GST India: GSTR-1 Demystified
GST brings the concept of uploa...: GSTR-1 Demystified GST brings the concept of uploading business transaction data versus the existing system of filing summary informat...
GST India
Sunday, 18 June 2017
GSTR-1 Demystified
GST brings the concept of uploading business
transaction data versus the existing system of filing summary information. GSTR-1
refers to filing of outward supply details by a regular dealer registered in
GST on or before 10th of subsequent month.
These details get
auto-populated to counterparty (buyer) as GSTR-2A on 11th. Adherence
to dates is of prime relevance since apart from late fees (Rs 100 per day up to
a maximum of Rs 5,000), missing deadlines leads to changes in return filing
flow. Concept of return revision has been done away with and changes if any
have to be done at invoice level.
Return may be filed by user in following
methods:
- Enter invoice data directly in GST portal – requires high speed and reliable internet connectivity and suitable for small business. Ex: 50 to 100 invoices per month
- Enter data in Excel template provided by GST >> import into offline utility >> convert to uploadable file (.json) >> Login to GST portal, browse and upload – multi-step process, suitable for business maintaining data in Excel or using billing or Point of Sale solutions (not integrated with GST) which can provide excel output/summary
- Use Accounting/ERP software and upload data directly to GST – connected solution: convenient and preferred method for most business, as the ERP would handle most of the backend activities (upload/download/session) with minimal physical presence of owner required.
Principal categories of information to be furnished as
part of GSTR-1 are:
·
Sales
(Local/Interstate, Taxable/Exempt/Nil Rate, B2B and B2C)
·
Exports
·
Debit and Credit
notes
·
Advances
·
Revisions for earlier
tax period
·
Other Info (Turnover,
HSN Summary, Invoice series etc.)
Below is the table-wise details of information to be furnished:
1.
GSTIN
– The 15 digit GST Registration number of the business entity Ex: 27ARETY3456J1Z1
2(a). Legal name of the business Ex: One97 Communications
(b). Trade
name of the business Ex:
Paytm
3(a). Turnover of previous financial year (2016-17)
(b). Turnover of April-May-June 2017
Aggregate turnover here refers to combined
turnover across India for the PAN, and includes exempt supplies and exports.
This does not include inward supplies on which tax is paid on reverse charge
basis.
4. Taxable outward supplies to registered business
Taxable
supplies are to be reported in Table 4 (A to C) and thereby this table does not
include details of supplies of Nil Rated / Exempt or non-GST goods even if
supplied to B2B customer. However if an invoice has at least one taxable
item/service it will be reported here although other items may be Nil/exempt. Supplies
done to SEZ or SEZ developer and sales of deemed export nature although of
taxable and B2B nature will not participate in Table 4. Across all tables when
invoice information is reported, rate-wise breakup is to be provided. If there
are multiple items (Ex: 15) in a single invoice but falling in 3 rates, the
invoice information will be furnished in 3 lines.
4A.
Outward supplies to registered business
Explanation:
Taxable sales done to business (B2B) customers having GSTIN and such service is
not classified as reverse charge. Does not include B2B sales done through
e-commerce operators.
4B.Outward
supplies attracting reverse charge
Explanation:
Sales done to business (B2B) customers having GSTIN of those services
classified as reverse charge. Ex: Goods Transport Agency services, Legal services,
Rent-a-cab services etc.
4C.
Outward supplies made through e-commerce operators
Explanation:
Sales done to business (B2B) customers having GSTIN but done through e-commerce
operators like Amazon, Flipkart, e-Bay, Indiamart etc. Sales have to be
provided segregated e-commerce operator wise.
5. Taxable Inter-state B2C supplies more than
Rs.2.5 lakhs
Only taxable supplies will be reported in this
table. (All sales of Nil Rated / Exempt / Non-GST goods or service to
interstate consumers will not participate here).
