NEW CORE ENTITY FEATURE IN GST
GST when launched was publicized as ‘one nation, one tax’ by the government, aimed to provide a simplified, single tax regime. GST is a dual levy where the Central Government levies and collects Central GST (CGST) and the State levies and collects State GST (SGST) on intra-state supply of goods or services. Centre also levies and collects Integrated GST (IGST) on inter-state supply of goods or services.
The GST Portal is a website where all the compliance activities of GST can be done before and after GST login. Activities such as the GST registration, return filing, payment of taxes, application for refund, etc. can be done on the GST Portal. The GST Network (GSTN) has now enabled a new feature that requires the taxpayer to select one core business activity on the GST Portal.
The GST Network (GSTN) in order to curb unscrupulous businesses from taking Input Tax Credit (ITC) by showing high expenses (fake bills) on unrelated activities, has enabled a new feature that requires the taxpayer to select one core business activity on the GST Portal.
What do you mean by Core Business Activity?
Core Business Activity means which kind of business you primarily deal in. For example, if you are a phone manufacturer you may select “manufacturer” in Core Business Selection.
What is the new ‘core entity’ feature introduced by GSTN?
The taxpayer has to mention the core business on his profile page.
There are three options under the core business section – Manufacturer, Trader, Service Provider, Other.
Manufacturing: A manufacturer is a registered person produces new products from raw materials and components using tools, equipment and machines and then sells them to the consumers, wholesalers, distributors, retailers or to the other manufacturers. A manufacturer may sell some more brought out items or may provide some ancillary services with his manufactured goods, but he would continue to be classified as manufacturer because it is the Primary Business Activity.
Trader: A trader is a registered person who engages in the buying and selling of goods. Traders have been further classified as Wholesaler or Distributor and Retailer. The Retailer includes a registered person selling goods through e-commerce operators.
Service Provider and Other: A service provider is a registered person who provides service to a recipient of service and is neither a manufacturer nor a trader.
A taxpayer can select only one core business activity.
Business activities like work contract and other miscellaneous items will be included in the Others category.
If taxpayers want to change core activity, they can do so on the profile page.
What led to the introduction of the ‘core entity’ feature?
Tax experts believe the idea behind the move was to stop unscrupulous businesses from taking Input Tax Credit (ITC) by showing high expenses (fake bills) on unrelated activities.
Once an entity mentions its core business activity, tax authorities can confront it if it raises high-value invoices for unrelated services.
A GSTN spokesperson says the idea behind the new feature is to check the practice of circulation of ITC within a company.
Usually what happens, say a manufacturer sells to its sister company which claims to be into trading business, and take services from another sister concern which claims to be into providing a particular service.
This way the ITC is kept circulating within the group.
What businesses are exempted from compliance of these rules?
Certain businesses have been kept out of the scope of these rules. They include GST Practitioners, Online information and database access or retrieval services (OIDAR), TDS deductors, embassies, etc.
What are the effects of issuing fake invoices under GST?
Final action will be taken by the Government after investigating the genuineness of the supplier who generated the fake invoice and buyer who used that invoices for the taking unnecessary tax benefit. Once the forgery is proved then the following steps will be taken:
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