[Nav-i-gator]

How "small retailers" will try to escape the GST (my assumption, basis my limited understanding of GST)

Do not register with GST, and buy from dealers as "customers". Tax incidence to be passed on to "real" customers (like us) through

1. Marking up price of goods with no MRP (loose food/grocery items which have either 0% or at most 5% GST)

2. selling at MRP (no discount, maximizing the margin and compensating some part of tax paid through non-declaration under GST)

of course, this (or any similar) method used will not allow the small businesses to scale up.

For B2B transactions, there seems to be no leeway in the long run. A major chunk of non-tax paying (or under-paying) businesses do B2B business (small vendors selling packaging materials to manufacturers, for example). These would have to register and pay tax, or loose the business.

[Sawyer]

There are other reasons why banking transaction tax has some issues, but what you say isn't one of them.

What is recommended along with it is that all notes above Rs 100 are demonetised six months after it is introduced. And with the rate as low as 2%, for many people there will be no incentive to suffer either the inconvenience or the risk of dealing in cash. As more and more people opt for online shopping, do you really think that people will prefer to buy in 100 rupee notes from real world traders? And no corporates will switch to cash transactions if these are simply banned under the Companies Act. Or even if that is not done, I believe. There are too many problems in handling cash that clog up efficient work flows for large scale operators.

Everything that is being done today to go digital and cash less should also be continued. Including banning of transactions above a certain limit in cash. And over time, the sheer convenience of non cash modes, allied to the equal inconvenience/risk of dealing in small denomination notes will not lead to what you fear. That is just something that is touted by those with a vested interest in keeping the current ways of collecting tax in place and making them even more complicated to put in place, understand, comply with and enforce.

[vinit.merchant]

Originally Posted by Sawyer

There are other reasons why banking transaction tax has some issues, but what you say isn't one of them.

What is recommended along with it is that all notes above Rs 100 are demonetised six months after it is introduced.

That is something on the lines of US withdrawing all notes above the 100. But then it can work there, because for a 100 USD one can get a tankful of gasoline, two meals and still have some extra change in pocket left from the 100 USD. What does one get in INR 100?
The value that the INR has, a note of 500 denomination is a must, though one note may not take us through the day.
There is no infrastructure in place in our country to go fully digital. Additionally, people outside the cities are still not able to understand and use the cashless system.
When demonetization happened, I had some 1500 in cash in new notes in my pocket and thats all. Had to visit Lonavala from Pune. And guess what, the cards payment services were down at the petrol bunks. And these are company operated pumps on expressway. I waited for 30 min, and with no luck on services resuming, put in fuel for a paltry 500 bucks and carried on.

How about a flat tyre or lets say a damaged tyre that needs replacement? A guy on the highway may not have cashless mode of accepting payments. For him, no cash, no help.

Point being, the cost of going cashless may not be affordable for most of the rural folks.

How on earth can one rely on cash less mode once outside city limits? And the risk of getting stuck without cash is very high, even for someone like us savvy with digital payments. And now carrying cash in 100 denomination only?
Issue is the infrastructure and the cost of going cash less being not affordable for most folks. Eg: A pack of smokes costs 250 bucks, but there is hardly any margin made by the seller on it, so one cannot expect him to go digital and bear the cost of transaction. In such cases, he will refuse to sell unless cash only.

And to make matters worse, people will not find it difficult to deal in 100 denomination currency if it is saving them taxes.

[Sawyer]

The Banking transaction tax deserves a thread of its own for a robust discussion of its pros and cons; not just because of any Off Topic concerns, but because, if implemented, it will be the single biggest change made in India since 1947, much more impactful than even the famous 1991 budget, by orders of magnitude. It will not only propel the country to unheard of levels of economic activity and growth compared to that seen anywhere in the world till now but it will at the same time allow us to leap frog many countries in both the least corrupt country lists as well as ease of doing business lists. It will be transformational in the true sense of the word by blasting away the established status quo that favours law makers, bureaucrats and wheeler dealer businessmen and give free reign to the economic and commercial savvy of Indian citizens in general instead.

Which is probably why it will never be passed; we will never have a leader with the courage and the vision to take the country to it, by building genuine consensus across all in the country and then driving its implementation. Even doing NOTHING other than this will cement that leader's place ahead of any in India so far - arguably, even above Gandhi, who delivered us from a comparatively benign evil, the British. This leader will deliver us from tax collectors of every kind, that have been the bane of the country since all its recorded history. In historical times, there wasn't the tech or the institutions in place to have this tax; now we have both, so we don't have the historical excuse for not moving to that route of revenue collection.

Discussing it in the GST thread demeans it.

