. The transferor will have available ITC which will be passed to the transferee at the time of transfer of business.

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GST Registration Casual Taxable Persons

GST Registration

Casual Taxable Persons

Casual taxable persons have been provided special treatment under GST. The GST Act defines as casual taxable person as a person who occasionally undertakes transactions involving supply of goods or services or both in the course or furtherance of business, whether as principal, agent or in any other capacity, in a State or a Union territory where he has no fixed place of business. Hence, persons running temporary businesses in fairs or exhibitions or seasonal businesses would fall under casual taxable persons under GST. In this article, we look at GST registration for casual taxable persons.

Casual Taxable Persons VS Regular Taxable Persons

A regular taxable person would be someone who is required to be registered under GST and not classifiable as a casual taxable person or non-resident taxable person. Hence, regular taxable persons would be someone with a fixed place of business located within India.

Unless a regular tax payer is enrolled under the GST composition scheme, the taxpayer would be required to file monthly GST returns, maintain accounts as per GST Act, maintain a fixed place of business and comply with GST regulations.

Casual taxable persons would find it hard to maintain a fixed place of business or file monthly GST returns continuously, as their business would be seasonal in nature with no fixed place of business. To accommodate the unique requirements of such taxpayers, special provisions have been provided under the GST Act for registration of casual taxable persons.

GST Registration for Casual Taxable Persons

All persons who are classified as casual taxable persons are mandatorily required to obtain GST registration, irrespective of the annual aggregate turnover. Further, the application for GST registration for a casual taxable person must be made at least 5 days prior to the commencement of business. GST registration application for casual taxable persons can be made using FORM GST REG-01.

Deposit for GST Registration

Unlike regular taxpayers, casual taxable persons are required to deposit tax in advance for GST registration. The amount of tax to be deposited would be equal to the expected tax liability during the validity period of GST registration. Hence on applying for GST registration, a temporary reference number is generated for payment of GST deposit. On paying the GST deposit, the electronic cash ledger of the taxpayer is credited and GST registration certificate is released. (Know more about amount of deposit required for GST registration)

Document Provided for Payment of GST Deposit

Validity of GST Registration for Casual Taxable Persons

The validity of GST registration for a casual taxable persons is the validity period specified in the GST registration application or 90 days from the date of registration, whichever is earlier. The sample GST registration certificate below shows validity period being specified only for casual taxable persons and non-resident taxable persons under GST.

Sample GST Registration Certificate for Casual Taxable Persons

Extension of GST Registration for Casual Taxable Persons

In case a casual taxable person needs extension of the validity period mentioned in the GST registration certificate, then FORM GST REG-11 must be submitted. Along with the request for extension of validity period, advance GST deposit must also be made by the taxpayer based on the expected tax liability. If the officer verifying the application is satisfied and advance GST deposit is made, the GST registration can be extended by upto another 90 days.

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GST COMPOSITION SCHEME

GST COMPOSITION SCHEME

Goods and Service Tax is a game changer as because with its implementation, a tremendous outflow of benefits are expected. Today in India, there are numerous taxes such as Service Tax, VAT, Excise and many others that are ultimately borne by consumers leading to double taxation or having cascading effect. Post GST, around 17 taxes will be subsumed under one tax regime.

GST will apply to almost every assessee in business, thereby boosting revenues for the government. While purchasing goods or services both CGST and SGST i.e. both central and state taxes will be levied thereby eliminating all confusion. With the introduction of GST, a new regime of business compliance will be established.

Big organisations in India have the required resources and expertise that can facilitate the compliance procedures. On the other hand, small and medium enterprises (SMEs) and start-ups will have difficulty in complying with these provisions. Thus, to lower the burden of compliance for small businesses, a composition scheme has been introduced under GST law where the assessees have to pay tax at a minimum rate based on their turnover. This is mostly similar to the provisions in VAT law.

In this article, we’ve explained what is GST composition scheme, who can apply, eligibility criteria, it’s limitations and how it can benefit small businesses.

Eligibility For GST Composition Scheme

Getting registered under composition scheme is optional and voluntary. Any business which has a turnover less than Rs.50 Lakh can opt for this scheme but on any given day, if turnover crosses the above-mentioned limit, then he becomes ineligible and has to take registration under the regular scheme. There are certain conditions that need to be fulfilled before opting for composition levy.

They are as follows:

Any assessee who only deals in supply of goods can opt for this scheme that means this provision is not applicable for service providers. However, restaurant service providers are excluded.
There should not be any interstate supply of goods that means businesses having only intra state supply of goods are eligible.
Any dealer who is supplying goods through electronic commerce operator will be barred from being registered under composition scheme. For example: If M/s ABC sells its products through Flipkart or Amazon (Electronic Commerce Operator), then M/s. ABC cannot opt for composition scheme.
Composition scheme is levied for all business verticals with the same PAN. A taxable person will not have the option to select composition scheme for one, opt to pay taxes for other. For example, A taxable person has the following Business verticals separately registered – Sale of footwear, the sale of mobiles, Franchisee of McDonald’s. Here the composition scheme will be available to all 3 business verticals.
Dealers are not allowed to collect composition tax from the recipient of supplies, and neither are they allowed to take Input Tax Credit.
If the person is not eligible under composition scheme, tax liability shall be TAX + Interest and penalty which shall be equal to the amount of tax.
Dealers who collect Tax at source u/s 56.

