GST for musicians and sound professionals : Q&A part 2

GST FAQs
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GST for musicians and sound professionals : Q&A part 2

Posted On19/01/2018
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Thank you for sending questions on GST for further clarification. I have tried my best to answer these. You can first go through the Overview on GST as well as FAQs in part 1. You can also watch the #converSAtions video on GST basics for the music industry.

If you need further clarifications or have more questions to ask, feel free to email me on maulikca@gmail.com

 

*** FAQs on GST – Part 2 ***

Q1. I compose / produce music / record in my home studio setup. The house is owned by my father / mother.
– Can I pay rent to the person who owns the house?
– What benefits do I get by doing so in GST and Income Tax?

If you are using the place for the purpose of business you will be eligible for input tax credit (ITC) if your father/mother or any relative is registered person and tax is charged & in case if he is not registered person you need to pay RCM (Reverse Charge Mechanism) on rent and claim input tax credit. However, payment of RCM on purchases from registered person has been deferred till 31st March, 2018.

As per Income Tax act, also you can claim rent paid as business expense, if such a place is used for business purpose.

 

Q2. Can you list the specific block credits mentioned in your video?

Section 17 sub section 5 of CGST Act, specifies Input tax credit which shall not be available. Following is some of the list

  • Motor vehicles and other conveyances, subject to other conditions section 17(5)(a)
  • Food and beverages, outdoor catering and other as specified in section 17(5)(b)(i)
  • Membership of a club, health and fitness centre section 17(5)(b)(ii)
  • Rent a cab section 17(5)(b)(iii)
  • Works contract services when supplied for construction of immovable property (other than plant & machinery) subject to other conditions section 17(5)(c)
  • Goods or services or both received for supplied for construction of an immovable property (other than plant & machinery) on his own account, subject to other conditions as per section 17(5)(d)

 

Q3. What things should I be careful about in the GST regime to make the most of it?

Like I have said earlier, GST is one of the biggest tax reforms in our country and will be a game changer in indirect taxes.

When you make an outward supply, you need to first identify is it an interstate or intrastate supply, because this will determine your tax liability, i.e. will you have to charge i) IGST or ii) CGST & SGST .

Then you need to classify your goods or services according to HSN (Harmonized System of Nomenclature) which is an internationally accepted product coding system used to maintain uniformity in classification of goods, or SAC (Services Accounting Code) codes specified to determine your applicable rate of tax on such goods or services provided by you.

In case of musicians, lyricists, performing artists, sound engineers and also recording studios hire, SACs are used for the identification of the nature of service. You can look these up on various websites like here >>

Secondly, while receiving inward supplies make sure your invoice is having all the prescribed details on it – your trade name, address and your correct GST number. And the same is to be followed while making outward supplies you should issue invoice with all prescribed details of the purchaser.

Click here to download a sample (and an editable) Excel sheet of GST bill formats which you can use for inter-state and intra-state supplies.

 

Q4. How do i calculate set-offs for interstate and intrastate billing against my purchase which also are local and from outside my state of operation? Please give an example with numbers.

You can set off CGST or SGST input tax against the output liability of IGST and IGST input tax against the output liability of CGST or SGCT.

The input tax credit will be set off as follows:

Credit Of To Be Utilized First For Payment Of Maybe Utilized Further For Payment Of
CGST CGST IGST
SGST/UTGST SGST/UTGST IGST
IGST IGST CGST, then SGST/UTGST

 

Example A.

Mr. M from Maharashtra, a registered dealer not falling under the composition scheme has sold goods within and outside the state.

Mr. M has the following output tax payable under GST for the month of December 2017:

IGST 44200
CGST 9900
SGST 9900

Accordingly, he has the following input tax credit available on purchase of goods and receipt of services:

IGST 20000
CGST 15600
SGST 15600

The tax payable will be calculated as follows:

Type of tax Output tax liability Input tax credit IGST Input tax credit CGST Input tax credit SGST Balance payable by cash
IGST 44200 20000 5700 (15600 – 9900) 5700 (15600 – 9900) 12800
CGST 9900 9900
SGST 9900 9900

 

Example B.

Mr. G from Gujarat, a registered dealer not falling under the composition scheme and has provided services within and outside the state.

