Frequently asked Questions (FAQS) ON MSME list
Q1 Whether a registered person will have to approach two authorities -Centre as well as State for various permissions, audit etc. under the Act?
Ans No, a registered person will have to approach only one tax authority for all practical purposes. Each registered person would have one tax administration office, either of the Centre or of the State. Legal provisions (called cross empowerment) have been made to ensure that one officer can discharge all functions under CGST, SGST and IGST Act. The registered person would be informed of the tax administration concerned with him. A single registration is granted for the purposes of CGST, SGST/UTGST and IGST.
Q 2 What is input tax credit?
Ans A person doing business will be purchasing goods/availing services for making further supplies in the course or furtherance of business. When such purchases are made by him, tax would have been charged by his supplier and collected from him. Since tax is collected from him, he can avail credit of the tax paid by him to his supplier (that is to say, he can use this amount for making payment of tax due from him on further supply made by him). This is known as input tax credit for the recipient.
Q 3 What is the threshold for registration in GST?
Ans A person having business which has aggregate turnover of more than Rs. 20 lakh calculated for a given PAN across the country would need to register under GST. There are some exceptions to this rule as mentioned in Section 24 of the CGST Act, 2017. Aggregate turnover is defined in Section 2 (6) of the said Act. For example, assume that a taxable person’s business is in many States on same PAN. All supplies are below Rs. 10 lakh but collectively they are above Rs. 20 lakh. He would be required to register under GST.
Q 4 Is an agriculturist liable to registration?
Ans No. An agriculturist, to the extent of supply of produce out of cultivation of land, is not liable to registration.
Q5 What is the most important precaution to be taken to avail the facility of threshold exemption?
Ans An MSME availing threshold exemption should not make any inter-State supply whatsoever, though the MSME may receive supply from other States.
Q6 I am engaged exclusively in the business of supplying goods or services which are exempt from GST. Am I liable for registration?
Q7 How do I make supply, if I have not applied for registration?
Ans You should apply for registration at the earliest on the GST common portal and obtain application reference number (ARN). You need not disrupt your business and may continue to make supplies on invoices without GSTIN. The application for registration must be made within 30 days of the turnover crossing Rs. 20 lakh or attracting any of the conditions mentioned in Section 24 of the CGST Act, 2017. After registration, you can issue revised invoices as permitted under Section 31 (3) (a) of the said Act. These supplies should be shown in the return and taxes paid on them.
Q8 If I have obtained provisional GSTIN (PID), can I use the same on the invoice to make supply without waiting for final GSTIN?
Ans Provisional GSTIN (PID) would eventually be your final GSTIN. The number would remain the same. Yes, you can use this PID on invoice for making supply without waiting for final GSTIN.
Q9 If I register-voluntarily though my turnover is less than Rs. 20 lakh, am I required to pay tax on supplies made post registration?
Ans Yes. If you obtain voluntary registration despite the turnover being below Rs. 20 lakh, you would be treated as a normal taxable person and would need to pay tax on supplies even if they are below the threshold for registration. You will also be entitled to take input tax credit.
Q10 What details are to be contained in a ‘ tax invoice’?
Ans The tax invoice shall contain details as specified in the rule in this regard. The key details specified in the rules are – name, address and GSTIN of the supplier and the recipient (if registered), a unique number of the invoice and the date of issue, description of goods, value of goods, rate of tax, amount of tax and signature.
Q11 When should a tax invoice be issued for goods?
Ans Tax invoice for goods shall be issued on or before the time of removal/delivery of goods. In case of continuous supply of goods, it shall be issued on or before the time of issue of statement of accounts/receipt of payment.
Q12 Is there any scheme for payment of taxes under GST for small traders and manufacturers?
Ans Yes. Composition levy is an alternative method of levy of tax designed for small tax payers whose turnover is up to Rs. 75 lakh (Rs. 50 lakh for special category States, excluding J&K and Uttrakhand). It is a kind of turnover tax. The objective of the scheme is to provide a simplified tax payment regime for the small tax payers. The scheme is optional and is mainly for small traders, manufacturers and restaurants.
Q13 What is the eligibility criteria for opting for composition levy? Which are the Special Category States in which the turnover limit for Composition Levy for CGST and SGST purpose shall be Rs. 50 lakh?
Ans Composition scheme is a scheme for payment of GST available to small taxpayers whose aggregate turnover in the preceding financial year did not cross Rs.75 lakh. In the case of 9 Special Category States, the limit of turnover is Rs. 50 lakh in the preceding financial year, , namely – Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Himachal Pradesh. However, if you are a manufacturer of ice-cream, pan masala or tobacco or tobacco products or if you are a service provider other than a restaurant, you are not eligible for composition scheme.
Q14 What is the form in which an intimation to pay tax under the composition scheme needs to be made by the taxable person?
Ans Composition scheme is optional and intimation that option has been availed should be made electronically in FORM GST CMP-01 by the migrating taxable person. A person who has already obtained registration and opts for payment under composition levy subsequently needs to give intimation electronically in FORM GST CMP-02.