5A. Inter-state B2C supplies more than Rs.2.5
lakhs
Explanation:
Interstate sales done to consumers (B2C) and the invoice value is more than Rs
2.5 Lakhs (does not include sales done
through e-commerce operator).
5B. Inter-state B2C supplies more than Rs.2.5
lakhs through e-commerce operators
Explanation:
Interstate sales done to consumers (B2C) and the invoice value is more than Rs
2.5 Lakhs and the sale has happened through e-commerce operators (to be
reported e-commerce operator-wise)
6. Zero rated supplies and
Deemed Exports
6A. Exports
Exports
with or without payment (under Bond or letter of undertaking) of tax will be
reported in this section. The Shipping Bill number (13 digit code including six
digits of port code) is not mandatory during saving of invoice and can be
subsequently updated through amendment table. Shipping bill number is to be
mandatorily updated before claiming refund.
6B. Supply to SEZ
Similar
to Exports, supplies to SEZ is zero rated and can be with or without payment of
tax, to be reported here. Shipping bill details will be applicable
when supplied under Bill of Entry.
6C. Deemed exports
Deemed
exports as notified by government to be reported here.
7. Net
B2C outward supplies other than that covered in table 5
All
taxable B2C supplies other than table 5 (interstate B2C > 2.5 lakhs) to be
reported here. Only taxable and B2C supplies of Nil/Exempt/Non-GST will not
participate.
7A. Intra-state B2C supplies
7A (1).
Consolidated rate-wise B2C supplies
All within-state
B2C supplies (irrespective of invoice value) to be consolidated (net of
debit/credit note) and reported here including supplies done through e-commerce
operators.
7A (2).
Consolidated rate-wise B2C supplies done through e-commerce operator
Only those
intra-state B2C sales done through e-commerce operator to be sorted e-commerce
operator wise and reported as consolidated values (net of debit/credit note).
7B.
Inter-state B2C supplies of value up to Rs 2.5 Lakhs
7B (1).
State-wise details of consolidated rate-wise B2C supplies
All interstate
B2C supplies of invoice value =< 2.5 lakhs to be consolidated (net of
debit/credit note) and reported here including supplies done through e-commerce
operators.
7B (2).
State-wise details of consolidated rate-wise B2C supplies done through
e-commerce operator
8. Nil Rated / Exempt /
Non-GST supplies
Explanation: This table captures
net sales (after debit / credit note adjustments) of Nil Rated, Exempt and
non-GST outward supplies and the information is to be further bifurcated as
B2B/B2C and as inter/intra state. All ‘Bill of Supply’ having only Nil / Exempt
/ Non-GST supplies are to be reported in this section.
8A.
Interstate B2B supplies of Nil/Exempt/Non-GST goods/service
8B.
Intrastate B2B supplies of Nil/Exempt/Non-GST goods/service
8C.
Interstate B2C supplies of Nil/Exempt/Non-GST goods/service
8D.
Intrastate B2C supplies of Nil/Exempt/Non-GST goods/service
9. Amendments, Debit and
Credit Notes
Explanation: As stated earlier,
in GST regime there is no provision for return revision and invoices of earlier
tax period entered erroneously (Ex: clerical error) can be corrected through
amendment table by re-uploading the rectified information. Amendment to invoice
data is subject to following conditions:
·
The invoice / Debit / Credit Note is not already
accepted by buyer
·
The invoice / Debit / Credit Note is not already
amended / modified earlier
·
The last period in which any amendment can be
performed is the September return of next financial year or filing of annual
return whichever is earlier
9A.
Invoice amendment
Provision to enter corrected
information pertaining to invoices uploaded & filed in earlier tax periods.
This table can also be used for updating shipping bill details against an
export invoice uploaded in earlier tax period.
9B.
Debit/Credit notes and Refund voucher
Debit and Credit notes issued
against invoices of current or earlier tax periods (not earlier than April month
of the FY to which it belongs) are added in this section. Refund
vouchers are also to be reported here.
