Q: I am a businessman involved in importing goods into the country, and I need to file my GST returns. The instructions indicate that one should upload only the sales information. It is not clear whether I should provide details about the goods that were imported, that is, the import purchases. If so, how will these import purchases be reflected in the GST portal?
A: You’ll need to include information about your import purchases. Here’s how it works:
Import tax: When you import goods, a tax called Integrated Goods and Services Tax ( IGST ) applies. This tax is similar to a regular GST but goes to the central government instead of being split between state and central governments.
Tax destination: The tax is applied based on where the goods will be used (destination principle). So, even though it’s an import, the tax revenue might ultimately benefit the state where the goods are consumed.
Tax credit: It is important to note that importers are entitled to claim a full Input Tax Credit ( ITC ) for the Integrated Goods and Services Tax ( IGST ) paid on imports. This ITC can be utilized to offset the GST liability arising from subsequent sales made by the importer.
Who pays?: Normally, the supplier pays the GST. However, in the case of imports, you, the importer, might be responsible for paying the IGST under a concept called “reverse charge mechanism.”
Reporting imports:Import purchases are reflected on the GST portal in your GSTR-2 form. Specifically, you’ll report them in Column 5, titled “Goods/capital goods received from overseas (Import of goods).
In summary, it is the obligation of importers to disclose import purchases in the GSTR-2 form’s designated section (Column 5). Moreover, minimizing the total GST payment resulting from subsequent sales is achieved by claiming the applicable Input Tax Credit ( ITC ) for IGST paid on imports. Importers can optimize their tax liability and maintain compliance with GST requirements by precisely reporting import purchases and utilizing the ITC mechanism.
Q: Are any of the outstanding returns under the VAT system required to be filed? Will they be carried over to the GST?
A: Yes, any outstanding returns under the Value Added Tax ( VAT ) system must be filed. These returns are not automatically carried over to the Goods and Services Tax ( GST ) system. In order to carry forward your available ITC from the VAT regime to GST, you need to ensure that all your compliance formalities in VAT, including VAT returns and payments, are fulfilled. For this purpose, please ensure that all returns are filed and closed in VAT.
Section 140 of the CGST Act 2017 ( and SGST Acts/UTGST Acts ) enables the taxpayers to carry forward the Input Tax Credit ( ITC ) earned under the existing laws to the GST regime. Under transitional arrangements for ITC, the ITC of various taxes paid under the existing laws such as Central Value Added Tax ( CENVAT credit ), State Value Added Tax ( VAT ) etc. are eligible to be carried forward into GST under the relevant subsections of Section 140 of the Act.
Q: I have two DEMAT accounts. One is a joint account with my wife, and the other is solely in my name. If I transfer the shares from the first to the second, will I incur any capital gains tax?
A: You will not directly attract any capital gains tax on transferring shares between DEMAT accounts if no money has been paid for the transfer. It is important to note the nature of the transfer to determine whether it is taxable or not. In this case, if the transfer is considered a gift from your spouse, there will generally be no capital gains tax liability at the time of the transfer. Nonetheless, it will be taxable when any future sale of those shares from your personal account is subject to capital gains tax, which will be based on the original purchase price and holding period (including the time the shares were held in the joint account).
Q: My wife had a car accident recently and had to undergo major surgery to stop internal bleeding. All the medical expenses were incurred by me, and the complete bills were stacked up. Does the government offer tax deductions for medical expenses? What if the expenses are covered by insurance or claimed later through a Motor Accident Claims Tribunal ( MACT ) order?
A: The government does offer tax deductions on medical expenses under certain conditions. For individual taxpayers, medical expenses for specified diseases or ailments can be claimed under Section 80DDB of the Income Tax Act, 1961. Additionally, expenses for the medical treatment of a dependent with a disability can be claimed under Section 80DD. Medical expenses incurred due to a car accident do not generally qualify for a specific tax deduction under the Act.
If a person receives compensation for a motor accident and becomes permanently disabled as a result of the accident, the receipt is deemed a capital receipt and is not taxable. However, if the disability is temporary, the payment of the claim is taxable.
However, in National Insurance Company Ltd. v. Savitri Devi (2018), the court held that âcompensation awarded under the Motor Vehicles Act or Employeesâ Compensation Act in lieu of death of a person or bodily injury suffered in a vehicular accident, is a damage and not an income and cannot be treated as taxable income. Accordingly, interest awarded by the Motor Accident Claims Tribunal on a compensation is also a part of compensation upon which tax is not chargeable; hence, the action of insurance company to deduct tax at source on the awarded compensation and interest accrued thereon is illegal and is contrary to the law of landâ. Accordingly, the respondent was directed to refund the tax deducted at source.
Q: If a man books a hotel room and makes the payment, but the rate of tax changes after the booking and before check-in, will the change affect the customer?
A: No, the change in the rate of tax will not affect the customer if the payment has already been made and the invoice has been issued at the time of booking. According to Section 14(b) of the Central Goods and Services Tax ( CGST ) Act, 2017, in case the goods or services or both have been supplied after the change in rate of tax, where the invoice has been issued and payment is received before the change in rate of tax, the time of supply shall be the date of receipt of payment or date of issue of invoice, whichever is earlier.
Since the invoice is issued and payment is made at the time of booking, the tax rate applicable at that point will be the final rate. Any subsequent change in the tax rate before check-in will not affect the customer.
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