The Goods and Services Tax (GST) is a comprehensive, multi-stage, destination-based tax that will be levied on every value addition effective from July 1, 2017. The design of GST is fairly complex with a dual administration arrangement that involves the tax authorities of both the Central as well as the State Government, separately taxing a single transaction.

In our previous article, we spoke about what GST is and the taxes that it will soon replace. In this post, we’d like to emphasize on the various changes that this comprehensive indirect tax reform will bring about, the impact it will have on you and the necessary steps that you need to take to be prepared for it.

IMPACT:

Certain services provided by LogicBoxes will fall under the ‘Online Information and Database Access or Retrieval Services (OIDAR)’. OIDAR includes provisioning of Cloud Services; data or information, retrieval or otherwise, in electronic form through a computer network; digital content and digital data storage among a few others. Read on to know more about how it impacts resellers based outside of India, having Sub-Resellers/Customers based in India.

A. Impact On Non-Indian Resellers:

The levy of tax in the GST regime is being shifted on the word “supply”. Hence, it also includes import of services. The term “Import of Services” has been defined under section 2(11) of IGST Act, 2017, which means:

The supply of any service, where:

1. The supplier of service is located outside India;
2. The recipient of service is located in India; and
3. The place of supply of service is in India

If the place of supply of services is India (i.e. the location of service recipient), it is important to understand who will pay the GST:

• For B2C transactions: The supplier of the services needs to be registered in the taxable territory (i.e. India) and pay GST on those services when the transaction is happening with a *non-taxable online recipient
• For B2B transactions: The recipient of the service needs to pay GST under **Reverse Charge Mechanism (RCM)

After deciding the person who is liable to pay tax, it is important to know when is the person supposed to pay tax.

Time of Supply of Services (whichever is earlier):

1. Date of Payment as recorded in the books of accounts of the recipient
2. Date on which the payment is debited from the payer’s bank account
3. Date immediately following 60 days from the date of invoice

If 1, 2 and 3 is not possible, then the tax will be deducted on the date of entry in the books of accounts of the recipient.

We request you to initiate the GST registration process and share your provisional GST ID with us using this form as soon as possible. There are 2 ways to go about the registration:

• Option #1: You can carry out the registration process on your own and secure your GST ID using the Central Board of Excise and Customs portal. You can refer to the detailed procedure specified by CBEC for more clarity.
• Option #2: You can outsource this procedure by appointing an agent (Chartered Accountant/Tax Consultant) based in India, and get the agent to liaise with the GST Suvidha Provider (GSP) on your behalf to secure your GST ID.

B. Impact On Indian Resellers:

If your annual turnover is above 20 lakh rupees, it is compulsory for you to register and submit you GST ID. If your annual turnover is less than 20 lakh rupees, you may or may not register for GST ID. If you have already obtained your GST ID, we request you to fill this form with necessary information. If you are an existing Service Tax-payer, you will need to migrate to GST.

NEXT STEPS:

We request you to initiate the GST registration process and share your GST ID with us as soon as possible. In case you already have yours ready, please make use of this form to share it with us.

WHAT HAPPENS IF YOU DON’T SUBMIT YOUR GST ID?

An important aspect of transitioning into the GST regime is heavy emphasis on online matching of credits. This will require us to include your GST registration number into OrderBox so that we can upload the information into the returns to be filed by us. If you do not submit your GST ID, we will not be able to pass on the credits to you, even if you are eligible for it.

The 1st of July is going to bring about a sea of changes pertaining to the way invoices, debit and credit notes are treated in OrderBox. Feel free to reach out to your Account Manager to get more clarity on this or for getting your queries answered.

Glossary:
*Non-taxable Recipient – Any Government, local authority, governmental authority, an individual or any other person not registered under GST and receiving online information and database access or retrieval services in relation to any purpose other than commerce, industry or any other business or profession, located in taxable territory.

**Reverse Charge Mechanism – The liability of paying tax rests on the recipient of goods/services, instead of the supplier.

INTRODUCTION

The Government of India has approved the operationalization of the Goods and Services Tax (GST) – a unified indirect tax regime across the country, which is identified to be one of the biggest tax reforms post-independence. GST will replace the multiple Central and State-level taxes that were being levied on Indian businesses till date and will make India one unified common market. As per the latest official announcement, the GST will come into effect on July 1, 2017.

Read on to know what exactly GST is and how it affects OrderBox.

WHAT IS GST?

GST is a comprehensive indirect tax levied on the supply of goods and services; right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

Since it is a destination-based consumption tax, GST will be charged based on the location of the recipient’s state. We will raise an invoice for our Reseller based on the Reseller’s location, and in turn, the Reseller will raise an invoice based on his/her customer’s location.

WHAT ARE THE TAXES THAT GST WILL REPLACE?

The GST replaces a host of indirect taxes such as:

1. Central Excise Duty
2. Service Tax
3. Countervailing Duty
4. Special Countervailing Duty
5. Value Added Tax (VAT)
6. Central Sales Tax (CST)
7. Octroi
8. Entertainment Tax
9. Entry Tax
10. Purchase Tax
11. Luxury Tax
12. Advertisement taxes
13. Taxes applicable on lotteries

HOW DOES THIS IMPACT ORDERBOX?

GST is a fundamental change in the framework of indirect taxes and impacts not only the rates of tax but also various business processes and associated documentation. There will be a wide range of changes dealing with processing reverse charges, the treatment of credit and debit notes, and the manner in which invoices are raised for resellers/customers. We are in the process of making all the necessary changes to integrate your GST IDs in OrderBox for simplifying tax collection and easing business operations. You will be notified of these changes as and when they happen.

While we ensure constant communication from our side during the entire development period, we also request you to please follow any announcements coming from the Government of India regarding this matter. Always feel free to get in touch with your account manager for any queries that you may have, no matter how small.

Additional Reading:

1. What is GST
2. More Info

Coming up: More information on GST and its impact on different entities.