(Refund voucher: when advance is received
(receipt voucher) form buyer and subsequently the supply does not happen, supplier to issue a refund voucher)
9C.
Amendment to Debit or Credit note and refund voucher
Corrections to Debit / Credit
notes and Refund vouchers issued in earlier tax period principally to rectify
clerical errors.
10. Amendments to B2C
supplies reported in Table 7
This section refers to
corrections to be incorporated to consolidated B2C sales reported in earlier
tax periods. The information needs to be bifurcated state-wise (Place of
supply) and between e-commerce and non-ecommerce sections.
10A.
Revision of Intrastate B2C supplies of earlier tax periods (including
e-commerce)
10A (1).
Revision of Intrastate B2C supplies of earlier tax periods made through
e-commerce operators
10B.
Revision of Interstate B2C supplies of earlier tax periods (including
e-commerce)
10B (1).
Revision of Interstate B2C supplies of earlier tax periods made through
e-commerce operators
11. Advances received,
adjusted and amended
Another unique provision of GST,
borrowed from existing service tax laws is the requirement to report advances
received from buyer for future supplies and pay tax liability on them. Subsequently
when the invoicing happens, the tax liability paid earlier can be used to
set-off the liability resulting from invoice.
I) Information for current tax
period
11A. Advance received in current tax period but not
invoiced
Consolidated value of advances
received in current month against which no invoice has been raised (or
partially raised) is to be reported in this section with state-wise and rate-wise breakup.
11A (1).
Intrastate supplies
11A (2).
Interstate supplies
11B.
Advances of earlier tax period adjusted in current tax period
This table refers to reporting of
adjustment of liability in invoices raised in current period against liability
discharged on advance in earlier tax period.
11B (1).
Intrastate supplies
11B (2).
Interstate supplies
II)
Amendment to information furnished in tables 11A and 11B in earlier tax periods
Amendments if any to information
furnished in earlier tax period in Table 11A and 11B to be provided here.
12. HSN Summary
The Table is a provision to
report HSN (Harmonized system of nomenclature) / SC (service code) wise outward
supplies summarized for the return period. For stock items,
the quantity details along with applicable unit of measure also needs to be
reported. For business with turnover < 1.5 crore, HSN is optional and
instead description of goods may be provided.
13. Document series
This section is for reporting the
different voucher series being maintained by business for each document nature
(Ex: B2B invoice, retain invoice, Debit/Credit notes,
Receipt/Refund/Payment vouchers etc.). The number of vouchers issued/cancelled
in the current return period is to be reported.
Conclusion:
GSTR-1 invoices can be uploaded from the beginning of the month till 10th
of subsequent month. The return has to be digitally signed and submitted on or
before 10th of subsequent month. Dongle based digital signature or
Aadhaar based e-sign or EVC (electronic verification code) based signing is
permitted. Taxpayer may also assign a Tax Return Preparer on GST portal and
authorize him to conduct all tax compliance activities. On 11th the
supplies get auto-drafted to buyer and he has option to accept / reject /
modify the supplies and also add any missing invoice in his GSTR-2. Buyer’s decisions are communicated back to
supplier in GSTR-1A, filing of which is optional. Final summary of outward
(GSTR-1) and inward (GSTR-2) and the resultant tax payable is generated by GST
system as GSTR-3. Taxpayer has to discharge his liability and file GSTR-3
latest by 20th.
As is evident, delay in filing of outward details beyond 10th
will result in supplies not getting auto drafted to buyers and thereby
impacting credit flow. Taxpayers need to
therefore adopt an effective ERP solution that assists in addressing these
nuances.
(Views expressed are purely personal and do not represent any organization. This article is based on publicly available information and strictly for education purpose only)
Saturday, 10 December 2016
Impact of GST on E-commerce
E-commerce in India:
Market place model: An
asset light model wherein the e-commerce firm merely acts as a platform and
connects buyers and sellers and does not own any inventory. 100% FDI (Foreign
Direct Investment) is allowed.
