Grab that GST with both hands and make a stash...

My dear sharp minded tax-payers,

GST law has a principle.. and that is that... GST is..

- (i)     payable on ~ everything... that is sold

- (ii)   payable by ~ everyone... who buys

- (iii) charged by registered dealer only...

If you read in between lines... you may make out a hole... GST leakage hole... big enough to evaporate GST out of it...

Well... that reminds me of the song album --- Money - by Pink Floyd

Money, it's a gas.

Grab that cash with both hands and make a stash.

GST is nothing else then money that govt wants to collect... we know that... right!

Yes or No... whatever is your answer... Let me tell you...  the hole is that...

"SALES are NOT DONE by REGISTERED dealers only"...

A simple example of it could be - your milkman selling you ghee...

I don't say that Milkman are not required to get registered in GST... but normally they are not... as their turnover is less than Rs20Lac...

So, your milkman CANNOT charge you the GST;

But my dear, he has sold you the ghee, so GST was payable on it... right? Isn't it a hole? That GST was payable but not charged...

Do you think the principle should have one more point... point # (iv)...? Where someone, either the buyer or seller should charge GST...

hmm..... You are right...

GST maker thought the same... and... required that, in such cases... if the buyer is registered dealer then he should deposit GST... on his own motion...

So, in our milkman example... if you are registered under GST, then it becomes your responsibility to deposit GST on Ghee... eh..

So, please add this point # (iv) to the list:

Point # (iv) -  when an unregistered dealer sells something to a person, then that person (ie buyer) should collect GST... if he (buyer) is registered... This is provided by section 9(4) of the CGST 2016...

So, how does the process flow?

Let us elaborate it through the milkman example...

Say you had bought Ghee of Rs500 from the milkman... GST @ 12% is chargeable on ghee...that means a GST of Rs 60 (viz 500*12%) is due on ghee...

In normal case of sale... you would have paid Rs560 to the milkman... Milkman would have kept Rs500 with him and deposited Rs60 with the Government...

But... in this case... as milkman is unregistered... so... you would pay Rs500 only to the milkman... and milkman would keep it with him...

AND... You would deposit Rs60 with the government... This Rs60 is GST on ghee...

So, do you think... has the hole been filled? Yes?

But what if both the buyer and seller, are unregistered ones?...

GST maker is not a novice... It has one more section... section 9(3)... where GST maker has kept a right (power)... And the power is that GST maker can notify the supplies (eg supply of cashew nuts, bidi wrapper leaves have been notified)... on which GST has to be compulsorily be charged... Of course, by the recipient (buyer). And if you ask... what if buyer is unregistered in this case... then my dear... read my ripple @ <_______________>

OK, so is the leak hole fixed by now?

You can't comment? or you are reserving your comments... till you read my next ripple on it....

But dear... after reading my next ripple... still if you feel the hole exists... then let me tell you that govt has one more concept... concept of ITC (Input tax credit) covered u/s 2(63), 16, 17, 18, 19, 20 and 21 of CGST 2016... that may fill the gap... by using natural operational business forces..

Nevertheless... a little leakage should be allowed... for living sake... for the sake of general public...

Oh Yes... the song...

Hmmm.... is it still not clear... money... gas... both hands... stash... etc...?

If it isn't then I can't clarify it more...

BTW....

Very good luck wishes from me...

PS: The collection mechanism in point # (iv) is called as "REVERSE CHARGE MECHANISM"...