SANJEEV KUMAR SHARMA’s Post

GST TDS ON SALE OF METAL SCRAP W.E.F 10.10.2024 Key Insights on GST TDS Provisions for Metal Scrap (Notification No. 25/2024-CT) The Central Board of Indirect Taxes and Customs (CBIC) announced a pivotal update to GST regulations on October 9, 2024, with Notification No. 25/2024-CT. The notification introduces a Tax Deduction at Source (TDS) mechanism for metal scrap transactions under the GST framework, effective from October 10, 2024. Overview of the TDS Mechanism 1. Applicability and Scope: *Rate of TDS: A TDS rate of 2% is mandated (split as CGST 1% and SGST 1%, or IGST 2% for inter-state transactions). *Transaction Value Threshold: TDS applies only to transactions exceeding a taxable value of ₹2.5 lakhs. *Eligible Transactions: Applicable exclusively to B2B purchases of metal scrap from registered suppliers. 2. Basis for TDS Calculation: *TDS is calculated on the value of supply, excluding taxes such as CGST, SGST, IGST, UTGST, and TCS under Income Tax. *The deducted TDS amount will automatically reflect in the supplier’s GSTR-2A, enhancing transparency. Compliance Requirements 3. Filing Obligations for Deductors: *Return Filing: Buyers responsible for deducting TDS must file Form GSTR-7 by the 10th of the following month. *TDS Certificate: Deductors must provide suppliers with a TDS certificate in Form GSTR-7A, akin to Form 16A in Income Tax. 4. Supplier Benefits: *TDS Credit Utilization: Suppliers can claim the credited TDS reflected in their electronic cash ledger. This credit can either offset tax liabilities or be claimed as a refund. 5. Registration Requirements: *Buyers required to deduct TDS must register separately under GST via Form REG-07. *Documentation includes the DDO/Tax Deductor’s PAN, Aadhaar, and proof of business premises. *As per the October 22, 2024 advisory, taxpayers should select “Others” under the “Constitution of Business” category and specify “Metal Scrap Dealers.” For more details or clarification, please message or comment..

what is value added tax VAT Value Added Tax (VAT) is a consumption tax that is added to the price of goods and services at every stage of the supply chain, from production to the point of sale. It is a type of indirect tax that is based on the value added at each stage of production or distribution. VAT is typically charged as a percentage of the final price of the product or service and is collected by businesses on behalf of the government. The aim of VAT is to generate revenue for the government and to ensure that the tax burden is distributed fairly across the economy. For example, if there is a 20% VAT on a product that costs $10, the consumer will end up paying a price of $12. Value Added Tax vs. Sales Tax Sales tax is very similar to VAT, with the key difference being that sales tax is assessed only once at the final stage of the purchase. Unlike VAT, which is assessed at each stage of purchase/production and paid by every successive buyer, sales tax is paid only once by the final consumer. A key advantage of VAT over sales tax is that the former can allocate the tax amount to different stages at production based on the value added at that stage. Since sales tax is only paid once by the final buyer, one cannot measure the value added at each production stage. It makes it difficult to track and allocate the sales tax to specific stages of production.