[sukhoi30]

Not sure how many of you have noticed the GST applied on food bills in restaurants. They have started applying CGST and SGST @ 9% each making an 18% GST on the total bill. Now, earlier when there was no GST, restaurants and hotels used to "include" sales tax within the cost of each item in the menu. Apparently most of them have not changed the menu rates at all. So, silently we are being over charged. A biryani that used to cost Rs. 300 + VAT (12%) should ideally cost Rs. 250 + GST (18%), but that is not the case.

[DriverR]

Originally Posted by sukhoi30

Not sure how many of you have noticed the GST applied on food bills in restaurants. They have started applying CGST and SGST @ 9% each making an 18% GST on the total bill. Now, earlier when there was no GST, restaurants and hotels used to "include" sales tax within the cost of each item in the menu. Apparently most of them have not changed the menu rates at all. So, silently we are being over charged. A biryani that used to cost Rs. 300 + VAT (12%) should ideally cost Rs. 250 + GST (18%), but that is not the case.

You are spot on. In fact the Revenue Secretary has said that Restaurants and Eateries should cut the rate of food items post GST.

Eateries should cut rates of food items post GST: Hasmukh Adhia

Restaurants, hotels and eateries should cut rates on food items in their menu to reflect the benefit of being able to set off tax paid on inputs under GST, Revenue Secretary Hasmukh Adhia said today.

He also said that GST will be levied on entire sum of food bill, including service charge, in a restaurant, while the value of alcohol or alcohol products consumed will attract VAT.

Previously, a service tax was levied on the bill. But the tax the hotel or restaurant operators paid on inputs could not be set off against the tax on final bill. This facility, called input tax credit (ITC), is available in the Goods and Services Tax (GST) regime.

"Most of the restaurants should revise downward the rate charged on food items in their menu because of ITC which is now available. So ITC should be accounted for now in form of reduction in the value of supplies which they are giving," Adhia said in GST Master Class.

[Samurai]

Originally Posted by Samurai

I still don't fully understand the system, but this is the gist I have so far.

After doing some transactions, I know a little more now.

First let me talk about B2B transactions, which is what GST is mainly about. I will be ignoring TDS for this discussion.

As a registered business I can buy goods and services from two types of vendors.

1) Unregistered Vendor: As long as the invoice amount is less than 5000, I can pay just that amount and don't worry about GST. But if the invoiced amount is 5000 or more, I have to pay reverse tax. Say the invoice amount was 10000, then I have to pay 10000 to the vendor, and then pay GST tax on the amount to the government. Let's say the tax is 1800 due to 18% rate. So my total outgoing is 11800. While paying the reverse tax, I have to mention the vendor name, so that the tax authorities visit that unregistered vendor soon. That means any unregistered vendor selling to registered business with invoices above 5K will be soon caught and forced to register.

2) Registered Vendor: The invoice will mention the seller GST and the buyer GST. So for a 10000 rupee item, the invoice amount will be 11800. As buyer I will pay 11800 to the seller. Then I can turn around and resell that item for 12000, and collect 14160 (12000 + 18%) from my customer. Now when I pay tax to the government, I won't pay the full 2160 I collected from my customer. Instead I will deduct 1800 that I paid to my vendor from it. This is called input credit. I will only pay 2160-1800 = 360 to the government as tax. All this will be handled by the software. So I pay tax only on the value I added.

There is a special case under registered vendor, which I have already encountered. What if I buy from a registered vendor who doesn't take my GST number, which means I won't get credit? This happens with online vendors like Amazon. I created an Amazon business account hoping it will take my GST and apply to invoices of all business purchases. But so far I have found no way to enter GST into my Amazon business account. As a result, when I purchase office equipment from Amazon, I will get an invoice with seller GST number, but not my GST number. Since the seller never takes my GST number, he treats me like an end user. So I end up paying full GST tax and don't get any credit. What if I input that invoice into my system? It won't compute because the seller hasn't entered my GST into his system against his invoice. I am not entirely clear what happens in such cases.

If you are using company car, and filling petrol, make sure you present your company GST number to the petrol station attendant, so that you can get an invoice with both GST numbers. Imagine spelling out the GST number to the half-literate attendant, while the car behind you is honking like mad about the delay.

Taking the client for a dinner? Don't forget to hand out the GST number to the waiter before asking for the bill.

Finally, if you are an end user buying from an registered vendor, you just pay the GST that is applicable. That is it, there is no escape or credit. But if you are buying from an unregistered vendor, you don't have to pay any tax. If they do try to collect tax, the bill must contain the GST number, which they don't have. Expect shady guys to collect tax using fake GST numbers from individuals who won't be able to verify the number. But they do run the risk of some GST registered customer finding it out while trying to get input credit.