Ex:
Amazon, Flipkart, Snapdeal, eBay etc.
Inventory based Model:
The e-commerce firm owns the inventory of goods and services and sells to the
consumers directly. No FDI allowed.
Ex:
Bigbasket, Jabong
Taxation blues:
Today
e-commerce in India is mired in a host of taxes: VAT / CST / Service Tax / TDS
with more than one tax applicable on any given transaction. Involvement of
logistics / reverse logistics, advertising & promotion services, goods like
software, music, e-books etc. makes it hard to differentiate Goods &
Services component of each transaction.
Also, grey areas have emerged due to e-commerce players who have adopted
marketplace model are having own warehouses to store the inventory. Although
there is visible value addition by e-commerce players no VAT is being paid by
them. This has resulted in many disputes with state commercial tax departments.
Karnataka has been insisting on these warehouses to be registered under VAT and
e-commerce players be considered as consignment agents and be made to pay VAT.
Several states (Ex: Delhi, Rajasthan) have insisted on separate disclosures by
dealers of online transactions due to concerns of such sales getting
under-reported. Uttar Pradesh has imposed several restrictions (declaration
form) on interstate purchase of goods worth more than Rs 5,000 through
e-commerce. States like Uttarakhand, Bihar, West Bengal, Himachal Pradesh and
Uttar Pradesh have levied entry tax ranging from 5 to 10% on goods purchased
interstate through e-commerce platforms.
E-Commerce in GST:
Many
e-commerce firms have welcomed GST since for the first time there is a legal
framework that defines ‘electronic commerce’ and
‘electronic commerce operator’. Although the draft model law is far
from being comprehensive, it is expected to evolve and attain maturity.
Business Process Impact:
Outward Supply: With
GST, uniformity in compliance across India is ensured, thus e-commerce sellers
can look for markets beyond state boundaries without the hassles associated
with complying to state specific rules (Ex: Declaration Forms, Way Bills) and
taxes (Ex: Entry Tax).
Compliance: All
sellers on e-commerce platforms will have to obtain GST registration
irrespective of turnover meaning increased compliance vis-à-vis offline
sellers. Fulfillment centre of e-commerce to be registered as additional place
of business by sellers and stock transfer will be treated as taxable supply
leading to cash flow issues. Both the vendor and e-commerce operator will have
to report supplies and will be cross-matched. Any supply reported by operator
but not by vendor will be added to the liability of the vendor.
Tax Invoice: Tax invoices need to be physically or
digitally signed (digital signature ink).
Schemes and Discounts: All
discounts will have to be explicitly mentioned in invoice and post supply
discounts by market place to a seller (promotions) will have to be more
explicit and be agreed in advance. As Freebies will also be taxable, sellers
will need to tweak their offerings.
Logistics: With
e-commerce operators expected to collect a portion of GST and pay to the
government on behalf of the seller (Tax Collected at source at 2%) there is a
new paradigm getting established. The TCS deducted on aggregate sales for the
month (sales less sales return) will be credited to electronic cash ledger of
seller. E-commerce players providing
their own logistics services will be able to quickly adopt to this new reality
as cash flow happens through their network. With nearly two third sales
happening through CoD (Cash on Delivery) model, if a third party logistics
provider is involved, the cash flows have to be now tweaked to flow back to the
e-commerce operator to enable deduction of tax. Alternatively, the tax amount of
CoD orders has to be now deducted from pre-paid sales.
With many e-commerce firms following weekly settlement for sellers, the TCS needs to be deducted in such invoices and filed by e-commerce operator in their GSTR-1.
(Note: This is not to be confused with 10% income tax TDS (on commission) which sellers are supposed to deduct while paying commission to e-commerce operator. This in practice is currently deducted by operator and paid to income tax department on behalf of seller.)
Reverse Logistics:
With high prevalence of goods returns (15-20%) and cancellations, reverse
logistics also needs to be more robust. Raising of credit note is not a very
prevalent practice currently, but will have to be adopted for accurate
depiction of tax liability.
