Comments Off on Government releases ₹40,000-crore GST dues to States
Government releases ₹40,000-crore GST dues to States
Amount to help meet shortfall in compensation cess
Through back-to-back borrowings from the market, the Centre issued 40,000 crore to States and Union Territories on Thursday to help overcome the gap in GST compensation cess revenues.
The Finance Ministry stated this was part of a 1.59 lakh crore gap in the Compensation Fund for States that will be covered by market borrowings, but that the overall GST compensation to be paid in 2021-22 could be more than the States’ actual dues for the year.
In July, a total of 75,000 crore was transferred to states, leaving 44,000 crore to be borrowed and dispersed during the remainder of 2021-22.
The remaining funds will be released as soon as possible, according to the Ministry.
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Over and above
“This is in addition to usual GST compensation being distributed every two months out of actual cess collection,” the Ministry said, adding that more than Rs 1 lakh crore was expected to be released to States based on GST cess collections throughout the financial year.
Write-off possibility
“The entire amount of 2.59 lakh crore is projected to exceed the amount of GST compensation accruing in FY 2021-22,” it added, implying that some of the outstanding dues dating back to 2020-21 would be written off to that extent.
The Ministry stated, “It is believed that this publication will assist States/UTs in planning their public expenditure, among other things, for enhancing health infrastructure and undertaking infrastructure projects.”
Any person supplying taxable services must be registered in the state from which he or she is providing such taxable services under current GST laws; if the person’s aggregate turnover in a financial year is more than Rs 20 lakh ( Rs 10 lakh in some states such as those in the North East), the same would apply to freelancers once they exceeded the specified threshold. Based on the nature of the services offered, the GST rate applicable to any other service provider (which is normally 18%) would also apply to such freelancers.
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The GST costs for a freelancer will be 18% of the total bill amount because it is the replacement service tax. Every bill or invoice you send out must contain 18% GST clearly visible.
What Is The GST Return Filing Process?
GST returns are due quarterly or monthly, depending on the amount of revenue and whether you have chosen the composition scheme. Quarterly returns can be filed by composition vendors or dealers with yearly sales of less than Rs.1.5 crore. You must file GST returns once you have obtained a GST Identification number.
Is it necessary for a freelancer to register for GST?
GST registration for a freelancer is dependent on the following variables, regardless of the nature of your services:
Annual income of less than $20,000 – No registration necessary.
Annual income of more than 20 lacs, regardless of customer location in India – Prior registration is necessary.
Who Is Responsible for GST Fees?
Your customers will pay you, and you will pay the government the same. Clients can then claim it as a tax credit when they file their taxes, making it a win-win situation for everyone. Even if your clients ask for a discount, do not pay the GST yourself because you will be responsible for it and your clients will receive a tax credit.
To claim an input tax credit (ITC), freelancers must have an invoice, have received the products and/or services, and guarantee that the tax levied by the supplier has been paid to the government. They must also file their own return. Because obtaining ITC on the basis of fraudulent invoices is a common method of tax evasion, a restriction has been imposed under Section 16(2)(aa), but it is not yet in effect.
This provision strengthens Rule 36(4), which authorises ITC only if the details of the said invoices issued by the suppliers appear in the recipient’s Form GSTR 2A.
Comments Off on GST Mechanism between Centre & States: Payments & Dispute!
The Centre and the states are in a tussle over delayed compensation payments under GST
The Goods and Services Tax (GST), implemented in July 2017, marked a significant change from traditional production-linked tax to consumption-based tax.The new scheme covered State levies such as VAT, sales tax, excise / entry tax together with central levies such as central excise and service tax.States gave up some of their taxation rights in lieu of the Centre passing on their revenue share under GST and also compensating them for potential revenue losses in the first five years.
GST includes a tax levied by the Centre on the intra-state supply of goods and/or services called Central GST (CGST), and a corresponding tax levied by states/UTs called the State GST (SGST/UTGST) on these goods and services. CGST and SGST are levied simultaneously on every purchase of goods and services, except exempted ones. The customer pays the average rate under one of the major tax brackets—5 per cent, 12 per cent, 18 per cent and 28 per cent — in which half accures to the Center and half to the State where consumption occurs.
Integrated GST (IGST) is the GST levied on inter-state transactions and exports/imports of goods and services. IGST is a combination of SGST and CGST and is first levied and administered by the Centre, which then distributes it between the consuming state and itself.
In addition, a compensation cess, ranging from 1 to 200 per cent, is imposed on sin and luxury products such as tobacco, pan masala and other types of vehicles, over and above the topmost slab of 28 per cent.
How is all this work?
Take spoons and forks with a GST of 12 per cent. The consumer will pay 12 per cent on the price of spoons and forks if he or she buys from the manufacturer in the same state (intra-state transaction). Then 6 per cent will be the Center ‘s share as CGST and 6 per cent the State’s share as SGST.
In the case of a wholesale (B2B) trade, the GST allows the seller to claim an input tax credit (ITC) by taking off the tax liability against the tax already paid. For example , a manufacturer in Andhra Pradesh sells spoons and forks to a store in Andhra Pradesh (an intra-state transaction). The owner of the shop pays 12% to the manufacturer. When the customer buys them from his store, She pays 12 per cent of GST at the final price.The shop-owner then takes ITC for the 12 per cent he has already paid and deposits 12 per cent of GST with the authorities, removing the effect of taxation. For the whole purchase, GST of 12% is in effect applied only once after availing ITC.
How did compensation become an issue?
Compensation payments to states began to be delayed since October last year as GST revenues began to slow down. The Covid-19 pandemic widened the gap, with revenue from the GST decreasing by 41% in the April-June quarter.
The Centre released Rs 13,806 crore to the States on July 27 for March 2020, wrapping up the full payout for FY20 at Rs 1,65 lakh crore. Compensation is still pending for the four months of this financial year (April to July).
How is the dispute now placed?
Fresh tensions have resulted after senior Finance Ministry officials are learnt to have reported the Centre’s inability to compensate states in the near future, which was followed by the Attorney General of India’s legal opinion that the Centre does not have an obligation to pay for a revenue shortfall. The AG is learnt to have suggested that the GST Council can recommend to the Centre that it allow the states “to borrow on the strength of the future receipts from the compensation fund” and that the Centre will have to take the “final decision in the matter”.
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