Change in Rate of Tax Under GST – 9 Questions Answered with Example

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Change in Rate of Tax Under GST – 9 Questions Answered: Everyone Expect that GST will be implemented by July 1, 2017 and hence the month of May is very critical for our profession as we have to fully geared up with transition to the biggest indirect tax law reform of India. The CAknowledge is striving to organise more and more workshops and lecture meets on GST. This article explains GST (Goods and service tax) Change in Rate of Tax, GST effective date, Short term and long term impact on GST & latest updates related to Change in Rate of Tax under GST Regime. Lets understand what is the Change in Rate of Tax under GST, Applicability of GST in GST Regime, GST rates, its impact on your business and latest updates about GST Act 2017. Now check more details for Change in Rate of Tax as per CGST Act 2017..

Change in Rate of Tax Under GST

Q 1. How do we determine the rate of tax in case there is change in the tax rates?

Ans. Three important events need to be considered – Date of raising invoice, receipt of payment and completion of supply. If any of the two events occur before the change in rate of tax then the old rate will apply else the new rate will apply.

Illustration – Rate of GST on Supply made on or after September 1, 2017 increased from say 18% to 20% then the tax to be applied on supplies will be as under Before – Event occurred before September 1, 2017 After – Event occurred on or after September 1, 2017

Supply Provided Invoice issued Payment received GST Rate
Before After After 20%
Before Before After 18%
Before After Before 18%
After Before After 20%
After Before Before 18%
After After Before 20%

Q 2. I have received the payment but I have not deposited the cheque in the bank account. What is the date of receipt of payment?

Ans. The date of receipt of payment is date of entry in the books or date of credit in the bank account whichever is earlier.

Q 3. What is the rate of GST to be charged on advances received before the change in rate of tax if the supply is completed after the change is rate of tax?

Ans. If the invoices is also raised before the change in rate of tax then the old rate will be applicable even though the supply is complete after the change in rate of tax. Else, the new rate will be applicable.

Q 4. If 95% of the work is complete before the change in rate of tax but invoice can be raised only after completion of supply then what is the rate of tax to be applied?

Ans. Assuming the supply is completed after the change in rate of tax, new rate will apply.

Q 5. In case of Construction Contracts, builders remit taxes on receipt of payment or completion of slabs as provided in the contract. What will the impact due to change in the tax rates?

Ans. For payments received before the change in rate of tax, if invoices are also raised before the change in rate of tax, old rate will be applicable. Else the new rate will be applicable. For slab completion before the change in rate of tax, if invoices are also raised before the change in rate of tax, old rate will be applicable. Else the new rate will be applicable.

Q 6. How do we compute GST liability on supplies which are liable to tax under reverse charge?

Ans. Separate provisions have been provided under the present service tax laws to determine the service tax payable on reverse charge mechanism which is linked to date of payment to the service provider unless the payment is made within 3 months of the date of invoice. However, such provisions are not forthcoming from the CGST Act, 2017. Accordingly, general provisions relating to change in rate of tax shall be applied in determining the appropriate rate of tax.

Q 7. Will I be required to pay GST at the new GST rate on Debtors outstanding as on the date of change in the rate of tax?

Ans. If the supply was complete for such outstanding balances and the invoice is also issued before change in rate of tax then old rate will be applicable. Else the new rate will be applicable.

Q 8. I have raised the invoice with old rate of tax but now I am required to remit the taxes based on new rate of tax. Can I recover the additional tax payable from my customer?

Ans. Yes. You can raise a supplementary invoice / debit note to recover the additional tax from the customer.

Q 9. Will the customer be able to take credit of additional taxes referred at Q8?

Ans. If the customer is entitled to claim the credit of tax mentioned in the original invoice, the input tax credit of additional taxes can be availed which is subject to conditions specified in this regard.

 

On our website we have provided all the details of GST Act 2017. We hope that our article will be helpful for you to understand the GST Act 2017.

 

Check Also:

Section 97 of GST – Application for advance ruling

Section 152 of GST – Bar on disclosure of information

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