|Tax Payable||Due Date||Date of Filing|
5 Important changes with effect from 15th November 2017 pursuant to the decisions taken in the 23rd meeting of the GST Council at Guwahati.
- Eating out will be cheaper (Standalone Restaurants Only) – 5% will be the GST irrespective of whether the restaurant is Air Conditioned or not. Input tax cannot be claimed.
- For Restaurants in hotel premises the GST rate will be 5% provided that the room tariff doesn’t exceed Rs.7500 per day. Input tax cannot be claimed.
- For Restaurants in hotel premises where the room tariff exceeds Rs.7500 the the GST rate will be 18% however Input tax can be claimed.
- For Outdoor Catering the GST rate will be 18% with full Input tax credit.
- GST on admission charges to protected monuments will be exempted.
To start with 15 taxes are subsumed under the GST
- Central Excise Duty
- Additional Excise Duty
- Excise Duty on medicinal & toiletries preparations
- Service Tax
- Additional Customs Duty or CVD
- Special Additional Duty on Customs or SAD
- Surcharges & Cesses levied by centre including NCCD, cess on rubber, tea, coffee etc
- Central Sales Tax
- Value Added Tax
- Entertainment Tax
- Luxury Tax
- Taxes on gambling, betting & lottery
- State Cesses & Surcharges
- Octroi & Entry Tax
- Purchase Tax
Salient features of GST in India
- Centre will have the power to frame the rules and laws relating to inter-state sale of goods and services.
- State will get a share of revenue on all sale of goods and services happening from their state
- State tax will be called – State GST (SGST)
- Centre tax will be called – Central GST (CGST)
- SGST & CGST shall be levied all the sales happening within the state
- In case of sale outside the state Integrated GST (IGST) shall be levied. A share of IGST will be given to the state as well.
- GST will subsume 17 taxes including Central Excise, Octroi, Entry Tax, VAT, Service Tax, Luxury Tax, Entertainment Tax, Purchase Tax, Additional Customs Duty, Special additional duty etc.
- Imports shall be levied customs duty and IGST.
- Petroleum & Crude Oil, Alcohol are not covered currently under GST but the council have the power to include them under GST by way of a notification.
- Administration of GST shall be done by the GST Council which shall comprise of state and central ministers
Everybody is talking of removal of cascading effect in GST,. So what does Cascading effect mean and how does its removal help?
To understand how removal of cascading effect helps lets analyse an example with the present taxation regime and the GST regime.
#1: Present taxation regime:
|Excise Duty @ 10%||100|
|VAT @ 14%||154|
Cascading effect happens when VAT (an indirect tax) is levied not only the product value but also on the Excise Duty (also an indirect tax).
#2: GST regime:
|Central GST @ 12%||120|
|State GST @ 12%||120|
In both the cases the tax rate is assumed at 24% [10% ED + 14% VAT] in present regime and 24% [12% CGST +12% SGST] in the GST regime, however there is a difference of Rs.14 on the bill total. This is the benefit of removing cascading effect in indirect taxation.
CHANGES APPLICABLE FROM 01.06.2016
It’s often said change is the only constant. This is very true when it comes to Indian Taxation. There are a slew of changes envisaged in the Finance Act of 2016 that are applicable from 01.06.2016. The changes are important and path breaking. Let’s have a look at the various changes.
- Changes in the Tax Deduction at Source [TDS] & Tax Collection at Source [TCS]
|1.1. TCS on sale of goods and services – Section 206C(1D)
Every person, being a seller, who receives any amount in cash as consideration for sale of goods, bullion, jewellery or providing of any service shall, at the time of receipt of such amount in cash, collect from the buyer, a sum equivalent to 1% of sale consideration as income tax, if such consideration –
– For bullion exceeds Rs.2 Lakhs
– For jewellery exceeds Rs. 5 Lakhs
– For any goods, other than those referred above or any service exceeds Rs.2 Lakhs.
Provided that if any transaction covered under TDS or TCS will not be applicable on it.
1.2. Exceptions to TCS on sale of goods and services – Section 206C(1E) – Not yet Prescribed
1.3. TCS on sale of Motor Vehicles– Section 206C(1F)
Every person, being a seller, who receives any amount as consideration for sale of motor vehicle of the value exceeding Rs.10 Lakhs, shall, at the time of receipt of such amount, collect from the buyer, a sum equal to 1% of the sale consideration as income tax.
- If even a single rupee of cash payment is made TCS will be on the entire amount. Rs.10 Lakhs of sale Rs.20 K received in cash balance in cheque the entire 10 Laks is subject to TCS
- If cash payment is made exceeding the limit for different invoices each invoice under the limit then TCS provisions are not applicable.
