GST Session to Spare Parts Dealers Compliances in brief

Rate applicable:
1. Rates of GST Supply of the following goods will be chargeable to GST at 28%
a. 8706 Chassis fitted with engines, for the motor vehicles of headings 8701 to
8705
b. 8707 Bodies (including cabs), for the motor vehicles of headings 8701 to 8705
c. 8708 Parts and accessories of the motor vehicles of headings 8701 to 8705

Specific Issues:
2. Some areas related to the present industry:
a. Job works at Work Shop Is it a Works Contract?
i. As per Section 2(119) of the CGST Act, 2017, Works contract means
a contract for building, construction, fabrication, completion,
erection, installation, fitting out, improvement, modification, repair,
maintenance, renovation, alteration or commissioning of any
immovable property wherein transfer of property in goods (whether
as goods or in some other form) is involved in the execution of such
contract.

ii. The definition of Works Contract applies only to Immovable

Property. Hence, service in the workshop do not fall under Works
Contract.

b. Discount: (Section 15(3))

i. Given before or at the time of supply: Shall be allowed as deduction
if the same is mentioned on the invoice.
ii. Given after the supply: Shall be allowed as deduction if:
1. It is as per the established agreement entered into at or before
the time of supply and specifically linked to invoices and
2. Input tax credit attributable to the discount has been reversed
by the recipient.

c. Sales Returns:
i. As per Section 34(1) of CGST Act, 2017 where goods supplied are
returned by the recipient, a Credit note may be issued to the
recipient.
1. Format of Credit Note is given in Rule 8(1) of the GST Invoice
rules, 2017.
2. Credit/Debit notes need to be declared in the return for the
month of issue.
3. No Credit or Debit note can be issued after earliest of
 a. 30th September or
b. Date of submitting Annual return (31st December or
earlier) following the end of the financial year to which
it pertains.
4. Corresponding reduction in Output tax Liability is not
allowed, if the incidence of Tax and interest has been passed
on to any other person.

ii. Transitional provisions pertaining to Sales returns Refund of

duty paid is allowed on return of goods, if:
1. Duty has been paid on goods on the removal under Existing
law, not earlier than 6 months prior to the Appointed Day (1st
January 2017)
2. The said goods are returned within 6 months from the
Appointed day (1st January 2018) and
3. The goods are identifiable to the satisfaction of the proper
officer.
4. If the goods are returned by a registered person, then it shall
be deemed to be supply and the person returning the goods
needs to charge GST.

d. Input Credit on the Stocks held on the Appointed Date: (Submit FORM
GST TRAN-I within 60 days from 1st July, in the Portal As per Rule 1(1) of
DRAFT Transition Rules)
i. VAT and Entry Tax:
1. Shall be allowed to be credited to Electronic Credit Ledger to
the extent Carried forward in the return relating to the period
ending with 30th June (The return should be submitted within
90 days from 1st July).
2. Such credits shall not be allowed unless they are allowed to
be taken under GST law also.
3. The Input Credit to the extent of Forms (C Forms or F Forms)
which are not available within 90 days, shall not be allowed
to be Carried Forward.

ii. CENVAT Credit:

1. Input Credit of Excise Duty on the parts paid prior to 1st July
(Lying in Stock as on that date), can be taken subject to the
following conditions:
a. Such inputs or goods are used or intended to be used
for making taxable supplies under GST Act.
b. The Person is eligible for input tax credit on such inputs
under GST Act (Should not be under Composition).
 c. Invoice pertaining to such Credit, is available
d. The Invoice is not earlier than 12 months prior to 1st
July.

iii. In case TAX Invoices are not available: Pertaining to CENVAT

Credit (In Case of VAT, this provision applies to goods which have
suffered tax at the first point of their sale in the State and the
subsequent sales of which are not subject to tax in the State availing
credit)
1. As per Rule 3 of DRAFT Transition Rules, 2017, such Credit
shall be limited to 40% of Central tax payable on supply of
goods after 1st July.
2. Such amount shall be credited to the Electronic Credit Ledger
maintained in FORM GST PMT-2 on the Common Portal,
AFTER the Central tax has been paid on such supply.

