Impact of GST on Traders

Dictionary meaning of the term ‘Traders’ is ‘a person who buys and sells things, especially goods in the market’. Accordingly, ‘Trade’ means the transfer of goods/ services from one person/ entity to another. Article mainly focused on Impact of GST on Traders and GST applicability for traders.

As we know, ‘Goods and Services Tax’ was implemented on 1st July 2017. Even after completing almost 5 years, lots of confusions and complications still prevail under the GST law. The major reason for the same is frequent updation and numerous changes.

By going through the present article, one will travel and study the GST implication on traders both as normal taxpayer and also as GST composition scheme dealer.

Impact of GST on Traders : Provisions 

Impact of GST on Traders & Provisions

Under GST, for each and every transaction, the trader needs to determine the GST applicability ; the nature of tax payable; the time when the incidence of tax gets attracted and the amount on which tax gets payable. The following table summarizes and simplifies the same

Concept

Details

Supply

Necessary to determine the GST applicability

Place of supply

Necessary to determine the nature of tax applicable i.e. CGST + SGST/ UTGST or IGST.

Time of supply

Necessary to determine when the incidence of tax is attracted

Value of supply

Necessary to determine the amount on which tax is payable

Accordingly, all the concepts i.e. supply; place of supply; time of supply and value of supply as important for the traders, are briefly explained in the below paragraphs.

Impact of GST on Traders and GST Applicability [Supply]

Under GST, the tax is leviable at the time of ‘SUPPLY’ of goods or services. Notably, supplies that are effected against ‘Consideration’ and also made in the course or furtherance of the business will be liable to tax.

Thus, making it simple, in the case of a trader, GST will get leviable under the following circumstances –

  • There is a supply of one or more ‘goods’; or
  • There is a supply of one or more ‘services’; or
  • There is a supply of a combination of goods and services.

Levy of GST will be as under –

Type of tax

Section Authorizing the levy of tax

Central Goods and Services Tax (CGST)

Levied as per section 9 of the Central Goods and Services Tax Act, 2017

State Goods and Services Tax (SGST)

Levied as per section 9 of the respective State Goods and Services Tax Act, 2017

Union Territory Goods and Services Tax (UTGST)

Levied as per section 7 of the Union Territory Goods and Services Tax Act, 2017

Integrated Goods and Services Tax (IGST)

Levied as per section 5 of the Integrated Goods and Services Tax Act, 2017

Place of supply of Goods under GST 

Place of supply’ is important to determine the nature of tax applicable on the supply transaction i.e. –

Transaction

Nature of tax

Type of GST payable

The location of the supplier and the place of supply is in the same state

Intra-State

CGST +SGST/ UTGST

The location of the supplier and the place of supply is in different state/ union territory

Intra-State

IGST

Notably, in the case of goods, usually, the place of supply is the place where goods are delivered.

Say, for example, M/s. A (Trader) is located in Delhi. M/s. A supplies machinery to M/s. B who is located in Gujarat. However, the machinery is delivered, as per the direction of M/s. B, to Kanpur. In such a case, the place of supply will be Kanpur.

Further, in the case of services, usually, the place of supply is the location of the service recipient.

Time of supply in GST

Determination of the ‘Time of supply’ has its own importance under GST. It means the point of time when the goods or services or both are considered supplied. Accordingly, the GST gets payable.

In other words, CGST + SGST/ UTGST or as the case may be IGST, applicable to the respective transaction gets payable on the ‘Time of Supply’.

Time of supply in case of both goods or services is explained hereunder –

Time of supply in case of the supply of goods

Time of supply in case of the supply of services

Earlier of the following –

  • Date of invoice; or
  • Last date on which invoice should have been issued; or
  • Date of receipt of payment.

Earlier of the following –

  • Date of invoice; or
  • Date of receipt of payment; or
  • Date of provision of service.

Now, let us take one simple example

Mr. A, a trader, located in Delhi supplies goods to Kanpur on 1st April 2022. Mr. A. prepares invoices also on the same day i.e. 1st April 2022. Accordingly, the time of supply, here, will be 1st April 2022.

Accordingly, Mr. A, a trader, needs to discharge IGST (it is inter-state supply as goods are delivered by supplier of Delhi to Kanpur). Accordingly, the said IGST payable for the month of April 2022 should be paid within the due date as applicable to Mr. A.

Value of supply under GST : Applicable to the Traders

Under GST, the value of supply means the transaction value i.e. price actually paid/ payable for the supply of goods or services between the persons who are not related and where the price is the sole consideration.

It is important to note that for determining the ‘transaction value’ one needs to refer to section 15 of the CGST Act, 2017 which covers various the inclusions and exclusions.

