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
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
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. –
Nature of tax
Type of GST payable
The location of the supplier and the place of supply is in the same state
CGST +SGST/ UTGST
The location of the supplier and the place of supply is in different state/ union territory
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 –
Earlier of the following –
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 –
Impact of GST on Traders Invoicing and Return Filing
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 –
Number of digits of HSN/ SAC
Up to INR 5 Crores
More than INR 5 Crores
Return filing under GST for traders
Normally, the GST Return filing for trader the list is given below
Respective Return Form
Corresponding due dates
Details of all the outward supplies of goods or services
GST Annual return
31st December following the end of the relevant Financial Year.
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 –
Who can opt for 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
Claim upto 100% Input Tax Credit
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