Important GST Definitions, Terms and Glossary

The GST is ready for implementation and brings with it a slew of changes that indirect tax payers and business owners need to get familiar with. Not only are businesses required to register themselves under the GSTN, they must also reassess their business in accordance with certain new terminologies to determine how the GST impacts them. A few of the important GST definitions and the registration process are briefly specified here to help you get started.

GST terms to know 

Certain essential definitions have been mentioned under the Model GST Law, which was first released in June, 2016, and then modified and released again in November, 2016.

Business : Definition: Business refers to trade, commerce, manufacture, profession, vocation or any other similar activity, including transactions related or incidental thereto, irrespective of volume or frequency, as well as supply of goods/ services in connection with commencement or closure of business.

The definition is quite wide and seems to be borrowed from State VAT legislations. Some parts have been modified to include transactions in services.

Place of Business : Definition: (a) A place from where the business is ordinarily carried on, and includes a warehouse, a godown or any other place where a taxable person stores his goods. (b) A place where a taxable person maintains his books of account. (c) A place where a taxable person is engaged in business through an agent.

Since GST is a destination-based indirect taxation system, the place of business is a critical factor in determining the business model and taxation dues of a business that is present in many places.

Time of Supply : Definition: The time of supply is the earlier of the following dates: (a) Date of issue of invoice by the supplier or the last day by which the supplier is required to issue invoice or (b) Date of receipt of payment.

The time of supply is important since it determines the point of taxation i.e. the point in time when goods / services have been deemed to be supplied or services have been deemed to be provided and hence SGST or IGST apply.

Goods : Definition: “Goods” refers to every kind of movable property other than money and securities, but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply.

While the term “movable property” has been mentioned, it has not been defined in the Model GST Law, and one needs to refer to the General Clauses Act 1897 for this. It does not include intangible property such as intellectual property rights (copyrights, trademarks). Also, an item needs to be movable for it to be classified as goods.

Services : Definition: “Services” means anything other than goods.

The GST Model Law clarifies that services include intangible property and actionable claims but does not include money. There are separate definitions for supply of software, works contracts and leasing transactions, even though they fall in the ambit of services. The inclusion of “actionable claim” may create confusion where financial and commercial transactions are involved.

Software includes the development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software, and is treated as a service.

As far as leasing transactions are concerned, a finance lease would be considered as supply of goods, and an operating lease would be considered as a service under the Model GST Law,

Works Contract : Definition: It is an agreement for carrying on building, construction, fabrication, erection, installation, fitting out, improvement, modification, repair, renovation or commissioning of any moveable or immovable property. Work Contract has been defined as a “Service”, simplifying its taxation procedure.

Supply : The GST has three new definitions related to “Supply”, i.e., Principal Supply, Composite Supply and Mixed Supply.

1. Principal Supply
Definition: It is the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary and does not constitute, for the recipient an aim in itself, but a means for better enjoyment of the principal supply.
It is generally the dominant supply in a bundle of supplies or a bundle of services. For example, in a mobile phone and the charger, the mobile phone will be the principal supply.

2. Composite Supply
Definition: a supply made by a taxable person to a recipient comprising two or more supplies of goods or services, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply.

For example, goods packed with insurance and packing material is a composite supply, with the good being the principal supply. Here, there is a main supply and supporting supply, which normally go together in the course of business and enhance the enjoyment of the main supply.

3. Mixed Supply
Definition: Two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply.

Take the case of a corporate gift pack that consists of a tie, a wallet and a pen. These are bundled in a package supplied for a single price. None of the items is dependent on the other, nor necessary to be purchased together. This is a case of a mixed supply, where the individual items, which can also be sold separately, are sold together.

Aggregate Turnover : Definition: “aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess.

Reverse charge tax is a system where the recipient of the supply (goods and services), i.e. the client, is liable to pay the tax. Inward supplies are input supplies used as an input for manufacturing the goods or providing the service. Tax paid on input expenses can be adjusted against tax paid on output supplies, through input tax credit. This means that it cannot be treated as a part of the aggregate turnover.

Read more about GST at our GST blog for India.

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Top 10 Time Management Tips for Small Business Owners

Time is money. No phrase proves this statement better than when you own a growing business.

As you strive to achieve your business aspirations, juggling responsibilities and managing activities end-to-end sums up a typical work day. You simply cannot afford to compromise on any of the processes at hand, because it might have a profound impact on the growth of your venture. The trick is to focus your productivity on the limited resources you have in a time-efficient manner till you can confidently handover the heavy lifting to experts. Successful businessmen will tell you the same, but in two words: time management.