No Service Tax payable on freight margin recovered from the customer in case of outbound shipments The CESTAT, Ahmedabad in the case of Vishal Tansukhbahai Gohel v. Commissioner of Central Excise and Service Tax, Rajkot [Service Tax Appeal No. 10867 of 2017-DB dated May 14, 2024] held that in the case of outbound shipment, both by aircraft and vessel, the destination of goods shall be outside India. Therefore, there will be no Service tax on the freight margin recovered by the Appellant from the customer Facts: Vishal Tansukhbahai Gohel (“the Appellant”) being a proprietary concern, was registered for the Service Tax under the category of ‘Clearing and Forwarding Agent Service’. During the course of inquiry of the financial record of the Appellant, the Department observed that freight income as being expenses incurred towards freight expenses was less than freight charged by the Appellant from their customers. There was some positive difference in expenses which were incurred by the Appellant. This income as per the Department was nothing but an excess amount charged by the Appellant from their customers towards ocean freight. The Department after verification of the accounts, issued a Show Cause Notice (“the SCN”) to the Appellant demanding Service Tax of INR 3,93,172/- under Section 73(1) of the Finance Act, 1994 (“the Finance Act”). The interest and penal provisions were also invoked as per the provisions of the Finance Act. The Department has demanded the Service Tax under the category of Business Auxiliary Service stating that the differential amount of freight retained was nothing but commission received towards the provision of service. The matter got adjudicated and the original adjudicating authority vide its Order dated January 13, 2016 (“the Impugned Order”) confirmed all the charges. The Appellant filed an appeal before the Commissioner (Appeals) but did not succeed. Therefore, the Appellant filed an appeal before the CESTAT. Issue: Whether an Assessee can charge Service Tax on freight margin collected from the customers in cases of outbound shipments?

Accounts Payable Department is one of the key Departments in any Business.   Sales Tax: Sales tax is a levy imposed on consumers, collected by manufacturers of goods and service providers. These entities collect the tax on behalf of government agencies and remit it to the national treasury. For instance, if a manufacturer sells a product for RS 100 and the government imposes a 10 rupee tax on it, the manufacturer would sell the product for RS 110, keeping RS 100 and forwarding RS 10 to the government. Types of Sales Tax: There are TWO types of Sales Tax ·        Input Tax ·        Output Tax Output Tax: is the sales tax we deduct from our customers and clients to whom we provide services and products and submit that tax to the respective agencies. Input Tax: is the same tax that we have paid to our vendor, when the vendor sold us something, they also sold with Sale Tax. We need to know the Percentage of Tax, Period of Tax, and how to register. Government Agencies: Businesses collect sales tax from customers and clients and transmit it to government agencies. There are three types of agencies involved: ·        Federal agency (FBR) ·        Provincial agency (PRA) ·        District agency (CDGL) Tax Collection Period: The tax collection period is determined by these agencies, who inform businesses accordingly. Collection periods can vary from monthly to annually. Conditions to Register for sales tax: Businesses must meet certain conditions to register for sales tax: ·        They cannot be classified as Cottage industries. ·        Annual sales must exceed 50 lakh (for importers, exporters, wholesale dealers, and distributors). Variations in Sales Tax: Remember that our sales tax can vary in different ways and it can have many combinations. The percentage of Sales tax can vary from product to product, from service to service, customer to customer, province to province, and District to District. Conclusion: Invoices must specify the agency for which sales tax is being deducted (e.g., Excise Duty, Sales Tax, Withholding Tax), along with the tax percentage and amount. In summary, all registered businesses must pay sales tax unless exempted. #salestax #taxaccountant #bookkeeper #accountspayable #accountant #accounting #taxation  

Understanding Value Added Tax: Comprehensive Guide for Businesses and Consumers Value Added Tax (VAT) is a widely implemented consumption tax that applies to goods and services at each stage of production or distribution. It is a critical aspect of the tax system in many countries, impacting both businesses and consumers. Understanding Value Added Tax is essential for compliance and effective financial planning. What is Value Added Tax? Value Added Tax, commonly referred to as VAT, is a tax levied on the value added to goods and services at each stage of production or distribution. Unlike a sales tax, which is only applied at the point of sale to the end consumer, VAT is collected incrementally at each stage of production and distribution. Each business in the supply chain charges VAT on its sales and can reclaim VAT on its purchases, ensuring that the tax is ultimately paid by the end consumer. For businesses, VAT compliance involves registering for VAT, charging the correct amount of VAT on sales, maintaining accurate records, and submitting regular VAT returns to the tax authorities. Failure to comply with VAT regulations can result in significant penalties and damage to a business's reputation. Ho... #businesses #consumers #pricing #profitability #taximplications