Since the entire reconciliation happens online, the VAT offices are totally out of work. Earlier, VAT offices would be full of traders filing their returns and paying bribes openly to overlook discrepancies. But the online reconciliation has removed the need for visiting VAT office. This is the only positive thing we have seen so far.

There is a whole list of cons, which I will address some other day. I gotta sleep now.

[harshavardhan]

@ Samurai

* Petrol is out of GST. Nobody needs to mention GSTIN along with name / vehicle number in the petrol invoice.

* Wrt transactions on e-commerce portals like Amazon, the Recipient / purchaser can intimate the Supplier / seller his GSTIN that needs to be mentioned on the GSTIN Tax invoice. The e-com operator merely deducts TCS and issues TCS to the supplier. It is not the e-com operators job to mention the recipient GSTIN.. The e-com operator is only providing a platform to do business.

* Many states like Karnataka have switched over to e-filing of VAT returns wef April 2010 onwards along with e-payments. The dealers are uploading invoice level details from May 2014 onwards.

Hope the information helps.

[Samurai]

Originally Posted by harshavardhan

* Wrt transactions on e-commerce portals like Amazon, the Recipient / purchaser can intimate the Supplier / seller his GSTIN that needs to be mentioned on the GSTIN Tax invoice. The e-com operator merely deducts TCS and issues TCS to the supplier. It is not the e-com operators job to mention the recipient GSTIN.. The e-com operator is only providing a platform to do business.

If the seller on Amazon.in doesn't have my GST, how will I get credit for it? Right now, the Amazon business account doesn't even take my GST number.

Originally Posted by harshavardhan

* Many states like Karnataka have switched over to e-filing of VAT returns wef April 2010 onwards along with e-payments. The dealers are uploading invoice level details from May 2014 onwards.

It was not compulsory. So traders who did golmal accounting preferred to visit the VAT office and pay the bribe. Now that option has been removed. Wonder what new loophole they will open...

[DigitalOne]

Originally Posted by Samurai

After doing some transactions, I know a little more now.

First let me talk about B2B transactions, which is what GST is mainly about. I will be ignoring TDS for this discussion.

As a registered business I can buy goods and services from two types of vendors.

1) Unregistered Vendor: As long as the invoice amount is less than 5000, I can pay just that amount and don't worry about GST. But if the invoiced amount is 5000 or more, I have to pay reverse tax. Say the invoice amount was 10000, then I have to pay 10000 to the vendor, and then pay GST tax on the amount to the government. Let's say the tax is 1800 due to 18% rate. So my total outgoing is 11800. While paying the reverse tax, I have to mention the vendor name, so that the tax authorities visit that unregistered vendor soon. That means any unregistered vendor selling to registered business with invoices above 5K will be soon caught and forced to register.

2) Registered Vendor: The invoice will mention the seller GST and the buyer GST. So for a 10000 rupee item, the invoice amount will be 11800. As buyer I will pay 11800 to the seller. Then I can turn around and resell that item for 12000, and collect 14160 (12000 + 18%) from my customer. Now when I pay tax to the government, I won't pay the full 2160 I collected from my customer. Instead I will deduct 1800 that I paid to my vendor from it. This is called input credit. I will only pay 2160-1800 = 360 to the government as tax. All this will be handled by the software. So I pay tax only on the value I added.

There is a special case under registered vendor, which I have already encountered. What if I buy from a registered vendor who doesn't take my GST number, which means I won't get credit? This happens with online vendors like Amazon. I created an Amazon business account hoping it will take my GST and apply to invoices of all business purchases. But so far I have found no way to enter GST into my Amazon business account. As a result, when I purchase office equipment from Amazon, I will get an invoice with seller GST number, but not my GST number. Since the seller never takes my GST number, he treats me like an end user. So I end up paying full GST tax and don't get any credit. What if I input that invoice into my system? It won't compute because the seller hasn't entered my GST into his system against his invoice. I am not entirely clear what happens in such cases.

If you are using company car, and filling petrol, make sure you present your company GST number to the petrol station attendant, so that you can get an invoice with both GST numbers. Imagine spelling out the GST number to the half-literate attendant, while the car behind you is honking like mad about the delay.

Taking the client for a dinner? Don't forget to hand out the GST number to the waiter before asking for the bill.

Finally, if you are an end user buying from an registered vendor, you just pay the GST that is applicable. That is it, there is no escape or credit. But if you are buying from an unregistered vendor, you don't have to pay any tax. If they do try to collect tax, the bill must contain the GST number, which they don't have. Expect shady guys to collect tax using fake GST numbers from individuals who won't be able to verify the number. But they do run the risk of some GST registered customer finding it out while trying to get input credit.

