Question

Question 2
(a) Jinping is an employee of Private Health Pty Ltd, a national health specialist.
On 1 April 2016, Jingping takes out a housing loan with his employer for
$400,000 at an interest rate of 1.75% pa. This was a very good rate as he had
made enquiries and the rate available at his bank was 4.25%. The statutory
rate for the 2016-17 FBT year is 5.65%.
Calculate the FBT payable by Private Health Pty Ltd in relation to the loan
fringe benefit.
(b) Discuss who is required to pay the GST and who is entitled to input tax credits.

Answer 1

a) Fringe Benefit Tax (FBT) is the taxation of perquisites provided by the employer to his employees, in addition to the cash salary or wages paid.

The taxable value of a low-interest loan is the difference between the interest on the loan and the interest calculated with either the prescribed rate or the market rate (the market rate is only available for employers who are classified as financial institutions).

Therefore Taxable value=400000*4.25% - 400000*1.75% = 17000 - 7000 = 10000

FBT payable = 10000*5.65% = 565

b)The liability when to pay GST is covered by section 12 of Model GST Law. In this case, every person who supply goods or services has to pay GST.

As you would know, GST is a dual levy with the Central and States simultaneously levying tax on a common tax base. GST levied by the Central on intra-State supply of goods or services would be called the Central Tax, while GST levied by the States and Union Territories would be called the State Tax/UT Tax respectively.

In case a product of service is supplied within the State or Union Territory i.e. Intra-State supply, both the Central tax & State Tax/UT Tax would apply while in case of  Inter-State supply, IGST (Integrated GST) will have to be paid which is equivalent to Central GST + State GST. However, there is no difference of rates.The imported goods will also be charged integrated tax (IGST) in addition to Basic Customs Duty. IGST paid on imports will also be available as credit to the importer in further supplies. Besides, the Central Tax, State Tax/UT Tax and IGST, Compensation Cess under the GST (Compensation to States) Act, 2017 shall be levied on a few luxury goods,. The cess shall be available as credit for further payment of cess

Now let us see who all are liable to pay GST. The following categories of persons will be liable to pay GST:

1. Persons registered under GST and making taxable supplies under GST.
2. Persons registered under GST required to make payment of tax under reverse charge mechanism.
3. E-Commerce operators registered under GST and through whom certain categories of notified supplies are made.
4. Persons registered under GST and required to deduct Tax (TDS)
5. E-Commerce Operators registered under GST and required to collect tax (TCS)

There are following factors which describe as who is liable for GST registration:

1. Every person if supplying goods or services more than 25 lakh (Rs.10 lakh for north east states including Sikkim).
2. If you are purchasing or selling goods outside the state irrespective of the limit mentioned in point 1.
3. If you are receiving or providing services outside the state irrespective of the limit mentioned in point 1.
4. If you are required to pay tax under reverse charge.
5. If you are non-resident taxable person irrespective of the limit mentioned in point 1
6. Input Service Distributor
7. An aggregator who supplier services under his brand name or his trade name irrespective of the limit mentioned in point 1.
8. Every electronic Commerce operator like Flipkart, Amazon, etc., irrespective of the limit mentioned in point 1
9. A person who supplies goods and services through electronic commerce. In other words, if you want to sell on Flipkart, Amazon, then you will need to register yourself first irrespective of the limit mentioned in point 1.
10. Any person who is required to deduct TDS under GST (not under Income Tax Act, 1961).

Therefore any person having aggregate turnover more than 20 lakh is liable to register under GST and hence needs to pay the tax as well. However, if you belong to the northeastern state, the youneed to register if your turnover is more than10 lakh.

Who is entitled to input tax credits

“Input Tax” in relation to a taxable person, means the Goods and Services Tax charged on any supply of goods and/or services to him which are used or are intended to be used, during furtherance of his business. Fulfillment of Input Tax Credit under GST – Conditions To Claim is one of the most critical activity for every business to settle its tax liability.

Input tax credit- conditions

A registered person will be eligible to claim Input Tax Credit (ITC) on fulfillment of the following conditions:

1. Possession of a tax invoice or debit note or document evidencing payment
2. Receipt of goods and/or services
3. goods delivered by supplier to other person on the direction of registered person against a document of transfer of title of goods
4. Furnishing of a return
5. Where goods are received in lots or installments ITC will be allowed to be availed when the last lot or installment is received.
6. Failure to the supplier towards supply of goods and/or services within 180 days from the date of invoice, ITC already claimed will be added to output tax liability and interest to paid on such tax involved. On payment to supplier, ITC will be again allowed to be claimed
7. No ITC will be allowed if depreciation have been claimed on tax component of a capital good
8. If invoice or debit note is received after:

• the due date of filing return for September of next financial year or
• filing annual return whichever is later

No ITC will be allowed

9. Common credit of ITC used commonly for

• Effecting exempt and taxable supplies
• Business and non-business activity