3. This scheme shall be available for 6 Tax periods from 1st July,
subject to the following conditions:
a. Such goods were not wholly exempt from Excise Duty
or were not NIL rated
b. Document evidencing purchase of goods is available
c. A statement in prescribed form (yet to be notified), at
the end of Six tax periods, is submitted
d. Such stock of goods are easily identifiable by the
registered person.

Prominent Definitions and their implications:

3. Turnover: It includes turnover in all states and Union territories with Same PAN
Section 2(6) of CGST Act.

4. Capital goods: Definition widened - goods, the value of which is capitalised in the
books of account Section 2(19) of CGST Act. Input Credit of Godown Furniture
may be taken???

5. Composite Supply: Packing charges, for Accessories if any, will form part of
Single supply Composite Supply chargeable to tax at the rate applicable to
Goods Section 2(30) of CGST Act read with Section 8(a) of CGST Act, 2017.

6. Consideration: Penalty for delayed delivery, Demurrage charges for damaged

Parts, etc., if collected, will form part of Consideration the monetary value of any
act or forbearance Section 2(31) of CGST Act.
7. Conveyance: It includes a Vehicle Section 2(34) of CGST Act, 2017. Using the
conveyance as a means of transport in contravention of the provisions, makes it
liable for confiscation Section 130(v) of CGST Act, 2017. Hence, if the transporter
is non-compliant, Vehicles may get stuck with the authorities.

Compliances with regard to Issue of invoices/Payment of taxes:

8. Reverse charge for supplies received from an unregistered person Purchases
from unregistered dealers attract Reverse charge Section 9(4) of CGST Act, 2017.

9. Composition Tax payable @0.5% for turnover (intra-state) up to Rs. 50 Lakhs

Ineligible if Inter-state turnover exists Tax not to be charged No Input Tax
Credit.

10. Issue Invoice:

a. At the time of removal/delivery/making available of Vehicles Section 12
read with Section 31(1).

b. Invoice needs to contain Description, Quantity and Value of Vehicles and

Tax charged (Information prescribed as per GST Invoice Rules).

11. Revised invoice can be issued within One Month of the date of issuance of
certificate of registration Section 31(3)(a).

12. No invoice is required to be issued, if the value of accessory supplied is less than
Rs. 200 Section 31(3)(c).

13. Composition tax payers need to issue a Bill of Supply (If the value of supply
exceeds Rs. 200).

14. A receipt voucher needs to be issued in case any advance is received before supply
of Parts (refund voucher needs to be issued in case no supply is made and no
invoice is issued).

15. Supplies from an Unregistered person:

a. Issue an invoice in respect of goods or services received from an
unregistered person on the date of receipt of goods/services Section
31(3)(f).
b. Issue a payment voucher to an unregistered person at the time of making
payment Section 31(3)(g).

16. In case of Parts removed for Sale or return basis, Invoice needs to be issued within
Six months from the date of removal, if not approved by that date Section 31(7).
 Liability to tax:
17. Liability to Tax arises by the earliest of
a. Issue of invoice for Parts Supplied or
b. Receipt of Payment
Tax needs to be paid in that period accordingly.
Even if Parts are not actually dispatched, the supply is deemed to have been
made to the extent invoiced Section 12.

18. In case of supplies covered under reverse charge, liability arises by the earliest of:
a. Date of receipt of goods,
b. Date of payment to the supplier as per the books,
c. 30 days from the date of invoice.

19. Interest, late fee for delayed payment of consideration is taxable on receipt basis
Section 12(6).

20. Price actually paid may be rejected as Transaction Value, if the parties are related.
Parties are deemed to be related in the following cases:
a. Employer and employee
b. Partners
c. Officers or Directors of each others business
d. Under Common Control
e. Commonly control a third party
f. One Controls the other
g. Ownership of 25% of voting stock
h. Members of the same family

21. Transportation charges of Parts, even if paid by the recipient, will be includible in
the value of Supply Section 15.

