GOODS AND SERVICE TAX (GST)

FAQ 1: WHAT IS GST?

Goods and Services Tax (GST) is an indirect tax throughout India to replace indirect taxes levied by the central and state governments. Exports and direct taxes like income tax, corporate tax and capital gain tax will not be affected by GST. It is a single tax which impose on the sale of goods and supply of services. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

GST would replaces following indirect taxes:

STATE INDIRECT TAXES	CENTRAL INDIRECT TAXES
1     Value Added Tax (VAT),       2.     Octroi,        3.     Entry Tax,        4.     Purchase Tax,       5.     Luxury Tax,       6.     State cesses and surcharges        7.     Entertainment tax (other than the tax levied by the local bodies).       8.     Taxes on lottery, betting & gambling	1.     Central Excise Duty,              2.     Service Tax,              3.     Counter Veiling Duty (CVD),              4.     Special Additional Duty of Customs                    (SAD),              5.     Central charges and Cesses              6.     Central Sales tax (levied by the Centre                and collected by the States)

FAQ 2: HOW GST WORKS?

All Businesses who makes taxable sales and services have to be registered under GST if their annual sales turnover has exceeded the prescribed threshold. Only a registered person can charge and collect GST on the taxable supplies of goods and/or services made by them. GST is charged on the value or selling price of the products.

The amount of GST incurred on input (input tax) can be deducted from the amount of GST charged (output tax) by the registered person.. If the amount of output tax is more than the input tax in the relevant taxable period, the difference shall be remitted to the Government. However, if the input tax is more than the output tax, the difference will be refunded by the Government. 

The GST will be concurrently levied by central and state government. There are three types of GST which will be implemented to help tax-payers to take credit against each other.

       a)     CENTRAL GST (CGST)

CGST will be levied by Centre Government for Intra-state movement of Goods and/or Services i.e. Local Sale of Goods and/or services.  

      b)     STATE GST (SGST)

SGST will be levied by State Government for Intra-state movement of Goods and/or Services i.e. Local Sale of Goods and/or services.

      c)      INTEGRATED GST (IGST)

IGST will be levied by Centre Government for Inter-state movement of Goods and/or Services i.e. Sale of Goods and/or services from one state to another. IGST will also apply on Imports.

Example:

A dealer in Delhi sold goods to the consumer in Delhi worth Rs. 1,000. The GST rate is 12% comprising of CGST rate of 6% and SGST rate of 6%, in such case the dealer collects Rs. 1200 and Rs. 600 will go to the central government and Rs. 600 will go to the Delhi government.

Now, if the dealer in Delhi had sold goods to a dealer in Gurgaon worth Rs. 1,000. The GST rate is 12% comprising of CGST rate of 6% and SGST rate of 6%. In such case the dealer has to charge Rs. 1,200 as IGST. This IGST will go to the Centre.

FAQ 3: HOW TO AVAIL INPUT CREDIT?

GST paid on Purchases or Input Services can be availed and utilized at time of Payment of GSt on Output Sales and Services.

 Sequence of utilization of input tax credit of GST.

Input GST	First Setoff From Output GST	Second Setoff From Output GST	Third Setoff From Output GST
IGST	IGST	CGST	SGST
CGST	CGST	IGST	-
SGST	SGST	IGST	-

FAQ 4: INPUT CREDIT IS ALLOWED ON ALL INPUT ITEMS?

A.     In the following cases Partially Input credit will be available.

PARTICULARS	CONDITIONS
When the goods and/or services are used partly for the purpose of any business and partly for other purpose	Credit shall be restricted to so much of the input tax as it attributable to the purpose of his business.
When googs and services are used partly for taxable supplies and partly for exempted supplies including reverse charge supplies.	Credit shall be restricted to so much of the input tax as it attributable to the said taxable supplies.