Mr. G has the following output tax payable under GST for the month of July 2017:

IGST 10000
CGST 24000
SGST 24000

Accordingly, he has the following input tax credit available on purchase of goods and receipt of services:

IGST 36000
CGST 8000
SGST 8000

The tax payable will be calculated as follows:

Type of tax Output tax liability Input tax credit IGST Input tax credit CGST Input tax credit SGST Balance payable by cash
IGST 10000 10000
CGST 24000 16000 8000
SGST 24000 10000 (36000-10000 – 16000) 8000 6000

 

Q5. For mixing and mastering work done outside India, you said I need to follow the RCM system. Do I need an IEC (Import Export Code) license for this also?

When you receive services from outside India it will be an import of services and Customs law will be applicable. Regarding GST, when there is import of goods or services it will be treated as an inter-state transaction, and the importer will have to pay IGST on such imports, subject to exemptions availabl (if any).

 

Q6. What are the SAC codes for music producer and composer? Or for sound engineers to use for their services provided?

These services come under section 9.
SAC 999631 : Services Of Performing Artists including Actors, Readers, Musicians, Singers, Dancers, etc.
SAC 999632 : Services Of Authors, Composers, Sculptors And Other Artists, Except Performing Artists
SAC 999611 : Audio-visual And Related Services

 

Q7. Can you provide us with a sample invoice we musicians need to raise for our customers?

Click here to download sample (and an editable) Excel sheet of GST bill formats which you can use for inter-state and intra-state supplies.

 

Q8. Can I claim input credit from car service / repair bill, sound proofing work or AC maintenance and AMC contracts for my place of business?

Yes you can claim input credits for all input services or goods except for credits mentioned in section 17(5), if such inputs are used for furtherance of business.

 

Q9. What about expenses incurred while touring in India (hotel bills) for my work?

Hotel will always charge CGST & SGST in that state where the hotel is situated. So if you have a GST registration in the same state, then you can claim that input credit amount, or else you cannot.

For food (restaurant) bills, no input credit will be available as mentioned in section 17(5).

 

Q10. How many times do I have to file my GST return? And if no business is done (no services rendered), even then do I have to file it?

As per the rules prescribed returns are to be filed on monthly or quarterly basis, as per type of your registration.

For regular registered person, he/she has to file 3 (three) returns each month as under:

  • GSTR-1 for output sales on or before 10th of next month
  • GSTR-2 for input sales from 11th to 15th of next month
  • GSTR-3 from 16th to 20th of next month

Even if you have no sales or no purchase, you will be required to file nil GST returns on a regular basis.

Note: GST council has given some relaxation in filing of GST returns for the time being. And some improvements are in the pipeline as per the latest GST meet held on January 18, 2018 for filing.

 

Q11. What are the dates related to filing as of now?

GSTR-1 due dates as of now are given below:

July to Nov 17 10th January 2018
Dec 2017 10th February 2018
Jan 2018 10th March 2018
Feb 2018 10th April 2018
March 2018 10th May 2018

As notified recently, a person having annual turnover less than Rs. 1.5 Cr in previous year or current year can file GSTR-1 on a quarterly basis. However, it is upto the individual if he or she wants to file the return quarterly or monthly basis, and that will be binding till March-2018, or till further notification.

GSTR-3B has to be filled on or before 20th of next month for all person along-with payment of tax, if any.

GSTR-2 & GSTR-3 due dates will be worked out later.

 

Q12. I am told the system is too complicated. So do i need to hire a CA for all this? It means another Rs. 25-30,000 a year expense for just coming up with an output minus input amount!! Can i handle this – from application to filing – on my own?

It is not a complicated system! If you want to file your returns on your own, you surely can. Just be  should be well equipped with the act and rules of GST as well as the notifications issued time on time. The only thing is after you file your GST returns it will not be revised later. However, the incorrect details can be amended in the later month GST returns, subject to the conditions prescribed.

 

Q13. Is GST filing available in different local languages?

Currently, it is available only in English.

 

Q14. I run a music academy, but my annual turnover is under the optional limit of registration. In your video, you said it is optional to register in such a case. I am also not going to do any interstate billing. So by registering, I don’t want to increase my fees or reduce my income by absorbing the GST amount. Can I avoid registering?

Yes absolutely. If your turnover is within the limits prescribed, you need not get registered under GST. Just make sure you do not fall under the compulsory registration norms as per the Act and donot supply your services outside the State where you academy is located.

