It’s more than two months since the Goods and Services Tax has taken over the previous indirect tax regime and most businesses and professionals have made a valiant attempt to adapt to the new laws.
The migration of the existing indirect tax payers is almost complete and the first set of returns are currently being filed. If you are a professional service provider, here are a few things you need to be aware about the new GST regime.
Registration for GST
In the earlier regime, service tax had to be paid on all services, except those in the negative list, if the aggregate turnover in a particular fiscal year was above ₹10 lakh.
There is a little reprieve for service providers under the GST regime with the exemption limit for registering for payment of GST, almost double, at ₹20 lakh. The limit is lower in case of North-Eastern States at ₹10 lakh.
So professionals such as Chartered Accountants, Cost Accountants, Company Secretaries and so on, with annual income of under ₹20 lakh can now opt to not get a GST registration.
However, it would be better to get a registration if you are providing services to larger companies that would like to claim Input Tax Credit on payment made to you.
Dealing with unregistered tax payers involves paying the GST under reverse charge for larger companies and hence they might prefer not dealing with you.
In some cases, GST registration is mandatory. For instance, if you provide services to a company or person located in another State (inter-State supply) then you need to register and pay GST. Similarly, if you make supply through e-commerce portals, GST registration is mandatory.
The nitty-gritty
The service tax rate under the GST has increased from 15 per cent earlier to 18 per cent now. While you can pass on the higher cost to the service receiver, your services are going to be more expensive now.
Services that are supplied within a specific state shall be charged Central GST (CGST) and State GST (SGST) while Integrated GST (IGST) will be charged on services supplied to other States; this will be a total of CGST and SGST.
A service is considered as inter-State supply if the registered place of business of the person making the supply and the location of the service receiver are in two different States.
The time of supply of services is the earlier of the two — date of invoice or date of receipt of payment, whichever is earlier. The date when the service is completed can be taken as the time of supply if the invoice is not raised within the time prescribed. The value of service shall be the price actually paid or payable for supply.
Professionals having branch offices in various States need to be registered in each of the States from where they render service. Input Tax Credit (ITC) can be availed by professionals for inputs, capital goods purchased for providing the service and services used by the tax payer as an input.
However, ITC is available only on a provisional basis to the tax payer. The supplier has to file a valid GST return and the data of the supplier and the receiver have to match before the credit can be confirmed.
If your supplier has not made the tax payment, you have to pay the GST under reverse charge along with interest from the date when the credit was wrongly taken.
Returns filing
While the rules were complicated enough under the previous regime, compliance burden increases sharply under the GST regime. “Service providers had to earlier file returns quarterly if the turnover was less than ₹50 lakh,” says Pritam Mahure, a Pune-based tax consultant. “But now they have to file at least 37 returns in a year.”
Professionals now have to file three returns every month — GSTR 1, which is the statement of outward supplies, GSTR 2 that is the statement of inward supplies and GSTR 3 that shows the final tax. Besides this, they have to file one annual return, GSTR 8. Further, they may also be required to file GSTR 7, which is a statement of TDS.
While this sounds onerous, you need to focus mainly on uploading the invoices for outward supplies and filing the GSTR 1. Based on the GSTR 1 filed by those who have made supplies to you, an auto-populated GSTR 2 will come to you. You need to validate the entries in GSTR 2 and add a few additional items such as imports. Similarly GSTR 3 is also auto-populated return which only needs validation. It would be best to upload the invoices on the GST utility daily, if you have numerous invoices, to avoid last-minute hassles.
Manage cash flow
Be sure to make adequate adjustments for the change in cash-flow under the GST regime. Under the earlier regime, since tax was paid only at the end of each quarter, service providers had 90-day window to pay tax.
This window has now shrunk to just 30-days since returns have to be paid at the end of each month.