The GST law implies a levy of tax on all taxable supplies made within a specified period by the taxpayer. For Intrastate supply of goods and services both CGST and SGST is to be charged while for Inter-state supply, IGST is charged by the taxpayer while invoicing. To be liable to pay GST to the government, it is necessary for the person to get registered under the GST act and furnish all required GST returns to the government by specifying details of supplies made within a stipulated period.
To simplify the above situation, it is necessary to understand
‘Who is required to pay GST? ‘.
A person who is registered or liable to get registered (having a turnover above the prescribed threshold limit or as the case may be) under the GST Act is a taxable person. The GST Act further states about certain taxable persons who are compulsorily required to pay GST in case of supplies made;
– Any person whose turnover crosses over the prescribed threshold limit. (Limit subject to change as per notification)
– A person registered under any previous taxation scheme – VAT, Service tax etc.
– Casual Taxable Person
– E-Commerce Business Operator
– The person liable under Reverse Charge
– Input Service Distributor.
– Interstate supplier of goods.
– TDS deductors
– Persons liable to pay, specified with a notification in official gazette.
Also Read: Is it compulsory to fill out the GST return
To determine who is required to pay GST under the situation where a vendor provides services to a company, the following cases can be observed:
Case 1: If the vendor is a registered person under GST.
With subject to the conditions of the law, if the vendor is a registered person and supplies goods or services to another registered person, he can collect the required tax applicable on the supply by issuing an invoice to the person receiving the supply, to pay the amount along with GST. In this case, the supply will be considered as a registered supply and GST will be collected and submitted by the vendor while furnishing his GST return. Also, ITC can be claimed by the company for making payment to the vendor with the subject to the condition, that such services have been taken in furtherance of business.
In the case of the Inter-state supply of services, the vendor will charge IGST while issuing an invoice to the registered person.
For example: If a registered company contracts with an agency to get all his Air Conditioners serviced. Here the agency will issue the invoice including GST to the registered company and will pay the tax collected to the government while furnishing his GST return.
Case 2: If the vendor is a non-registered person under GST.
If the vendor is not a registered person and supplies any goods or services on which GST is applicable, In such a situation, the receiver of goods will pay GST to the government under the Reverse Charge Mechanism. The recipient of supply will do self-invoicing, charging the required CGST, SGST amount and will submit it to the government while furnishing his GST return. In this case, the company can claim ITC only if the services have been provided in furtherance of business and the required tax amount have been paid while filing of the GST returns.
In case of Inter-state sale also, the recipient will pay IGST applicable to such supply under Reverse Charge Mechanism.
For example: If an Institute providing computer education gets all his computers repaired from an Individual not registered under GST. In such a case, the registered company can get such services charged under GST by self-invoicing.