Goods and Services Tax (GST) is meant to be a destination-based consumption tax, to be levied at each stage of value addition of goods and services at the state and national level. Since independence, GST is one of the biggest tax reforms in India as this has subsumed various state taxes and central taxes like VAT, Service Tax, Central Excise, entertainment tax, etc..
Being still at the nascent stage, GST has brought various challenges for an average taxpayer such as difficulty in return filing procedure, confusing slab rates for different activities, introduction of complex audit procedure for adjustments and readjustments to name a few. This has increased the demand of various GST law firms in India which can assist the taxpayers in understanding the intricacies of the GST law. Due to the ambiguities under the law, there has been a significant rise in the GST law or consulting firms in India which are rendering GST legal services including advisory and compliance aspect.
GST being the only indirect tax which is to be levied on the supply of goods and services unlike the erstwhile GST regime, it is pertinent to understand five basic concepts of GST in the simple words:
- One Nation One Tax
GST was launched with the concept of ‘one nation one tax’ i.e., levy of only one tax i.e., GST on the goods as well as services.
However, there are multiple tax rates applicable to different goods and services. It is difficult for a common taxpayer to determine the applicable tax rate as applicable to specific goods or services. One can tax assistance of GST law or consulting firms in India that render GST legal services including providing of advice to clients with respect to the applicability of the GST rates on different transactions.
- Destination Based Consumption Tax
GST is destination-based consumption tax as compared to erstwhile tax regime (particularly tax on goods) which was origin based. Accordingly, under GST, tax accrues to the destination where goods and services are actually consumed instead of the place where they originated. There are complex place of supply rules under the GST law that help determine the place where GST would be payable.
Therefore, determination of place where goods and services are supplied becomes important under GST. The interpretation of the place of supply provision has been a very contentious issue and may be difficult for an average taxpayer to determine the correct place of supply for levying GST.
- Supply
GST is applicable on ‘supply’ of goods and services. In other words, the concept of ‘supply’ is the determining factor for attracting GST.
The definition of ‘supply’ is very wide under GST and covers almost every aspect of the commercial as well as certain non-commercial transactions under the ambit of GST.
- Input Tax Credit
GST is based on the principle of value-added scheme where tax gets charged on each of the stages value addition of supply chain. The supplier is allowed to recover the input tax credit (‘ITC’) of GST charged on the inputs used and can set off the same against its GST liability on output supply of goods and services.
However, GST provisions for claiming ITC are made stringent in order to ensure that a taxpayer claims ITC only on the supplies for which tax has been actually deposited with the Government. Therefore, compliance to ITC provisions becomes important exercise under GST as the non-compliance could lead the taxpayer to face penalty on account of wrongful availment of ITC.
- GST Compliance
GST law and consulting firms in India play a very vital role in assisting the taxpayers in timely compliances under the GST law. Typically, the compliances are return filing, registration, are to be complied with vide the online GST portal. The GST firms in India mainly comprises of professionals like Chartered Accountants, Lawyers etc. who are acquainted with the technical and legal aspects of the GST law and can very well undertake compliances for clients on a pan-India basis.
Summary
As GST law is still evolving, one may expect various amendments, publications for resolving the daily challenges being faced by the taxpayers.
Since, three years have been passed from the implementation of GST, litigation under GST may also rise as the departmental authorities have started issuing notices to the taxpayers on account of adopting the wrong position under the GST law.
In case a taxpayer faces any challenge in understanding the GST provisions, services from a GST law firm or consultants may be obtained. The GST law firms/ consultants can aid in providing advice on the issues faced. Even in case of any requirement of outsourcing the GST compliances (such as return filing, registration, handling tax audits etc.) GST law firms or consultants may be engaged. The GST law firms and consultants also keep their clients updated with respect to various amendments under law.
By choosing to take professional help, taxpayers may reduce the risk of any unforeseen liability or demand on account of non-compliance with this law, especially during the first few years when the law has been still developing.