What does the GST Law say?
GST law, under Article 269A, considers import supplies of goods and/or services, as Reverse Chargeable. Under GST, a supply will be considered as an import when:
a) The supplier of the service is located outside India.
b) The recipient of the service is located in India, and
c) The place of supply of the goods and/or service is in India.
Therefore, a company registered under GST in India pays GST on purchases of goods or services from a supplier who is located outside India. Such purchases are supposed to be considered as purchases from outside the state, and ‘IGST’ will be payable on it.
Import of services under GST
GST law considers the import of services as supply based on whether there is a monetary consideration or not, and whether the supply of service leads to the furtherance of business.
Let us consider this scenario:
Your GST registered company in India takes Professional Legal Services worth $2000 (assumed exchange rate = Rs. 68) from a Germany-based company ‘Global Legal Services Inc.’. You receive a bill of $2000 and you make the payment.
In such a scenario, your company is liable to pay taxes as per the applicable rate of IGST.
Therefore, services worth Rs. 1,36,000 ($2000*68) taxable at 18% = IGST payable by you is Rs. 24,480. You will raise a liability on yourself for this amount and pay it to the department, after which you can claim input tax credit on it.
How to handle import of services in GST Software?
Setup Supplier and Service Ledger for GST:
1-Select appropriate Country in Supplier Ledger.
2-Specify SAC description, code, and rates in the Service Master.
3-Create IGST Ledger (Important for booking adjustments and payments)
Now, simply pass a purchase entry with appropriate Supplier and Service Ledger and accept it. We suggest that you pass a Journal Voucher to record the increase in IGST liability. Finally, make a payment towards the liability.
Import of goods under GST
IGST Act, 2017, defines the Import of Goods as, bringing goods into India from a place outside India. The law considers all imports as interstate supplies, and accordingly, Integrated Tax is levied in addition to the applicable Customs Duties. As per the law, on certain luxury and demerit goods, Cess will also be levied as per Cess Act, 2017.
The IGST Act, 2017, provides that the Integrated Tax on goods imported into India shall be levied and collected on the value determined by the Customs Tariff Act, 1975, at the time when duties of customs are levied on the said goods.
Suppose, the assessable value of an article imported into India is Rs. 100/-.
Basic Customs Duty is 10% ad-valorem.
The integrated Tax rate is 18%.
The calculation of taxes will be as follows:
• Assessable Value= Rs. 100/-
• Basic Customs Duty (BCD) = Rs. 10/-
• Value for the purpose of levying Integrated Tax= Rs. 100/- + Rs.10/-= Rs. 110/-
• Integrated Tax = 18% of Rs.110/- =Rs. 19.80
• Total taxes = Rs. 29.80
On the top of this, Cess, in case it is applicable to the goods under the Goods and Services Tax (Compensation to States) Cess Act, 2017.
How to handle import of goods in GST Software?
In GST ready software Tally.ERP 9, Setup Supplier, Goods and Purchase Ledger for GST:
• Select appropriate Country in Supplier Ledger.
• Specify HSN description, code, and rates in the Item Master.
• Create IGST, Customs Duty, and other expenses ledgers. Enable the option “Inventory values are affected?” in the duty ledgers and other expenses ledgers in case you want the payment of these to increase your item cost.
Record your purchase with appropriate supplier and item.
Then record payment towards the following as assessed by the Customs Department:
1) Customs Duty, specify the item and value of customs paid for it.
2) Other expenses, specify the item and value paid towards these expenses.
Increase the taxable value of goods, to the extent of Customs and other expenses, for effective calculation of IGST.
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