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.”

Are you a freelancer? Key points to know about GST payment

Are you a freelancer? Key points to know about GST payment

As a freelancer, you now perform services, and the Indian government has established that there are conditions in which you must pay GST.

Depending on where their clients are located, freelancers are responsible for IGST, CGST, or SGST. It’s crucial to keep in mind that there are no GST exemptions. Even if you only work with international customers, you may be subject to GST.

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.

Profits and benefits of plying, hiring, or leasing goods

Input tax credit claims

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.

GST Intermediary Dispute Remains Unresolved

GST Intermediary Dispute Remains Unresolved

Recently, a circular -159/51/2021-GST-Clarification on Doubts Regarding the Scope of ‘Intermediary’ was released, but I’m not sure if the doubts were cleared or persisted…

First and foremost, the term “intermediary” is defined as “a person who acts as a middleman between two parties.”

‘A broker, an agent, or any other person, by whatever name called, who arranges or facilitates the supply of goods or services, or both, or securities, between two or more persons, but does not include a person who supplies such goods or services, or both, or securities on his own account,’ says the definition.

The term “intermediary” was borrowed from the Service Tax Regime in the GST. As stated in the circular, the scope of ‘’intermediary services” under the GST REGIME does not differ from the scope of ‘’intermediary services” in the Service Tax REGIME.

The circular merely mentions who is a middleman, however, it is unclear if the services provided by the intermediary are considered exports of services or not –– the debate continues —–

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Several instances are offered in a circular format but are only described once

Who is the intermediate

I.e., who arranges or facilitates the provision of products or services, i.e., a third party between two parties, although it is unclear if intermediary services are exportable or not?

Let’s look at an example:

A- Machine Manufacturer and Supplier in India

B- if you want to buy a machine but don’t live in India.

C- Assists ‘’B” in identifying customers –

C acts as an intermediary, invoicing ‘’B” in order to complete the transaction between ‘’A” and ‘’B”.

Non-filers of monthly GST returns would be prevented from filing GSTR-1 from next year. 

Why can’t C’s services be classified as exports of services because he provides services outside of India?

The supply of any service when it is exported is referred to as service export.

  • Supplier of service located in India –i.e A and C
  • Recipient of service located outside India- i.e B
  • Payment for such service received in convertible foreign exchange.
  • Place of supply of service is outside India – as per Sec 13(8) clause (b) IGST ACT 2017

IN THE CASE OF INTERMEDIARY SERVICE – SUPPLY PLACE – SUPPLIER LOCATION

The location of the supplier in India does not justify the export of services in this case.

The foregoing is still disputed, and litigation is ongoing, according to the circular.

Conclusion: If GST is a destination-based consumption tax, and C is providing a service to B – OUTSIDE INDIA, and payment is made in convertible foreign currency, why can’t it be classified as a service export?

So, unless the government clarifies the above, the litigation will continue.