REVERSE CHARGE MECHANISM

REVERSE CHARGE MECHANISM (RCM)

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GST being an indirect tax which is imposed on supply of goods & services is a comprehensive destination base tax. It is based on “One Nation One Tax” Approach which has subsumed almost every indirect taxes ate state/centre level.

Registration: A person who is required to pay tax under RCM has to mandatorily register under GST and the threshold limit of INR 40 lacs & INR 20 lacs is not applicable on this.

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Input Tax Credit (ITC)?

  • When Goods purchased are for personal use: ITC cannot be claimed
  • When Goods purchased are for business use: ITC can be claimed
  • When Goods purchased are partly for personal & partly for business use: ITC can be claimed only on the portion used for supplies.
  • ITC not allowed for those supplies which are exempt from tax.

WHEN IS REVERSE CHARGE APPLICABLE?

According to section 3 of CGST act 2017, read in continuation with rule Rule46 of CGST rules, every invoice has to mention it on the top whether tax is in respect of supply on reverse charge.

: Maintenance of the accounts by a registered person.

: Reverse charge liability cannot be set off against the Input tax credit.

: Generally the supplier is liable to pay GST to the government almost in 90% of the cases, remaining 10% of the cases the liability is on the buyer to pay the GST. This creates a Reverse Charge where the liability shifts from supplier to the buyer. There are two (2) types of Reverse charge scenarios:

  • When an individual buys from an unregistered manufacturer.
  • When an individual buys from an e-commerce trader.
  • Supply of certain goods & services as specified by CBEC.

Time of supply?

It is the point at which the liability to pay GST arise. Factors relevant for time of supply depends on the person who is liable to pay tax. Therefore, the time of supply under reverse charge mechanism (RCM) is different from that of “forward charge”.

  1. Case of supply of goods

  • Date of receipt of goods; or
  • Date of debit as per bank account/Date of payment as per books of accounts (whichever is earlier); or
  • Date following the 30 days from date of issue of invoice. 
  1. Case of supply of services

  • Date of debit as per bank account/Date of payment as per books of accounts (whichever is earlier); or
  • Date following the 60 days from date of issue of invoice.

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What is the concept of self-invoicing?

“Self-Invoicing” is a concept under Reverse charge mechanism (RCM) in which the onus of preparing the invoice lies with the receiver of goods or services falling under this category.

When you have purchased from an unregistered supplier then such transaction falls under reverse charge where the duty to pay tax lies with the receiver.

This is due to the fact that your supplier cannot issue GST invoice since his business is not registered. Hence, self-invoicing becomes necessary in this case.

 

What is FSSAI?

WHAT IS FSSAI?

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FSSAI registration is based on the ONE NATION ONE FOOD LAW ideology which aims at providing globally benchmarked food standards and practices, ensuring consistency in enforcement of the rules and regulations so formed, and also manage food testing with standardized testing methods and products. FSSAI India has headquarters in New Delhi and 6 regional offices located in Delhi, Mumbai, Guwahati, Kolkata, Chennai, and Cochin.

As per Section 31(1) & 31(2) of Food Safety and Standards Act, 2006 every Food Business Operator in the country is required to be licensed/registered under the Food Safety and Standards Authority of India. FSSAI licensing, registration procedure and various other requirements are regulated by the Food Safety & Standards (Licensing and Registration of Food Business) Regulations, 2011.

GST Registration

An online portal has been created to ease out the process and make the procedure user friendly. Food Licensing and Registration System was been launched by Food Safety and Standards Authority of India to facilitate Food Business Operators (FBO) in India to apply for License/Registration Certificate and also be able to track their applications during the course of processing. FLRS is being used by 5 Regional offices and 2 Sub-Regional offices of FSSAI and several State Governments for processing and generation of licenses/registration certificates.

CATEGORIES OF FSSAI:

The process of application starts with identification of eligibility of your premise. Depending upon the installed capacity, turnover and location, your premise may be eligible for any of the following categories:

CENTRAL LICENSE:

  • Food Businesses with Annual Turnover more than 20 crores.
  • Operating business in two or more States.
  • Food business as listed in Schedule 1 of FSS (Licensing and Registration of Food Businesses) Regulations, 2011. 

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STATE LICENSE:

  • Food Businesses with Annual Turnover between 12 lakh and 20 crore.
  • All grain, cereal and pulses milling units irrespective of turnover.