High
volume of transactions (200 to 300 per day), thin margins, and increased
compliance (upload & matching, advance tax) mean, only adoption of a robust
IT solution can guarantee smooth business operations.
Depiction of Process Flow:
Below
diagram illustrates the flow of orders and funds in the GST era:
Fulfillment
of Cash on Delivery order by an e-commerce seller through a 3PL provider is
illustrated. In this case fulfillment is by seller and not the marketplace.
Order and Goods Flow:
Cash Flow:
Let
us assess the impact using an example as below:
M/S
SLV Traders deals in Metallic Sports Water Bottles. He purchases them directly
from manufacturer and sells on e-commerce platforms through the fulfillment
model.
Assumptions:
For the sake of this illustration, it is assumed that the products are charged
at 5% VAT, and goods charged at lower VAT rate are likely to be charged at
lower rate of GST as well (12%). For the sake of comparison the purchase and
sale price are kept same in both tax regimes.
Current Tax Regime:
GST Regime:
Comparison:
Findings:
·
Despite similar purchase and sale price in both VAT and GST regime, the
profitability is much higher in GST. This is mainly due to a number of taxes
(Central Excise and Service Tax) that formed costs in VAT regime will be
available as inputs in GST regime.
· In the above illustration although the GST rate at 12% is much higher
than VAT rate of 5%, the net tax payable in GST regime is lower by 9% due to
elimination of cascading effect.
· In the medium to long term due to competition the profit margin levels
may come down to pre-GST levels and thus the benefits of lower cost and lower
tax payable will be passed onto end customer.
Impact Assessment:
The
earlier draft model law talked principally of two categories of online players,
i.e market places and aggregators of services under their brand name (Ex: Ola/Uber/IRCTC/Makemytrip
etc.). However, many e-commerce players act as both aggregator and marketplace. Other
prevalent e-commerce formats like aggregators of ‘goods’ under their brand (Ex: Quikr/CarTrade/Olx etc.) are not
clearly defined. Many e-commerce firms only act as a meeting place for buyers
and sellers and are not themselves involved in financial transaction (Ex: B2B
players like Alibaba and eBay) and hence collection of tax at source cannot be
applied. A host of job portals (Ex: Naukri.com, Timesjobs), matrimonial
websites (Ex: Shaadi.com, Jeevansaathi.com), restaurant booking (Ex: Zomato),
food delivery (Ex: Swiggy), adventure/vacation booking sites (Ex:
Thrillophilia), hyperlocal delivery (Ex: Grofers, Amazon Now, Zopnow), cab
rentals (Ex: Zoomcar, Myles), digital wallets (Ex: Paytm), music download,
mobile advertising (Ex: InMobi) have innovative business models which cannot be
classified as a pure play marketplace or aggregator. Hence further redefining
of Model draft law is needed.
The
revised draft GST law however has removed the definition of aggregators and
these might get covered under draft rules.
Conclusion:
In
conclusion, the benefits of GST resulting from uniformity in processes across
the country, elimination of cascading effect, boost to economy, legal standing
for e-commerce will far outweigh the glitches pertaining to increased compliance
burden. E-commerce platforms and sellers
will have to make the necessary changes to their IT infrastructure to
accommodate for ‘destination-based-consumption’ regime and to meet new accounting requirements pertaining to Tax
deduction at source. E-commerce sellers will be required to be mandatorily
registered under GST irrespective of turnover. Outward supply reported by
sellers (GSTR-1) will be compared with report of sales by e-commerce operator
(GSTR-8) and any under reporting will be penalized adding to compliance burden.
With many e-commerce unicorns (valuation in excess of 1 Billion US $) emerging
in India (Flipkart, Ola, InMobi, Paytm, Shopclues, Zomato) GST law needs to
encourage such business growth while not compromising on reasonable tax
demands.
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