22. Subsidies (directly linked to the price), other than Central and state government
subsidies, to be added to the Value of Supply. Post supply discount will be
deductible in certain cases.

Provisions with regard to Input Credit:

23. Input Credit shall be credited to Electronic Credit Ledger Section 16. All the
transactions with respect to Input Credit need to be done only through this Ledger.

24. No Input Credit without:

a. Invoice/debit note, etc. on hand
b. Receiving the goods
i. Receipt by a third person on the direction of the registered person, is
considered as receipt by the registered person.
 ii. Goods in lots Credit upon receipt of last lot.
c. Tax being paid to the government and
d. Regular return being filed

25. If payment is not made to the supplier, within 180 days, the input credit is to be
paid back along with interest Proviso to Section 16(2).

26. No Input Credit:

a. If Depreciation is claimed as per IT act Section 16(3).
b. After the earliest of Regular return for September (20th September) of the
financial year to which such invoice pertains or date of annual return (31st
December) Section 16(4). Not applicable in case of Re-availing of Credit
after reversing the same due to non-payment ITC Rules, 2017.

27. Amount of credit shall be proportionately reduced with respect to usage for non-
business purpose and with respect to exempt supplies (includes reverse charge
supplies???) Section 17.

28. Input credit is not allowed on specified supplies Section 17(5).

29. Input credit shall not be allowed after one year from the date of issue of the invoice
Section 18(2).

Provisions with regard to Registration:

30. Threshold limit for registration Rs. 20 Lakhs (Rs. 10 lakhs for special Category
states). Application for registration needs to be made within 30 days of so
becoming liable.

31. Some persons are required to get registered irrespective of turnover Section 24,
some of them are:
a. Persons making Inter-state Taxable supplies.
b. Casual taxable persons
c. Persons who are required to pay tax under reverse charge
d. Electronic Commerce Operator
e. Persons who are required to deduct tax under section 51,
f. Input Service Distributor

32. Each registration:

a. Within or outside the state and
b. Each establishment in each state
Shall be treated as distinct persons as per Section 25(4) and (5).
33. Acceptance/Rejection of Registration under SGST/UTGST leads to
acceptance/rejection under CGST Act, 2017 Section 26.

34. Registration may be cancelled if:

a. Returns are not submitted for 6 months (three tax periods in case of
composition tax payer)
b. Person who has obtained Voluntary registration has not commenced
business within 6 months.

Accounts, Records and Audit:

35. Accounts and records
a. Need to be kept at Principal place of Business Section 35(1).
b. Need to be retained for 6 years (72 months) Section 36(1)

36. Owner, operator of warehouse or godown for storage of Parts and every
transporter shall maintain records, consignor, consignee and other prescribed
details.

37. Audit by a Chartered Accountant/Cost Accountant is required after a prescribed

limit of turnover.

Returns:
38. Furnish Returns as below:
a. Return of outward supplies by 10th of the following month
b. Accept or reject changes made by the recipients within 15th to 17th of the
Succeeding month.
c. Return of inward supplies within 10th to 15th of the succeeding month
d. Regular return by 20th of the succeeding month (Composition tax payers by
18th of the month succeeding the quarter).
e. An ISD return, by 13th of the succeeding month
f. Annual return, by 31st December following the financial year (with a copy
of audited financial statements and reconciliation statement, in case audit is
applicable).

39. Tax payable as per the return, needs to be paid by the due date of the return
Section 39 (7).

40. Regular return needs to be submitted even if the turnover is nil. Regular return
is not allowed if the return for the previous period is not submitted.

41. Rectification of errors is allowed in the return for the month in which they are
noticed (interest applicable). No rectification after 20th October/31st December of
the end of the financial year.
42. Late fee for delay in submission of:
a. Outward/inward supplies/Regular return Rs. 100/day (Maximum Rs.
5,000)
b. Annual return Rs. 100/day (Maximum of 0.25% of the Turnover in the
State/UT)

Utilization of amounts:
43. Amount available in:
a. The Cash Ledger to be used for payment of Tax, Interest, Penalty, fees, etc.
b. The Credit Ledger to be used for making payment of Output tax under
CGST Act/IGST Act.