Goods Transport Agency (GTA) Services under CGST Act, 2017 – Simplified Explanation Under the CGST Act, a Goods Transport Agency (GTA) refers to any person who provides services for the transportation of goods by road and issues a consignment note. This consignment note is crucial, as it defines a service provider as a GTA for tax purposes. Taxability of GTA Services: GTA services are taxable under GST, and the tax can be paid through: Forward Charge Mechanism (FCM): The GTA can opt to pay 12% GST, which allows them to claim an input tax credit (ITC). Reverse Charge Mechanism (RCM): The most common method for GTA taxation is the Reverse Charge Mechanism. Here, the recipient of the service (not the GTA) is liable to pay GST at 5%. The recipient could be any registered business, partnership firm, factory, or company. Exemptions: Certain services provided by GTAs are exempt from GST. These include: Transport of agricultural produce. Transport of goods where the freight for a single carriage is less than ₹1,500 or less than ₹750 for a single consignee. Transport of newspapers or relief materials. Key Notifications: Notification No. 12/2017-Central Tax (Rate) provides for various exemptions to GTA services. Notification No. 13/2017-Central Tax (Rate) mandates the reverse charge for certain recipients of GTA services. Court Rulings: Courts have consistently emphasized that only those who issue a consignment note can be treated as a GTA, making the issuance of this document critical for the taxability of services. In summary, GTA services are primarily taxed under the reverse charge mechanism unless the GTA opts for forward charge, and certain exemptions provide relief for specific sectors.

Is GST Applicable on Maintenance Charges Under Builders? There is often confusion regarding the applicability of GST on maintenance charges, especially when these services are provided by builders or Resident Welfare Associations (RWAs). Here’s a quick guide based on the GST laws in India: 1. GST Applicability: As per Notification No. 12/2017-Central Tax (Rate), maintenance charges collected by builders or RWAs are exempt from GST if they are up to Rs. 7,500 per month per unit. Any amount exceeding this threshold attracts 18% GST on the entire amount. 2. Specific Case: If you’re paying maintenance charges of Rs. 3,000 per month, as per the rules, no GST will be levied since the amount is below the prescribed exemption limit. 3. Clarifications by Circulars: Circular No. 109/28/2019-GST further clarifies that if the charges exceed Rs. 7,500, GST will be applied on the total amount, not just the excess over Rs. 7,500. 4. Key Judicial Precedents: Various High Courts, including in the cases of Raj Karan Singh vs Union of India (Delhi High Court) and Amit Kumar Agarwal vs Union of India (Gujarat High Court), have upheld the legality of applying GST on maintenance charges above Rs. 7,500. These cases confirm that the law is clear—maintenance charges exceeding this threshold are taxable. Conclusion: For maintenance charges below Rs. 7,500, whether provided by a builder or RWA, GST is not applicable. However, if the charges exceed Rs. 7,500, the entire amount becomes taxable at 18%. Knowing these rules can help both homebuyers and builders ensure compliance and avoid unnecessary GST payments.

Principle of approbation and reprobation in indirect taxes: The principle of approbation and reprobation says that a party cannot retain the benefit of a transaction and simultaneously challenge the validity of the transaction. This principle is applied in indirect taxes by courts. For example - where output excise duty is paid by a manufacturer even though it was not payable, cenvat credit cannot be denied to the buyer on the ground that it is not a duty of excise, but an amount wrongly paid. In GST this principle will be useful in cases like where ITC is denied where GST is wrongly paid by the supplier on exempted goods. Or in case where the Dept. takes a stand that there is issue of invoice without actual supply. (Eg circular trading). In such a case, although GST is paid, ITC is denied on the ground that this is not GST, but an amount wrongly paid as there is no supply. In this situation, the Department cannot both retain the GST paid by the supplier and yet say that there is no supply i. e. challenge the validity of the transaction. Can the Department say that they will disallow the ITC and since the GST is wrongly paid, let the supplier claim refund? Because, often the time limits of the refund are expired. Of course, there are several case laws which hold that time limit for refund does not apply to amount wrongly paid as tax. But that apart, the Department cannot take such a stand because the principle of approbation and reprobation is a principle of estoppel. Since the Department on its own has not given refund to the supplier and is retaining the benefit i. e. GST, it is estopped from saying that ITC is not admissible as there is no supply. The same principle will apply to penalty u/s 122 (1) (ii) in this case. Views welcome. : Adv. Kuldeep Kulkarni