FSSAI BASIC REGISTRATION:

Meant for small manufacturers, restaurants and petty retailers dealing in food products which includes food sale done by the temporary stall holder.

Company Registration

FSSAI RENEWAL:

It depends on the application made by the food business operator the FSSAI License is granted for a period of one to five years as requested. The fee for registration also varies according to the number of years for which the license is applied. FSSAI renewal can be done thirty days prior to the expiry date of the license.

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Q. What is the difference between FSSAI Registration & FSSAI License?

A. As we have discussed that according to the Food Safety and Standards Regulation, 2011, all food operator mandatorily require either FSSAI license or FSSAI Registration, if they are engaged in manufacture, distribution, selling, transportation, and storage of the food products. Whether one needs to go for FSSAI registration or license solely depends on the size and nature of the FBO.

Accounting & Auditing

Q. What are the consequences of not obtaining FSSAI?

A.  All the registered persons have to abide by the FSSAI rules and regulations. The Food Safety Officer has the authority to conduct the inspection of the facility provided by the food business operator and identify the level of compliance, if any. He marks the FBO based on the compliance level:

  1. Compliance (C)
  2. Non-compliance (NC)
  3. Partial Compliance (PC)
  4. Non-applicable/ not observed (NA)

In case the food safety officer issues an improvement notice to the FBO and they fail to comply with it, the officer may cancel their registration. The decision of the officer can be challenged through appealing in the Food Safety Appellate Tribunal/ High Court.

PAN Card number

Transactions in which it is mandatory to give your PAN Card number

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There are various financial transactions in which attaching your PAN card details is mandatory. These exceptions are specified under Rule 114B of the Income tax rules, 1

962 which came into effect from 01, Nov, 1988.

There are 18 transaction which require your PAN Card details.

  1. Sale/purchase of Motor vehicle as specified under Motor vehicle act, 1988 requires PAN card number.
  2. Opening of Bank A/c with a banking company or a co-operative bank which are regulated by banking regulation act, 1949.
  3. Making an application to a banking company/financial institution/co-operative bank for the issuance of Credit or Debit card.
  4. Opening of Demat A/c under SEBI Act, 1992.
  5. Paying your bill at a hotel/restaurant (Cash payment more than INR 50,000)
  6. Payment in relation to traveling to any foreign country or currency exchange for the same. (Cash payment exceeding INR 50,000)
  7. Mutual fund payment for purchasing additional unit. (Amount exceeding INR 50,000)
  8. Payment to acquire bonds/debentures of a company. (Amount exceeding INR 50,000)
  9. Purchase of bonds issued by RBI. (Amount exceeding INR 50,000)
  10. Deposit with a banking company/co-operative bank/post office regulated by banking regulation act, 1949. (Cash deposit exceeding INR 50,000)
  11. Purchase of Demand deposit/Pay order/bankers cheque from a banking company/co-operative bank regulated by banking regulation act, 1949. (Amount exceeding INR 50,000)
  12. Time deposit with a banking company/co-operative bank/Post office/Nidhi company/NBFC. (Amount exceeding INR 50,000 or amount exceeding INR 5,00,000 during a financial year)
  13. Any pre-paid payment instrument as defined by RBI under Payment & settlements act, 2007.
  14. Premium of Life Insurance premium paid. (Amount exceeding INR 50,000 during a financial year)
  15. Sale/purchase of securities under Securities contracts act, 1956. (Amount exceeding INR 1,00,000)
  16. Sale/purchase shares of a company not listed on stock exchange. (Amount exceeding INR 1,00,000)
  17. Sale/purchase of any immovable property. (Amount exceeding INR 10 lakh)
  18. Sale/purchase by any person of goods/service of any nature except those mentioned from 1 to 17. (As notified by the central government).
YOUR PAN CARD MIGHT BECOME INOPERATIVE FROM 01, JANUARY, 2020

IMPORTANT POINTS TO REMEMBER

  • When a person involved in any of the above-mentioned transactions, is a MINOR & does not have any income chargeable to income tax, he/she should mention the PAN Card details of father/mother/guardian.
  • Anyone who does not have a PAN Card and enters into any of the above-mentioned transactions must fill Form No. 60 as per Rule 114B of Income-tax act, 1962.
  • Note PAN Card details in case of Tax deduction at source i.e. TDS or Tax collection at source i.e. TCS under section 139 [5b &5c] respectively.

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