B.     In the following Input credit will be available if same category of output supply is made.

PARTICULARS	CONDITIONS
Motor Vehicles and other Conveyance	a) When Such motor vehicles and conveyances are further sold. b) When used for Transportation of Passangers c)  When used for imparting training on diving, flying, navigating such vehicles or conveyances d)     When used for Transportation of Goods
Credit for Input Supply of food and beverages, outdoor catering, beauty treatment, health services and cosmetic and plastic surgery.	Will be available when the outward supply if same is made by the taxpayer.
Works contract service       a)     When used for Output Service of Works Contract        b)     When used for Movable Goods        c)      When used for Plant and Machinery        d)     When used for immovable goods	Allowed Allowed Allowed Not Allowed

C.     In the following cases Input credit will not be available.

1.     Sale of membership in a club, health, fitness centre.

2.     rent-a-cab, health insurance and life insurance except the following:

3.     Travel benefits extended to employees on vacation such as leave or home travel concession.

4.     Goods and/or services for construction of an immovable property whether to be used for personal or business use.

5.     Goods and/or services where tax have been paid under composition scheme

6.     Goods and/or services used for personal use.

7.     When goods lost, stolen, destroyed, written off or disposed off by way of gift or free sample.

8.     Goods or services or both received by a non-resident taxable person except for any of the goods imported by him.

9.     ITC will not be available in the case of any tax paid due to non-payment or short tax payment, excessive refund or ITC utilized or availed by the reason of fraud or willful misstatements or suppression of facts or confiscation and seizure of goods.

WINDING UP OF COMPANY - By Registrar or Voluntarily by Company

REMOVAL OF COMPANY NAME FROM REGISTER OF COMPANIES

(WINDING UP OF COMPANY)

A) REMOVAL OF COMPANY NAME FROM REGISTER OF COMPANIES BY  REGISTRAR

As per Section 248 to 252 of the Companies Act, 2013, the Registrar of Companies has the powers to remove name of company from the register of companies, if the Registrar has reasonable cause to believe that:

a)  The company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application for obtaining the status of a dormant company under section 455.

b)    The company has failed to commence its business within one year of its incorporation;

The Registrar of Companies may send a notice to the company and all the directors of the company and requests them to send representations along with copies of the relevant documents, if any, within a period of thirty days from the date of the notice.

B)     VOLUNTARILY REMOVING COMPANY NAME USING FORM FORM STK-2

The company may also remove its name from register of companies by filing Form STK-2 which was announced by MCA for removing name from register of companies or winding up of a company. Form STK-2 will be made available by the MCA from the 5th of April, 2017 for filing on the MCA platform.

a)     Requirements before filing STK-2

Before filing the Form STK-2 the company should fulfill all the following requirements:

1.     The company should have pay off all its liabilities

2.     A special resolution shall be passed with the consent of 75% of members in terms of paid-up share capital for removal of company name from register of companies.

3.  In case the company is regulated under a special Act, approval of the regulatory body constituted or established under that Act should also be obtained and enclosed with the application.

b)     Requirements for Filing Form STK-2

The following are the enclosures that must be attached with Form STK-2:

1.     Indemnity bond duly notarized by every director in Form STK 3;

2.    A statement of accounts comprising assets and liabilities of the company made up to a day, not exceeding thirty days before the date of application and certified by a Chartered Accountant;

3.     An affidavit in Form STK 4 by every director of the company;

4.     A copy of the special resolution accordingly certified by each of the directors of the company or approval of 75% of the members of the company in terms of paid up share capital as on the date of application

5.     A statement with reference to pending litigations, if any, involving the company.

6.     Declaration by Director or Managing Director

7.   Digitally certified by a Chartered Accountant in full-time practice or Company Secretary in full-time Practice or Cost Accountant in full-time practice.

c)      Form STK-2 cannot filed, in the following cases:

1.    The company changed its name or shifted its registered office from one State to another before three months of filing of Form STK-2;

2.  The company disposed property or rights held by it, before three months of filing of Form STK-2. This provision is not applicable for trade wherein disposal of property for gain is in the normal course of trading or carrying on of business;

3.    The company engaged in any other activity except the one which is provided in the MOA or expedient before three months of filing of Form STK-2.

4.     The company has made an application to the Tribunal for the sanctioning of a compromise or arrangement and the matter has not been finally concluded;

5.  The company is being wound up under Companies Act or under the Insolvency and  Bankruptcy Code, 2016.

d)     Effect of Removing Name from Register of Companies

1.    If STK-2 is filed and accepted by the ROC, the company would be dissolved under section 248 of the Companies Act, 2013. Further, the business would cease to operate as a company and the Certificate of Incorporation issued to it shall be deemed to have been cancelled from such date – except for the purpose of realising the amount due to the company and for the payment or discharge of the liabilities or obligations of the company.

2.     Also, if a company is closed using Form STK-2, the liability of all director, manager or other officer who was exercising any power of management, and of every member of the company would continue and can be enforced as if the company had not been dissolved.