GST functions on the concept of ‘self-assessment’ by which every registered taxable entity shall itself determine the tax liability under GST law and furnish prescribed returns for the specified tax period. Any entity that falls under the ambit of GST needs to follow the necessary compliances and procedures. The filing of GST returns and payment of tax within prescribed timelines is one of the crucial parts of the compliance requirements. In case of late or incorrect filing of a return, an additional amount may be required to be paid in the form of a late fee, interest, and or penalty. In order to file timely GST returns, it is necessary to understand, on what value tax is to be levied, the place of supply, the type of taxes and the applicable tax rate.
Under GST, the taxable event and the liability to pay tax arises when there is a supply of goods or services. GST is generally levied on the supply of all goods and services except for the supply of alcoholic liquor for human consumption and certain petroleum products. The tax on such alcoholic liquor and petroleum products continues to be under the ambit of the erstwhile indirect tax regime, i.e., central / State excise duties and Value Added/ Sales Tax. Under GST, supply includes all forms of supply of goods or services or both, such as sale, transfer, barter, exchange, license, lease, rental, disposal, etc. Such supply is chargeable to tax only when it is made for furtherance of business and for consideration. The term ‘consideration’ in relation to the supply of goods or services broadly includes any payment made or agreed to be made, whether in money or otherwise like barter etc. However, transactions within the same legal entities or related parties are also chargeable to tax even if made without consideration.
GST contains provisions relating to the valuation of goods or services made in different situations and between different persons. The tax payable is generally computed on an ad-valorem basis, i.e., percentage of the value of the supply of goods or services. Typically, GST is chargeable on the supply of goods or services or both on the transaction value of goods or services or both in the case of unrelated persons. The transaction value means the price actually paid or payable for the supply of goods or services.
In most cases, invoice value is considered as taxable value for levying a particular tax. Central Goods and Service Tax (CGST) and State Goods and Service Tax (SGST) is levied in case of taxable supplies within a state/Union territory. Integrated Goods and Service Tax (IGST) is levied in the case of taxable supplies between two different states/union territory. In the case of specified supplies like coal, Motor cars, aerated drinks, compensation cess is also levied in addition to such GST.