Following are the inclusions to the transaction value –

  • Any taxes, fees, duties, cesses, charges levied under any other statue (other than SGST, CGST and compensation cess) separately charged from the recipient;
  • Any amount that the supplier is liable to pay, however, the same is paid by the recipient and is not included in the price;
  • Subsidies which are directly linked to the price (which excludes the subsidies as provided by the Central Government and State Government);
  • Interest, penalty or late fee for delayed payment of any consideration towards any supply;
  • Incidental expenses like packing, commission etc. charged by the supplier at the time of or before delivery of goods/ services.

Impact of GST on Traders Invoicing and Return Filing

Invoicing under GST

Impact of GST on Traders : Invoicing under GST

The trader needs to raise the appropriate tax invoice/ bill of supply/ e-invoice, as applicable, covering all the details. GST invoice of the trader also needs to contain HSN (i.e. Harmonised System of Nomenclature) or SAC (i.e., Service Accounting Code) in the following manner –

Aggregate turnover 

Number of digits of HSN/ SAC

Up to INR 5 Crores

4 digits

More than INR 5 Crores

6 digits

Return filing under GST for traders

Normally, the GST Return filing for trader the list is given below

Respective Return Form

Particulars

Corresponding due dates

GSTR 1 return filing

Details of all the outward supplies of goods or services

Period

Due date

Monthly (applicable to traders having an aggregate turnover of more than INR 5 Crores or traders who have not opted under the QRMP Scheme)

11th of the succeeding month

Quarterly (applicable to traders who have opted under the QRMP Scheme)

13th of the month succeeding the respective quarter

GSTR-3B return filing

Self-declaration statement

Period

Due date

Monthly (applicable to traders having an aggregate turnover of more than INR 5 Crores or traders who have not opted under the QRMP Scheme)

20th of the succeeding month

Quarterly (applicable to traders who have opted under the QRMP Scheme)

22nd or 24th of the month succeeding the respective quarter

GSTR 9 annual return

GST Annual return

31st December following the end of the relevant Financial Year.

GSTR9C annual return

Reconciliation Statement

31st December following the end of the relevant Financial Year (applicable to traders whose aggregate turnover during the Financial Year exceeds INR 5 Crores). 

Impact of GST on Traders | Composition Scheme Applicability

The benefit of the composition scheme is available to the traders as well. However, for availing of the benefit and opting under the composition scheme, the trader needs to satisfy the following conditions –

  • The trader should not be carrying out inter-state supply of goods/ services;
  • The trader should not be supplying goods/ services which are not taxable under GST;
  • The trader should not be a casual taxable person or a non-resident taxable person;
  • If the trader is engaged in supplying services, then, the quantum of the same should not exceed, higher of the following – 10% of the turnover; or INR 5 Lakhs.
  • The trader should not be engaged in supplying goods/ services through an e-commerce operator;
  • The trader should not be engaged in manufacturing goods like pan masala; ice-cream and other edible ice; all the goods, classified under heading 24, like tobacco and manufactured tobacco.

Who can opt for Composition Scheme

Impact of GST on Traders and composition scheme

The trader who satisfies all the above conditions and wants to opt under the GST composition scheme rules needs to follow the below steps based on the relevant situation

  • Steps for the trader, who is applying for new GST registration, and directly want to opt under the composition scheme

File GST registration application in Form GST REG-1.

Select option in Part B while filing registration application in Form GST REG-1.

  • Steps for the trader, who is already registered under GST registration, and wants to opt under the composition scheme

File an intimation in Form GST CMP-02 before the commencement of the Financial Year for which the trader wants to opt for the composition scheme.

Submit a statement in Form GST ITC-3 within 60 days from the commencement of the Financial Year.

Tax rate applicable to trader under composition scheme –

Trader opted under the Composition Scheme has to pay GST @1% i.e., 0.5% CGST + 0.5% SGST.

Return filing compliance applicable to trader under the Composition Scheme –

The trader, opted under the Composition scheme, has to furnish the following GST return filing for composition

  1. Quarterly return in Form GST CMP-08 – to be furnished within 18 days from the end of the respective quarter; and
  2. GST Annual return in Form GSTR-4 – to be furnished within 30th April of the subsequent Financial Year.

CA Poonam Gandhi

About the author

Poonam Gandhi is a Chartered Accountant and a Lawyer. She is a Professional Freelance Content Writer/ Editor and an Educator.

She masters in creating result-oriented as well as Search Engine Oriented Content. Currently, she is associated with some of the topmost leading sites of India.

She holds more than 3 years of experience in the content field. Before entering the content writing field, she possessed a wide practice experience of more than 9 years, specifically, in the field of Indirect Taxation.

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