44. Order of utilization of Integrated Tax, Central tax, State Tax and UT Tax defined
Section 49(5).

45. Dues related to returns of previous periods are to be cleared first Section 49(8).

Interest:
46. Interest for
a. Default in payment of tax up to 18% - Section 50(1).
b. Undue or excess claim of Input Credit/Excess reduction in Output Tax
liability up to 24% - Section 50(3).
TDS:
47. Requirement to deduct TDS @1% on intra-supplies exceeding Rs. 2,50,000/- .
Procedure specified in Section 51.

Refunds:
48. Application for refund (more than Rs. 1,000) of tax, to be made before two years
from relevant date. Refund of balance in Electronic Credit Ledger, may be claimed
in regular return.

49. Refund of unutilized Input Credit in certain cases Section 54(3). Provisional
refund of 90% in case of refund on account of Zero rated supplies Section 54(6).

50. Interest up to 6% on delay in sanctioning refund beyond 60 days from the date of
application/the amounts withheld due to appeal Section 56 and Section 54(12).

51. Audit by department

a. Intimation before 15 days
b. To be completed within 3 months (extendable by further 6 months)
c. Assessee to be informed within 30 days as to the findings, etc.
52. Audit by a Chartered Accountant Report within 90 days (extendable by 90 days)

Other Provisions:
53. Inspection of premises for specific reasons Section 67
a. Suppression of Transaction relating to
i. Supply
ii. Stock in hand
b. Claiming Excess Input Credit
c. Contravention of provisions with an intent to evade payment of Tax
d. Transporter or Owner of a warehouse/godown has kept goods which have
escaped payment or to cause evasion of tax.

54. Search and Seizure Section 67(2) Goods liable for confiscation or documents or
books or things (useful for or relevant to the proceedings) have been secreted. To
be returned within 6 months.

55. Inspection of conveyances carrying consignment of goods exceeding specified

value, to verify whether specified documents or devices are in possession or not
Section 69.

56. In case of other than fraud Section 73:

a. Order needs to be issued within 3 years from the due date of Annual return
(Show Cause Notice needs to be issued at least 3 months prior to the three
years).
b. No Penalty if the amount along with interest is paid
i. Before issue of Show Cause Notice or
ii. Within 30 days from the issue of Show Cause Notice
c. Penalty higher of 10% of tax or Rs. 10,000 on adjudication (if tax is not paid
within 30 days)

57. In case of fraud Section 74:

a. Order needs to be issued within 5 years from the due date of Annual return
(Show Cause Notice needs to be issued at least 6 months prior to the three
years).
b. 15% Penalty if the amount along with interest is paid before issue of Show
Cause Notice or
c. 25% Penalty, if tax, with interest is paid within 30 days from the issue of
Show Cause Notice
d. 50% Penalty, if tax, with interest is paid within 30 days from the issue of the
Order.

58. Amount paid as Central Tax/State Tax by mistake, instead of Integrated Tax, shall
be refunded in the manner prescribed.
59. Amount paid as Integrated Tax, instead of Central/State Tax No interest shall be
payable on Central/State Tax.

60. When an order is issued, the tax demanded shall be payable within 3 months, after
which, the recovery proceedings may be initiated.

61. Offences Minimum penalty Rs. 10,000 Section 122:

a. Supply without an Invoice/With incorrect or False invoice
b. Issue of invoice without supply of goods/services in violation of provisions
c. Collection as and Non-payment of Tax within 3 months, to government
d. Failure in Deduction/Collection of Tax.
e. Taking or utilizing Input Credit without receipt of goods/services in
contravention of the provisions
f. Fraudulently obtaining refund of tax
g. Falsification of Financial Records
h. Failure to obtain Registration/Furnishing false information with regard to
the particulars
i. Obstructing officers
j. Failure to furnish information called for
k. Transportation of goods without documents
l. Suppression of turnover
m. Failure to keep, maintain or retain books of account
n. Disposing or tampering with the goods detailed or seized
o. Tampering or destroying Material evidence
p. Related to Goods or services (Without Fraud, With Fraud)