Q15 What is the rate of tax under Composition levy fora manufacturer? Ans Composition rate for manufacturers is 2% (1% CGST and 1% SGST). Q16 Are all manufacturers eligible for composition scheme? Ans A manufacturer is eligible to avail composition scheme except manufacturers:
(a) whose aggregate turnover in the preceding financial year crossed Rs. 75 lakh;
(b) who have purchased goods or services from unregistered suppliers unless they have paid GST on such goods or services on reverse charge basis;
(c) who make any inter-State outward supplies of goods;
(d) who make supply of goods through an electronic commerce operator;
(e) who manufacture the following goods.
|SI. No.||Tariff Head||Description|
|1.||2105 00 00||Ice cream and other edible ice, whether or not containing cocoa|
|2.||2106 90 20||Pan masala|
|3.||24||Tobacco and manufactured tobacco substitutes|
Q17 How is a manufacturer under the composition scheme required to bill his supply? Can a registered person, who purchases goods from a composition manufacturer take input tax credit?
Ans A manufacturer opting to pay tax under the composition scheme cannot issue a tax invoice to his buyer but would issue a Bill of Supply. He cannot collect any tax on supplies made by him on his Bill of Supply and is required to show only the price charged for the supply. Consequently, the registered person buying goods from a composition manufacturer cannot take input tax credit.
Q18 How would a manufacturer under the composition scheme who receives inputs or input services from an unregistered person pay GST? What will be the tax rate if the purchase is from a person availing composition?
Ans GST will have to be paid on inputs and input services received by such manufacturer under reverse charge at normal rates and not at the composition rates. Purchase from a person under the composition scheme is purchase from a registered person and hence will not attract tax under reverse charge under section 9(4) of the CGST Act, 2017. Any person migrating from the existing law to a composition scheme and holding stock of goods purchased from unregistered persons is required to pay tax on such goods.
Q19 What is the effective date of composition levy?
Ans There can be three situations with respective effective dates as shown below:
|Situation||Effective date of composition levy|
|Persons who have been granted provisional registration and who opt for composition levy (Intimation is filed under Rule 3(1) in FORM GST CMP-01)||1st July, 2017.|
|Persons opting for composition levy at the time of making application for new registration in the same registration application itself (The intimation under Rule 3(2) in FORM GST REG-01)||Effective date of registration; Intimation shall be considered only after the grant of registration and his option to pay tax under composition scheme shall be effective from the effective date of registration.|
|Persons opting for composition levy after obtaining registration (The intimation is filed under Rule 3(3) in FORM GST CMP-02)||The beginning of the next financial year.|
Q 20 Can a person paying tax under composition scheme make exports or supply goods to SEZ?
Ans No, because exports and supplies to SEZ from Domestic Tariff Area are treated as inter-State supply. A person paying tax under composition scheme cannot make inter-State outward supply of goods.
Q 21 Can a manufacturer under composition scheme do job-work for other manufacturers?
Ans Job-work is a supply of service and not eligible for composition scheme. Any manufacturer or processor who wishes to carry out job-work for others would not be eligible for composition scheme.
Q 22 Does a registered person under the composition scheme pay his taxes every month?
Ans No, registered person under the composition scheme will not pay taxes every month. He would file return and pay taxes on a quarterly basis i.e. for each quarter of the financial year. Due date for payment of tax for them would be on or before the 18th day after the end of such quarter.
Q 23 What are the accounts a manufacturer under the composition scheme needs to maintain?
Ans Rules on Accounts and Records provide details of the accounts to be maintained. They are maintained under normal course of business by any small manufacturer. The details to be maintained in accounts inter-alia consists of goods supplied, inward supplies attracting reverse charge, invoices, bills of supply, delivery challans, credit notes, debit notes, receipt vouchers, payment vouchers, refund vouchers etc.
Q 24 Does a manufacturer under the composition scheme need to maintain details of accounts of every supply received and made?
Ans No, the requirement to maintain detailed accounts of stocks in respect of goods received and supplied, work in progress, lost, destroyed etc. does not apply to a manufacturer under the composition scheme. Such a person shall maintain a true and correct account of production or manufacture of goods, inward and outward supply of goods, stock of goods, tax payable and paid.
Q 25 Does a manufacturer under the composition scheme needs to maintain account of inputs tax credit?
Ans A manufacturer under the composition scheme need not maintain account of input tax, input tax credit claimed etc. as he is neither allowed to avail of input tax credit nor can he issue an invoice showing tax using which buyer can avail input tax credit.
Q 26 Can a manufacturer under the composition scheme maintain his accounts manually? And can he issue his bill of supply manually?
Ans Yes, a manufacturer under the composition scheme can maintain his accounts in registers serially numbered and also issue bill of supply manually following the conditions specified in rules in this regard.
Q 27 Whether a registered person under the composition scheme needs to learn HSN code of any input purchases and output supplies?
Ans No, a registered person under the composition scheme would not need to specify HSN code of their products in bill of supply or return.
Q 28 What return a registered person under the composition scheme needs to file and at what frequency?
Ans A registered person under the composition scheme of GST is required to furnish quarterly return called GSTR-4 between the 11th day and 18th day of the month succeeding the quarter.
Q 29 What details are required to be furnished in the return to be filed by the registered person under the composition scheme?
Ans GSTR-4 may be referred for details required to be filled in the return. It is a very simple return containing consolidated details of outward supplies, details of import of services or other supplies attracting reverse charge and inward supplies which shall be auto-populated.
Note: Reference to CGST Act, 2017 includes reference to SGST Act, 2017 and UTGST Act, 2017 also. More detailed MSME FAQs are available at URL: goo.gl/VoUAQb
Disclaimer: The replies given above are only for educational and guidance purposes and do not hold any legal validity.
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