Here are our favorite tried-and-tested time management tips for small business owners to save you time and make running your business easier.

1. Fix a Schedule and Stick to it

The best way to accomplish a productive day is to show up at work with a clearly defined set of goals and tasks, preferably hand-written. A disorganized schedule leads to ineptness and wasted hours, eventually leading to a loss of focus on business objectives. Account for every hour of the day, from the time needed for meetings and document review to travel and shopping. Create your schedule with three categories- one for the responsibilities that need to be completed that day, another for those activities that require your attention but can be put on hold and a third with minor tasks that you can work on if you have extra time. Know your downtime- you can use this for short breaks.

2. Focus on ONE Task at a Time

Multitasking might seem like a clever way to do many things within a short amount of time, but it divides your attention among the responsibilities at hand. Being a budding enterprise, this is not a risk that you want to take now. Instead, you can try the ‘Pomodoro technique’. This involves setting your timer for a specified time and focusing wholly on one task before the timer goes off. Repeat this after taking short breaks of 5 minutes between tasks. An efficient way to structure your time, this technique ensures that you devote time for a specific activity regularly.

3. Delegate Work

All small businesses are a one-man army early into their business operations. But your growth journey to becoming a larger enterprise begins when you start delegating responsibilities to expert personnel. Hire people who are dependable to manage tasks you don’t have time for or you are not suitably skilled for. This will give you more time to work on things that you are best at and need your personal attention. Keeping in mind that most growing enterprises might not be sufficiently funded to hire the right people, Capital Float offers Unsecured Business Loans to support the recruitment needs of these businesses.

4. Avoid Distractions

Any means of distraction is harmful for the growth of your business, as the work you do is very different compared to those of your employees. If you think your team members are wasting time on social media, set up a URL blocker on your system. You can forward calls, set up caps on answering emails or designate others to perform repeated tasks, if these are causing you to deviate from your daily schedule.

As you get busier, more people demand your time. Reducing distractions implies training the people around you to respect your time. Your employees tend to consume your time with constant problems or through attempts to garner your attention. Take steps to identify the major time-wasters and keep them at bay.

5. Prioritize difficult tasks

An effective time management hack is to start your work hours with the most challenging task at hand. Despite varying individual notions of productivity, mornings are accepted as the time of the day when you are at your optimum performance levels. This leaves the rest of the day to handle repercussions or developments, and you can work on other priorities with a relaxed frame of mind.

6. Watch out for ‘Shiny Objects’

Many a small business that has just entered the economic space face the ‘shiny object syndrome’ early into their growth phase. Shiny objects, or seemingly bright opportunities, keeping popping up from time to time and they tend to distract you from your business objectives. You can eliminate such time-wasters by asking for agendas before attending any business proposition and comparing new prospects with the value of opportunities at hand.

7. Organize your Work Space

There is no bigger demotivating factor than coming to a cluttered workspace every morning. Not only does it create an unorganized mental space, but according to recent surveys, makes you stay at office longer. Documents categorized into inbound and outbound piles, color-coded filing cabinets, scanning forms onto Outlook, and similar techniques will save you the trouble of rifling through scores of paperwork to find information.

8. Evaluate and Improvise Consistently

The worst thing to do to your business is to continue implementing processes that do not benefit your cause. Most small business owners might be busy with specific projects to spend time analyzing their business models. This is where a quarterly evaluation becomes the most significant of time management tips and strategies. A quarter, or three months, is relevantly sufficient amount of time required to determine the effectiveness of a strategy or a business relationship. Carrying out evaluations at the end of every quarter gives ambitious entrepreneurs better process insights and a chance to move in the right direction.

9. Measure Big Successes & Failures

One of the critical time management skills that a small business owner must possess is goal setting. Define scalable weekly business goals with an emphasis on a particular aspect of your business that you want to focus on, and evaluate the big wins and losses at the end of the week. What makes this strategy so productive is that here, failures are treated as important as successes, as early analysis saves the time that your team might have continued working on them.

10. Leverage Technology

Most small business owners spend more time running a business than growing it. Tasks like staff rotas, invoicing, payroll and tax consume more than 30 hours of productive time every month. With the infinite number of apps and services available online, technology can be used to fill the gap in your current business processes. Automating repetitive tasks such as these will help you save a lot of time to focus on activities that directly impact the growth of your business.

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