- Provision to obtain lower deduction certificate is available in Form 13
- In case the buyer doesn’t have PAN, Form 60 has to be obtained. The copy Form 60 has to be maintained for 10 years.
|1.4. For the purpose of deduction of tax in the case of contractors (194C) the yearly aggregate limit has been increased from Rs.75,000 to Rs.1,00,000
1.5. For the purpose of deduction of tax for commission agents (194H & 194 ) the aggregate limit has been increased from Rs.5,000 to Rs.15,000. Further the rate of tax has been reduced from 10% to 5%
1.6. Form 15H (SC) & Form 15G can be now furnished for rental income as well. [Form 15G/H have to be uploaded using DSC in the income tax website]
1.7. Due date for filing of TDS return has been extended from 15th of succeeding month to 31st of succeeding month for all quarters except Q4. [Due dates now are 31st July, 31st October, 31st January, 31st May] [Word of caution – TCS returns filing due dates aren’t changed]
- Changes in the dates for Advance tax.
- There is no distinction between advance tax payments for companies and non-companies from hereon.
- In the case of assessee’s declaring income tax on presumptive basis, 100% of the tax due has to be remitted before 15th
- Equalisation Levy
It is determined with reference to the gross amount of the payment and the rate of equalisation levy applicable on it, which is full and final tax.
- Online advertisements
- Provision for digital advertising space or any other facility as notified
|Service Provider||Service Receiver||Applicability|
|Resident||Non Resident with PE||Not Applicable|
|Resident||Non Resident without PE||Applicable|
|Non Resident with PE||Resident||Not Applicable|
|Non Resident with PE||Non Resident with PE||Not Applicable|
|Non Resident with PE||Non Resident without PE||Applicable|
|Non Resident without PE||Resident||Not Applicable|
|Non Resident without PE||Non Resident with PE||Not Applicable|
|Non Resident without PE||Non Resident without PE||Not Applicable|
Further it’s not applicable to following transactions:
- Services is for purposes not for business and profession
- Aggregate amount of consideration for services received / receivable in the previous year doesn’t exceed Rs.1,00,000/-
- Not part of the income tax act but part of the Finance Bill – 2016.
- Certain provisions of the income tax are applicable to equalisation levy
- Levy shall be @ 6% on the gross amount of service provided
- 7th of succeeding month shall be due date of payment of levy to the government.
- Interest at the rate of 1% per month or part of shall be charged in case of delay u/s 170.
- Penalty for non-compliance can be upto the amount of levy
- Penalty for deduction and non-remittance will be Rs.1000 per day but shall not exceed the liability.
- If equalisation levy is not paid by the deductor such expenses shall be disallowed under section 40a(ib)
- To be filed once an year and the due date shall be 30th June immediately following the financial year.
- Will have one more year for revising the returns.
- 100 per day penalty for delay in filing the returns.
B.SERVICE TAX LAW
Applicability of Krishi Kalyan Cess[KKC]
- 50% shall be collected on value of service chargeable to service tax. [Total tax to be collected now will be 14% + SBC of 0.50% + KKC of 0.50% = 15.00%]
- CENVAT can be claimed against KKC paid unlike SBC
- KKC is not a cess but a tax itself charged at 0.50%
- KKC shall not be charged on the abatement value as per Notf. 28/2016-ST
Construction industry is one of the major sources of revenue to the government of India. It is very imperative for each and every entrepreneur to plan his service tax well in advance. Before starting any project professional consultation on applicability of various taxes needs to be understood. In an effort to do that today I am writing this article on service tax applicability on construction projects.
Construction activities are broadly taxed in the following manner under the service tax law
- Construction of residential complex
- Construction services (industrial & commercial)
- Works Contract services
There are major amendments to service tax law applicable from 01.07.2012 which saw the arrival of negative, mega exemption notification and so on. Certain aspects before 01.07.2012 has not been discussed herewith.
This article is only for education purpose. Not to be construed as an opinion. Seek professional help before taking any decisions based on this article.
There were number of issues on considering construction portion in a works contract or construction activity as a service. To remove ambiguity and to establish the intent of the government, an amendment has been made to make construction activity a declared service. Hence no questions can be asked upon whether it is a service or not.
Exemptions for certain activities
Only construction service is taxable and not sale of building. According to Section 66E(b) if all money is received by the service provider on obtaining completion certificate from the competent authority.