Benefits Under GST Composition Scheme

Less Compliance
Under the normal scenario, a taxpayer under GST has to file minimum 3 returns monthly and one annual return. To be precise, he is compelled to file 37 returns in a year or penalty will be levied for non-compliance. For small suppliers and manufacturers, it is quite difficult to maintain so detailed books of accounts on a daily basis and record every transaction with supporting documents.

Whereas, in composition scheme, only a quarterly return will be uploaded under GSTR-4 by:

18th July – 1st quarter

18th October – 2nd quarter

18th January – 3rd quarter

18th April – 4th quarter

This will ease the compliance burden for SMEs, and they can focus more on their business rather than getting occupied in compliance procedures.

Reduced tax liability
Another advantage of being registered with composition scheme is the rate structure. The rate is 1% for manufacturers, 2.5% for restaurant service providers, 0.5% for other suppliers of turnover. This can be more justified with the following example.

Particulars	Description	Registered as Normal Tax Payer	Description	Registered as a Taxpayer under composition scheme
A	Total Sales Value	118000	Total Sales Value	118000
B	Sales Value exclusive of taxes	100000	Sales Value exclusive of taxes	115686
C	GST @ 18% on sales value	18000	GST @ 2% on sales value	2314*
D	Input Purchases	65000	Input Purchases	65000
E	GST @ 18%	11700	GST @ 18%	11700
F	Total Purchase Value (D+E)	76700	Total Purchase Value (D+E)	76700
G	Net GST Liability (C–E)	6300	Net GST Liability (C–E)	2314
H	Net Profit {A-(F+G)}	35000	Net Profit {A-(F+G)}	38986

*In composition scheme, a supplier is ineligible to collect tax separately from the buyer in an invoice. The above illustration is for the basic understanding of the composite scheme.

High Liquidity
For normal taxpayers, most of his working capital will be blocked as Input Tax credit because he can avail the input only if his supplier has filed the return. The supplier has to pay tax at standard rate and credit of the input will only be availed when his supplier files the return. In composition levy, dealer need not worry about his supplier filing return as he cannot take credit and will pay tax at a nominal rate.

For Example: In the above case, a Normal taxpayer will have to pay a higher tax of Rs. 6300/- compared to Rs.2314/- and Input Tax credit of Rs. 11700/- will also be blocked till his supplier files the return. Whereas, the composition scheme tax payer, will only pay Rs. 2314.

Transitional Provisions

Any taxpayer who is in Composite Scheme under current regime and transits to Regular Taxation under GST will be allowed to take the credit of Input, semi-finished goods and finished goods on the day immediately preceding the date from which they opt to be taxed as a regular tax payer.

The inputs can only be availed subject to few conditions such as;

Those inputs or goods are meant for making taxable outward supplies under GST provisions
The dealer taking the Input Credit was eligible under the previous regime but could not claim due to registered under Composition Scheme
The taxpayer claiming Input credit on goods, those goods should be eligible for such credit under GST regime.
The taxpayer must have a valid legal document of input tax credit i.e. he must possess an invoice evidencing taxes or duties have been paid.
Those invoices or documents should not be older than 12 months before the appointed date.

When a taxpayer is shifting from a normal scheme to composition scheme, the taxpayer has to pay an amount which shall be equal to the credit of input tax in respect to those inputs which are held as stock on the immediately preceding date from the date of such switchover. Any balance which is left in Input Tax Credit account after such payment, then that balance will lapse and not usable.

Limitations of GST Composition Scheme

There are some of the limitations that every business owner must be aware of:

No Credit of Input Tax
Any dealer registered under Composition Scheme will not be eligible to take credit of Input Tax credit on purchases. Also, the buyer of those goods will not get the credit of taxes paid.

No Inter-state business
The major drawback of this scheme is that the assessee cannot deal in interstate transactions or affect import – export of goods and services. He is barred from performing such actions which limit his territory for expansion and can only conduct local or intra state transactions.

Pay tax from own pocket
Since the dealer is not allowed to charge tax from his buyer, despite the rate being very low, he has to pay out of his own pocket. He is not even allowed to issue a tax invoice, resulting the burden on the assessee to pay tax.

Strict Penal provisions
Utmost care is required while taking benefit of composition levy under GST regime as the penal provisions are quite severe. If by any chance, it is proved that the assessee is wrongly registered under this scheme, not fulfilling the required criteria and thereby avoiding taxes will face bad consequences. He will be then be asked to pay taxes along with penalty, which is equal to 100% of taxes put on him.

GST has the potential to boost revenue for the government, lower the budget deficit, which means more funds will be generated to spend on the welfare of the society and people. There will be always a section of traders, dealers or taxpayers who find it difficult to maintain books of accounts or fulfil the compliance requirements of tax laws. This may happen due to small size of their business or due to the nature of their business. To give benefit to these businesses, composition scheme was launched for such small taxpayers.

The composition scheme is quite beneficial to small suppliers, intra state local suppliers and restaurant sector as it prevents them from various procedural compliances and gives a hassle free working environment. Today, to make compliances better for small businesses, states have provisions in their VAT law about the composition scheme. Similarly even in GST, composition scheme is introduced to safeguard the interests of small businesses. GST, composition scheme is introduced to safeguard the interests of small businesses.

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