Since the entire reconciliation happens online, the VAT offices are totally out of work. Earlier, VAT offices would be full of traders filing their returns and paying bribes openly to overlook discrepancies. But the online reconciliation has removed the need for visiting VAT office. This is the only positive thing we have seen so far.

There is a whole list of cons, which I will address some other day. I gotta sleep now.

On Unregistered Vendors: You are partially right. The way it works is not by stick (govt officials visiting the vendor) but by carrot. There is an incentive for an unregistered vendor to become registered. Let me expand your example to illustrate:

Suppose your unregistered vendor (B) buys the same stuff from a registered vendor for Rs. 8000 (A). He would have paid total invoice amount of Rs. 8000 + 8000*0.18 = 9440 to A.

Unregistered vendor B gets 10000 from you. B's profit is 10,000 - 9440 = Rs 560.

If B gets registered, then B gets 10,000 + 1800 = 11,800 from you. He pays 1800 - 1440 = Rs 360 GST to the government. B's profit now is 11,800 - 360 - 9440 = Rs 2000.

So there is a major incentive for any vendor to get registered.

Originally Posted by Samurai

If the seller on Amazon.in doesn't have my GST, how will I get credit for it? Right now, the Amazon business account doesn't even take my GST number.

It was not compulsory. So traders who did golmal accounting preferred to visit the VAT office and pay the bribe. Now that option has been removed. Wonder what new loophole they will open...

On E-Commerce, it is still the seller's (not Amazon's) responsibility to maintain your GSTIN. Amazon does not generate the invoice.

On getting credit from transactions like restaurant bills or fuel pumps, I think you can still claim input credit on it by uploading your purchase invoices as part of GSTR2 and quoting seller GSTINs. There won't be any matching invoices in which case your invoice gets accepted. I am almost sure of this but better to check with your CA.

[akshay380]

Guys we run a small retail store and pharmacy and used to get all supplies locally from our distributors by paying VAT. As of 30th June we had few lakhs worth of stock. How do we sell it after GST kicked in? Billing software applies GST on this stock as well and hence cutting into our profits. Our tax guy told something like we will get 40/60% input credit but I didnt not understand it. Mind if someone clarifies?

[kvish]

My experience post GST has been mixed, as a consumer. There is more push for cash transactions, saying 'if its cash its X' if you want a bill its X+28%.

Worst part was the chartered accountant. Earlier they used to charge a net amount of Rs X and offset the VAT or service tax within the X. However, this time they were very specific on X+GST%. Clearly shows they were never paying their taxes to govt.

The question that concerns me is that inspite of the additional money taken, what if they still dont pay the GST to the govt?

Also, For Card transactions, why cant GST go straight to govt? (similar to TDS)

[earthian]

I have a small consulting business. A one man show in my own name and no company or LLP. What is the applicable rate of GST? Is there any revenue limit after which the GST kicks in?

If my consultancy is in the area of education, does it make a difference in the GST rate?

[akshaymahajan]

Noob GST query

Transported a bike from BLR to Delhi (nightmare coming up on the correct thread)

The transporter has given a hand written bill with 18% GST included but the bill has only a Service Tax number

Also, the tax is applied on total bill (including the insurance and docket charge whatever that is).

Is this legal? The transporter has been a pain, and if this bill is in any way illegal, I will take him to court and get the excise department involved.

Location: Bangalore

Thanks

[iamahunter]

GST Verification

Guys I had an experience yesterday. Not very good neither very bad, just something to think/do about.

Me and missus had been to a restaurant for dinner. Post dinner when the bill arrived, I handed the waiter my credit card for payment. On this the waiter replied that the machine is not working and we need to pay in cash.
As it was a tiring day, wife promptly paid in cash and we left.

Today morning I found the bill in the car, that restaurant had a GST number and had charged us 18% in total. I just felt a need to validate the GST number. I tried to verify it online here, but the website never loaded. Neither is it opening at the moment. I searched and downloaded a couple of apps from the play store and put the GST in there. 2-3 apps showed me that the GST is INVALID.

So basically, I think the restaurant fooled us with a fake GST number. But I am not very confident to say that as I have not found a 100% reliable way to validate that. I am not anywhere worried about the amount that we paid the restaurant under the term "GST", as its gone now.
But this can happen to anyone and the amount can be substantial. I've learnt a lesson on a very small loss.

Is anyone here aware of a full-proof method of validating the GST number. I would like to take it as a habit to validate GST no. of the seller on every next purchase.