62. Offences Penalty up to Rs. 25,000

a. Aiding or abetting the offences as above
b. Related to goods liable for confiscation
c. Related to services in contravention of provisions
d. Failure to appear before officer
e. Failure to issue invoice as per the provisions/failure to account for an
invoice

63. General Penalty Section 125 up to Rs. 25,000

64. No Penalty Section 126:

a. if the Tax involved is less than Rs. 5,000 (Minor Breach)
b. Omission or mistake in documentation which is easily rectifiable
65. Detention and seizure Section 129 Transporting any goods or storing any goods
while in transit in contravention of provisions Released only if (Non-payment
within 7 days leads to Confiscation):
a. Owner is willing to pay
i. Tax plus penalty 100% of Tax is paid
ii. Exempted goods 2% of the value or Rs. 25,000 whichever is less is
paid
b. Owner is not willing to pay
i. Tax plus Penalty 50% of Value of goods (less Tax paid thereon) is
paid
ii. Exempted goods 5% of the value or Rs. 25,000 whichever is less is
paid
c. Furnishing Security equivalent to the above

66. Confiscation Section 130

a. Supplying and receiving goods in contravention
b. Failure to account for the goods
c. Supplying goods without taking registration
d. Contravention with an intent to evade payment of tax
e. Uses a conveyance as a means of transport for carriage of goods in
contravention

67. Fine in lieu of confiscation Section 130(3)

a. Maximum Fine Market value of goods less tax chargeable
b. Minimum fine As per Section 129(1)
c. Fine equivalent to tax payable on the goods Conveyance used for carrying
goods or passengers for hire

68. Goods or Conveyance to be disposed of within three months Section 130(7)

69. Imprisonment for offences specified Tax evaded/Input Credit wrongly availed
or utilized/Refund wrongly taken:
a. Exceeds Rs. 500 Lakhs up to 5 years with fine (Cognizable and non-
Bailable if they pertain to Invoices, Input Credit and Payment of Tax as
stated in the provision)
b. Is between Rs. 250 Lakhs and Rs. 500 Lakhs 3 years with fine
c. Is between Rs. 100 Lakhs and Rs. 250 Lakhs 1 year with fine
d. Committing or abetting the committing of (Falsification of financial records,
Obstruction of an officer, Tampering with evidence) 6 months or fine or
both

70. Committing offence for second time results in Imprisonment for 5 years with fine.
Minimum imprisonment 6 months.
71. Compounding Section 138:
a. Minimum amount Rs. 10,000 or 50% of the Tax whichever is higher
b. Maximum amount Rs. 30,000 or 150% of Tax whichever is higher

Transitional Provisions:

72. CENVAT Credit (VAT in case of SGST) not carried forward in the return
(Pertaining to Capital goods) by RP other than a Composition Taxpayer (SGST
Provision exists) Section 140(2) it should be admissible under existing law and
CGST Act.

73. Issue of Supplementary invoice/Debit Note or Credit Note in case of price

revisions of contract entered into prior to the App. Day (SGST Provision exists)
Section 142(2).

74. Claim for refund of CENVAT Credit, duty, tax, interest, etc. (Input tax Credit in
case of SGST) paid under existing law (SGST Provision exists) Section 142(3).

75. Once Tax is leviable under VAT Act/Chapter V of Finance Act, 1994, no tax would
be payable under CGST Act Section 142(11)(1).

76. Tax paid as VAT and Service Tax will be available as credit towards the tax leviable
under CGST act, for the supplies made after the App. Day Section 142(11)(3).

77. Tax deduction at source under Section 51 where invoice was issued under VAT,
prior to the App. Day and payment is received after the App. Day.

78. E-Way Bill needs to be issued where the value of Supply exceeds Rs. 50,000
(DRAFT E-way Bill Rules, 2017)