Exemption has been provided to following services :
Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of :
|(a)||a civil structure or any other original works meant predominantly for use other than for commerce, industry or any other business or profession;|
|(b)||a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958);|
|(c)||a structure meant predominately for use as an establishment for following purposes:|
|♦||an art or cultural establishment.|
|(d)||canal, dam or other irrigation works|
|(e)||pipeline, conduit or plant for|
|♦||water treatment, or|
|♦||sewerage treatment or disposal; or|
|(f)||A residential complex predominantly meant for self-use or the use of employees their employees or other persons specified in Explanation 1to clause (44) of section 65B of the said Finance Act.|
Construction of specified structures are exempt as well
Services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of:
|(a)||road, bridge, tunnel, or terminal for road transportation or for use by general public;|
|(b)||a civil structure or any other original work pertaining to a scheme under Jawaharlal Nehru National Urban Renewal Mission or Rajiv Awaas Yojana;|
|(c)||a building owned by an entity registered under section 12AA of the Income-tax Act, 1961 (43 of 1961) and meant predominately for religious use by general public.|
|(d)||a pollution control or effluent treatment plant, located as a part of a factory; or|
|(e)||a structure meant for funeral, burial or cremation of deceased.|
Construction of following original works are also exempt
Services by way of construction, erection, commissioning, or installation of original works pertaining to :
|(a)||an airport, port or railways, including monorail or metro;|
|(b)||a single residential unit otherwise than as a part of residential complex;|
|(c)||low cost houses up to a carpet area of 60 square metres per house in a housing project approved by competent authority empowered under the ‘Scheme of Affordable Housing in Partnership’ framed by the Ministry of Housing and Urban Poverty Alleviation, Government of India.|
|(d)||post-harvest storage infrastructure for agricultural produce including a cold storages for such purposes; or|
|(e)||mechanized grain handling system, machinery or equipment for units processing agricultural produce as food stuff excluding alcoholic beverages.|
CONSTRUCTION OF RESIDENTIAL COMPLEX SERVICE
There is lot of debate on choosing the right method of service tax for builders of residential complex. One chooses to go by the works contract method by claiming deduction of land and material, and the other chooses this service. In our opinion construction of residential complex is more apt for the following reasons.
- Construction of residential complex is also a works contract but there is movement of title by way of registration, which is absent in case of a normal works contract.
- Since there is a specific category available one has to choose it over a general category.
General model of construction industry is as follows
- A builder having money and expertise approaches a landowner.
- The landowner agrees to give his land on joint development.
- The builder constructs the building and transfers a part of it in return for the land transferred by the landowner.
Service tax applicability on transactions
|1)||Transfer of land by landowner to the builder||Not Taxable|
|2)||Sale of flats either through or without sale agreement and receipt of advance by the builder before obtaining completion certificate.||Taxable|
|3)||Sale of flats either through or without sale agreement and receipt of advance by the landowner before obtaining completion certificate.||Taxable|
|4)||Sale of flats by builder or landowner after obtaining completion certificate provided whole consideration is received after obtaining such certificate.||Not Taxable|
|5)||Transfer of flats by builder to landowner||Taxable|
Suggested scheme of taxation
- As soon as development agreement is registered and plan sanction is obtained, raise a bill on the landowner for the portion of building to be transferred.
- The value for that purpose can be considered at the guidance value prevailing on the date of joint development in such area.
- The same has to be paid to the government by the builder.
- The Landowner has to collect service tax on any sale of his share of building upto the date of obtaining Completion certificate.
- The Landowner can claim CENVAT credit of the tax paid to the builder based on the invoice raised by them.
Abatement – Notification No.26/2012-ST – Sl No.12.
Applicable from 01.04.2016
|1)||For a residential unit satisfying both the following conditions:
a) Carpet area of one unit is less than 2ooo SFT
b) The amount of consideration is less than 1 Crore
|2)||For other than above||70%||30%|
Conditions for claiming abatement
- No CENVAT credit of inputs
- Value of land is included in the consideration
However there is no restriction on claiming CENVAT credit on Capital goods used in construction of the project and the input services used in the project.
Following are few of the amendments applicable from 01.04.2015 in the State of Karnataka.
- Increase of limit for registration from Rs.7.50 Lakhs to Rs.10.00 Lakhs – A move towards GST. Service tax exemption limit is Rs.10.00 Lakhs as on this date.
- Amendment to Section 10(3) of the KVAT Act – Input VAT of previous tax periods can be claimed in the current filing period.
- Limiting the Input credit – Input credit to be restricted to the extent of the output tax paid. In case there is sale at a price lower than the purchase cost then there is loss of tax to the dealer.
- Filing of First Appeal – Provision to file the first appeal before the authorities electronically.
- Professional Tax – Removal of Rs.150 Slab. Now PT to be collected from employees whose salary is more than Rs.15000 at Rs.200 per month.
- Professional Tax – Reducing the age for considering a person as senior citizen from 65 years to 60 years.
CST & VAT : In case of restaurants, since element of service has been declared under Service tax laws and brought under Service Tax (i.e. 40% of bill amount to customers in restaurant), no Value Added Tax can be imposed on 40% of bill
Held in the case of Valley Hotels & Resorts vs Commissioner of Commercial Taxes Dehradun at the High Court of Uttarkhand.
Again reiterating that no double taxation.
Following are some of the amendments made in the Karnataka VAT Act which receive assent of the governor.
- Minimum turnover for registration hiked from 5 Lakhs to 7.5 per year
- Cancellation of VAT registration if the turnover of goods sold during the past 12 months is less than 5 Lakhs.
- Minimum turnover for registration hiked from 40000 rupees to 62500 rupees per month
- Section 22(9A) of the KVAT Act requiring any person carrying on works contract in the state of karnataka to have a compulsory VAT registration has been done away with.
- Annual returns are again brought into the act. Whether Form 120 or annual statement as being filed now is something we have to wait and watch for.
- Tax Exemption for sale of beer, fenny, liquor and wine have been withdrawn and now taxable under III schedule at 5.5%