And yes, then you should not charge any GST on the fees to your students, till you are not registered. Any input tax credits also cannot be availed by unregistered persons.

 

Q15. Are reverse charges (RCM) applicable only for intrastate transactions? In other words, does this not apply if a musician/audio engineer unregistered for GST from one state works for a GST registered musician in another state?

Reverse charge is just a mechanism where the obligation of paying tax is on the recipient. In all other situations, the obligation of paying tax is on the supplier. So, it doesn’t make any difference if the transaction is interstate or intrastate. If a transaction is intrastate, you will be paying CGST & SGST; and in case it is interstate, you will be paying IGST.

Q- If indeed it is an interstate transaction, who pays the tax? And what does input tax credit mean?

In reverse charge mechanism it is the recipient of goods or services who pays the tax, and he will be eligible for input tax credit of the same. Input tax credit is the tax paid for input supplies, which you can set-off against your tax liability.

Q- Does it mean that the reverse charge that is borne by the GST registered person is then adjusted in some way against the total GST that is paid by him or her for that month?

Reverse charge is the mechanism to pay tax. Like, when you purchase goods or services from an unregistered dealer, he will not be paying tax so in that case onus of payment of tax is passed on to the recipient of goods or services. This mechanism is what is reverse charge mechanism (RCM). Yes, it is same as input tax credit for the recipient and can be adjusted against the tax liability.

Q- How exactly does this adjustment take place?

Adjustment will be same in the manner as if the tax is paid by supplier, when you purchase from registered person.

(Note: With a recent notification, RCM on unregistered dealer has been deferred till 31st March, 2018.)

 

Q16. There is a GST exemption for performers who receive less than 1.5 lakhs per concert if their total income is less than 20 lakhs per annum.

But in such cases, such artists need to provide a bill of supply instead of a tax invoice. There are also exemptions on handcrafted Indian instruments.

Bill of supply can only be issued by a registered person providing exempted services or selling exempted goods or by a registered person under composition scheme. Moreover, if the person providing service is unregistered, he will be out of GST net and can issue any kind of document which he likes as an invoice.

 

Q17. What is the difference between bill of supply and tax invoices?

Any registered person supplying goods or services will have to issue tax invoices or bill of supply on basis of goods or services supplied as prescribed. If the goods or services supplied are taxable supply, then tax invoice have to be issued. If the goods or services supplied are exempt, or the person is under composition scheme, then bill of supply has to be issued as per the rules prescribed.

 

Q18. Can I have two different GST numbers? One for my personal service as a musician or sound engineer (when i freelance) and one for my company (for example, my own commercial recording studio)?

Every person liable for registration can have a single registration in the state from where he is providing services, subject to other conditions. He can have different registration state-wise, however it will be considered as a distinct person for each registration. If the person has multiple business verticals in a state, he may be have different registration subject to conditions prescribed.

If you work as individual and have another entity may be partnership firm, say an LLP or a company then you can have different registrations for as an individual and as the other entity.

Q- Is it better to club both numbers and have just one registration?

If you are single person not having multiple businesses, then you can’t have different registration number. And as an individual freelance artist and a proprietor, you operate under a single GST number.

 

Q19. Some people (suppliers / companies / agencies) cut GST amount from my payments, because I am not registered. So instead of paying me my regular fees, they deduct 18% GST and then pay me. Is that a correct thing to do by them?

For example, if you are a music producer working for a music composer. The music producer is not registered and the composer is registered. Then the composer cannot deduct the GST amount from the music producer’s fees as an excuse. Under RCM, the composer does have to pay the applicable GST amount for taking services of an unregistered person, but this becomes an input credit for his own GST returns. Eventually under RCM, he is the ultimate beneficiary – inspite of paying GST on your behalf.

 

Q20. Maulik, how can I contact you for professional services since i am in Chennai and you are in Gujarat. Is it possible to hire your services for handling my GST returns?

In the GST regime, mostly everything is becoming online. So it will not matter if you hire services of competent professionals who are not situated in your State. Feel free to contact me on maulikca@gmail.com

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  • Hi sir,
    I need your help regarding my musical shows, While I was going to outside state and other countries for music shows I am carrying various type of medical instrument, so should I make any Eway bill for my musical instruments to carrying in transit (road way)checking. Some time police/sales tax inspector are harassing for this.
    Please clarify asap. Waiting for your kind reply.

    Regards
    Mr. Vikki… From Delhi

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