GST Weekly Update #5 Hello Readers, This week, we tackle some important questions - Should the movement of goods be proof enough for claiming Input Tax Credit (ITC)? Can directors be personally liable for their company’s VAT dues without any wrongdoing? We also look at whether purchasers can be held responsible for their suppliers not paying taxes, and if Section 74 of the CGST Act can be applied. Additionally, we discuss whether recipients must pay taxes under reverse charge for services from outside the taxable territory. The update can be accessed here - https://lnkd.in/gy_xTWPC Rakesh.B Jain #gst #gstupdates

Non-Filing 🛑of Monthly GST Returns Constitutes Wilful Suppression; Penalty Upheld by the Andhra Pradesh High Court in Sriba Nirman Company (W. P. No. 25826 of 2023; 29-Jan-2025) ➡️Issue ❓ 🔹Whether the penalty under Section 74 of the CGST Act is rightly imposed on the Assessee for wilful suppression of facts (through non-filing of monthly returns) despite later payment of tax and interest, and whether the delayed issuance of the show cause notice precludes the imposition of such penalty. ➡️Ground of Appeal by the Assesee ⚖️ 🔹 The Assesee contended that mere non-payment due to cash-flow issues did not amount to fraud or wilful misstatement, and hence Section 74(5) should not be invoked. 🔹It argued that since all tax liabilities had been settled (with interest paid after the notice) well before the filing deadline for annual returns, the conditions for penalty under Section 74 were not met. 🔹The Assesee further maintained that issues arising from non-filing of monthly returns should be considered only after the due date for annual return filing under Section 44. ➡️Department's Argument 🏛️ 🔹The Department maintained that the Assesee was required to file monthly GSTR-3B returns under Sections 37–39 and Rule 61, and failure to do so amounted to suppression of facts. 🔹It argued that even though the tax was eventually paid, the non-compliance with the filing requirements was wilful, thereby justifying the imposition of penalties under Section 74. 🔹The Department stressed that timely filing is a mandatory compliance requirement, and late payment or non-filing (even if rectified later) does not preclude penalty under the Act. ➡️Precedent Analysis 📚 🔹CCE vs. Adecco Flexione Workforce Solutions Ltd., 2012 (26 S.T.R. 3 (Kar)) The court observed that payment of tax with interest generally precludes penalty if made before notice; however, the factual matrix here differed. 🔹Commissioner of Central Excise, Visakhapatnam vs. Tirupathi Fuels Pvt. Ltd., 2017 (7 GSTL 142 (AP)) The court held that penalty may not be imposed if tax and interest are paid prior to the issuance of a notice under certain conditions. 🔹Uniworth Textiles Ltd. vs. CCE, 2013 (288 E.L.T. 161 (S.C)) The Supreme Court clarified that mere non-payment does not equate to fraud or wilful misstatement; clear evidence of intentional suppression is needed to invoke Section 74. Court Judgment 👩⚖️ 🔹The Court dismissed the writ petition filed by the Assesee. 🔹It held that the failure to file monthly returns and timely pay the GST (despite later remediation) amounted to wilful suppression of facts. 🔹The Court affirmed that the provisions of Section 74 of the CGST Act were properly invoked because the Assesee did not satisfy the criteria for voluntary settlement under Section 74(5) and continued non-compliance cannot be overlooked. 🔹Consequently, the penalty was upheld, and no order as to costs was made, with pending miscellaneous petitions being closed.