Levy and Exemptions under GST India

The GST has brought in a new era with its ‘one nation, one tax’ philosophy. While this has simplified many things such as paying 17 indirect taxes and streamlining the e-commerce business, it has made things difficult for the e-commerce seller. The levies and exemptions now have a new definition under the GST.

Definition of taxable event

Taxable event now becomes any supply of goods and services. All intra-state supplies will be subject to CGST and SGST. For the inter-state supplies, IGST will apply. Reverse charge will apply to both goods and services. Further, if you purchase anything from unregistered dealers, you as the receiver of the goods cannot claim any Input Tax Credit (ITC). If you are registered under the composition scheme, then you have to pay tax on the reverse charge. You can tackle your accounting problem with easy bookkeeping software from the software providers.

If you have three business verticals, then you cannot apply for a composition scheme on just one business registration. You have to take into account all the three business verticals registered in your name with the same PAN number. There is a restriction on the collection of the composition tax. The supplier of the scheme cannot issue a tax invoice. So, the customer cannot be taxed. The minimum rate for the composition tax is 1%.

Penalty for violation

If a taxable person violates the conditions and is found to be ineligible for payment of tax under the Composition scheme, then he would have to pay the tax, the interest, and the penalty amount equivalent to the tax amount. However, if the goods are lost or destroyed in transit, then the tax payer is relieved from paying tax on those goods. This is the remission of tax for goods that are lost. This is because a tax event has not taken place. However, this does not apply to goods that are totally lost before the taxable event took place. It refers only to those that are partly lost. Use of easy bookkeeping software is helpful for small business owners.

The power to levy GST is obtained from Article 246A of the Constitution, introduced by the Constitution Act 101st Amendment 2016. This gives power to both the Parliament and the State Government to make laws regarding the GST. The clause 2 of the Article 246A gives exclusive power to the Parliament to legislate if needed for inter-state trade.

Law regarding charity

With regards to charity the stand of the GST is clear. There is no quid pro quo in the case of charity. The taxable event will occur only when there is a promotion of the business. So, this will not qualify under GST as a taxable event. Regarding composite supply, this refers to two or more supplies of either goods or services or both that is bundled in a natural way. This is supplied in conjunction to each other for conducting the business. One of these has to be the principal supply.

One example of such a supply is when a customer buys a grinder he is supplied with the warranty also. This is a composite supply and the grinder is the principal supply.

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